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.
Regulatory oversight and change is the most important issue currently facing the accounting profession.
Large-scale changes, such as the proposals by the European Commission and the PCAOB to reform audit firm rotation and the auditor’s report have potentially far-reaching implications on audit quality and competitiveness in the accounting industry. I believe that any new regulation needs to be studied carefully to ensure it will truly enhance audit quality and will not have unintended consequences for our profession or the investors and businesses we serve. In addition, we need to ensure that regulation is not so restrictive that it damages the audit profession’s ability to be competitive or to maintain its status as a sought-after career alternative for the best and brightest students.
Overall, I think the regulators for our industry both here and abroad take the approach of seeking input from many parties prior to enacting new regulations, and I believe it is important that these activities continue. However, I ultimately don’t believe independence, skepticism and objectivity can be legislated. Quality, objectivity and integrity are values that auditors have embraced for many years and ones that have enabled our profession to be one of the most respected. To further embed these values at McGladrey, we recently created a new professional judgment framework with three professors from the Brigham Young University School of Accountancy. All assurance professionals have received a printed copy and are being trained in the framework this year.
In addition to the regulation of our own industry, the significant number of new regulations that affect the clients and industries we serve could also have huge implications for McGladrey and other accounting firms. We have to stay abreast of the changing regulations in our clients’ industries and align our work products and advice accordingly. In addition, we expect to see an increase in demand for assurance, tax and business consulting services as a result of these regulations, particularly in the middle-market companies McGladrey serves.
Companies of this size typically have more limited resources and lack the capacity to implement complex standards and regulations on their own. McGladrey’s leadership team, organizational structure and strategy are centered on providing this type of support to our private clients. With more than 6,500 employees working in 75 offices across the country, we are able to provide national and international expertise with the local touch of a service team in our clients’ markets. We believe our understanding and experience will enable us to help our clients navigate these new business and compliance challenges.
Joe Adams -- Managing partner and CEO, McGladrey LLP
Loss of investor confidence in audit firms and their opinions. Also, loss of investor confidence in financial statements. Also, loss of investor confidence in the fairness of capital markets (Mary Schapiro has made speeches about this very issue). Unfortunately, much of this has been caused by large audit opinions somehow being associated with accounting scandals and audit failures.
Dave Albrecht -- Professor of accounting, University of South Carolina Upstate
Attracting and retaining young talent has been an issue for many years, but I think that with the sharper dropoff in recent years the issue has become acute. We, as a profession, need to make a more concerted effort to fundamentally change how we work. The AICPA and various state societies are working hard to project a more attractive image tailored to the qualities that the next generation is seeking in a career, but if their experience doesn’t meet these expectations, we will continue to see a talent drain.
Mark Albrecht -- CEO, XCM Solutions/Xpitax LLC
I believe the most important issue currently is whether there will be adoption of International Financial Reporting Standards by U.S regulators and how that will affect current accountants (different rules for small business than large business?), future accountants (do schools teach the new standards or GAAP?), and financial statement uses, who may have to reconcile two equally acceptable standards, which may be inconsistent with each other.
John Ams -- Executive vice president, National Society of Accountants
How to generate sustained growth and adequately reward existing and aspiring partners.
Rick Anderson -- Chairman and CEO, Moss Adams
The accounting profession has many facets. The top challenge faced by the majority of practitioners (the small and medium-sized firms) is the overwhelming burden of new regulations and standards. This one issue impacts several areas of the firm, from quality control, risk management to training.
Where there are so many regulations and standards, it forces accountants (especially in smaller firms) to spend less time helping their clients solve real problems. The same might be true for larger firms, since the service providers are more concerned (read spend more time) about compliance and risk management, rather than on other issues the client may be facing.
How can we expect CPAs to be nimble in a world with overwhelming new regulations and standards?
August Aquila -- President and CEO, Aquila Global Advisors, LLC
There are many, but the most important one is the same one that we’ve been facing for the past six years -- the poor economy. But for us, this tough economy has been a real motivator because it enforces a constant discipline upon our teams that requires them to be much better than our competition. The crash and slow economic recovery have exerted downward pressure on tax and audit prices and made the competitive landscape very challenging. But this has forced us to get much better at everything and to develop strategies that require us to look at our clients much more holistically so that we become a business solution provider and not just vendors of technical expertise.
Our firm focuses on the aspirations of our clients and we help them achieve those aspirations. The strategies we craft for them and the products we help them deploy must all work to that purpose and must give them a competitive advantage. We must bring our know-how and ingenuity to a comprehensive package of service and provide insight that CFOs and other executives need to survive and flourish in this economy. We’ve expanded into many areas that we never thought we’d move into, such as our growing customer relationship management practice within our consulting group or our AMF Media Group division, which provides strategic branding and marketing support, public relations and corporate communications for a very wide variety of clients. The bottom line is that if we diligently hone our strategy, improve our technical expertise and keep looking at the horizon for new trends, when the economy does turn, we will be ahead of the pack in terms of reputation and capabilities and will experience even greater growth and profitability.
Andrew Armanino -- Managing partner and CEO, Armanino McKenna
Technology is clearly transforming how firms provide services to their clients. Clients are looking for their firms to collaborate with them and leverage technology to improve their capabilities and digital presence. Client accounting is probably the greatest growth opportunity for the profession, due to these capabilities driven by cloud computing. To me, embracing change and making the right technology choices to fully transform into what we are calling a digital CPA is one the most important issues going forward.
Erik Asgeirsson -- CEO, CPA2Biz
The uncertainty of the financial/economic market, which continues to give our clients concern and caution.
Kenneth Baggett -- Managing principal and CEO, Reznick Group
People are not going to like this, but I’d say: relevancy. Many CPAs are nothing more than high-priced bookkeepers and unless they move away from the idea that they’re historians with bad memories, who can only report on the past, on lagging indicators, they’re future is perilous.
