As part of our Top 100 Most Influential People in Accounting report, we asked the candidates: "What is the most important issue currently facing the accounting profession?"
Their answers -- thought-provoking, insightful, sometimes controversial -- are given in full below.
The audit model and the role of the external auditor. External private audit firms are compromised because they are hired and paid for by the company for which they provide audit opinions. This compromise leads to a conflict of interest. As a result, audit firms are naturally biased in favor of the company being audited, and the public perception (if not the reality) is that honest audit opinions are difficult, if not impossible, to come by.
This problem is probably unfixable by anything other than a complete re-invention of the audit function, probably brought about by nationalization of audit firms.
You may think it strange I've identified auditors as the most significant problem, given that I've led the charge against IFRS for the past three years. It doesn't matter what the standards are if we don't get the audit function fixed.
-- Dave Albrecht
Associate professor of accounting, Concordia College
The profession is going through a major period of change. We've come to realize that in order to recruit and retain young talent, we need to change our outlook and how we work. The profession needs to change from the drudgery of long hours doing compliance work that we all faced to one that embraces a value model that empowers young talent to do more satisfying, productive work with the flexibility that affords them greater balance.
The challenge is how best to get there. Better leveraging technology and productivity tools will help get us there. But the shift goes much deeper, requiring leadership to take a hard look at revenue models, services offered, and sourcing strategies. For example, I believe there is great opportunity for firms delivering client accounting services. However, building a profitable practice area will require firms to rethink value creation, and bill accordingly - looking at SaaS solutions and outsourcing as key productivity enablers.
-- Mark Albrecht
CEO, XCM Solutions/Xpitax LLC
From a technical standpoint, I believe the merging of international standards with U.S. standards is the most immediate issue facing the profession. However, from a personal perspective, I believe it would be most beneficial for all states to create uniform criteria for certification. I also believe it would be in the profession's best interest to either adopt a secondary degree for certification or drop the 150 credit hours (this arbitrary credit-hour requirement essentially calls for students to pursue an additional year of college without benefiting them with a further degree).
-- Robert Albrecht
Partner, Gelman, Rosenberg & Freedman CPAs
In a word, credibility! Despite improvements in financial reporting standards, auditing standards and federal laws, there are still too many un-flagged business and government fiscal crises. Readers of audited financial statements expect to be alerted in advance of a financial crisis.
-- Tom Allen
The most important current issue is the impact of the adoption of IFRS. It will affect not only private companies and small businesses, but also the users of financial statements issued by these entities. For example, when will it be reasonable to expect small or regional banks to be sufficiently familiar with IFRS to base loan decisions on IFRS-based financial statements? Further, unless all entities of a certain size are required to adopt IFRS or a version of it at the same time, we run the risk that potential investors in small businesses will be confused when comparing the IFRS-based financial statements of one entity with the GAAP-based statements of another.
-- John Ams
Executive vice president, NSA
Internally, all firms are dealing with the ramifications of a lack of growth over the past two to three years. And the fact is we all need some growth in order to meet the expectations of partners, the desires of prospective partners, and so on.
Externally, I think it continues to be the pace of change as it relates to everything from technology to standards to oversight by governmental agencies.
-- Rick Anderson
Chairman and CEO, Moss Adams
The most important issue currently facing the accounting profession is how to strike a balance between safeguarding investors by providing them with valuable and accurate information while not imposing unnecessarily burdensome regulations. Regulatory costs could outweigh the benefits, and could cause a significant negative impact on businesses - particularly for small and midsized companies that lack robust resources and where the burden is greatest.
And, of course, let's not forget the ongoing push to adopt IFRS in the U.S. The continual absence of a resolution is unhealthy not only for the profession, but for businesses alike.
-- C.E. Andrews
President, RSM McGladrey
Pushing for implementation of supporting the Blue Ribbon Panel on Private Company Financial Reporting's recommendations on differential standards in GAAP and a separate, autonomous standard-setting entity for private companies. As a founding partner of a local firm in Denver, the majority of my clients are privately held companies. They all see a need for changes and modifications to existing and future GAAP for privately held firms, and a new independent board reporting directly to the Financial Accounting Foundation and not subject to FASB approval.
-- Gregory Anton
Incoming chair, AICPA
As the world moves towards a global economy, the most crucial issue for the accounting profession is transitioning to international accounting standards. The integrity of the profession can only be maintained in a global economy by doing so.
-- August Aquila
President and CEO, Aquila Global Advisors and Chantrey Capital Advisors Inc.
At the Moore Stephens global conference in Chicago recently (I am currently chairman of Moore Stephens North America), I heard from my peers almost universally that we are in a period of business cannibalism in our profession. It's a return to the late 1990s before the Enron debacle when national and super-regional firms kept auditing fees artificially low in order to gain market share and to attempt to sell more lucrative consulting services to clients.
There is continuing downward pressure on audit fees right now, and this is a major issue for many firms. For most of the past decade, audit prices were generally appropriate due to new regulations and SOX requirements. Now that the profession has helped American business become largely compliant with SOX, audit has again become a commodity as opposed to the specialty it is.
Our firm has not participated in this, as we differentiate ourselves in the marketplace as a business partner that provides comprehensive solutions for the full spectrum of an enterprise. Thus far, our strategy is working. Our clients recognize our spectrum of capabilities and our "business partner" positioning as important to their strategies and needs.
There is another secondary, yet important, challenge and that is the economy, which continues to present instability. The economic roller-coaster ride causes businesses to be much more risk-conscious and to delay IPOs, mergers and acquisitions, and more speculative investments until they are comfortable with the stability of the economic environment.
-- Andrew Armanino
CEO and managing partner, Armanino McKenna
Technology is changing the competitive landscape of the accounting industry, and that offers both opportunities and risks for practices. Using powerful, cloud-based programs, smaller firms can now compete on an equal footing with many of their larger peers, with the ability to provide up-to-the-minute data reporting and forward-looking analysis. The value of harnessing this kind of integrated, Web-based technology will continue to become more apparent to firms and their clients. The downside to this evolution is that firms that do not adapt to these new ways of providing services will find themselves at a competitive disadvantage.
-- Erik Asgeirsson
The ultimate decision regarding either U.S. GAAP convergence with, or full adoption of, IFRS for U.S. publicly traded companies will have major implications for the profession.
-- Robert H. Attmore
The ultimate determinations of IFRS and private entity accounting standards.
-- Billy Atkinson
Immediate past chair, NASBA
It is the woeful state of financial reporting. GAAP, and IFRS, for that matter, do not provide the information that investors and other financial statement users really need. Reporting time-lagged, allocated and otherwise smoothed historical cost information doesn't capture economic position and performance in today's technology driven world. It's time to bring financial reporting into the 21st century, by reporting fair values on a real-time basis.
-- Paul Bahnson
Professor of accountancy, Boise State University
The profession is operating on a business model that is coming up on it's 100th anniversary, despite the fact that the external world has changed dramatically. This business model of "We sell time" is hindering the profession's ability to innovate, communicate value to its customers, and capture a fair portion of that value to invest in tomorrow. Because of this, leaders see what we do as a commodity, which is a self-perpetuating circle of despair. Add to this the regulatory revenue we rely upon, and our ability to innovate and add value is seriously crippled.
We must not confuse activity with relevance. Yes, there will always be compliance issues for the profession to address, but we simply must add value beyond government edicts. Otherwise, we will be relegated to part-time bureaucratic status, doing nothing more than assisting businesses and individuals with stifling compliance rules and regulations.
-- Ron Baker
Founder, VeraSage Institute
In the U.S., IFRS. If you listen to media reports, it seems as if the rest of the world is adopting a single set of international accounting standards and the U.S. is being left behind. We have the former and current IASB chairs making public statements that imply the U.S. will "relinquish" its leadership role in international accounting if we don't transition to IFRS. So the pressure is there, and with the question of how or if we will transition to IFRS remaining unanswered for three years now, we may have become a little desensitized to just how important this issue is. Trading our tried U.S. GAAP for another set of standards, promulgated by an international standards-setter that does not fall under U.S. jurisdiction, is an enormous undertaking with immediate and long-term challenges. What does it mean for other standards-setters, like the PCAOB and the IRS? The U.S. needs to take the time to get it right. The words "Prepared in accordance with U.S. GAAP" send a message to the financial statement user that the methods under which the financials were prepared have been tested and are trusted. "Prepared in accordance with U.S. IFRS" has to send that same message.
-- Joanne S. Barry
Executive director, NYSSCPA
The prospect for true Tax Code simplification, either "fair" tax or "flat" tax like solutions, is not imminent but it seems inevitable. All economics is about incentives and the current tax wedge disincents employers from hiring employees and employees from seeking employment. Furthermore, Dr. Art Laffer's brilliant analysis released in June 2011 proves that the direct costs (e.g., tax preparer and tax software) and indirect (e.g., lost productivity) of personal income tax compliance is $431 billion per year, 30 percent of all personal federal income taxes collected. For example, the tax compliance industry employees more workers than Wal-Mart, UPS, McDonald's, IBM and Citigroup combined. [Tax simplification] is in the nation's interest, but many CPAs will not agree. A simplified personal tax system would liberate CPAs to provide more higher-order (and more profitable) consulting services.
-- Stephen 'Tony' Batman
Chair, CEO and president, 1st Global
The most important issue facing accountants today is the same one it has always been: the apathy to make their practices better. The Internet has created new opportunities for accountants that are collectively worth billions of dollars, but only a few accountants are taking advantage of these unprecedented opportunities.
