Did you know that an auditor’s skill set has a lot in common with the qualities of a successful entrepreneur? We sat down with AuditBoard co-founder and President Jay Lee to talk about taking calculated risks, breaking audit stereotypes, and using what he learned as an EY auditor to start an award-winning business.
Steve Jobs and Bill Gates dropped out of college before starting their software empires. John D. Rockefeller was on the verge of bankruptcy before he created Standard Oil. Oprah Winfrey overcame great personal adversity to become the queen of media and one of the richest people in the world. Such hero’s journey narratives are deeply ingrained in American capitalist lore, and have largely shaped the cultural understanding that to be a successful entrepreneur, one must have a healthy tolerance for risk.
Which is why, at first glance, the archetypal entrepreneur may seem at odds with the stereotypical profile of the risk-adverse auditor. Yet, as the 2019 regional winners of the EY Entrepreneur of the Year Award in Emerging Business Software, AuditBoard co-founders and former auditors Daniel Kim and Jay Lee have proven that stereotypes are worth the same amount of energy that goes into applying them: not a lot.
Below, AuditBoard co-founder Jay Lee describes his journey from EY auditor to AuditBoard founder, and what it was like breaking stereotypes along the way to becoming a 2019 EY Entrepreneur of the Year winner in Los Angeles.
How would you say you’ve balanced the seemingly disparate aspects of your professional life—as an auditor and as an entrepreneur—to find success?
Jay: My belief is that entrepreneurship and audit are not opposites at all, but that they go hand-in-hand. My experience as an auditor enabled me to be a better entrepreneur. Entrepreneurship is about taking calculated risk, not only taking into account the downside risk, but also the cost benefit and the upside risk.
My ability to successfully assess these things stems from being able to assume a third-party perspective of risk, which I learned from audit. But more than that, good auditors also have to take a step back and ask “How does this impact the business—and what does that mean for the business?” Having this perspective definitely shaped my entrepreneurial life in countless beneficial ways.
What was your thought process behind choosing audit as a career at the start of your professional life?
Jay: Atypical for most auditors, who usually major in accounting, my undergraduate major at USC was in Finance with an E-comm minor. When I graduated, I knew that someday I would run my own business, but my thought process was more of an assessment of “what is going to help me get there?” Because accounting is “the language” of business, I knew that was an important baseline I wanted to have. I pursued my Master of Science in Accounting from the University of Virginia, and from there, I joined the Ernst & Young external audit function. I knew consulting was going to be a great foundation for whatever I did next, because it would provide me with the unique opportunity to see many different businesses of all sizes and from various industries, and to understand how they work from an audit and accounting perspective. I knew the foundational lessons that I learned in audit would help me wherever I ended up—and it certainly did when I moved to private equity, mergers and acquisitions, and ultimately started AuditBoard.
How did your audit background help you in private equity?
Jay: At first glance, it was somewhat surprising for someone with my background—as a CPA and as an EY audit alum—to be working in the realm of private equity. But this audit background ultimately became the unique lens that I was able to use to add value and understand businesses from the perspective of their financials. For me, that was the crux of how my experience in audit and accounting translated: I could look at any business through their financials, and understand their business models and their business opportunities. My accounting and audit perspective was my opportunity to add value to any of the deals we were examining.
What influenced your decision to leave private equity and return to audit—this time as an entrepreneur?
Jay: What touched close to my heart is that Daniel and I both grew up in this industry. Our formative years as professionals were spent at PWC and EY, respectively, so when we were building this company it was important for us to keep reinvesting in the industry we came from. This has had a huge impact on our business in a very core way, down to our business model, in terms of hiring. Eighty percent of our team—Product, Sales, and Client Success—comes from audit or the industry.
When we think about the culture here, we see ourselves combining the best professional traits from technology and entrepreneurial culture with the best traits from Big Four culture and the audit profession: collaborative, detail-oriented, a team player mentality, and, very importantly, good communication skills. In external audit, when you work with companies a large part of your job is building relationships, whether you’re working with executives, controllers, and CFOs or with clerks. If you work within a business, your process owners and the other constituents within the organization are your “clients.” No matter which way you cut it, to be successful in audit, you need to be an effective communicator and a good team player. I think one thing that we as a business really pride ourselves on is understanding our clients, both current and future, and understanding the most effective way to communicate with them.
What are some of the common audit stereotypes that you have challenged?
Jay: My least favorite stereotypes are that audit is boring, mundane, that we’re a cost center, and that auditors are often pigeon-holed into being the “bad guys.” This completely overlooks the point that auditors help lead the business. By assessing the business’s risk and processes, the audit function helps prioritize what’s important for the organization and where people should spend their time—and these things make up the core of a business!
AuditBoard challenges these common stereotypes by helping auditors do their jobs better by improving efficiency, which helps auditors drive more value to the business. This helps shift the industry as a whole closer to a place where audit is seen as a value-add function, versus just a cost center or necessary evil.
Looking back at the beginning of AuditBoard after having received this recognition from EY, what was the craziest part of your journey?
Jay: Probably that at the time we began AuditBoard in 2014, Daniel and I both had very young families. That was probably the craziest piece to be honest, but we knew there was an opportunity, and we knew that if we built the business right and pulled it off, it would be very impactful. We knew the industry needed it—and on a personal and professional level—it would be gratifying to pay back our experience by reinvesting in the industry that shaped us and helped us in our careers in so many ways.
What is the best advice you’d give to auditors looking to start out in entrepreneurship?
Jay: Remember that you have to evolve as your business evolves. Expect to work hard and continue to build. Always make an effort to understand your audience and your customers’ needs, every day. Finally, build an amazing team. Daniel and I take great pride in the people that we have hired to this company. Not only the journey that we’ve taken as a business, not just the individual journeys each of our employees have gone on or the career growth that has transpired over the course of this company, but the combination of all these people and journeys has turned into quite an amazing business.
Learn more about the 2019 EY Entrepreneur of the Year Award winners here.
Learn how AuditBoard's integrated suite of easy-to-use software (audit management software, SOX compliance software, risk management software, audit workflow software, and compliance management software) can empower your team.