You go into a lot of these firms and they’re doing very low-level work and then they sit around and complain and moan that it’s a commodity. Well, sure. It’s relatively low-value stuff, and if that’s all you’re doing, then you’re going to be stuck with government regulation and compliance revenue, and I see that as the biggest threat to our profession.
Take the audit monopoly. I don’t think our profession should have a monopoly. I think we should open it up to competition. I think insurance companies, banks and others should be able to come in and do attest work. If an investor wants to buy financial statement insurance, Lloyds of London is completely capable of offering that. And they could probably do a better job than the auditors because, let’s face it, actuaries price risk, where auditors just charge by the hour for their audit.
For example, I think term-limiting the auditors is the wrong question. We’re not dealing with the 900-pound elephant in the elevator: How can an auditor be independent if they are paid by the people they are auditing?
When economists look at this, they just laugh. There’s no independence there. The incentive system is set up wrong. What we should do is open it up to competition and other forms of innovation: Let the stock markets hire the auditors and pay the auditors for their listed companies, and then we’ll get some true independence. And maybe the stock exchanges would hire Lloyds of London or an insurance company, or somebody else, or maybe it would be the Big Four. But they would have control over it because they’re the ones who can best capitalize on the information in the audit reports.
Competition spurs innovation, and unless our profession continuously innovates and adds value, we deserve irrelevancy. What was the last innovation from the profession? The compilation and review standards from 1978 -- a 34-year innovation curve, and counting.
Ron Baker -- Founder, VeraSage Institute
The response to this question varies depending on the size of the firm and client base. For the vast majority of accounting firms, the most important issue facing the profession is one of relevance in the face of inertia. These are times that are defined by breathtaking changes in technology and the proliferation of readily available information. And the new generation of clients is far more sophisticated -- they grew up with technology, so they have a deep understanding of this new world order. They expect to be served differently and they don’t have the patience to work with professionals who -- in their minds -- operate in the past.
The firms of today must be in sync with technical changes, and they must elevate themselves to be connected advisors, rather than after-the-fact reporters of financial or tax information. They also need to realize that accounting and reporting are only part of a good client relationship. Today’s clients also expect them to bring new ideas, proactive thinking, and a higher level of customer service. This means redefining what they do, how they do it, and who they serve. The client of today lives in a do-it-yourself world where they question the need for an after-the-fact professional. If firms cannot visualize this sea change and adapt, they will not survive. Inertia -- training by SALY (“same as last year”) -- is hindering many firms and threatening their very existence.
In the words of Jack Welch, “If the rate of change on the outside exceeds the rate of change on the inside, the end is near.” Those are words to live by.
For the largest firms, the greatest challenge is keeping abreast of the myriad changes in global standards, regulations, and general oversight. The goal of these standards -- to provide consistent, transparent financial reporting so that stakeholders across the globe can more easily interpret and thoroughly understand the data -- is an important one. After all, more consistent reporting of global financial information is a goal that we all strive for. The challenge lies in keeping pace with the changes that will ultimately get us there.
Overlay all this with the backdrop of the aging of the profession and related requirement to attract the best and the brightest, and the pace of regulatory change, and it becomes apparent that this is a very challenging and very exciting time to be in the profession.
Jonathan Baron -- Managing director, Professional Segment, Thomson Reuters Tax & Accounting
In the past 10 years, we have seen drastic changes in the perception of the United States’ standing as a global competitor. The jury is still out on our leaders’ responses to the 2008 financial crisis and the alleged cozy relationships between the actors in the financial crisis and our financial regulators continue to be exposed -- their possible knowledge of the LIBOR scandal years before it was revealed and talk of the U.S. falling off a “fiscal cliff,” leaves Americans distrustful of the financial institutions that the U.S. economy was built on. The world is getting smaller: Our markets are irrevocably tied to one another as we see the effects the European debt crisis has had on U.S. markets; the PCAOB is entering into international partnerships with audit regulators around the globe to conduct joint inspections of audit firms, which is a good thing; the U.S. continues to dance around International Financial Reporting Standards; and the CPA Exam is now offered internationally, allowing millions of more people access to the CPA brand.
During this time of transition, the profession has to ensure that the foundation on which the CPA has been built -- ethics, professionalism, trust -- continue as hallmarks of the profession. Consolidating accounting standards and regulations on a global scale is a massive undertaking that needs to be done with great care and deliberateness. Not all of the onerous regulations the U.S. has in place may be celebrated by those being regulated, but as our regulators increasingly partner with other countries, we have to ensure that the gold standard that generations of CPAs have so ardently protected is maintained.
Joanne Barry -- Executive director, New York State Society of CPAs
Convergence of U.S. GAAP with IFRS. It is essential that all members of the global economy work under one set of high-quality accounting standards. Based on the recent report of the SEC, it appears that U.S. adoption of IFRS will not be realized in the near future, so convergence to the extent possible should be the targeted goal.
Wayne Berson -- CEO-elect, BDO USA LLP
The most important issue currently facing accountants is to understand the impact of the cloud on their practices. While migration to the cloud is inevitable for virtually every accounting practice, most accountants are still uncertain about the tremendous opportunities the cloud offers for accountants to regain control of accounting and payroll services that have been lost to competing forces. By not getting ready in time to take advantage of all the opportunities the cloud presents, most accountants are likely to miss this tremendous opportunity to give their practices a boost.
Chandra Bhansali -- President, AccountantsWorld
Describing “change” as the most important issue facing the accounting profession seems somewhat mundane and redundant in that it could be described as a significant issue in most times. What ramps up the importance recently is the level of uncertainty and inconsistency associated with change.
• Is convergence to IFRS a reality anytime soon and something for the profession to prepare for, or were early efforts premature?
• Will the new Private Company Council adequately address the need for private company standards and, if so, will they work seamlessly and intuitively into the professional workability?
• Will the Bush tax cuts be extended temporarily or permanently and for what income brackets?