-- Chandra Bhansali
The issue that I've found coming up again and again is certainly one of technology, specifically the current focus on new cloud technologies. I would not classify the cloud as a fad, professional affiliation notwithstanding. With reliable and trusted cloud solutions, you have an entire IT team at the organization dedicated to keeping your data safe and secure, your systems and programs up and running -- that's their whole business model and key priorities for a cloud solution. When you compare this to the on-call tech support team that many smaller firms are working with, the choice is clear. Along with scalability solutions, and unbeatable flexibility when compared with on-site options, the cloud is a great resource for any business in the accounting profession. Trusting the experts to focus on what they do best, through partnering with smart cloud solutions, while your own firm can focus on providing amazing customer support and insights, is really a smart business decision on all ends.
Another aspect of the technology issue is the amazing growth rate of technology in the marketplace. With so many different technology solutions, gadgets, platforms, and just "cool things" coming out every day, it can be overwhelming to know what is worth the investment, both in terms of financial costs and the time costs involved in learning and implementing a new system. Focusing on the goals you have for your business, and for your clients, along with the help of trusted professionals and resources, can help accountants make smart decisions to help their businesses (and their clients' businesses) grow faster and smarter.
The industry is changing, that's for sure. But that's a good thing! The move towards new technologies, new processes, new ways of running firms, working in the cloud, and working with customers -- a whole new way of thinking in the accounting profession. What it comes down to is recognizing which tools can help you and your clients be more productive and efficient. It's no longer about just doing your job, but about doing your job better, about continuous improvement and always working to improve.
-- Kasey Bayne
Accounting ambassador, FreshBooks
The continuous discussion and consideration of transition or convergence to IFRS remains the most important issue currently facing the accounting profession in the U.S. and abroad. The recent exposure of the SEC paper "Work Plan for the Consideration of Incorporating International Report Standards" outlines a possible way to incorporate or converge IFRS into GAAP. The paper seems to demonstrate a more moderated and cautious approach than earlier models. The SEC sponsored "roundtable" also signifies a new look and perspective.
-- Ken L. Bishop
President- and CEO-designate, NASBA
International Financial Reporting Standards, which includes the process and cost of adoption, and the application to private business. To have two accounting systems apply in the U.S. will undoubtedly lead to much confusion and considerable additional cost on American business and in the financial markets.
-- Parnell Black
The issue of CPAs becoming commission-compensated salesmen.
-- Clark Blackman
Founder and president, Alpha Wealth Strategies
There is tremendous change on the horizon for our profession, and change management skills will be critical to the future success of all organizations. The next generation of technology, employees, clients and business models will all be drastically different than those to which we've become accustomed. As "Change the Culture, Change the Game," by Roger Connors and Tom Smith, points out, sustainable change starts with a cultural change. I agree completely, and believe that organizations that face these changes head on and proactively manage their teams through the process will survive, and those that let change happen to them will become obsolete. "Business as usual" won't cut it in the future -- planning needs to begin today.
-- Jim Boomer
CIO and shareholder, Boomer Consulting
Change management: Technology, talent, regulation and globalization all impact our profession. CPAs and firms that can "mesh" internal and external resources to meet the changing client requirements will be successful, while those that don't will become less relevant. Talent development and the ability to connect with external tacit knowledge require a change in the way CPAs think, plan and grow. CPAs should take a leadership role as industry transformers.
-- L. Gary Boomer
CEO, Boomer Consulting Inc.
In my opinion, the most important issue facing the profession relates to "globalization." So much has been debated about standards ... large vs. small. We sometimes forget that we live in a worldwide community. Globalization of the accounting profession is a necessary must, as we continue to do business around the world 24 hours a day, seven days a week. No longer do territorial barriers create roadblocks for companies; however, non-globalization of the profession sometimes does. Whether it is the "CPA" title as we know it today or some agreed-upon new credential or title, the world needs one global credential to recognize the individual who understands the worldwide financial rules, concerns and needs of business, whether located in the U.S., Germany, Greece, Japan, Australia or any other county one would like to name. The globalization of the profession is the most important issue and one that I believe will take years to perfect.
-- Jim Bourke
The role of the auditor continues to evolve and the accounting profession is at an important crossroad. We face several critical challenges in the post-financial crisis world, where both transparency and financial stability are vitally important. The profession's ability to contribute to increased transparency, greater stability and greater market confidence will determine our ability to be relevant in the future.
-- Beth Brooke
Global vice chair for public policy, Ernst & Young
It is a challenge to create growth which will lead to opportunities for a talented upper management group in a modest economy. From 2002-2008, the accounting industry, and the U.S. economy, experienced a period of rapid growth. During that time of economic expansion, firms developed talent pools of qualified individuals. Today, many of those individuals deserve to become shareholders but cannot be promoted due to the industry's level growth.
-- Raymond Buehler
President and CEO, Schneider Downs & Co.; chair, IGAF Polaris
The AICPA is committed to helping CPAs (both in firm and in business and industry) work more effectively and efficiently. Through CPA2Biz, the AICPA has reclaimed lost real estate in the technology area and is suddenly leading our profession to the right technologies. To me the most important issue is to continue to make advances in their new leadership role of using technology to enable all their members to better serve their constituencies. The right technologies will help address whatever external economic, legislative or reporting issues that may transpire.
-- Peyton Burch
Senior channel executive, Intacct
Accounting firms competing on fees, new client development and client retention.
-- Marc Busny
Regulatory complexity. In tax and accounting, providing expert advice and client service in today's environment is increasingly difficult, given complex issues and regulations. Today's accounting professional finds it harder to stay current with accounting standard changes, a global economy and a complex tax system. To adapt to this complexity, practitioners must network with other specialized professionals and use smart technologies to provide a high standard of service to their clients.
-- Jim Buttonow
Co-founder, New River Innovation
Helping businesses navigate the increasingly complicated and burdensome tax and regulatory environment.
-- Paul Caron
Publisher and editor-in-chief, TaxProf Blog
Continued high-level service to the American taxpayer.
-- Michael Cavanagh
Executive director, Council for Electronic Revenue Communication
Relevancy of the financial statement and the related role of the auditor.
-- Stephen Chipman
CEO, Grant Thornton
Over-zealous regulation by federal agencies continues to create significant efficiency and morale issues within the profession while doing very little to improve the technical excellence and effectiveness of engagements.
-- Timothy Christen
Chairman and CEO, Baker Tilly Virchow Krause
For those firms involved in reporting for public companies, there is a intensifying dialogue underway, driven by the PCAOB with respect to the relevance of the audit report and the need for users of these financial statements to get more transparency from the auditors as to what they think about the entity under audit. The so-called pass/fail audit report has declining relevance in today's complex environment and users want more. This dialogue is also underway internationally, as the international audit standard-setters are floating ideas on how to improve the reporting.
In many ways this may be an existential debate for the audit profession and increase the strains among issuers, regulators and the auditors. Whether this will increase regulation is an open question.
-- Robert Ciaruffoli
In my opinion, the most important issue currently facing the accounting profession is the commoditization of many of the services historically offered by the profession. Innovation and improved technology such as e-filing tax returns and more capable in-house business management software have enabled businesses to do more on their own. As a result, CPAs have been compelled to examine how they can provide greater value to clients beyond transactional activities (e.g. tax, write-up, etc.) that may have been the cornerstone of their practice in the past. While the "cheese is moving," I believe the change is an ideal opportunity for individual CPAs and the profession at large to explore new ways to provide additional value to the clients.
-- David Cieslak
Principal, Arxis Technology
The due diligence rules and the penalties associated will force small companies to go out of business.
-- Sharon Cook
Incoming president, National Society of Accountants
To continue to earn and sustain the public's trust in CPAs not only as trusted advisors, independent auditors and professional practitioners, but also as decent, honest folk with untarnished integrity. NASBA's Center for the Public Trust is the evangelist for the state boards and the profession in this regard, and starts at the college and university level to instill in accounting and business students that scholarship is important but ethics and trustworthiness are basic and critical to what a CPA, a CEO and a CFO are all about.
-- David Costello
President and CEO, NASBA
The complexity of standards and regulations continues to increase. Market dynamics, a global economy and worldwide communications are driving the need for revised standards and regulation.
On the plus side, complexity increases the demand for CPAs' services. On the minus side, CPAs are increasingly in the liability crosshairs. Specialization is an important strategy to deal with both.
-- Gale Crosley
Global accounting standards: The U.S. CPA and the business community must recognize not only the need for global standards, but the need for a deliberate, prudent standard-setting process. Whether it's IFRS or some other yet-to-be-identified global set of standards, any acceptable process should produce standards set by an independent body -- primarily influenced by the needs of investors, financial institutions and other stakeholders -- that rely on the financial statements prepared by, or reported on, by a certified public accountant or chartered accountant. Also, the process for change must be at a pace which will allow full consideration of the effects of such changes in our current standards. And finally, we must not forget the value of our current standards ("the gold standard"), which set the bar for any other global set of standards to exceed in quality, consistency, application and challenge.
-- Michael T. Daggett
We do live in a very challenging environment mainly because of the financial crisis that most of the economic players are still recovering from and the globalization.
