A host of changes are presenting challenges to the accounting profession, according to two leaders of the American Institute of CPAs, but they are also engendering business opportunities for those accountants who are willing to seize them.
In a joint presentation at the Practitioners Symposium and Tech+ Conference here in Orlando, institute president and CEO Barry Melancon and chair Tommye Barie offered an update on professional issues that did not shy away from the significant issues the profession faces, but also identified clear strategies for leveraging them to its advantage.
The global landscape
Barie kicked the presentation off with a survey of the economy. “It’s taken a little bit longer than expected for the economy to recover,” she noted, adding that the best place to look for growth is the emerging economies.
“Whatever’s happening around the world is happening in our own backyard,” she said, noting four major changes that are unfolding both here in the U.S. and around the world: urbanization, accelerating technological change, an aging world, and greater global connections. “The current changes are having 3,000 times the impact of the Industrial Revolution.”
They are also opening up international markets, she said, noting that 64 percent of small and midsized businesses had sold merchandise or services to a customer outside the U.S., while 70 percent of the world’s purchasing power is outside the U.S.
Making the most of these and other opportunities will require some introspection. “All of us need to look more closely at our business model to move more effectively into the future,” Barie said.
The profession will also need to think about how to address the crucial issue of ensuring that it replenishes itself. “The pipeline of students in accounting is as full as it’s ever been,” she said, “but those pursuing licensure is flat.”
She cited AICPA research that identified three critical inflection points in the career of a potential CPA:
- When they’re in high school thinking broadly about possible careers, at which point the most important factor is whether they have a model in their lives -- a friend or relative who is a CPA;
- When they’re in college, thinking more specifically about their career, at which point the most important factor is the degree and intensity of firm recruiting activity at their college; and,
- When they’re in the workplace, at which point the most important factor is whether their employer requires or subsidizes the taking of the CPA Exam.
Barie also highlighted the importance of attracting more minorities to accounting. “Diversity is a big deal, but not a politically correct deal -- it’s crucial if we’re to succeed as firms and as a profession,” she said. “We did a lot about encouraging minorities to join the profession, but we didn’t do much to make them feel welcome and to get them to stay.”
Peer review and more
Melancon focused in part on the profession’s ongoing work to improve itself, starting with the institute’s proactive response to a recent Department of Labor report that suggested that many audits of employee benefit plans were sub-par.
Its research into the area revealed that many of the most problematic audits were performed by firms that didn’t do that many audits.
“There are huge quality issues for those who don’t specialize in any particular area,” Melancon said, suggesting that firms should pursue expertise in narrow specialties, rather than dabbling in a wide range of services -- and that describing the AICPA’s specific approach to improving the audit process.
He also spoke at length about the future of peer review, urging accountants to be “incredibly proud” of the fact that they’re the only profession that monitors itself with such a mechanism. That said, the institute is looking at peer review, and has a number of ideas to consider for improving it. He strongly urged to all CPAs to read Future of Practice Monitoring to join the discussion.
Melancon went on to identify a host of other changes facing the profession, and their potential upside:
- Changes to the way accountants learn, which will move away from the old by-the-hour format, but do much more to guarantee that people actually learn the material.
- Changes to the way clients value accountants’ services, which will devalue old models, but open up new ways to offer more value to clients.
- Changes to financial reporting in the form of integrated reporting, which combines financial, strategies and sustainability reporting. The U.S. is lagging the world in this area, but it will be a great service offering for accountants.
Changes in technology will create vast amounts of data and enormous security vulnerabilities, but data analytics will be a critical tool for accountants, and security-related services have the potential to be an “annuity business” for CPAs.
Melancon summed up the update with this thought: “Our profession has gone through a significant amount of change. The profession’s relative strength gives us a huge opportunity to create change going forward. And it’s better for the profession to drive change from a position of strength than otherwise.”
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