Adding in considerations of redefining “attest,” firm names and practice privileges only amplifies the level of uncertainty of change for the accounting profession.
Ken Bishop -- President and CEO, NASBA
Keeping pace with changing and evolving technology is, in my opinion, probably the most important and greatest challenge facing the accounting profession. This is because regardless of all the other normal challenges we have faced over the years, e.g., laws, regulatory taxes, etc., technology cannot be ignored no matter how much one wants to ignore it. And I am speaking from experience. I used to hate technology, resisting it as long as I could (I was using spreadsheets and a ten-key long after everyone else was using Lotus). But I have grown up and have seen the light, and now feel that I am at least current with the times, but mainly with how we conduct our business.
We must all face reality: Ten years from now (maybe sooner), everything we do will be through the Internet and in the “cloud.” So why is this the profession’s most important issue? Because just staying current with the technology curve: (1) takes time, which almost no one has (or feels he or she has); (2) costs money; (3) does not fall under billable hours; (4) must be dealt with in addition to all the normal (and often painful) stuff a CPA needs to be on top of; (5) is not going to slow down; and (6) to ignore it, one will become a dinosaur.
Parnell Black -- CEO, NACVA
The most important issue currently facing the accounting profession is the danger of our profession becoming obsolete. Due to the rise of non-professional businesses competing with CPA firms (e.g., H&R Block, Liberty Tax Service), and the rapid creation of smarter technology that further competes with firms (e.g., TurboTax), our profession is moving towards commoditization. There is the potential that we will no longer be needed.
Furthermore, there is a demographic issue within our profession where older firms and accountants often view change as unnecessary. As younger accountants desire to change how our profession is viewed, and the work that we do, more conservative views of how the profession should be run are constantly holding back the immediate need for disruptive innovations within the profession. Thus, changing our current state of becoming obsolete may happen more rapidly with the mass retirement of one generation and the influx of a new generation into our profession.
Jason Blumer -- Chief innovation officer, Blumer & Associates CPAs PC
Succession and talent development: The profession has aged, with a high percentage of partners approaching tradition retirement age. Great leaders identify and develop their successors. Too many CPAs have procrastinated and failed to invest in the next generation. Therefore many firms are faced with mergers as their only transition strategy. Talent and the ability to develop talent will separate the best from the rest over the next 10 years.
L. Gary Boomer -- CEO, Boomer Consulting
Succession. We are headed toward a massive transition in leadership at firms across the country as the current leadership gets closer to retirement. Some firms have already successfully transitioned, others are preparing, and then there are those that don’t yet have any plans in place. The transition discussion is abuzz at the conferences I’ve recently attended -- both among attendees and speakers. And tensions are high between the very generations whose roles are about to shift, which is extremely concerning. There is too much focus on the flaws of each generation, which is leading to a lot of finger-pointing. What we need is for both sides to come together and blend their perspectives and the positive attributes they bring to the table to ensure a successful transition -- together.
Jim Boomer -- CIO and shareholder, Boomer Consulting
Globalization: Beyond any doubt the continued globalization of the world economies is allowing for our clients to easily do business across borders and on multiple continents. In my opinion, technology and the proliferation of the Internet as a primary way to reach customers is the primary factor behind this issue. As CPAs, our clients are coming to us with questions about foreign rules, regulations and registrations, foreign financial reporting issues, and general business issues brought about as a result of complexities of doing business in multiple countries.
Jim Bourke -- Partner, WithumSmith+Brown
The key issue facing our profession is the heightened level of uncertainty and scrutiny that has arisen in the regulatory environment. In the wake of the global financial crisis, many policymakers have proposed reforms to corporate governance, financial reporting, and the role of audits -- some reforms we agree with and some we disagree with. It is important that, as a profession, we remain fully engaged in these discussions, to ensure that future regulation enhances the quality of financial reporting and the relevance of our role as auditors.
Beth Brooke -- Ernst & Young
My perspective is a bit skewed to marketing-related issues, but with that in mind, I think the biggest issue most firms face is how to differentiate themselves from their competition and better connect with their clients and prospects. Read a handful of CPA sites and you'll quickly get a pretty strong case of deja vu. Many are afraid to pick one (or a few) niche(s) because it might mean lost business. But what most don't think about is the flip side of that equation … tons of new business because of a targeted focus.
Bonnie Buol Ruszczyk -- President, BBR Marketing
Staying current. I think the days of generalists have come to an end. Accountants today are faced with massive changes / uncertainty in all facets of their practice: tax reform, heath care reform/payroll tax consequences, IFRS, SSAE 16, cloud computing, CGMA, new financial reporting requirements for small companies -- the list goes on and on.
CPAs are expected to be “experts” on all of these complex issues. Are you kidding me? With the rate of change, the complexity in our global business model, and the legislative uncertainty, staying current is a daunting, if not insurmountable, challenge.
Peyton Burch -- Senior channel executive, Intacct
Communications training -- Aside from fine-tuning technical skills, I believe the accounting profession’s priority should be working to develop better communication skills to service clients and employers. Firms and educational institutions should work to ensure that current and future CPAs, accounting professionals, and marketers in the industry possess the skills and knowledge necessary to communicate with all publics (clients, employees, prospects and the community) using all methods available.
Professionals in the accounting industry should not only be able to communicate with their publics effectively, but should also be trained and advised on how to consistently represent their firm, company and themselves in a positive manner. Corporate image is incredibly important in the business world, and having the appropriate communication skills is a fundamental part of crafting your professional image and behavior.
Emphasis should be placed on communication education and training, the sharing of best practices, and the power of making a connection, both in person and through the utilization of digital, Web and social media tools.
As technical demands increase and change each year, there may be less time spent on developing and managing relationships. Knowing the great importance and value of being able to merge “old-fashioned networking” and taking it “off the golf course” to the digital world, can help create and maintain relationships and open up new opportunities for accounting professionals of all ages, levels of experience and gender.