From a European standpoint, the Green Paper released by the EU Commission last October entitled "Audit Policy: Lessons from the Crisis" led to the launching of a wide-range debate questioning the role of auditors. The auditing profession cannot ignore the causes and the consequences of the most serious financial crisis that took place since the formation of the European Union more that five decades ago. If we want to build a true competitive and integrated single market in Europe in order to serve the public interest, the role of the profession need to be rethought. Mazars is actively participating to this debate as we share the view that a new dimension should be added to the role of truly independent auditors by increasing the range of information over which assurance is offered and by boards and auditors being more transparent on the main findings from the audit.
From a more global standpoint, as an international integrated partnership operating in 61 countries around the world, Mazars is willing to reinforce its presence in growing emergent economies that will be key for the future of our profession. Moreover, as a global player, Mazars feels that we have the responsibility to go beyond legal requirement and to be committed to enhanced transparency. We achieve this goal through the voluntary publication of the group's annual report, which includes our consolidated financial statements prepared under IFRS and audited by two external auditors since 2004.
-- Patrick de Cambourg
President and CEO, Mazars
Previously the biggest issue facing our profession was "standards overload," and there is still a rush to adopt certain pronouncements in the name of "convergence." Once that process is complete, it will be interesting to see how our profession reacts to "stability" in our standards.
-- Jeffrey Deane
Partner and CEO, Malin, Bergquist & Co.
For those accountants providing wealth management services, retaining high-net-worth clients will become increasingly challenging as the need for ever-more-sophisticated tools and resources will become either more costly or less available.
-- Michael Di Girolamo
Managing director, Investment Advisors Division, Raymond James Financial Services
Aligning the public understanding, recognition and perception of the CPA brand at a global level. This incorporates the efforts to adopt international standards and to clarify the CPA's role and responsibilities.
-- Loretta Doon
CEO, California Society of CPAs
The most important issue is the role of the independent audit in the evolving business and financial reporting environment. This is the focus of regulatory proceedings in the United States and abroad that are addressing topics such as the content of the auditor's report, the scope of the audit, and the structure of the audit profession.
The independent audit plays a critical role in protecting investors and providing confidence in the capital markets. A high-quality audit contributes to the public interest by furnishing investors and other stakeholders with reliable financial information needed for the economy to function effectively.
The regulatory proceedings are pursuing questions as to whether more can be done to ensure that audits provide investors with information they need to make investment decisions. Concerns about risks facing investors have been heightened by the financial crisis, but there are other factors at work as well -- business and financial changes that are being driven by globalization, technology advances and other forces. What information investors need, how they should receive it, and who should provide it are questions that may require answers different from those that were thought to be satisfactory in the past.
In the course of exploring the auditor's role to identify possible improvements and expansions, there is the opportunity to address the gap that sometimes appears between what investors and other stakeholders believe an audit is, or should be, and what professional auditing standards require.
We therefore have a historic opportunity to re-examine the auditor's contribution to investor protection. The independent auditor has much to offer in addressing the evolving needs of investors -- familiarity with the capital markets, subject matter expertise and a commitment to objectivity. Clearly the independent audit needs to change to remain relevant and meaningful. If the process is thorough and balanced, we can open the way to a new and clearer definition of the auditor's role that serves the public interest in the eventful 21st century.
-- Joe Echevarria
In today's new economy, the war for clients is one of the most important issues currently facing the accounting profession. Middle-market firms are increasingly being squeezed between the Big Four returning to the space after a brief absence and lower-revenue firms being more aggressive in their acquisition of clients. Technology has created a more even playing field and firms have to clearly differentiate themselves in the eyes of the client and prospect. This is having a positive effect, as firms are taking the time to be strategic in their client retention, marketing and business development activities. Firms are becoming more client-focused. There has been a shift in conversation from a "we" mentality to a "you the client" mentality.
International business is the thread that runs through all of our clients and prospects. The global marketplace cannot be ignored. PKF Texas is in the fourth-largest city in the country. With 93 consular offices, the largest port in foreign waterborne tonnage, and home to the global energy industry, Houston is the international city to do business in. The close proximity as a gateway to Latin America and the effect the expansion of the Panama Canal will have on the Port of Houston and East End further solidify Houston's place as a global partner.
-- Raissa Evans
Executive manager, Pannell Kerr Forster of Texas
While accountants face a wide array of issues, depending on the size of the firm or corporation they work for, I believe the most important issue facing the entire accounting profession is their role as professionals in assuring public confidence in the financial reporting of corporations. The issue may have ebbed a bit since Sarbanes-Oxley, but I believe it is a fundamental issue.
-- George Farrah
Executive editor, Tax and Accounting, BNA Inc.
I think the biggest challenge, both now and in the next several years, is going to be meeting the needs of the next generation of clients.
Tomorrow's clients are digital natives, and as such they have different definitions of service, convenience and value. They put less value on rote compliance work such as tax prep and generating payroll checks. They see straight compliance work as a commodity, a view that will only become more prevalent with the proliferation of inexpensive, do-it-yourself solutions that will serve to further drive down the profession's profitability on low-value services.
Tomorrow's clients expect more value-added services like financial planning and advice, business consulting, and other advisory services. They seek service, convenience and coaching, not a computation professional.
They are used to working with service providers over the Web, staying connected with mobile devices and mobile apps, interacting with individuals and business via social networking channels, and being loyal to their preferred brands.
In the short term, this may present a challenge to firms. They will need to use technology, online communication channels, unique marketing messaging, a shift to professional services vs. computation services, and firm branding to attract and retain younger-generation business owners and individuals as clients.
But in the long run, I think the firms that choose to focus on marketing and progressive technology, and that work to be indispensable advisors will be rewarded with more loyal clients and the ability to deliver better service at a lower cost.
-- Scott Fleszar
Vice president of strategic marketing, The Tax and Accounting business of Thomson Reuters
We operate in a highly complex, rapidly changing world, where business models are evolving fast to meet the shifting relationships between the developed and developing world, customers, suppliers and governments.
The accounting profession must also move forward in step with the new realities of business. Ensuring that we continue to provide a service that is relevant and reliable, and meets the needs of investors, organizations and other stakeholders, is our first priority. We must continually evolve and expand the scope of work we perform to provide the clarity and understanding that businesses and investors need to make critical decisions.
Financial reporting also needs to evolve to provide the transparency needed to support market confidence and to enable efficient allocation of resources and, ultimately, growth.
The profession needs to have a strong view and voice in ensuring that financial reporting continues to fulfill its critical role in informing investors and other market participants.
The accounting profession should welcome these challenges -- we are uniquely positioned to be a leading advocate and participant in responding to the new realities.
-- Timothy P. Flynn
Chairman, KPMG International
Relevancy and value. The financial crisis exacerbated investors' expectations gap with respect to the product provided by the public company audit and the role the auditor plays in the financial reporting process. Regulators in the United States and around the world are considering a number of approaches auditors might employ to meet the changing information needs of investors. The CAQ and the public company auditing profession are in discussions with investors and other stakeholders, and are participating with the PCAOB and overseas regulators, in an effort to create workable and responsive solutions. The outcome will likely result in changes to the auditor's reporting model as well as potential changes to the role of the auditor. I believe it is critical that the profession continue its dialogue with capital market stakeholders and with regulators to build consensus around these potential changes, and to work toward consistency in the global marketplace.
-- Cynthia Fornelli
Executive director, Center for Audit Quality
The most important issue facing the profession is whether we can remain relevant in an all-digital world. Up until now, CPAs have derived the vast majority of their income from historical services such as accounting and taxes. These services are becoming a commodity as technology removes the magic. How quickly will the profession be able to retool itself with new value-added services? Or are we going to let other professions steal our franchise?
-- Christian Frederiksen
Chairman, The 2020 Group
From my vantage point -- I would say growth. Everybody is competing fiercely, with the large regional firms going down-market, which is adding pressure to the smaller firms. Since the economy has not recovered as anticipated, firms are as lean as they can get and now the only solution is to grow the top line.
-- Barry Friedman
There are a number of issues facing the accounting profession that require a balance of flexibility and adaptability, from a maze of ever-changing and complex regulations to exponentially growing information technology, to increased competition and navigating today's economic setting. Although I am an avid advocate of employing technology to create efficiencies I believe the issue that stands out the most is sustainability.
In order for a firm to sustain in today's environment, they need to attract, develop and retain not only the best resources but also the best talent. How does a firm attract high-skilled performers when there still exists a shortage of skilled and talented accountants? Firms need to;
1. Create a positive reputation;
2. Create a culture focused on developing and supporting individual career plans;
3. Provide job-related technical and non-technical training;
4. Place a premium on innovation and creativity;
5. Develop reward and appreciation strategies linked to performance;
6. Deliver challenging assignments;
7. Leverage technology and social media; and,
8. Promote a healthy work-life balance.
-- Lou Fuoco
Managing director, Fuoco Group
I believe there are two critically important issues now facing the accounting profession: understanding the CPA's value from the buyer's perspective and compellingly conveying that value ("the value conversation"), and the challenges inherent in leading teams who work in a virtual environment ("virtual leadership").
-- Michelle Golden
President, Golden Practices
Given the current pace of change in standards, regulations and oversight, the profession faces a dual challenge: keeping up to date on all the changes and their implications, and figuring out how to leverage rapidly changing technology to best meet these changes and the challenges they present to the profession and to our customers.
-- Jeff Gramlich
President, CCH Small Firm Services
The industry could not work if the registered preparer is not a business model to work in; for example, final regulations of Circular 230 say that once a registered preparer completes a return they can not give any advice after completion.
