10 Issues That Are Keeping Accountants Up at Night
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.
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."
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."
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."
WithumSmith+Brown partner Jim Bourke, meanwhile, warned about one of technology's attendant dangers: "An issue flying under the radar relates to the continued threats posed by cyber-attacks and data breaches that occur on a nearly daily basis," he warned. "Our profession will continue to be challenged with ensuring that such information is securely stored and that we have exercised best practices to help ensure the continued confidentiality of such data."
And for some, the technology itself wasn't as important as how accountants are responding to it. "The most important issue facing the accounting profession right now is that clients are ahead of their accountant with their move to technology, mobile and the cloud for their business operations," said Amy Vetter, global vice president of education and enablement at Xero. "This is a major concern because it is important for clients to feel their accountant is ahead of them with the latest tools and technology."
"By far, the rapid pace of change in technology is the most critical issue facing practitioners and firm leaders today," explained Rootworks president and CEO Darren Root. "A firm's ability to strategically evaluate and adopt new technologies and train staff to use them, given all of the other complexities they face, is the critical factor that impacts how successful a firm will be in today's market."
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."