It is six o’clock in the evening, on a gorgeous British summer evening. Over seventy people have flocked to the soft chairs of the sun-bathed lounge. They have all come to a sell-out event on a Friday night. Most surprisingly, the event is not taking place in the City but at the Royal College of Art, in the heart of London’s culture, science and museum district. What makes the event even more unexpected is that it is not an accounting conference on standards and regulation. It is a salon on design and trust, with a discussion inspired by a philosopher, a designer and an auditor.
The event is the first in a series of Accountancy Salons, organised by the AuditFutures programme of ICAEW and the Finance Innovation Lab. One of the fundamental aims of AuditFutures is to create a space where challenging questions can be asked and complex problems addressed. The Accountancy Salons will contribute to this endeavour by galvanizing momentum on core issues of accountancy with unusual partners in unconventional venues.This first Salon, on design and trust, is a partnership with the Royal College of Art and aims to introduce fresh perspectives to the ongoing questions regarding the future of audit and offer design ideas that can deliver social change.
The Salon expands the boundaries of our thinking and aspirations in several ways. It builds on our work and research on trust by adding a philosophical twist: in the groundbreaking report that we co-authored with the RSA, we saw trust as a building block of social capital and identified audit as the trusted intermediary in a ‘trust-rich’ society. At this Salon, we continued exploring this theme using philosophical questions and design principles. As a catalyst for the discussion and an application of this new thinking, the event showcased the five design questions and propositions that students from the Royal College of Art have co-created with us as part of their academic programme.
A philosopher, a designer and an auditor
“I think what made the event so amazing was the rich content, brought by the design students and the wide scope of the panel discussion”- this was the sentiment of most participants. We think that a great salon discussion needs three components – diverse and curious guests, rich and stimulating content and an intellectually diverse panel. Our discussion on design and trust was infused by the thought-provoking ideas of the panel – a philosopher, a designer and an auditor.
The three panelists helped to break any preconceptions about audit and design. Their viewpoints were enlightening for people who were not familiar with either audit or design and might have been frowned upon by the those who were more aware of these professions. Our goal was to stimulate a discussion, so the panelists’ varied backgrounds, experiences and thinking was essential. Brannan Jacoby is a philosopher, lecturer and writer, whose research analyses the concepts of trust, trustworthiness and betrayal. Robert Hodgkinson was an audit partner and is currently an executive director at ICAEW, leading the technical and thought-leadership work. Nick de Leon leads the service design programme at the RCA and has rich experience in industrial design of products and services and his research explores the impact of information and communication on the social and economic vitality of cities.
Auditing and accounting as designed services
Robert Hodgkinson positioned audit as something that naturally goes with design. It is the result of years of experimentation to create a service to satisfy people’s need for assurance. Although, it is currently identified with regulation, it goes above and beyond that. The current paradigm of auditing is primarily about dry financial reports which come from the accounting systems. This prevents us from thinking why is it there and what the purpose of audit is. We have become distracted by the technicalities of how we do things – how we accumulate evidence and how we check things. However, in reality, audit is a service that has allowed people to build trust and engage in economic activity. This trust has enabled international trade and activity and it is designed to allow people to reap the benefits of economic development.
Therefore, it is worth remembering that the accounting profession is rooted in real practical needs and has evolved to meet them. Double-entry bookkeeping was invented to keep track of business and financial transactions. Reports were developed to give people a true account of the health of organisations. Audit was invented to give people assurance on these reports. Nevertheless, we cannot stay attached to the conventional and traditional ways of doing things – technological and social changes will bring new challenges for the profession and we need to learn how to respond to these. Therefore, Robert repeatedly emphasized that “we welcome the challenge from the Royal College of Arts to bring us back to the question of why audit is necessary and how it can be re-designed”.
So we are welcoming these challenges and hope they will help us reinvent what we do. For example, we are currently focused on financial transactions but there are so many more interactions that matter to people – it is not only about accounting for monetary transactions. Can we actually adapt the mindset of auditors to a whole set of human interactions? Can we also adapt to a world where the expansion of technology and the shrinking of the planet will place completely new challenges on trust? Can we also get away from our thinking of applying standards to relating to people who want to be more confident in our services? Can auditors meet people’s needs and not only satisfy statutory requirements?
Double-entry bookkeeping is an invention that has design at its core. It is not about arithmetic. It is about exercising judgment and thinking about the other side of ledger. It is not about following rules or procedures – it is about professional judgment. When people invented double-entry bookkeeping, it was very profound as it involved a moral relationship of trust.
Nick de Leon emphasized that what is common to all the work of the RCA is that it is people-centric: “everything that we start, begins with people, with culture, with who we are”. When we look at trust, the question that we have asked the RCA is to what extent trust is developing and to what extent it might be eroding between individuals and organisations and institutions. We want to discover what the opportunities are for the audit profession to reinvent it services. This is why we are working with service designers – to ponder on that question and to come up with some intriguing propositions and fresh new takes on it.
Design is about discovering the basics of what it is that people need and what works for them. Design can help us get to the roots of what the audit profession is about. It can remind us not to enshrine ourselves with the way we have been delivering services. Otherwise, we often explain these products and services within the frameworks of regulation and standards rather than explaining what their purpose is.
I think one of the most surprising things that came across is why we are running such an event at the RCA. ICAEW wanted more out of the box thinking and while you can get this from a business school, we were able to add human and cultural dimensions to the question about trust – that’s why it is relevant that we are here.
The philosophical question about trust
What is trust? For Brennan Jacoby, trust is incredibly hard to define as it varies and comes in a lot of different packages and although it involves reliance, confidence and co-operation, it is also distinct from them. He asserts that it is not the same as those concepts because it is possible to cooperate with someone even if you do not trust them. It is possible to be confident in someone’s abilities, yet not consider them trustworthy. Therefore, trust is something distinct and Brennan argues that “trust is the optimism to accept vulnerability to someone or some organisation”. This means that by being vulnerable, we are willing to accept some risk. Of course, not all trust is well-placed and sometimes we need to break that trust – for example when criminals are abusing our trust to break the law. Therefore, one interesting challenge for the profession is to talk not only about trust but “well-placed trust” – trust in what is trustworthy.
This is the other question that Brennan put on the table: “what is trustworthiness?” Trustworthiness is often described as predictability and reliability but he would like to push that a bit further. Trustworthy people are not only those who always act in the same predictable or reliable way, but also people who we trust to do the right thing in all kinds of situations. We want to know that if we ask auditors to review the accounts, then if the house catches fire they will do the right thing and will not simply do the review of accounts.
Brennan defines trustworthiness within a basic but powerful framework that involves competence, commitment, character and connection. He thinks we should ask audit to give us not just the predictability and confidence in organisation. We should ask audit to cultivate good character and to encourage and empower individuals and organisations to rise up and exercise their agency, to make good decisions, rather than be scaffolded in by regulations and standards.
I think it is very positive that we are having a discussion on whether auditing can be designed in this way. But I think this is the key challenge – to what extent auditing and accounting can give us that space where individuals are encouraged to do the right thing.