-- Larry Gray
Government liaison, NATP
Succession. With a record number of firm owners and partners retiring or planning to soon retire in the Baby Boomer generation, firms are struggling with the next steps for their firms. In order for firms to survive past the retirement of their current owners, a solid group of leaders must be in place with a solid vision for the future, and the skills to achieve the vision are critical. While the economic downturn has caused many firm owners to begin working on further development of their people in the areas of technical and consultative, business development and leadership skills, a focus on these things is imperative no matter what is going on in the economy. Succession planning and preparation is not a short-term project.
Accountants act as financial and business advisors to leaders in all professions and have the privilege and the responsibility to offer good advice to help these business leaders and owners make the best decisions for organizations throughout the U.S. and abroad. I have gotten feedback from business leaders nationally that they desire for their CPAs to know more about their industries and businesses. I believe it to be an issue and an opportunity. There is an opportunity to become more specialized, as well as an opportunity for accountants to educate the next tier of leaders in their firms to be better advisors, consultants and communicators. Also, the professionals in the accounting industry have a huge opportunity to make an impact on financial literacy and responsibility for both individuals and organizations in the U.S. With such a need for these advisors, leaders should be positioning their firms to take advantage of these opportunities.
There has never been a better time. With such a need for these advisors, leaders need to be building their firms so that they can participate in these opportunities.
-- Angie Grissom
Executive vice president and COO, The Rainmaker Consulting Group
Varying standards, including international and U.S.-based, along with private and public companies. I am concerned that we maintain financial information that is consistent for users.
-- Calvin Harris
National president and CEO, NABA
In the small-business accounting and tax business, it is going to be very interesting to see how the regulation of tax preparers impacts the profession. Will the new rules confuse these taxpayers about who best can service their needs? Will the regulation lead to better compliance? Will it limit the supply of qualified preparers and therefore lead to higher costs? Will it have no real effect at all? I think anything is possible and the next few years should be interesting to watch as we see what does happen.
-- Roger Harris
President and COO, Padgett Business Services
I think the main issue facing the profession is the immediacy of complying with the new stringent standards for tax preparers. The IRS timeline for increased certification has set some immediate industry-wide deadlines that require action before the next tax season. The IRS has begun the most strategic effort at oversight and regulation of tax preparers in the history of American taxation. Over 712,000 tax preparers have registered for PTIN numbers, and a competency exam and continuing education credits will be required in 2012 for preparers who aren't CPAs or enrolled agents.
Liberty Tax has prepared for these new industry standards by implementing our own certification process and monitoring process. With our tax preparer certification process in place since 2007, we are poised for closer scrutiny of our preparers by the IRS. We have incorporated enhanced IRS certification instruction into our trainings and tax schools. Because Liberty Tax took a proactive approach toward professional standardization, customer satisfaction, and maintaining the integrity of the Liberty Tax brand with our three-tier certification process years ago, we are in a good position to incorporate the IRS mandates. As the IRS starts its "audits" of tax preparer credentials, the outcome will be increased trust and confidence from the public and more confidence in the job we can do for them. Ultimately, the tax industry will benefit from measures that guarantee the most credible practices for the consumer, and a collaborative effort to fight fraud. It's a win-win for consumers and tax professionals.
-- John T. Hewitt
Founder and CEO, Liberty Tax Service
Change! FEI is celebrating its 80th anniversary this year, and this year in particular could be one with the greatest amount of change for the accounting profession.
In fact, we believe significant change is so likely this year, the theme of our 30th annual Current Financial Reporting Issues conference this November in New York City is "On the Precipice of Change."
On the public company front, we await the SEC's decision whether to permit or require U.S. public companies to report to the SEC using International Financial Reporting Standards published by the IASB, vs. generally accepted accounting principles published by FASB. Accountants in all roles, including FEI members serving as CFOs, controllers, treasurers and more, will be impacted significantly, historically, by any such change. And even if a formal move to IFRS is not made, there is an inevitable move toward IFRS given that it is the standard of choice for more than 100 countries worldwide, and U.S. companies doing business globally, or that are based outside the U.S., will naturally be caught up in this movement.
Also, any decision that is mandatory for public companies often can significantly directly impact private companies as well.
And completion of the major projects on the FASB-IASB convergence memorandum of understanding and the related changes coming out of those projects will significantly impact public company and private company accounting professionals and their colleagues in public accounting. I believe a key issue is to provide sufficient opportunity for public comment on the revisions to these major standards that will significantly impact accountants, and the economy at large, on matters including revenue recognition, leasing and financial instruments, and to provide sufficient time for companies, their auditors, investors and others to understand the new standards and implement them. We are pleased that FASB recently announced it has decided to re-expose the revenue recognition and leasing standards. Something important for standard-setters and regulators to understand and appreciate is that new accounting standards are not implemented in a vacuum; companies have related requirements for audit and internal control reporting requirements, and face numerous demands on their time for internal and external reporting to a multitude of internal and outside parties, in addition to cash management, management of debt and other covenants, and so on.
Our Committee on Corporate Reporting has stressed in comment letters to FASB and the IASB, and I have stressed in letters I have personally sent to the boards, that it is key to release revised exposure drafts on these major MOU projects, to inform the public and allow comment on the most up-to-date revisions, and to provide sufficient time for implementation.
Separately, public companies are also dealing with change in terms of it being the third year of the SEC's phase-in of XBRL, with the smallest companies now part of the XBRL mandate, and larger companies adjusting to the loss of the liability exemptions that were available upon initial adoption.
In addition, finance and accounting professionals serving in corporate treasury and other capacities are carefully following, commenting on proposals, and implementing final rulemaking issued by the SEC, the CFTC and others, resulting from the Dodd-Frank Act, with respect to derivatives and new disclosure requirements. The large amount of rulemaking flowing from the Dodd-Frank Act includes significant items for the accounting profession to follow, and the fact that the SEC is being asked to develop large amounts of new rulemaking, on basically the same budget as last year, makes input from accountants even more important, to help inform the SEC (and other rule-makers) about practical aspects of proposed rulemaking, and to help them avoid unintended consequences.
On the private company front, our private company members, which make up half of FEI's membership, are also potentially facing historic change in the accounting profession, as the Financial Accounting Foundation considers the recommendations of the Blue Ribbon Panel on Private Company Standard-Setting, and decides whether or not to establish a separate board to set private company accounting standards, or a modification of the current structure short of forming a separate board.
There are arguments on both sides of this issue; some of our largest private company members prefer to use the same GAAP as public companies, while some of our larger private company members, and many of our small to midsized private company members, point out that users of their financial statements are not looking for the complex valuation, disclosure and other requirements that users of public company reporting, such as equity analysts, credit market analysts and the SEC, may desire for public companies.
Additionally, concerns about solving our home country deficit issues, and those of other countries that are financially stressed, and potential economic fallout from those crisis situations, is something that the accounting profession, internally serving companies, and our colleagues in the public accounting profession, will need to watch carefully as well.
-- Marie Hollein
President and CEO, FEI
Information overload -- legislative/regulatory/standards overload. The impact of the massive federal legislation (Dodd-Frank & Obama health care), state legislative and regulatory changes (threat of sales taxes on service), and changes in financial accounting standards (IFRS, IASB-FASB convergence, and private company standards). This increased complexity also poses a huge opportunity for CPAs capable of learning and understanding these changes quickly.
-- Tom Hood
CEO and executive director, MACPA
The credibility of auditors' reports issued by the larger auditors of public companies. (While the profession is still recovering from Enron, Worldcom, Tyco, etc., under the PCAOB's governance, there has been significant progress during the past nine years.)
Three more comments:
First, the credibility of auditors' reports issued in the private sector remains high.
Second, the credibility of auditors' reports, especially for public companies, is crucial to the effective functioning of the economy. It is part of the foundation of trust on which the U.S. economy operates.
Third, the credibility or trust issue even pre-empts the questions raised about the relevance of the "pass-fail" model, the shortcomings of which have been highlighted by the recent, and current, economic crisis.
-- Andrew L. Hult
The profession has an overwhelming deficiency in qualified bench-strength. Lots of partners nearing retirement age and not many partner-ready accountants who desire to carry the baton.
-- Trey James
The rising split of the profession into boutiques and supercenters. On the one hand, there are boutique firms/professionals that are increasingly specialized in areas like firm valuation, estate planning, international tax, etc. With this specialization come increased differentiation, fees, higher client retention rates, and overall firm growth. On the other hand, generalist firms that remain focused on 1040 tax preparation are experiencing erosion of fees, client retention, and growth. Technology is automating and commoditizing these types of services and price will inevitably become the only remaining competitive differentiator. In order to grow, these firms will need larger volumes that can only be delivered profitably through process and technology efficiency. Partners need to think strategically about their firm's future and determine where they will be on the value-volume continuum.
-- Edward V. Jennings
Applying the right level of controls to mitigate risk. This applies to mobile devices, cloud deployments, security on computer systems, access to accounting software or content management systems. The move to less data entry and more integration of systems will provide more opportunity to uncover fraudulent activity and waste.
-- Randy Johnston
Executive vice president and partner, K2 Enterprises
Helping the small-business community understand the current (and future) role of bookkeeping/accounting rules/regulations/trends so they can build their business. Too many small businesses are driving blind when it comes to their own accounting and understanding the data presented to them. As well, most do not have current information necessary to keep up to speed on how the rules affect their business. I would add that integrity has been and always will be very important. With all the pressures that businesses face, it's even more important to report accurate numbers and those that truly reflect the businesses.