Knowing how to be an effective communicator is a wonderful way to fine-tune one’s image and develop into a confident, successful professional. I often talk about professional image and style in my blog posts, and it’s very important to convey qualification, trust and professionalism on the outside. However, if your communications skills are lacking, educating yourself on how to connect with others will help find success and further develop your career.
Emily Alexandria Burns -- E-marketing communications specialist, Freed Maxick CPAs
Because I practice and write in the area of taxes, my choice for the most important issue facing the accounting profession is tax law complexity. In almost every survey, CPAs cite regulatory complexity, and in particular tax law complexity, as one of the most challenging areas for themselves and their clients. In the past 10 years, there have been more than 4,400 tax law changes. In the next three years, tax law will be further complicated as the IRS implements provisions of the Patient Protection and Affordable Care Act. Large-scale tax reform would require a phased approach that would add complexity in the short term. Similar to 1986 tax reforms, any future reform would require CPAs to take the lead in navigating their clients through the changes.
Jim Buttonow -- Co-founder and vice president of product development, New River Innovation Inc.
Assimilating the rapid changes in tax law and accounting standards and providing cost-effective services to clients.
Paul Caron -- Publisher and editor-in-chief, TaxProf Blog
I believe the most important issue currently facing the profession is complexity. While this can be seen as a challenge, it is also an opportunity for CPAs to use their expertise to help businesses navigate an increasingly complex, global marketplace. The best way for the profession to position itself to take advantage of complexity is to continue to work to attract and retain the best and the brightest young minds and ensure that they reflect the communities they serve. The AICPA is committed to addressing the issue of diversity and you will hear from us on this issue in the months ahead.
Richard Caturano -- Incoming chair, AICPA
Change. Accountants are faced with a world that is rapidly changing all around them. There are changes in technology, the demographic and economic landscape, the way people do business, and their clients’ expectations. There are also emerging new business models that are shaping the buying behavior of the market, particularly as it relates to delivery, pricing, and customer service. All of this change is forcing many accounting professionals to think about how to transform their business, taking advantage of the new opportunities that are embedded within all of this change. This is an exciting time but it can feel overwhelming, particularly when it’s necessary to go outside of your comfort zone to make decisions that are right for your firm.
Connie Certusi -- Executive vice president and general manager, Small Business Solutions, Sage North America
The most important issue that we face as a profession is simply that we need to foster trust in capital markets by bringing disciplined approaches and strong professional skepticism to our professional responsibilities. Fortunately, this is an issue where accountants can work together to make a difference.
Richard Chambers -- President and CEO, The Institute of Internal Auditors
The notion of relevancy is the most impactful challenge facing the profession. Following the financial crisis a lot of debate arose around independence, objectivity, skepticism, mandatory firm rotation, whether audit reports should be expanded, and whether going concern elements of reports should be changed. These matters are all wrapped up in the broader debate regarding the relevancy of the financial reports we audit and the relevancy of our reports on those statements, making this a long-term challenge for the profession.
Stephen Chipman -- CEO, Grant Thornton
I believe the single most important issue currently facing the accounting profession is the further commoditization of low-end services (e.g., write up, simpler tax returns, etc.). Technology, made readily available with cloud computing, has accelerated this trend. Small businesses have easy access to free (or very inexpensive) accounting software, tax returns, and write-up services.
While significant, I see this as a positive development in that it’s increasingly pushing CPAs to figure out what strategic role they will play on behalf of their clients. The CPA has always been regarded as a trusted advisor, but it’s clearly time for CPAs to more definitively step into that role.
For large businesses, I see the continued globalization of accounting standards and increasing regulatory complexity as two of the most important issues.
David Cieslak -- Principal, Arxis Technology
I believe “risk management” to be the most important issue facing the accounting profession. I say this for a multitude of reasons. In today’s economy, the temptation is stronger to take on questionable clients or be pressured by existing clients into unfavorable positions. I see an increase in related negative events in the coming years from those unprepared to deal with this issue.
Aside from the economy and more relative to what I do, I see an increase of legal threats coming from a security standpoint. The pressure to be more and more social (through online, technology, media, digital marketing, etc.) is just beginning to strengthen in our profession. Although the benefits still far outweigh the downfalls (go technology!), I foresee some firms falling vulnerable to leaks of information and privacy.
It is up to each firm to create standards for identifying and managing the varieties of risk. This should be a focus currently and looking forward.
Sarah Marie Cirelli -- Senior marketing coordinator, Interactive Marketing WithumSmith+Brown, PC
Leadership. As a profession, we’ve done relatively little to develop future leaders. As a result, firms are trying to play catch up. Some will start investing more and build the firm for the future. Others will be forced to merge.
Gale Crosley -- President, Crosley+Co.
The most important issue facing the accounting profession is also the most important issue facing all Americans. That is the inability of our Congress to work effectively and the unpredictability of what happens. Congress and the president (no matter the party) have not taken their responsibilities seriously. They allow important tax provisions (i.e., the estate tax) to expire, costing the nation billions of dollars. They have been passing for years and years one- or two-year extensions of important provisions (i.e., the AMT patch). This unpredictability extends to agencies also, such as the SEC and the IRS.
E. Martin Davidoff -- Firm manager, E. Martin Davidoff & Associates CPA
Aligning the expectation gap between the public and the profession.
Loretta Doon -- CEO, California Society of CPAs
The financial crisis has only augmented the incentive for companies to engage in off-balance-sheet treatment of complex financial instruments and risk, to report unduly favorable but hard-to-verify valuation of financial instruments, and to use complicated and confusing disclosures to put off reckoning with bad news.
Experience tells us that these tendencies are not the consequence of management's beginning with fraudulent intent. And "Occupy-the-City-of-Your-Choice" movements that think bad accounting is bred in the bone of capitalism are simply naive.
