In an era of disruption, it's hardly surprising that accountants
should find themselves overwhelmed by the many changes sweeping over
their profession. With so much going on in so many different areas,
it
can be hard to figure out where to focus, and which changes to address
first.
With that in mind, we asked many of the most prominent
figures in accounting -- regulators, association leaders, leading
practitioners, consultants, software vendors and others -- what they
think the most important issues facing the profession are. Their answers
highlight a number of serious concerns, to be sure, but many of them
are the flip side of a major opportunity. In either case, CPAs and
accountants will be grappling with them for some time to come.
1. STAFFING
The profession is in the
midst of what appears to be a severe shortage of qualified staff at many
levels -- and it has leaders in the field seriously concerned, whether
it's the lack of young accountants taking the CPA Exam, the dearth of
CPAs with three-to-five years of experience, or the shortage of
potential partners.
"The war for talent is at a level I've never
seen before," according to Koltin Consulting Group chief executive Allan
Koltin. "Most CPA firms nationally have made this a No. 1 strategic
initiative within their firms."
The problem is twofold, according
to Michael Colgan, the chief executive and executive director of the
Pennsylvania Institute of CPAs: rising demand and shrinking supply. "The
projected growth in accounting positions, as well as demographic
changes within the population, will challenge the profession to attract
and retain talented professionals," he said. "It is critical to keep the
pipeline of the best and brightest candidates full by encouraging
students to consider careers in accounting, finish their journey to the
CPA credential, and become those trusted advisors."
"Attracting,
developing and retaining young leaders will make or break a firm in the
coming years," warned Sarah Cirelli, marketing manager of interactive
marketing at Top 100 Firm WithumSmith+Brown.
2. THE NEXT GENERATION
The
leaders Cirelli mentioned were of specific concern to many of those we
spoke with. "Firms need leaders, and many leaders are landing in a
managing partner or partner role without much idea how to lead,"
according to Sarah Johnson Dobek, president of Inovautus Consulting.
Information
Technology Alliance president Stan Mork concurred: "We need to focus on
continuing to develop the future accounting leaders. The leadership
teams of many of the larger firms are getting older and closer to
retirement, and there appears to be a lack of future leaders moving up
within the ranks."
It's not just firms that need new leaders.
"Finding the next generation of leadership is the most important issue
currently facing the profession," according to Jim Boomer, chief
information officer and shareholder at Boomer Consulting. "And we will
not only face this challenge at the firm/business level but also
throughout the organizations that serve our profession, such as the
American Institute of CPAs and state societies."
3. SUCCESSION PLANNING
While
building the next generation is an important issue, so is the exit of
the last one. "The succession issues created by the aging Baby Boomers
are affecting almost every firm in the country," said Gary Adamson,
president of Adamson Advisory.
The demographic factor is
exacerbated by the absence of preparation. "A lack of succession
planning in many firms over the course of decades has pushed many firms
into an uncomfortable position, with limited choices," explained Art
Kuesel, president and owner of Kuesel Consulting. "It will be
interesting to see if the cycle repeats itself with the next generation
of ownership."
"Countless surveys have documented the shocking
number of firms who do not have a formal succession plan in place,"
noted Transition Advisors president Joel Sinkin. "So when a principal
wants to slow down or the firm is hit with an unexpected event -- i.e.,
the death or disability of a partner - they are forced into a hastily
arranged merger usually under not favorable terms."
4. M&A
Succession
may be one of the main drivers of the decade-long merger &
acquisition boom in the profession, but it's not the only one.
"The
accounting profession today has a 'grow or die' mentality that has led
to the unprecedented consolidation of accounting firms through M&A
activity," according to Russell Shapiro, a CPA and partner at the law
firm Levenfeld Pearlstein, whose practice focuses on M&A for
accounting firms. "Small accounting firms, by and large, are finding it
more difficult, and only the growth that a merger can bring will enable
firms to expand their service offerings, compete for the top talent that
clients demand, and fund deferred-compensation payments to the growing
universe of retiring partners."
While many firms see M&A as an
exit plan, others see it as a growth-booster. "One of the areas I will
be watching most closely during the next year is M&A," noted Joe
Adams, managing partner of Top 5 firm McGladrey, which added two firms
in 2013. "We plan to continue to supplement our strong organic growth
with the acquisition of firms that are aligned with our vision."
5. SHAPING THE FUTURE
Many
think the profession should focus on recruiting and retaining new staff
and partners, but 2020 Group chairman Chris Frederiksen warned that the
horse may, in fact, be out of the barn already. "Short of allowing in
several hundred thousand qualified immigrants," he said, "there are not
and will not be enough 'good' people. The real issue is making the huge
paradigm shift to the new model, which includes insourcing, outsourcing,
virtual offices, mobile and cloud technology."
This focus on a
new way of practicing is shared by Jason Blumer, chief innovation
officer of Blumer & Associates, for whom the biggest issue facing
accounting is "building a firm as a strategic company that replaces the
traditional partnership model."
Meanwhile, Barry Melancon,
president and CEO of the American Institute of CPAs, took an even
broader view of the work needed to shape the future of the profession:
"The future involves mapping new opportunities for growth, outthinking
conventional views, and pursuing thoughtful and substantial initiatives
that keep our members at the top of the game, competitive, committed,
serving the public interest, and helping people and business succeed,"
he said. "This profession is extraordinarily resilient, and to maintain
our standing as a profession at the heart of finance and business, we
have to constantly adjust and evolve our competencies."