-- Greg S. Jones
CEO, Bookkeeping Express
Tax reform and the impact of tax complexity are, yet again, in the forefront of congressional interest and in the administration's key message points. I believe the tax laws should be simple enough to enable taxpayers to understand the rules that apply to their situation and comply with them correctly and cost-effectively. Simplicity reduces the number of errors, improves compliance, and increases respect for the system. Although a truly simple tax system may not be possible, the level of complexity should be appropriate for the taxpayer or the transaction involved.
Simplicity is the basis for achieving many other tax policy goals, including transparency, minimizing noncompliance, cost-effective collection, and payment convenience. The less complex a tax system is, the better taxpayers are able to anticipate the tax consequences of their economic choices.
-- Edward S. Karl
Vice president of taxation, AICPA
The continuing biggest issue facing the accounting profession is change. The world is changing rapidly and those changes are forcing the U.S. to deal with societal changes and workforce changes. The ability to work virtually is growing rapidly and a diverse workforce is waiting in the wings to replace the aging Baby Boomers. Accountants and accounting firms will look very different in the future and the challenge is to get accountants to adapt more quickly.
--Rita A. Keller
President, Keller Advisors
Even though my focus is technology, I see a lot of gray hair in firms that, even though they are working longer, will create a huge brain and production drain to the profession which will create a shortage of professionals. If we can't fill the gap (with technology and new entrants), other banking and finance professions will find a way to do so.
-- Roman H. Kepczyk
Director of consulting, Xcentric
Clearly the No. 1 issue facing the profession is growth. With increased competition and a major price war taking place, firms have been challenged to dig deeper (both from a financial investment and a partner performance standpoint) in terms of developing new business for the firm.
-- Allan D. Koltin
CEO, Koltin Consulting Group
Unification of U.S. and international accounting standards. It's imperative that accounting professionals practice within a unified set of global accounting standards to facilitate investment and capital flow on a worldwide basis. Personally, I support the adoption of unified international financial reporting standards.
-- Kenneth Koskay
Vice president of learning solutions, The Tax & Accounting business of Thomson Reuters
The profession is so diverse that its difficult to pin one issue for the entire profession, but there are some big issues for many. Private company financial reporting is at an all-time critical stage and is at a point of high potential for change. For public companies, IFRS convergence/adoption is still very important. Take the two together, I guess you could say changes in financial reporting are big.
While the economy impacted hiring for the profession so that finding new staff wasn't as difficult, retaining the best and brightest to our profession will continue to be a challenge. As more CPA Baby Boomers retire, that will become even more critical.
-- Mark J. Koziel
Vice president of firm services & global alliances, AICPA
A degree of uncertainty. There is uncertainty today within the profession on a number of levels. First and foremost, there's the uncertainty regarding the accounting standards themselves, specifically the timing of IFRS, pending changes to GAAP, and developments with private company financial reporting standards. This puts firms in the unenviable position of trying to advise clients and train staff without knowing what the ground rules will be.
Second, there's legislative uncertainty -- to what extent will Dodd-Frank be implemented, and how will that affect the profession? Finally, there's the PCAOB and the changes they may make within the profession. Although they will technically only affect auditors of public companies, those changes could very likely cascade down to middle-market-focused firms as well.
Depending upon these outcomes, we could get caught in the crossfire and pulled into things that may not be in our best interest or the best interest of the public. The good news is that we aren't without recourse. It's important for us all to stay active on these issues and to have a voice, to do what we can to protect the public and their interests.
-- Gordon Krater
Managing partner, Plante Moran
Although mobility is being tackled, I feel we still need to work out some of the issues. CPAs moving and working in various states are still hassled with endless paperwork. A better, streamlined approach can be achieved.
-- Lana Kupferschmid
Incoming president, NCCPAP
I think we are in the middle of sea change where many of the tasks that accountants have done for the past 30 years are migrating to services that happen automatically. For example, we have already seen rapid adoption of e-file for personal tax returns done online without accountants. As the data connectivity increases and 1099s come in electronically, this will compound the issue. Similar examples exist in other pockets of services that accountants offer. In addition, there is always the threat of offshoring services that can take away some of the basic work the profession provides today. I believe that accountants need to embrace the change and lead consumers and small businesses with services that allow them to offer more financial advice and less financial grunt work. We definitely hear from our customers that the ones that do that are growing much faster than the ones that don't.
-- Rene Lacerte
Founder and CEO, Bill.com
The adoption of cloud-based technologies and the adaptation of workflows and client interactions to take advantage of those technologies. For the past 30 years, our profession has struggled to incorporate technology to help us more efficiently do what we've always done. The collaborative aspects of "the cloud" require that we begin doing things we've never before done! Clients are beginning to demand a level of seamless interaction that only cloud-based solutions can provide. Only firms that adapt their business practices will thrive in this "new normal" future.
-- Gregory L. LaFollette
Director of product strategy, CPA2Biz
From my perspective, the most important issue facing practitioners is complexity. Smaller firm practitioners (and honestly larger firm practitioners as well) are at times overwhelmed by the complexity and overload of accounting standards. To a certain but lesser extent, this is also true for assurance standards.
This complexity not only presents itself with respect to the original work product, but also in the oversight regime. Rather than looking at whether the practitioner applied his or her professional judgment in a rational and well-thought-out way, regulators and others involved in the oversight of the profession are too consumed with second-guessing the profession. And unfortunately, more complex prescriptive rules lend themselves to that problem.
-- Charles E. Landes
Vice president, Professional Assurance Standards and Services Group, AICPA
One of the most important issues would be motivating students to major in accounting and join the profession as a career.
-- Mont Levy
CEO and principal, BAM Advisor Services
In today's new economy, the war for clients is one of the most important issues currently facing the accounting profession. Middle-market firms are increasingly being squeezed between the Big Four returning to the space after a brief absence and lower-revenue firms being more aggressive in their acquisition of clients. Technology has created a more even playing field and firms have to clearly differentiate themselves in the eyes of the client and prospect. This is having a positive effect, as firms are taking the time to be strategic in their client retention, marketing and business development activities. Firms are becoming more client-focused. There has been a shift in conversation from a "we" mentality to a "you the client" mentality.
International business is the thread that runs through all of our clients and prospects. The global marketplace cannot be ignored. PKF Texas is in the fourth largest city in the country. With 93 consular offices, the largest port in foreign waterborne tonnage and home to the global energy industry, Houston is the international city to do business in. The close proximity as a gateway to Latin America and the effect the expansion of the Panama Canal will have on the Port of Houston and East End, further solidify Houston's place as a global partner.
-- Karen Love
Director of practice growth, PKF Texas
Adoption of IFRS, as well as the internalization of the accounting profession.
-- Taylor Macdonald
Vice president of channels, Intacct
I think that succession is the most important issue facing the profession. We have four very different generations working in the profession today, the Matures, Boomers, Generation X and Millennials. As the Boomers retire, the members of Generation X and the Millennials will have the responsibility of leading our profession.
Are they properly trained and ready to lead? How will they deal with the shortage of accounting professionals? Will they be able to successfully change the culture of their firms? Will they be able to run organizations that can adequately fund the retirement plans of the Boomers?
-- Barry MacQuarrie
Consultant and IT director, KAF Financial Group
Today, accountants must adapt to the current technological innovations, from running a paperless office to conducting client relations on the cloud, while increasing their ability to provide valuable consulting and advisory services. Bookkeeping, auditing and IT departments must find ways to stay relevant as the accounting profession moves away from data entry and emphasis on in-house hardware and progresses toward automation and mobile/cloud software.
-- Jessica Mah
Founder and CEO, inDinero.com
One of the most prevalent themes is the impact of globalization. As the financial services world becomes more globalized and technology enables borderless commerce, even mom-and-pop companies are feeling the impact. New professionals are entering into a work force far more mobile and subject to the trickles and tides of international events. Another overarching issue facing the accounting profession has to be the convergence of U.S. GAAP and IFRS.
In a move that underscores the importance and timeliness of this issue, the SEC issued a paper on possible adoption scenarios and other IFRS issues on May 26, 2011. One thing is clear: The world is looking for the U.S. to make its intentions on adopting international standards clear. If and when the SEC decides to adopt IFRS, U.S. businesses and their CPAs need to ensure they are positioned for the transition.
-- Janice M. Maiman
Senior vice president of communications and media channels, AICPA
The intersection of many issues, including massive regulation and new governance requirements, debt crisis, and an uncertain economy.
-- Eric Majchrzak
Marketing and communications director, Freed Maxick & Battaglia CPAs
Growth in a very competitive, changing business environment
-- Krista M. McMasters
CEO, Clifton Gunderson
Other than private company financial reporting, the most important issue currently facing the profession is the adaptation to change. This manifests itself in the state of the economy, the increase in globalization, tax changes at federal, state and local levels, regulatory increases affecting business, and in technology like the cloud and mobile technology.
-- Barry Melancon
President and CEO, AICPA
As a result of firm consolidation and the economic developments over the past three years, firms are experiencing an increasingly competitive environment. Downward pressure on fees has become one of the biggest challenges facing firms, along with increased urgency of new client acquisition.
Also among the top issues cited by practitioners are keeping up with changing accounting and attestation standards and the changes and complexity of the tax laws.