We know that markets have demanded more real-time access to information, that the relevant information carries more uncertainty, and that such uncertainty involves volatility and risk.
Consider, for example, the recent pricing volatility in the CDO-swap market, which has accompanied the efforts of institutions to spread valuation risk: This business strategy, which is designed to implement prudent risk management, is virtually certain to make life more difficult for auditors. But unless disciplined by the audit, management's business techniques for risk-spreading can replicate the Katzenjammer Kids' (or Dennis the Menace's) basement chemistry experiments.
The financial audit is the linchpin for restoring confidence.
James Doty -- Chairman, PCAOB
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, ways to improve objectivity and skepticism (including the possibility of firm rotation) 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 confidence that they are receiving 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 are performed with independence and objectivity, providing investors confidence that the information they need to make investment decisions is accurate and credible. 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 -- CEO, Deloitte
For tax accountants, the most important issue is the prospect for major tax reform.
For accountants dealing with public companies, the most important current issue is the future of International Financial Reporting Standards in the United States and whether (and if so, how) IFRS would be incorporated into the regime for public company reporting. FASB’s future -- and, therefore, the future of U.S. GAAP -- is affected by that decision. However, both U.S. and international standard-setters have said repeatedly that the FASB will retain a major role in shaping international accounting standards.
For nonpublic company accountants, the most important issue is how the Private Company Council (under the Financial Accounting Foundation) will, in conjunction with FASB, shape accounting standards for private companies.
George Farrah -- Executive editor of Tax and Accounting, Bloomberg BNA
Discussions this year about the importance of the public company auditor’s independence, objectivity and professional skepticism have put a spotlight on three distinct yet interdependent groups -- auditors, audit committees and the PCAOB -- and how fulfilling their respective responsibilities can increase investor confidence in audited financial information released by public companies.
I believe the three audit quality stakeholders share the common goals of investor protection and confidence. Auditors must perform high-quality audits -- and audit committees select the auditor and oversee their services; the PCAOB sets auditing standards by which audits are performed and comes back after the fact to assess whether the audits were performed in a satisfactory manner. These interrelated roles require robust communication and a joint commitment to maintaining a culture of continuous improvement.
Cynthia Fornelli -- Executive director, Center for Audit Quality
This response is probably quite different than those of other people. The most important issue is how do we as CPAs remain a relevant force in the business world. Our heritage is being scorekeepers, whether as accountants, auditors or tax preparers. According to a recent survey, this area will grow at less than 2 percent over the foreseeable future, because whatever organic growth there is, it is being offset by advances in technology, which includes the paperless revolution, moving everything to the cloud, portals, seamless outsourcing, virtual offices and mobile communications.
To be relevant, we will have to move much more quickly and forcefully from compliance to coaching. Many firms won't make it because they are stuck in the old model. Clients want strategic planning, benchmarking, KPI analysis, wealth management and meaningful help in running their businesses. If we don't provide these, they will look elsewhere.
Chris Frederiksen – Chairman, The 2020 Group
The most important issues currently facing the accounting profession are much the same as those challenges facing the entire federal system of tax administration.
At the top is the security of information as tax administration continues its relentless migration to the Internet and electronic environment. The move to electronic filing (allowing taxpayers to file from their home computers) has greatly expanded the options for taxpayers to electronically file their tax returns at any time, day or night, without having to go through a paid preparer. As computer usage continues to be inextricably integrated into core Internal Revenue Service business processes, the need for effective information system security has become essential to ensure the confidentiality, integrity and availability of data. The IRS and the nation rely extensively now on computer systems to carry out the demanding responsibilities of administering the nation’s tax laws, including processing federal tax returns and collecting federal taxes. IRS computer systems process hundreds of millions of tax returns and contain confidential tax information for over 100 million taxpayers. From a security standpoint, the IRS is responsible for maintaining effective information security controls to protect confidential taxpayer information from inadvertent or deliberate misuse, improper disclosure, or destruction.
The electronic environment has increased internal and external vulnerabilities that can be exploited by criminals. Attacks on the integrity of the system have been launched from around the world, and an astonishing amount of damage can be done by a single individual hacker or by a foreign government through sophisticated intrusions into computer networks. If an intrusion is successful, it could result in substantial economic disruption.
To all who are involved in the system of tax administration, the advances in technology and greater availability of and access to data along with the more stringent auditing/reporting standards and laws that have been put in place pose significant new challenges.
J. Russell George -- Treasury Inspector General for Tax Administration
Relevance. Accountants sell a number of services that are becoming more and more automated (e.g., F/S, payroll, and tax preparation). Additionally, modern business owners find lagging financial statements to be of questionable value -- real-time information is worth more to them. And audits, quite frankly, are paid for (firms hired by) the entirely wrong parties; investors and stakeholders who want to know their risk should be paying for the audits, not the companies whose auditors seek to be rehired by the company in the subsequent year -- this isn't aligned with independence, and because the wrong buyer is buying, the price is driven down. Firms will have to become more consultative and value-oriented as buyers become less interested in paying expert-level prices for compliance-related services.
D. Michelle Golden -- President, Golden Practices
This is a difficult question to answer, as there are many significant issues facing the profession, and what would be considered the most important issue would depend on the perspective of the person answering the question. I believe that for smaller-sized CPA firms, the most important issue currently is what the new Private Company Council will issue for the profession. While this issue is not new, it has again become significant for private companies in light of all the complexities and challenges faced by small, privately owned companies required to meet current GAAP standards.
Robert Goldfarb -- Managing partner, Schoenfeld Mendelsohn Goldfarb LLP
The continued globalization of accounting practices and procedures -- and the implications inherent in those changes -- will present the greatest challenges at the macro level. On a more micro level, the ways in which technology is impacting workforce mobility have tremendous day-to-day operational issues for practitioners, as do the ways clients are using new technologies and expecting their practitioners to use those technologies to improve the client-practitioner collaboration.