6. RELEVANCE
Many of those we spoke with were concerned about whether the profession will even have a future to shape.
"The
most important issue currently facing the accounting profession, in a
nutshell: the battle between obsolescence and innovation," warned CPA
Trendlines president Rick Telberg. "The profession as a whole, across
the globe, in public practice and in industry, teeters on the brink of
competitive irrelevancy and irreversible obsolescence. Businesses are
increasingly recognizing that they don't necessarily need a CPA to do
what they need most profoundly: apply a discipline of metrics and
controls to provide operational insight and strategic leadership."
"I
believe complacency and lack of leadership is hurting the profession,"
said Sharada Bhansali, co-founder and executive vice president of
AccountantsWorld. "The profession is losing its relevance, and many
accountants have settled for this compromising situation. Accountants
need to look confidently toward the future."
"In this continually
changing and increasingly global environment, CPAs risk losing relevance
in the marketplace without ensuring our services provide value in a
timely and meaningful manner," said incoming AICPA chair Tommye Barie.
"Our profession must cast a wide net to address ever-deeper business
needs."
Not everyone is convinced the profession is up to it.
"Unless our profession continuously innovates and adds value, we deserve
irrelevancy," said Ron Baker, founder of the VeraSage Institute. "What
was the last innovation from the profession?
7. THE IMPACT OF TECHNOLOGY
Talk
to any accountant in the country and it rapidly becomes clear that
technology is changing everything, from how they offer their services,
to what services they offer, to who they offer them to, and much more.
"We
continue to see the impact of technology and cloud computing on the
profession as the biggest issue and opportunity," said CPA.com CEO Erik
Asgeirsson.
Technology is affecting the profession in many ways -
commoditizing many of its traditional services, for one thing, while
offering opportunities for closer relationships with clients, for
another -- but both Grant Thornton CEO Stephen Chipman and Public
Company Accounting Oversight Board member Lewis Ferguson were
specifically interested in one of its seeming byproducts. "We must find a
way to reconcile ourselves and embrace big data - vast amounts of
seemingly unrelated and unstructured data," said Chipman. "The
accounting profession must develop and teach methods that extend beyond
traditional data analysis. ... It's the key to our profession being a
relied-upon business partner."
8. KEEPING UP
Technology isn't the only area where change is creating issues for the profession.
"Government
regulation changes at a pace rivaling changes in technology that
creates an inordinate amount of pressure on practitioners," noted AICPA
vice president of small firm interests Carl Peterson. "The fast pace for
both financial reporting and tax laws puts small firms in a position of
risk and exposure to what they do not know or cannot keep up with in
this increasingly complex regulatory environment."
Technology,
legislation, regulation, best practices, demographics and the economy
were all cited as major areas of change -- and some of those we spoke
with were worried about accounting's ability to adapt. "Our profession
still struggles mightily with cultural resistance to change," said
Michelle Golden, a member at Top 100 Firm Kennedy and Coe. "Yet the only
constant these days seems to be that the pace of external change
continues to accelerate. But internally, within the profession, firms
still create and adopt change at a snail's pace by comparison."
Keeping
up may end up being one of the most important skillsets accountants can
develop. "The most important issue is the ability to constantly learn
and change in order to take advantage of the many opportunities
presented to our profession as trusted business advisors," said Boomer
Consulting CEO Gary Boomer. "Those who can identify the opportunities
and learn faster than the competition will be more successful and remain
relevant in a rapidly changing environment."
9. GLOBAL ISSUES
As
more and more businesses find customers and markets around the world,
accountants will need to be ready to support their clients wherever they
are.
"The increasing interconnectedness of global markets remains
one of the most important issues currently facing the profession and
issuers," said Center for Audit Quality executive director Cindy
Fornelli. "In this global context, U.S. regulators need to help ensure
the primacy and the competitiveness of our markets."
One area
where this is particularly important is in standard-setting, "The future
of international convergence in the U.S. remains an important issue for
the profession," according to Teresa Polley, president and CEO of the
Financial Accounting Foundation, the parent organization of the main
U.S. standard-setter, the Financial Accounting Standards Board. "From
the FASB perspective, this means balancing the demands of international
convergence with improvements to GAAP."
10. ACCOUNTABILITY AND INTEGRITY
Finally, some in the profession are looking to its reputation for integrity, independence and reliability.
"The
most important issue currently facing the public accounting profession
surely is the difficult balance between 'public accounting as a
business,' which comes with the challenges of keeping a 'client' happy,
and 'public accounting as a profession,' which requires accountants to
act in the public interest to protect the interests of investors," said
PCAOB member Jay Hanson. "As a profession, public accounting has a long
and rich tradition of members who are smart, diligent, reliable, ethical
and trustworthy. As a business, however, public accounting has been
subject to criticism, some of it deserved, for blurring the lines
between the independence that public accountants need to have and the
business relationships, including engagements for non-audit services,
that sometimes erode the necessary skepticism and objectivity."
In
a slightly more biting formulation, this issue is one of "coming up
with plausible explanations for how growing their consulting businesses
doesn't compromise auditor independence," according to Caleb Newquist,
editor-in-chief of Sift Media U.S.
This focus on integrity and
accountability isn't strictly client-facing, either. "Many firms still
operate with partners who aren't accountable to each other," said
Capstone Marketing president Jean Marie Caragher. "This not only limits
what the firm is able to achieve, but fosters the next generation of
unaccountable CPAs."