-- Steven Charles Mendelsohn
President of Knowledge Solutions, The Tax & Accounting business of Thomson Reuters
Without a doubt, private company financial reporting. This potential systemic change to GAAP effects 29 million small businesses in the U.S. This is a real chance for positive improvement for the businesses that fuel the economic engine of America.
-- James C. Metzler
Vice president of small firm interests, AICPA
What is the best way to overcome the lethargy among leading practitioners over the low quality of financial statements prepared in accordance with GAAP?
Two movements (moving to IFRS and creating a private company board) are clearly aimed at preventing substantive progress in financial reporting. They need to be abandoned.
Instead, the profession needs a new vision to focus on the needs of those who use financial statements, instead of those who prepare and audit them. This vision needs to penetrate all sectors, including large and small firms, and especially education.
-- Paul B.W. Miller
Professor of accounting, University of Colorado at Colorado Springs
Sustainability of the accounting firm. Economic pressures have eroded the client base and loyalty that many firms once enjoyed. This has led to significant fee pressures that have "cannibalized" the industry. Meanwhile, firm leaders have an impending succession challenge, prompting them to focus more on developing the next generation of leaders.
-- D. Scott Moore
Immediate past president, AAM
There are three important, intertwined issues the profession is facing that will present it with challenges for years to come: the shortage of talent; game-changing technology; and diversity. Let me start with talent, which is our commodity. Talent is key to performing high-quality audits and providing the best advice to the largest, most complicated companies. While some consider technical training and compliance with exacting rules and standards as the primary drivers of audit quality, I believe having the most talented people is equally important. At PwC, we have always been focused on attracting and retaining top talent, which is challenging in a competitive environment. However, the talent challenge gets even more daunting when you consider that companies are expanding into new markets, which will require highly trained and qualified accountants and auditors who understand risks and business cultures that are very different from those in the West. Further, according to the World Economic Forum and other analysts, talent shortages and mismatches are looming in many of these markets -- including for accountants and professional service providers. Clearly, the profession needs to develop a long-term solution to the talent challenge.
Game-changing technology will transform many aspects of the global marketplace -- from consumer behavior to new business models. It will also intensify demand for top talent. Digital mobility, cloud computing and social media underpin the transformation taking place in both developed and developing economies. All of this will put pressure on the accounting profession -- not only in terms of the sheer numbers of people it will need, but also to step up to the challenge of being an international connector of businesses, as well as a protector of public trust in corporate reporting.
The challenges brought about by talent and technology are also causing businesses to look anew at their approaches to diversity. Twenty years ago, "diversity" often meant numbers -- hiring more minorities or women to meet some numerical goal, whether self-imposed or legally required. Now, however, the global economy is so deeply integrated that there are even more compelling reasons for redefining what we mean by diversity. People of diverse ethnic and cultural backgrounds approach problems and engage people in different ways, which is critically important as world markets expand and businesses continue global integration. Finally, organizations that choose to ignore the importance of diversity miss out on critical talent they will need to grow their businesses.
-- Robert E. Moritz
Chairman and senior partner, PwC
One of the most important issues currently facing the accounting profession is the ability to successfully execute managerial and financial accounting procedures in light of the heightened compliance issues. Today's accounting professionals have to comply with an ever-more complex regulatory framework than their predecessors did.
-- Zach Nelson
President and CEO, NetSuite
Not enough partners named Bob or Jim.
-- Caleb Newquist
Founding editor, Going Concern
The most important issue confronting the CPA profession currently is capable leadership. While we could point our finger at the economy, succession planning or client continuity, they all pale in comparison to effective and highly capable leadership. With highly capable leadership, firms will be able to deal with the many other issues confronting the profession. HCL allows firms to address the issues of the economy, succession planning and client defections. HCL motivates employees and other partners to stay focused and be productive participants no matter which issues are derailing a practice. Effective leaders make the difference between mediocrity and highly successful practices. Being at an accounting firm nearly every day, every month, I can be certain that those firms with HCL will out-perform others lacking leadership skills. Success leaves clues, and one such clue to success among all the other challenges firms face are highly capable leaders. Those firms that appear to be in trouble are so for may reasons, but the most obvious is the lack of great leaders.
-- Jay N. Nisberg
President, Jay Nisberg & Associates
Succession of accounting firms. There are many accounting firms that are being run by Baby Boomers. They have a different work ethic than younger CPAs, and unfortunately they have not done a very good job in bringing in younger partners for succession.
-- David J. Nissen
Managing partner, Mueller & Co.
After talking with our advisors, many of whom are CPAs, the general consensus is that excessive paperwork and reporting requirements by the government are diminishing the CPA's value in providing expert tax and investment advice. Overlapping rules from regulators such as the IRS, the SEC, FINRA, the Department of Labor and state accounting societies require additional disclosures, which are sometimes opposing requirements, and result in clients' confusion and often inaction.
One example involves three client signature forms. Our advisors' tax and financial clients must be presented with either two or all three disclosure forms annually. They provide tax clients a "letter of engagement" before preparation of even a simple tax return requiring a client signature. Tax clients must also be provided with a separate "solicitation and use" consent form, which requires client acknowledgement before our advisors provide anything outside of the scope of tax return preparation such as financial planning or even the most basic tax planning. The form needlessly confuses clients, who sometimes have to be talked down from believing their advisors are providing their information to third parties. Also, our advisors must provide tax clients who currently have investments a "solicitation and disclosure" consent form, which again must be signed in order for advisors to provide any of their information to H.D. Vest for administration of accounts.
Another example of confusing documentation is the Treasury form T DF 90-22.1 This is the form required for U.S. residents to file if they have $10,000 or more in foreign accounts. Based on the information requested, this could be a very straightforward form for tax professionals to complete for clients, but it is made more difficult by its requirements and eccentricities. Tax professionals must print out the form and explain to clients that it must be mailed to a separate address in Detroit that does not correspond to any other address clients ever use for tax filings. Another complication is the form's June 30 deadline date, which cannot be extended to coincide with the October deadline. Thus, it requires tax professionals to contact that handful of clients every spring to coordinate preparing the forms, sometimes months before actually meeting with them to do the tax return.
These documentation requirements offer some glaring examples of the paperwork nightmare for our advisors and their clients. The excessive paperwork when added with the additional layer of investment paperwork creates extra unnecessary steps to service clients.
-- Roger Carlton Ochs
President, H.D. Vest Inc.
Whether, how, when the SEC will incorporate IFRS into the U.S. financial reporting system
-- Judith O'Dell
Chair, FASB Private Companies Financial Reporting Committee
Overcoming irrelevance. Technology and global competition are going to rock the once-secure client loyalty boat. The profession must move away from seeing clients as recipients of just accounting services toward a relationship focus where accounting services are a by-product of the relationship.
-- Edith Osborne
CEO and mentor, Mentor Plus
The most important issue facing the accounting profession is the same as that facing everyone -- the state of the economy. This impacts every element of our profession, from the impact of accounting standards to employment to business development and beyond.
-- Barbara Oswalt
Tax and business valuation director, Hoyman Dobson
Lack of skill sets to work in the current environment. You have the experience and knowledge of the old guard who lack the technology adaptability. You also have the technology aptitude of the next generation, but without the practical experience and wisdom of the old guard. And it seems as the though the disconnect continues to grow.
-- Jody Padar
CEO and principal, New Vision CPA Group
Directly -- succession. The "public" side of the profession is woefully unprepared to transfer ownership and operations to the next generation of practitioners.
Indirectly -- the U.S. economic crisis and the potential for wholesale tax system reform.
-- Jeffrey S. Pawlow
CEO and managing shareholder, The Growth Partnership; CEO, iShade
Meeting the challenges of the increasingly global economy, including the complex tax and accounting implications of companies operating on a global basis and moving to IFRS.
-- Brian Peccarelli
President, the Tax & Accounting business of Thomson Reuters
I view change as the most important issue, in two main areas. First, the amount of change to accounting standards that is imminent, given the number of projects on the Memorandum of Understanding between FASB and the IASB. The challenge will be to manage these changes in a way that balances the need for improvement with the resources required to make improvements happen.
The standard-setting structure in the United States is another area undergoing change. For public companies, it means grappling with questions about how and when we adopt or "condorse" International Financial Reporting Standards. For private companies, it focuses on whether or not there should be a separate standard-setting board, as recommended by the Blue-Ribbon Panel. In short, we're asking fundamental questions about who should be setting standards in a way these questions haven't been asked since the Wheat Committee established the FASB in 1973.
-- Teresa S. Polley
President and CEO, Financial Accounting Foundation
Talent succession: Over the next 10 years, the Baby Boom generation will be retiring, including the many partners in accounting firms. Due to the dramatic decrease in accounting graduates in the succeeding generation, there may not be enough capable, experienced and motivated accountants to take over the management of the many accounting practices that will be needed in the future. Dramatic steps must be taken to create the talent pool necessary to assure that the future accounting needs of businesses and individuals are accommodated. This entails attracting the best and brightest back into the profession, as well as training and retaining the dwindling number of experienced young accountants remaining in public accounting.
-- Charles Postal
Managing director, Santos Postal & Co.
The obvious answer is the economy. Whether it's the impact the recession has had on businesses of every type and variety or the impact on CPA firms, the economy has created both chaos and opportunity, and not always simultaneously. Some organizations are responding better than others in terms of how they address the challenges they face, but no organization has been immune from the recession's impact. The less obvious answer is the pending departure of the Baby Boom generation. This is also affecting businesses of every type and variety, including CPA firms, but the impact may be most dramatic to those CPA firms that either haven't prepared for the departure of senior partners/rainmakers or that haven't anticipated the changes that are coming to their privately owned clients who are being taken over by a younger generation of leaders or are being sold.