Jeff Gramlich -- President, CCH Small Firm Services, a Wolters Kluwer business
The economy. All of our clients are being affected. Money is tight for small businesses, unemployment is high, still a lot of houses to move through short sale and foreclosure, and a possible increase in taxes when the money is needed to create jobs to solve all of the above.
Larry Gray -- Government liaison, NATP
There is a succession crisis in many accounting firms today. Firm leadership is struggling to transition their practices. They are finding that there is a lack of qualified future leaders in the firm, as well as other factors that contribute to this crisis. This is a result of many factors. These include a lack of training, a lack of accountability at the top, a gap in leadership, and a needed paradigm shift in how time should be spent in the firm by both the partners and the professionals. Many firms are aware of this and are working to correct the issues.
There are also huge opportunities for the profession in the coming years. They are very exciting. Businesses need their accounting firms to be most trusted business advisors now more than ever before. Another issue that we are facing is accountants being able to charge what they are worth. There is a great deal of price cutting and business cannibalism in the profession in every market. This is working against the industry. We need to work together to maintain the price integrity and value perception of these services and offerings.
Angie Grissom -- Executive vice president and COO, The Rainmaker Consulting Group
There is significant concern as to whether the profession is developing enough CPAs with the appropriate skills and capabilities to lead the accounting firms and the future of the profession in addressing the challenges of the retiring Baby Boomers, advances in technology, globalization, and expectations of the regulators and users of financial reporting.
William Hancock -- President, Mayer Hoffman McCann PC
The profession’s biggest issue is the global economy and the ability of accounting professionals to work within a global environment. Also, the profession’s usage of technology continues to be a huge issue.
Calvin Harris -- National president and chairman of the board, NABA
Timing. Our systems of standard-setting and regulation have not kept pace with the changes in business. Some seem to function with a Martian year calendar. (From the travels of Curiosity, we’ve learned that the Martian year is equivalent in time to 687 Earthly days.) I’ll mention a few obvious organizational examples. Accountants, firms, companies and the public are waiting too long on the SEC, PCAOB, Treasury and IRS, Congress, FASB/GASB, other standard-setters and regulators. Changes to curricula lag in time. In some jurisdictions in America, our candidates have to wait to sit for the CPA Exam while they take additional courses in a sequence different than their neighbors (i.e., 120 to sit concept). Candidates wait too long for scores or a window to re-take. Except for the work of the Pathways Commission, led by Bruce Behn, too many concerns in the ACAP report of 2008 wait to be seriously addressed.
Mark Harris -- Chair, NASBA Board of Directors
From our perspective, the uncertainty of what the tax laws will be for 2012 and beyond are a huge concern for us and our clients. We are being asked more questions about what the law will be moving forward and we have fewer answers than ever before. Unless something dramatically changes in Washington, there appears to be no help in sight until after the presidential election. Even if Congress is able to address all the outstanding tax issues immediately after the election, it will still make for a very interesting filing season. I don’t even want to consider what might happen to this upcoming filing season if there is a significant delay in resolving all of the expired and expiring provisions.
Roger Harris -- President and COO, Padgett Business Services
Generational issues / succession planning -- this showed up as the No. 1 issue during the AICPA CPA Horizons 2025 Future Forums (we designed the format and facilitated these sessions) where the generational differences, work styles and technology differences were major parts of the discussion. This is already starting to get worse as the talent shortage increases at both the public accounting sector and the business & industry sector. Four out of the Top Ten issues identified by grassroots CPAs after seeing the latest trends research from the AICPA identified generational and talent issues as the top issues facing the CPA Profession.
Tom Hood -- CEO and executive director, MACPA
Accountants inability to understand and then educate our customers on our relevance in the business world. What value do we provide our customer in helping them achieve their goals. Why should they hire (and more importantly, value) us and our services.
W. Michael Hsu -- Founder and CEO, DeepSky
I believe the near retirement of the current-day partners will bring about massive change in culture, business process, and approach to client service. These next generation leaders will be lean-minded, and über-creative when it comes to growing their businesses.
Trey James -- CEO, Xcentric
Managing accelerating change.
Transitioning business models from traditional approaches to accommodate regulatory, cultural, social and technological changes are becoming more challenging. Examples include: health care, globalization including manufacturing, outsourcing, IFRS and CGMA, continued acceleration of social media, Web enablement, as well as Cloud Computing, Bring Your Own Device, ultrabooks, tablets, smartphones and the rapid decline of older technologies.
Public practice CPAs need to be looking at their client services. These offerings should be based on changing regulations and client needs, and the appropriate way to support these with technologies. Industry CPAs need to look at more integrated systems, reporting and analytics plus single-purpose solutions to automate time-consuming processes.
Strategies that you may have perceived were good as little as two years ago no longer make sense. Providing high levels of client service is becoming more demanding. Having information on demand for management decision-making and customer response is critical. Mobility, apps, virtualization, security, accounting, reporting, and many more are all up for review.
Pick your business strategy and tactics and execute your vision.
Randy Johnston -- Executive vice president and partner, K2 Enterprises
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 Karl -- Vice president of taxation, AICPA
A major challenge we are all facing is attracting and retaining top talent. Having smart and skilled people is critical as we serve clients that are looking to adapt and thrive in an environment that is complex and rapidly changing. Firms are all competing hard for the best young and experienced professionals. To help us stand out, we work hard to make KPMG a firm that is a great place to work and build a career.
Henry Keizer -- Deputy chairman and COO, KPMG LLP
Leadership. In 2012, I joined five other CPA management consultants to form an alliance, the CPA Consultants' Alliance, because we all felt strongly that leadership issues inside public accounting firms needed to be addressed in an informative and educational manner. We now have 16 consultants as members of the alliance.
Rita Keller -- President, Keller Advisors
The impact of technology cannot be underestimated and I am seeing firms being stunned by rapid changes and an inability to adapt. If the traditional firms don’t get on board with the digital opportunities to service their customers, they won’t be able to add any new client blood, which will cause their firms to atrophy because they are relying on the traditional clients, which in turn reduces the value of their practices when they look to retire.
