The accounting profession will change beyond recognition over the next 10 years, according to American Institute of CPAs president and CEO Barry Melancon—except he really thinks it will come much more quickly than that.
“I really mean five years, but people get scared when I say that,” he said during a keynote address on “The State of the Profession” at the 2017 Digital CPA Conference, held in San Francisco by AICPA technology subsidiary CPA.com.
“In a world in which everything is changing, who are we to believe that we won’t have to change as well?” he asked. “The speed of change in our profession—and in our lives—is at an all-time high, and we need to think in a more complex way about change.”
Technology is driving much of the disruption in the profession and the wider world as well, he noted, citing the driverless car as an example of complex ramifications: While it’s easy to see how it will affect professional drivers and auto manufacturers, Melancon explained, it will also affect local governments (who rely on traffic, parking and speeding tickets for much of their revenue), law enforcement (who spend much of their time in traffic enforcement), city planners, the real estate industry, and even health care (through fewer accidents, smarter cars will significantly reduce the number of organs available for transplant).
“It isn’t about thinking about any one technology,” he concluded. “It’s about the implications of technology, and we need to be helping our clients understand and deal with these.”
All too many businesses think they’re exempt from change, Melancon said, citing surveys where more than half of business respondents think their competitors will be disrupted by technology, but that they themselves won’t be.
“We see too many people saying, ‘Yeah, but not us,’” he said—and that includes too many accountants. “We face the challenge of making sure that we continue to be successful. We have to be smarter and more passionate and more committed to change.”
As a cautionary tale of the depth of commitment required, he talked about Kodak, which failed to make the transition to digital photography. In fact, the company had made a serious commitment to changing over to digital photography, but was caught flat-footed when the change it expected to take 10 years only took two, and more nimble competitors beat it to market.
In the accounting space, technology is already affecting every aspect of what CPAs do. “One of the Big Four firms is one of the three largest users of bot technology in the world—not just accounting, but the whole world,” Melancon said. “They apply them in tax, and get a 40 percent efficiency rate with a 98 percent accuracy rate.”
Similarly, he noted, “I’ve seen the audit of accounts receivable changed to where there are only two points of human interaction—setting the scope, and checking exceptions.”
The largest firms are driving many of the changes in audit, applying artificial intelligence and cognitive computing to automate much of the grunt work and allowing auditors to discern new patterns and focus on higher-level services. “But how do we harness that change and bring it down to the 44,000 small firms?” Melancon asked.
“Who should transform auditing? Should we own that as a profession?” he went on. “We need to imagine a different approach to auditing. We need to imagine the technology we need, and to challenge the standards-setters to keep up, and to look at our methodology for auditing.”
Among the other changes facing the profession, Melancon noted that the challenge of cybersecurity is a major concern for both public accountants and those in industry, while the growing demand for sustainability information is reshaping corporate reporting.
In tax, technology is changing client expectations and empowering competitors. “Young people will think about tax and planning differently from the way Baby Boomers do,” he said. “Young people are using algorithmic advisors instead of financial planners, so brokers and financial advisors are going to give away tax return preparation to draw the young people in.”
“Tax practices that focus on simpler returns are at significant risk, when you combine technology, our competitors, and the new tax act,” he warned.
One major component of adapting to significant change will be learning to develop new and relevant skill sets, Melancon said, citing a World Economic Forum report that suggested that in five years’ time, more than a third of the skills currently considered important today will no longer be relevant.
“I worry about the entry-level people in our profession” who will have to develop new and different talents, he said, “but I worry more about the skills of people in the middle of their careers.” They may find it difficult to adapt to new demands—and that will cause problems for firms, he pointed out, mentioning a survey that found two-thirds of auditing firms reported difficulties finding job candidates with the needed skills in technology, communications, critical thinking and judgement.
“We need to learn new skills, but we also need to unlearn old ways of thinking,” he continued. Firm models will need to change, both internally—in terms of the ratio of entry-level to more experienced staff, for instance—and externally, in terms of how firms manage their relationships with clients. As an example, he said that he has seen more firms experimenting with subscription-based relationships, where for a flat monthly fee, the outside accountant takes care of all of a client’s accounting needs.
Despite his many warnings, Melancon remains optimistic about the future, and CPAs’ prospects in it.
“These are extraordinary times for our profession, with extraordinary opportunities,” he said. “The opportunities in a complex world for new types of attest, audit and tax work are significant. We are so well-positioned for the future—but we need to have the willingness to think differently, to be bold, and to have tolerance for occasional failure.”