-- J. Clarke Price
President and CEO, Ohio Society of CPAs
Change, including changing demographics of the industry, as younger CPAs enter the workforce with very different ideas, including how to use new technologies to build a practice where practitioners can work less and make more money.
-- Eric Pulaski
Founder and CEO, SmartVault
The most important issue currently facing the profession is the needed shift from financial reporting to corporate reporting. The measurement of corporate performance is much broader than just financial numbers. Financial statements give shareholders and the markets some of the information about how a corporation does over time, but the company's investors need to know how that performance is related to the strategy, the execution, and the risk -- all of which is not captured in financial statements.
The whole issue of the recession was risk and complexity, because there wasn't the transparency or metrics associated with many financial instruments, or the presumed assets of many companies. Today, GAAP requires [that] financial risks be presented in financial statements, but other key metrics could provide additional information to better understanding the health of a business.
The profession needs to be able to better articulate what a company's risks are, and also how it is managing those risks.
Financial statements are still a core element of the reporting package, but the profession needs to move beyond the financial statements to achieve more comprehensive corporate reporting.
The technology is available to better report the true state of a company, and how they are really doing. The accounting profession needs to leverage this technology to provide a better understanding of a business, and how it is accomplishing its strategy, with insight into the amount of risk involved.
-- Robert Reid
Globalization of accounting and auditing standards
-- Rick Richardson
Managing partner, Richardson Media & Technologies
-- Daryl Ritchie
The major issue that jumps to mind is whether and how IFRS will be implemented in the U.S. Critically important are the three major current projects FASB and the IASB are jointly undertaking -- leases, revenue and financial instruments. Right now, the boards are not 100 percent together on these issues. If they don't come to an agreement on the accounting and financial reporting treatment of these critical areas, there's a chance that convergence with international accounting standards in the U.S. could take a step backwards.
-- Kevin Robert
CEO, Wolters Kluwer Tax & Accounting
This is a no-brainer. It is succession planning. Baby Boomer partners' relentless march towards retirement, their frustrating inability to develop new younger partners and the dearth of partner-potential staff at their firms have created a perfect storm for CPA firm partner succession. 90-plus percent of all firms below the Top 100 think about it all the time.
-- Marc Rosenberg
President, The Rosenberg Associates
I believe regulation is the most important issues. The SEC, PCAOB, etc., are all developing new and complex regulations and rule changes for the profession to comply with.
-- Frank K. Ross
Director, Center for Accounting Education, Howard University
Technology and talent. Technology includes embracing social media, mobile and the clouds. It's a whole new way of doing business and it is not going away. Talent -- I believe there will be a shortage of talented people. We must continue to attract the best of the best.
-- Diane Roundy
Director of business development, Schenck
Because I focus on marketing, this will color my answer. But I think there are two.
1. Will the accounting profession embrace social media as a valid way to promote their services and reach out to new audiences? With LinkedIn surpassing 100 million followers earlier this year, and Twitter putting out 200 million tweets a day, these are not fly-by-night marketing tactics, but instead well-entrenched ways to reach new clients. In my work with firms, there is still a lot of confusion and a "head in the sand" mentality when it comes to social media. The opportunity is there to be taken; it's just a matter of who will make the move and benefit from it.
2. I hear a lot of talk about flat fee billing, and the firms that are adopting it seem to be really growing because of it. It's a huge adjustment for most firms that have worked in the hourly billing model since time, or at least taxes, began. But with the economic downturn and belt-tightening at most companies, clients are clamoring for this option, and the firms that are offering it are poised to jump well ahead of their competitors.
-- Bonnie Buol Ruszczyk
President, BBR Marketing
IFRS integration is an important and challenging issue facing the accounting profession today. There has been a general recognition that the world economy would be well served by having one universal financial reporting standard that applied everywhere. Many of our developed trading partners have already moved toward adopting IFRS, and FASB has been working with the IASB to achieve convergence between U.S. GAAP and IFRS. The convergence of the two, along with the transition, will be very complex and time-consuming.
-- Mike Sabbatis
President and CEO, CCH, a Wolters Kluwer business, North America
The auditing profession and its critical contributions to the capital markets has been an important topic of discussion, whether through the European Union Green Paper process or other regulatory proceedings around the world. We understand our responsibility. The critical challenge is for us to participate in and impact discussions with regulators and stakeholders in order to enhance and improve the quality of information available to stakeholders.
We understand stakeholders are certainly concerned about risks. However, other factors, such as the increasingly global markets, rapidly enhanced technology, and the changing demographics of investors, all impact the information needed by stakeholders. Discussions have included areas that impact the auditing profession directly such as the auditor's report and the scope of the audit. This is our opportunity to address the gap between what stakeholders believe an audit entails and the actual requirements of the professional auditing standards that guide us.
These are unique and challenging times, but they also present us with an opportunity. The accounting profession is comprised of committed, uniquely experienced specialists who are proud of their contributions to the capital markets. We understand that due to the complexity and challenges of the environment, changes to financial reporting along with clarification and enhancement of the role of the auditor are all appropriate in order to continue to protect the investor. We embrace the opportunity to contribute to the dialogue and to be part of the solution to these challenges.
-- Barry Salzberg
CEO, Deloitte Touche Tohmatsu Limited
The most important issue facing the profession is whether the SEC decides to incorporate International Financial Reporting Standards into U.S. GAAP, and if so, how.
In May, the SEC staff issued a paper, "Exploring a Possible Method of Incorporation," which suggests alternatives for how to approach its Work Plan on Global Accounting Standards. We understand that the SEC staff is planning to issue two more papers that explore the remaining differences between U.S. GAAP and IFRS, and how IFRS is being applied in practice. The FASB strongly supports the inclusive, deliberative process that the SEC is undertaking in determining whether and how to incorporate IFRS into the financial reporting system for U.S. issuers. This decision has the potential to fundamentally change the language of the accounting profession in the U.S. and around the world (as other countries follow our lead). It also has implications for tax and audit professionals, students, professors and, of course, investors.
-- Leslie F. Seidman
Dealing with information overload. The volume of information related to professional standards, tax laws and regulations and various other professional issues has reached the point where it is nearly impossible for members of the profession to stay current. This is especially true for practitioners in very small firms who are trying to run general practices offering a variety of services to their clients. It also affects CPAs who work in industry and must also stay current on various regulations and standards that affect the organizations for which they work.
While technology has helped with managing this information load, it is not a panacea and CPAs are still extremely challenged to absorb and stay current to comply with various professional and regulatory requirements.
-- John M. Sharbaugh
CEO and executive director, Texas Society of CPAs
I believe the accounting profession is entering into an era where we will see a major paradigm shift in our industry, and those that cannot make the shift will not survive. This is being brought about by several factors.
First, the recent recession has really increased competition, especially in the assurance area. We consistently see fees going for 30 percent to 40 percent of what they would have gone for three years ago. And this is not a short-term trend. Audits, reviews, etc. (for years the mainstay of revenue for firms) have become commoditized. In order to maintain profitability, we see firms of all sizes looking for ways to streamline the work, and reduce staffing levels to a minimum. This is a one-time solution and I believe puts the quality of work performed at risk.
Second, to make up for this loss in revenue and resulting decline in profitability, firms are looking for additional services to provide to their clients. We have been expanding our service offerings since the mid-1990s, and today only about half of our services would be considered traditional accounting services. This is not a short-term undertaking and for some firms it may be too late. For others, if not done correctly, it could undermine their current relationships with clients, and further weaken their position in the marketplace.
Third, due to the aging demographics of partners in CPA firms (and many having no succession plans in place) stakeholders will need to merge upstream in order to accomplish their retirement goals. We are already seeing this and it is happening at an increasing rate. It is becoming a buyer's market, and only the best firms will be successful. Others may be very disappointed in their merger opportunities, and may choose to ride it out, milking the firm as long as they can, and cease to exist. This is not a good scenario for the profession.
Finally, technology is playing a critical role in the ways we, and our clients, do business. Firms that do not embrace new technologies available (like cloud computing, social networking, etc.) will be left far behind. And for many, given falling revenues and profits, developing the skill sets necessary to compete with firms already having a strong technology presence will prove to be a very expensive move. And many simply do not have the foresight to see this shift, or the leadership and knowledge base to make the necessary changes.
-- James Sikich
CEO and managing partner, Sikich LLP
The pace of change in technology is creating huge opportunities for practice growth, but at the same time is presenting challenges for practitioners who need to figure out which vendors to work with, which technologies to deploy, and which skills they need to develop.
-- Douglas Sleeter
Founder and president, The Sleeter Group Inc.
The meteoric rise in cloud and mobile computing and the changing demographics are among the top issues impacting the accounting profession. According to the Intuit 2020 - Future of the Accounting Profession report released earlier this year, the next decade will be a period of rapid change and continuous churn for the accounting profession. The industry will exist in a state of permanent whitewater, requiring new levels of business agility and flexibility. Competition will intensify as new industry entrants, outsourcing and automation displace accounting, audit and tax professionals, especially for routine and lower-value services.
