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The impact of APIs on the Profession

Author: Dudley Gould

Published: 02 Dec 2022

Application Programming Interfaces (APIs) are dramatically impacting the day-to-day work of accountants and auditors. However, most practitioners are unlikely to be privy to the effect they are having on the profession as the APIs connect tools and pull data in the background, often unbeknown to them. Let’s explore some of the basics, and what APIs mean for the profession.

What are APIs?

While practitioners don’t need to fully understand how APIs work, it’s worthwhile to understand some of the principles behind them and acknowledge their role in streamlining workflows and speeding up service delivery.

APIs allow two separate pieces of software or apps to communicate with one another, typically over the web. This is executed via agreed protocols that transfer data in formats that can be interpreted by both the sending and receiving software providers. In this way, common functionalities are provided irrespective of the devices used or the system making the connection.

APIs are well-liked by developers due to their efficiency and ease of use. Code typically follows standard structures and can often be reused to connect to other applications, databases and services.

Business and consumer users can also benefit as they can access new data sources and communicate and transact through an ever-growing ecosystem of connected apps and platforms. The ability to ‘Pay with PayPal’ or ‘Sign in with Google’ leverage APIs to exchange account and payment information, while minimising the data exchanged and helping to keep customer data secure; encrypted ‘tokens’ are used to validate payments and credentials, in lieu of actual card details or passwords.

What do accountants and auditors use APIs for?

Practitioners use APIs in their everyday roles but aren’t always aware they are doing so. Most of the major accounting software packages leverage banking APIs to pull in live feeds. These vendors often also have APIs that are used to power connections to third-party apps, allowing smooth integration and minimising the manual transfer of data.

By leveraging such APIs, app partners can extend their expertise to accounting software users by enhancing functionality to carry out their specialisms (i.e. invoice chasing or cash flow forecasting). They also can use two-way integrations to publish their own data directly to the main platforms (with the right permissions, of course).

Another benefit of APIs is their flexibility. Practitioners don’t have to be tethered to one software provider to meet their needs and instead can build out a best of breed approach, with bespoke ‘app stacks’ to meet the needs of clients.

MTD and the evolution of data feeds

One of the most significant developments of APIs for accountants over the last few years has been the rollout of the UK Government’s Making Tax Digital (MTD) initiative, which sees many users leveraging HMRC’s APIs to make quarterly VAT submissions through approved solutions without even realising that it is APIs which underpin this process.

APIs will be further relied on when MTD for ITSA is introduced. This is a stark change to the current process of accountants needing to make one Self Assessment filing per year, with MTD for ITSA likely to require businesses and/or their accountants to make six different submissions; HMRC APIs are the only logical solution to this.

HMRC have a number of APIs, each designed specifically for different types of data read and write activities. As MTD for ITSA is not yet live, HMRC have provided a sandbox for web developers to experiment with (and provide feedback on) the APIs, which is common practice in API development.

Increasingly, public bodies are investing in API infrastructure as a way to reduce or remove the need for manual information requests and support innovative uses of their data. Companies House have a range of APIs available for access to publicly available information, and an app like Citymapper is only possible through its utilisation of APIs such as Transport for London’s Unified API which provides live information across all modes of transport.

Integration opportunities

The necessity to introduce new efficiencies in jobs is heightened by the difficulty, and expense, of hiring quality staff. Increasingly, APIs are providing the opportunities needed for accountants and auditors to achieve those efficiencies by integrating systems deeper and streamlining workflows.

There are also a handful of vendors that provide “open accounting” API connectors. These work with different cloud ERP systems and aggregate the different APIs so accountants and developers can use just one integration to connect to the various different cloud accounting providers. This in essence delivers a many-to-one-to-many relationship: the ability to connect many clients, through one vendor, to many data sources.

From an audit perspective, APIs support the rise of external evidence gathering and review platforms. These enable auditors to use APIs to access client and third-party data, confirm source data and perform key audit procedures, before feeding required documentation back to internal systems. While APIs can be used as a way of managing user and client access to information portals, deeper integrations can give full end-to-end transmission of data. Innovative approaches to the bank confirmation process are perhaps the most exciting development in this space in recent years, with APIs linking directly to banks, accounting packages and audit platforms to confirm balances and even individual transactions, and users never having to leave their own in-house platforms.

How deep should you go?

The most appropriate level of integration will differ for organisations based on their size and type. Many larger businesses and firms are developing their own APIs to fully integrate vendor applications into their own portals and exchange information to and from internally-developed solutions. But there is scope for organisations of any size to deliver benefits through simpler efficiencies such as receiving data feeds from client and third party platforms, or even just enabling the option of single sign-on that allows audit teams, staff, customers and clients to log on seamlessly to multiple applications. In this way, APIs can also deliver substantial security and risk benefits through its tight management of information exchange and reduction in manual intervention.

Businesses should review their providers on an ongoing basis to ensure they fulfil their needs today and into the future. API integrations are the direction of travel that all industries are going in, and software systems that do not support APIs ‘out of the box’ should be considered in the context of whether better, more integrated solutions might be available.

If you’d like to hear more about APIs, and see them in action, join our webinar API 101: The backbone of software integration (or watch on-demand afterwards).

About the Author

Dudley is a member of the ICAEW Data Analytics Community an ICAEW Chartered Accountant and Auditor, formerly with KPMG and Moore Kingston Smith. His specialism is in audit analytics and technology. He is the VP of Business Development at Circit and previously founded Audapio, a tool that leverages Open Banking to improve audit quality and efficiency.

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