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Circit: technology and the ‘point of trust’

David Heath, CEO and co-founder at Dublin-based audit advisory provider Circit, talks to Zoya Malik about the current climate for growth, and the trends in technology investment in the era of open banking

Zoya Malik: What has the business climate been like for Circit to onboard new clients through 2020?

David Heath: Positive. We set ambitious growth targets focused on growing our footprint in the UK and beginning to engage with audit teams across Europe.

Despite Covid-19 and it shifting our product development to better serve under-pressure audit teams, we look to be closing out 2020 as forecast, with particular growth coming from firms within the UK top 100, across our confirmations, verified transactions and PBC modules. This has led to a successful fundraising round, growing our team and recently making the finalists list for Software Innovation of the Year at the Accounting Excellence Awards. 2020 has by no means been plain sailing, but we’re happy that our agility has enabled us to adapt and solve new requirements shared by auditors.


ZM: What new services have been most needed?

DH: Prior to Covid-19, auditors were under the spotlight from clients and regulators, both looking for improvements in audit quality and efficiency. This has only been heightened by Covid-19; not only have audit teams needed to maintain their service delivery, they have also had to raise standards to ensure that going-concern risks and risks of misstatement and fraud, inherent in the new environment, are not overlooked.

Enforced remote working has led to firms pushing forward with technology adoption, which we have witnessed ourselves. We focus on firstly automating existing and often paper-based processes, so with limited or no access to offices we’ve been able to support firms with their business continuity whilst also improving assurance standards across a number of key audit areas.

This does not mean technology has all the answers, however; maximising the use of existing resources and understanding the capabilities of existing technology should come first. The most obvious example being videoconferencing, for instance Zoom or Teams, which was likely occasionally used pre-Covid, but has now become critical for client engagement.


ZM: Have you seen trends in the types or sizes of firm adopting technology?

DH: We’ve seen all sizes of firm review and address their options to handle the increase in remote working, although larger firms that have typically relied on in-house business support teams to work through administrative processes have certainly had to re-evaluate how these teams can operate.

The adoption of quality business applications built on cloud technology is key to maintaining business continuity, especially at the administrative level, which can sometimes be left behind when the service is not client-facing. Additionally, we’ve seen audit teams pay closer attention to how they obtain evidence to increase audit standards and reduce the client workload, particularly where onsite meetings are not possible.


ZM: What is the current state of play in terms of open banking’s impact on the accounting industry?

DH: Open banking has certainly accelerated its pace of adoption over the past 18 months. The banks are continuously improving their technology capabilities, and this is resulting in more applications being created to benefit businesses and their accountants.

The shift to open banking from ‘bank feeds’ powered by screen scraping, means a far more secure method of the transfer of client data. Traditional cloud bookkeeping software companies will need to change their methods of how they obtain the bank data and become regulated with the FCA separately. There is significant time and cost involved in making this shift; however, it does result in a much safer environment on which to build accounting software.

The industry API and security standards set forth in the open banking legislation has created a greater level of trust amongst the largest commercial enterprises who can now connect new applications to their corporate banking partners, and unlock new benefits to help their business move faster with connected systems. As a result, accountants in larger practices are going to see a revolutionary shift in how they approach their client engagements. These large practices did not see the technology advances which were seen in the bookkeeping world, primarily because the infrastructure was not in place. However, for five years now since 2015, large commercial banks have been working behind the scenes and rebuilding their technology stack to comply with open banking regulations.

While it could be argued that open banking is still in its infancy stage, clear use-cases are emerging that will bring major value to all stakeholders in a large corporate environment.


ZM: What audit applications is Circit developing, and whom are they targeting? What has Circit’s investment been into R&D in 2020?

DH: We are firm believers in the application of technology to audit processes where the impact on audit standards and efficiencies can be found immediately. Over the past year, this has predominantly been supporting firms’ removal of paper confirmations, and standardising the complete process across the firm, improving visibility and supporting the reduction in fraud risk on a critical audit process.

In the background, after a successful fundraise, we’ve grown our product development team to ramp up the building of banking relationships and integrations with banks globally. This has led to audit teams across Europe being able to obtain balance confirmations and transactions independently and in real time. This provides immediate improvements to efficiencies and audit quality, as it removes the reliance on the client to share bank information and opportunities for interference.

2021 will see new audit applications built on this source to further support auditors and fully automate many key audit tests, from revenue to going concern, to fraud and an analytics engine. Additionally, as a regulated AISP, we are in a position to build a connected network between banks, accountants and corporate clients, bringing value to each party. If the end goal is a continuous audit, there is certainly now a clearer path to making that happen.


ZM: How are these audit applications and services improving the quality of client engagement?

DH: From an assurance perspective, the ability to obtain bank transactions independently and repeat the process in real time creates an improved and solid foundation for audit work. This should now be one of the first items which an auditor obtains at the start of any job.


ZM: How do you see open banking developing for the audit practice?

DH: Today, there are applications that can provide greater assurance especially in verifying bank transactions. This higher-quality set of evidence is valuable in itself for all sizes of firms, but those exploring or investing in areas like data analytics can perform high-quality testing and reconciliations, feeding into improved client insights.

Ultimately though, the end goal is the continuous audit, providing the auditor and client with opportunities to identify risk and maintain an accurate company position and valuation throughout the year. Open banking can support this real-time view.

Additionally, consideration should be made for the increasing adoption of blockchain, as a more secure digital financial system, as applications built to connecting nodes will become key for auditors to have a window into assets and products not held on traditional financial platforms. Hence, open banking not only provides greater assurance and a foundation for improved audit quality in the short term, in the longer term it is vital to simply maintain visibility of all company assets.


ZM: How important to Circit is ICAEW accreditation in an increasingly busy vendor landscape? How will this increase market and stakeholder confidence and market differentiation?

DH: The security review and due diligence that ICAEW is undertaking for the accreditation process, we hope, allows audit teams to start conversations with us from a point of trust. Together, we can then focus on creating value and efficiencies, building our product set from auditor requirements and ultimately working alongside auditors as a trusted partner.

We are aware that there are many vendors and some are also expanding their product sets, which can create crossover with existing software that firms are using. This can be problematic and create inefficiencies. The ICAEW accreditation should assist firms in understanding and assessing Circit’s capabilities clearly and with confidence, so that when the timing is right, they can select us as the right option to review.


ZM: What has Circit’s experience been during Covid-19 in terms of clients’ technology investment?

DH: Covid-19 has brought forward firm technology investment and focused attention on the skill sets required to implement and maximise the efficiencies promised. We’ve had more questions around how best-of-breed solutions can still integrate with other systems, while more consideration seems to be being taken in how firms clients interact with the software. Rightly so, firms’ clients have been front of mind, with efforts to minimise client workload, especially considering increasing Covid-19 relationship concerns.

Part of this has also been attempting to limit the software with which clients have to engage and ultimately spend time performing their own due diligence. At Circit, this thinking is embedded into each of our modules, whether it is simplifying or reducing client steps during the PBC/request list phases, and in some instances we can remove client involvement completely, for instance during the bank confirmations process.


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