-- Brad Smith
President and CEO, Intuit
Working with companies to develop long-term value to shareholders, which in turn creates stronger economies and stronger countries. Our profession is involved in so many critical aspects of this equation: the CPA that works for the company in the management accounting role, the CPA in the external financial reporting role, the CPA in internal audit, the CPA in the external audit role, and the CPA in governance. Keeping focused on adding long-term value to our country through the application of our core values is the most important issue facing the profession.
-- Arleen Thomas
Senior vice president of management accounting, AICPA
The most important issue facing the profession is the ongoing debate about differentiated reporting standards and how that debate impacts the implementation of International Financial Reporting Standards. With private companies comprising roughly 50 percent of the economy, clearly the time has come to clarify some of the standards for private companies. I hear regularly from CPAs and other users about the need for more useful GAAP accounting. Complicating matters is the subject of IFRS, which has its own separate set of guidelines for private companies. While IFRS implementation may be years away, whatever private company model we end up with will have to evolve to encompass those changes.
-- Ralph Thomas
Executive Director, NJSCPA
Growth. For years, firms grew without having to work for it. Things have changed. As firms adjust from what they hoped were temporary pricing changes to what is now our new pricing model, they need to find new business to make up for the lost revenue. That business is harder to come by. The marketplace is more competitive. Clients are still price-sensitive. To complicate matters, the use of technology in business development is also changing the game. You're not just competing with the firm down the road. Through search engine optimization, social media marketing and mobile marketing, savvy firms are expanding their geographic reach. This requires firms (and marketers) to learn and embrace new marketing skills in order to remain competitive in the changing marketplace. In addition, the changes firms made to pricing over the last two years impact overall firm profitability and the ability to give raises to team members. The snowball effect that has occurred makes it even more important for firms to grow.
-- Katie Tolin
Marketing director, Rea & Associates
There are a few key trends shaping our world today; one key trend is our changing demographics. This trend will have a huge impact on the accounting profession, because as a profession our greatest asset is our people. We need to consciously think about the business imperative around talent, where that talent comes from today, and where it will come from tomorrow.
We need to recognize and embrace the advantage diverse teams and thinking provides. As a profession this will help us provide increasing quality and value to our clients here in the United States and also when we are serving across with business that spans international borders.
-- James S. Turley
Global chairman and CEO, Ernst & Young
I believe change is the most important issue facing the accounting industry. In order for CPAs to be successful, they have to acknowledge changes that are occurring around them and adapt accordingly. Of the many changes facing the industry, regulation, aging consumers, etc., new technology tops the list.
Technology is transforming everything our financial advisers do, from how they interact with clients and deliver services, to the tools they use to run their practices and plan for their future. I know firsthand from meeting and talking with many of our 2,000 financial advisers that they are embracing and implementing technology such as cloud computing, smart phones and QR codes. Our most successful financial advisers not only adapt to change, they welcome it to keep them fresh and relevant in the eyes of their clients.
-- Enrique M. Vasquez
President and CEO, Genworth Financial Advisers
Uncertainty created by an uneven economic recovery and continued escalation in regulatory activity at all levels has significant implications for our clients and the accounting profession.
As auditors charged with maintaining the integrity of the capital markets, we work closely with our clients to help them clearly understand regulatory changes and adhere to appropriate risk management and compliance processes.
In the current environment, finding the right balance between risk and opportunity has become more complex. What may have been considered a sound compliance strategy a year ago may be stifling growth today, while at the same time even deeper transparency may be needed to meet more stringent reporting requirements.
When major legislation like Dodd-Frank is passed, the challenge often comes in understanding the full breadth of new rules and resulting regulations, and then deploying resources to ensure compliance. While high-profile provisions, such as Dodd-Frank's "whistleblower" section, receive significant attention, lesser-known requirements often present similar or even greater complexity.
The so-called "conflict minerals" provision of Dodd-Frank -- which imposes new reporting requirements on the origins of certain minerals -- is a good example. While the provision requires long-range business and supply chain planning, many organizations have not yet developed a compliance strategy. At the same time, some have fully embraced the new rules, hoping to establish a commercial and reputational advantage by anticipating corporate social responsibility expectations from shareholders and state governments.
Of course, Dodd-Frank is one of many compliance requirements that must be considered. In this new regulatory landscape, companies need to continuously evaluate the adequacy of their compliance programs, while ensuring that evolved compliance strategies are in sync with the shifting needs of their business.
-- John Veihmeyer
Chairman and CEO, KPMG
One of the most important issues facing our profession is maintaining a culture of true servant leadership when it appears the world around us (including our leading politicians and news media) has moved more and more to a self-serving, narrow agenda more interested in gaining advantage through degradation and division that by inspiring and leading people to come together to accomplish great things. We need more states(wo)men.
-- Gordon A. Viere
Based on research that Intuit conducted with Emergent Research and published in the Intuit 2020 Report - Future of the Accounting Profession earlier this year, we found several major trends that will affect the accounting profession over the next 10 years: a shifting business environment that will create new opportunities for practitioners to act as financial strategists; demographic shifts that will change the face of professionals and clients as we continue to evolve into a global economy; and the already rapid technology changes in the accounting industry will accelerate over the next decade, with new technologies driving the creation of more powerful analytical tools and software. These tools, coupled with automated data capture, will shift the focus of accounting from computation to consulting as clients increasingly rely on their accounting professionals to analyze business information, support decisions and provide strategic advice.
-- Jill Ward
Senior vice president and general manager, Accounting Professionals Division, Intuit Inc.
Accountants have a unique opportunity to help businesses and families more wisely use their financial resources. Through the use of programs like the AICPA's "360 Degrees of Financial Literacy" and "Dave Ramsey's Financial Peace," CPAs can educate and motivate people to get out of crushing debt and prepare themselves for their future. This is an issue that is largely being ignored by most CPAs because it is not affecting our pocketbooks.
-- Troy Waugh
The SEC work plan for moving to IFRS is the most pervasive issue. I believe it is important for there to ultimately be a common set of high-quality accounting standards throughout the world. IFRS would meet that criterion. We hope the SEC's ultimate decision on incorporating IFRS into the U.S. reporting system is made as soon as practicable in order to provide companies and auditors adequate time to prepare for transition, including development of applicable training courses and to remove the uncertainty that has been pervasive in the past few years.
-- Jack Weisbaum
CEO, BDO USA
Next-generation accountants. I don't think the profession is evolving fast enough to meet the needs of future employees or clients.
-- Geni Whitehouse
Countess of Communication, Even a Nerd Can Be Heard and Brotemarkle, Davis and Co. LLP
The ability to change is the most important issue that is facing individuals and firms today. That may sound strange given all of the challenges that we are facing today, but if you drill down to the underpinning of all issues -- succession, changes in regulations, accountability, building a new niche, embracing new technology -- it all comes back to one thing. The inability to change the way we have always done things is holding us back. When we learn to welcome the changes that are in our grasp, we will be able to handle all of the issues that we face in a far more proactive way.
-- Sandra L. Wiley
Shareholder, senior consultant and COO, Boomer Consulting
Succession is the most important issue currently facing the accounting profession -- not because our Baby Boomers are all running off the retirement cliff tomorrow, but because I simply don't see enough of them preparing their organizations and their up-and-comers to run their firms or businesses without them.
As succession begins to drive staff shortages, and it will, firms that have not invested in their people will feel the most pain, seeing key people leave and destabilizing continuity plans. Unfortunately, a lot of firms and businesses took their eye of the people development/investment ball during the economic downturn. As the market begins to seek qualified accounting professionals in volume, those entities will suffer losses (and we're starting to see this in major cities and on both coasts already). Firms without real continuity or succession plans will drive further M&A activity and consolidation, which will fuel the growth for opportunistic organizations.
On a related note, look around at the attendees of many conferences, the speakers, the committee members and others in leadership positions across the profession. We see a lot of gray hair. The AICPA and many of the states are all aggressively working young CPA leadership programs and they are beginning to pay dividends, but the profession is still in dire need of an injection of younger viewpoints and perspectives represented in leadership.
-- Jennifer Lee Wilson
Co-founder and owner, ConvergenceCoaching
From my perspective, it is the landmark changes that are under way in the tax return preparation industry. For decades, anyone could hang a shingle as a tax preparer with little IRS oversight -- until now. A mandatory registration requirement is now in place for all federal tax return preparers, with the groundwork laid for a new testing, education and background regime to start later this year. Within the next two years, we will have in place a program that will limit the preparation of individual income tax returns for compensation to CPAs, attorneys, enrolled agents, and registered tax return preparers. These changes are improving the tax professional industry by establishing standards that promote competent and ethical tax professionals.
-- David R. Williams
Director, Return Preparer Office, IRS
The most important issue currently facing the accounting profession is age-old and that issue is ethics and the public trust! Our profession is built on ethics, reliability, honesty and doing the right things in the right way. Absent trustworthy ethics, the profession falters. As professionals, we can only lose the public trust once!
-- Donny J. Woods
Immediate past president, NSA
New information technology is making it possible for firms to focus on more value-added services that can be completed on a timelier basis. Accounting firms will need to adopt these technologies to effectively compete for clients and talent.
-- David Wyle
President and CEO, SurePrep
In the state tax arena, the most important issue being faced is the budget crisis at the state level, their efforts to balance their budgets, and how to implement and interpret state tax laws to the technological changes in how business is conducted today. This includes the determination of nexus through affiliate and technology activities.
-- Diane L. Yetter
President, Yetter Consulting
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