Roman Kepczyk -- Director of consulting, Xcentric
The obvious answer is Tax Code stability/tax reform, which is clearly a monster issue for reasons we all know. We’ve had years to chew on this, and the perils of inaction are well documented (inability to provide advice to clients, tremendous costs associated with compliance, etc.).
I also believe identity theft/tax fraud is absolutely exploding and is going to be a game-changer in the next few years both for tax professionals and for tax administrators. The dollar losses to the fisc are potentially enormous, the burden (both in dollars and time) placed on individuals whose identities are stolen, will be significant, and fraud detection regime tax administrators will have to put into place will change significantly how tax professionals conduct business.
Robert Kerr -- Senior director of government relations, National Association of Enrolled Agents
The operational challenges of integrating business functions and finding qualified professionals to sustain accounting practices.
Erinn Keserica -- Regional marketing manager, Cherry Bekaert & Holland
• The public does possess the smarts to understand the “business of business,” but the financial statements don’t provide enough operational data (cost to make a car, amount of pollutants, injuries on the job … real data about the business of business).
• Even with all the talk about computer security, there is an enormous naiveté as to the risks in enabling technology (social media, SAAS, cloud computing et al.). For example, SAAS and Cloud = drinking from a public water hose, yet folks are using these technologies for a few pennies of savings!
• The auditing profession is too reactionary … and woefully after-the-fact (I love the audit profession, and have been in the profession 30 years … but come on, way too much legacy thinking). And, unfortunately, auditors don’t “test” controls: They “review” them. World-class internal audit shops invoke process level controls in the ERP apps, and audit in real-time. We have the technology to do this, and to model processes with math, leading to Continuous Controls Monitoring. The critical benefit here is to use accounting data, and auditing expertise to manage/mitigate business risk.
Additionally, the leading edge businesses believe that annual reports offer little value to stockholders, and desire to offer quarterly, or monthly, assurances … and CCM is the enabler!
Dr. Dan Kneer -- President, Dr. Dan C. Kneer Advisory Group
Clearly, the next generation of partners. In 1990, 2 percent of college graduates got an accounting degree and ten years later, by the year 2000, only 1 percent of college graduates got an accounting degree. When played out to the present, that illustrates how difficult it will be for most firms to find and develop future partners during this decade.
Allan Koltin -- CEO, Koltin Consulting Group
I may be a broken record, but I continue to say that the diversity of the profession makes this question nearly impossible to answer with just one issue.
Succession may be the biggest issue that many firms are concerned with currently. Succession took a back seat during the recession as senior partners in firms put off retirement for a few years. Now all firm sizes are dealing with the issue once again. Larger firms have a slightly better handle on the issue, but are still concerned there’s not enough future leaders coming up through the ranks. Some of the merger activity is a direct result of succession issues.
Based on firm size:
• Small firms -- complexity continues to weigh heavily on the minds of small practitioners. This is true in both the A&A aspect and in tax complexity.
• Medium firms are kind of stuck between complexity and keeping up with standards and the nuances of growth and firm administration. Moving from that small firm to an established firm is difficult as these firms need greater infrastructure and need to have healthy growth to sustain the new needs.
• Larger firms’ issues are growth. Growth through additional services, growing traditional lines with new clients and getting partners and managers back out on the street doing business development. That also leads into another hot issue for larger firms being partner unity and accountability.
Mark Koziel -- Vice president of firm services & global alliances, AICPA
The most important issue facing the profession is what regulators and standards-setting bodies are likely to do in the short term. What will the PCAOB do with mandatory firm rotation or other related changes that they feel are needed to improve the audit process? At what pace will the SEC move related to IFRS adoption in the United States? What will FASB do with new standards aimed at converging with IFRS, and how far will FAF and FASB be willing to go related to private company reporting standards?
Developments with any combination of these issues could quickly change the landscape of the accounting profession. Access to talented staff has improved for the profession in recent years. The challenge facing the industry is growing staff technically to deal with more complex standards. Moreover, the accounting standards issues that are in play impact the nature, extent and timing of training that the professionals will need. The two are very interrelated.
Gordon Krater -- Managing partner, Plante Moran
The most important issue can be summed up in one word -- complexity. Accountants face complex tax laws, ever-changing technology, and changing accounting and auditing standards.
Lana Kupferschmid -- President, NCCPAP
The most important issue facing the profession is who is (and is not) included in the 2012 Top 100 Most Influential People list published by Accounting Today, a SourceMedia, Inc., publication (that and the commoditization and automation of the profession’s core services).
Greg Kyte -- Controller, Utah Valley Medical Offices
The shift from the desktop to the cloud is the most critical and important change for the accounting profession. While it might seem like a big leap to change from the manual processes of the past, the opportunities that the cloud brings us are endless. The cloud has provided a whole new platform for innovation. The sharing of data and services between customers and partners creates endless opportunities to automate processes by using technology in ways that it has never been used before. Innovation in the cloud is not just about using the latest technology, but instead it is about how a specific technology can vastly improve the day-to-day processes that we all have.
For example, because of the cloud, Bill.com can give accountants command and control over their cash flow, payables and receivables -- anywhere, anytime. It rakes in receivables faster, shows you the best time to pay every bill and eliminates hours of paperwork and drudgery. It invoices your customers, pays the bills on your schedule, banks your deposits and even syncs everything with your accounting program, freeing your time -- and your mind -- to grow your business.
Rene Lacerte -- Founder and CEO, Bill.com
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 change to the financial reporting system. 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 being performed, 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 often consumed with second-guessing the professional performing the work. And unfortunately, more complex prescriptive rules lend themselves to that problem.
