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Conrad Egusa
Entrepreneur

As PwC Israel is hit with fine, this entrepreneur has advice on automation

Shagun Malhotra (image free for use on a commercial platform in accordance with copyright law, courtesy of Shagun Malhotra)

PwC Israel, a member firm of PricewaterhouseCoopers International Limited, has three offices in Tel Aviv, Jerusalem and Haifa, and more than 50 partners and 1,000 staff.

Yet last month saw the firm hit the headlines for the wrong reasons. News broke that US audit regulator, the Public Company Accounting Oversight Board (PCAOB), had issued a $2.75m fine and sanctioned PwC Israel after it came to light that ‘widespread improper answer sharing’ has been taking place during internal training tests over a span of five years. 

After the regulator found that hundreds of individuals at PwC Israel were involved in training exam misconduct that put the firm in breach of quality control standards related to integrity and personnel management, PCAOB expects to see assurances that new quality controls are in place that prevent such occurrences from happening in the future. 

The situation highlights how critically important proper processes and standards are to accounting firms. Accounting has always been a highly regulated profession, yet as regulatory demands evolve with external trends such digital transactions, accounting firms may struggle to keep pace. 

For example, The Compliance Forecast report published in January found that 73% are concerned about their ability to stay compliant, with 30% admitting to fears about the next 12 months amid an increasingly complex regulatory landscape. 

This is an important trend to address. The accounting industry provides essential services to all kinds of businesses. It also represents a huge sector in certain locations. 

For example New York alone has over 140,000 people working as accountants, auditors and bookkeepers.

In an interview with Shagun Malhotra, who is based in New York City and founded the company SkyStem, she discussed what this means for the industry and advice for finance and accounting executives.

In your experience, why does regulatory compliance continue to pose such a challenge to accounting firms? 

Oftentimes, we find that even small discrepancies with internal controls can snowball into a major problem if left unchecked. This is especially true for large, multinational firms where manual inefficiencies and an absence of consistent processes can create a monster. 

For example, I worked as a consultant at a troubled financial services giant where I discovered all manners of broken internal controls with a balance sheet of over 10,000 accounts being off balance by billions of dollars. As a result, the business spent a full year and millions of dollars fixing a mess that could have been prevented with automated controls.  

Yet this example highlights a key dynamic at play across the accounting industry that I can see clearly as both a CPA and CIA. On one hand, auditors have a non-negotiable duty to play in holding companies accountable to the public and managing adherence to important regulatory frameworks. Yet accountants are often working late nights with limited resources. 

The recurring nature of such issues, as seen with the recent PwC Israel sanctions, highlights the importance of investing in tools that help firms manage complex regulatory compliance across large teams to avoid the risk of compliance issues. Tech solutions like automation have the power to bring forward realistic solutions for accountants. 

Can you expand further on the role of automation in the future of finance and accounting? 

I believe automation is key to the survival of companies in 2025 and beyond, and this couldn’t be truer for the complex environments of accounting and finance. 

Software automation streamlines processes and creates disciplined workflows which are key to maintaining compliance across large teams that handle thousands of accounts. It also gives rise to added efficiencies that save accountants time such as automatic report scheduling that eliminate the need to manually create these. 

Overall, it also greatly reduces the risk of errors or miscommunications while helping accountants identify any potential workflow challenges more easily. 

Seeing how prevalent manual systems and processes remained within the accounting industry inspired me to create SkyStem’s flagship solution, ART. Our system provides automation for month-end close processes. But automation can also drive improvements and create efficiencies in many other stages of the accounting cycle, from mandatory training through to account management. 

Has the accounting industry been slow to apply software solutions? 

The issue here has largely been twofold. 

On the one hand, existing platforms that have automation in this area are priced quite high, and often beyond reach for mid-sized companies. Yet I also saw that many large companies were still grappling with manual processes despite having the resources to invest in tech solutions.

Here, the adoption barrier could be due to decision-making and implementation complexity. 

The task of applying automated solutions is therefore often pushed down the road due to concerns about how long it will take to implement and train accountants on these new programs without creating any errors on live accounts. 

Whether it’s a large corporation or a smaller company, closing and reconciling is part of the routine function in the accounting department. 

As the importance of training for accountants is in the spotlight, how do you predict the industry will respond? 

The situation with PwC Israel is prime example of how automated controls and SaaS solutions are critical to the accounting and finance industry going forward. Digital tools aren’t limited to customers, but can have incredible impact on internal systems that ultimately help to save time and resources while avoiding compliance issues in the long-term. 

Further, as customer expectations and shifts in regulatory environments continue to evolve, accounting and finance executives are going to need to adapt their skill sets going forward. 

Proficiency in using financial software, understanding blockchain technology, and navigating digital banking systems are also going to come to the foreground as digital tools, software, and platforms continue to rise in popularity. 

Finally, basic programming skills can be highly beneficial to accountants. This allows them to automate tasks, build financial models, and work with data more effectively without relying on software engineers. 

While individual executives can work to hone these skills, I believe large organizations and accounting firms should also help to support their teams with training courses and development programs in order to create a future-ready workforce. 

Finally, do you have any advice for other entrepreneurs and financial executives in the space? 

Founders often struggle with the best course to take in terms of investment, how to get co-founders, equity distribution etc. To take money or not to take money was personally my biggest dilemma. 

The book that stands out the most is “The Founder’s Dilemma” by Noah Wasserman. It was specifically relevant due to the tech nature of our business. This book objectively discusses the pros and cons of taking outside capital. There is no right answer, but there is an answer that feels right for an individual and the type of business they are pursuing.

About the Author
Conrad Egusa is a Global Mentor at 500 Startups, Founder Institute, Techstars, Cardinal Ventures of Stanford University, Oxford Entrepreneurs and more, and has contributed to TechCrunch, VentureBeat, Forbes and TheNextWeb. Conrad is also is an Advisory Board Member at SXSW Pitch, an Advisor at Microsoft Startup Growth Partners and Horasis, and is a Judge at Start-Up Chile and Parallel18.
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