Charles Landes -- Vice president, Professional Assurance Standards and Services Group, AICPA
I believe the pressure on our talent pool will continue to be the most important issue facing the accounting profession for a long time. While this has been an issue for at least five years, there have not been enough bold steps to encourage the next wave of potential accounting students to make the decision to join the profession. We need a wholesale investment in high schools around the country, to provide opportunities for them to engage with members of the profession to make accounting a first choice. Only when we take control of the opportunity for the future will there be a change in the numbers entering.
Beth Kieffer Leonard -- Managing partner, Lurie Besikof Lapidus & Co. LLP
Private company financial reporting requirements.
Taylor Macdonald -- Vice president of channels, Intacct
The most important issue currently facing the accounting profession is the impact of technology trends on firms and clients, and the evolving face of client service.
Certainly many of today’s practitioners have seen changes and disruptions to workflow from technology over the course of their careers. Today is different in that the speed of the technology changes is exponentially faster, and they are impacting not only the workflows within the firm, but also our client interactions. The “consumerization” of interactions is changing the historically rooted way we do business. The expectations of the Internet, cloud-based computing, and the vast adoption of mobile devices is not confined to the walls (virtual or real) of the firm -- but actually changes the expectations of our clients, and their preferences for how we serve them. Firms need to evolve to survive and thrive in this fast paced environment.
Teresa Mackintosh -- Executive vice president and general manager of tax, CCH
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.
At the same time, the global economy is at a critical juncture, with an extended economic crisis driving permanent shifts in business models and strategies. CPAs in public and management accounting have an extraordinary opportunity to apply their expertise to help steer the path to sustainable and successful business practices.
Janice Maiman -- Senior vice president of communications and media channels, AICPA
Issue like technology, marketing, governance requirements, pricing, firm talent and succession issues continue to dominate the profession. Firms are starting to realize that adaptation to change is the norm, not the exception. They’ll continue to develop internal processes and leaders whose role it is to influence and manage change within their firms.
Eric Majchrzak -- Director of marketing, BeachFleischman, PC
As it relates to accounting firms, the two critical issues we continue to face are succession planning and shrinking billing rates. As it relates to client matters, the following are important:
• For some time, J.H. Cohn has believed that the U.S. needs to "jump-start" corporate engines by restoring access to public capital, and the JOBS Act is a sign in that direction. For the accounting profession, it also means understanding the requirements for emerging growth companies.
• It’s becoming increasingly important to belong to an international network or association because clients need stronger insight as they are increasingly doing business across border and because of the move toward IFRS.
• Cybercrime is a significant threat to businesses; accountants especially need to be prepared to combat phishing scams and other hacks.
• Under the Patient Protection and Affordable Care Act, individuals will be required to pay a penalty to the IRS if they are not covered by health insurance plan. This provision and other tax provisions contained in the act will mean sweeping changes for tax professionals over the next few years.
Thomas Marino -- CEO, J.H. Cohn
The most important issue facing the accounting profession today is succession planning and knowledge transfer. In some cases, industries could see approximately 50 percent of the workforce leave by the end of the decade. When these workers leave, the knowledge that they have acquired through the years will leave with them. In addition to the challenges of gathering and sharing the knowledge, another challenge will be in mentoring those employees who follow in the footsteps of the retiring workers.
Brian McGuire -- Associate dean, College of Business, University of Southern Indiana
Adapting to significant change -- change in demographics impacting succession, leadership, recruiting and retention in the profession, inevitable change in accounting standards and the structure used to set standards, change required by escalation in regulatory activity, and continuing change to adapt to a challenging growth environment.
Krista McMasters -- CEO, CliftonLarsonAllen LLP
There are huge opportunities and challenges for the profession. Complexity is both our biggest opportunity and challenge. Clients and employers are turning to CPAs for help in understanding the business and regulatory environment today. While that's an opportunity, remaining competent with all the complexity will remain a challenge.
In the short run, an economy that fosters business activity will remain the biggest issue facing the profession.
Barry Melancon -- President and CEO, AICPA
I think the most important issue would have to be Private Company Financial Reporting -- we are seeing some real progress on this issue. I think the decisions that come out of the Private Company Council will be watched closely by all key stakeholders in the profession, and for good reason, as it looks like there may finally be systemic change to GAAP that would help private companies.
Additionally and relatedly, the AICPA is developing an Other Comprehensive Basis of Accounting (OCBOA) -- a standalone Financial Reporting Framework intended to be used by private small and medium-sized entities in preparing their financial statements. We expect to develop the framework through 2012 and expose it for public comment before issuing it at some point in 2013 -- it should really help many of the 29 million small businesses in the USA and the small firms that serve them.
James Metzler -- Vice president of small firm interests, AICPA
The possibility that the Mayan calendar is wrong and there will be a 2013 busy season.
Caleb Newquist -- Founding editor, Going Concern
Among the most important issues confronting the profession today, I see (1) growth due to a stagnant economy and an insecurity or uncertainty regarding the near future. Business is not expanding, very few IPOs are occurring and clients are selling, dissolving or struggling, making it difficult for firms to raise or even maintain existing fees. (2) Low-balling on fees is again a prevalent nemesis, which I thought was a part of history. However, it seems like a difficult lesson for this profession to learn. (3) Baby Boomer retirements or requirement to continue to work is playing havoc with good strategic planning initiatives. Fortunately many agreements cap payments to retiring partners or limit the number of partners that can retire in any one year. (4) Succession planning is a critical concern since I see a very limited confidence level by retiring or senior partners in the bench of partners behind them. This is striking fear into many partners that they may never see their retirement benefits completed and causing the merger mania environment so prolific at the moment. (5) Finally, there is a myopic regulatory environment in a highly unfriendly political environment propagated by a present administration antagonizing the profession causing serious insecurity by many CPA partners.
Jay Nisberg -- President, Jay Nisberg & Associates
What the SEC will decide about convergence/condorsement with international accounting standards. Their lack of a decision has created uncertainty and with this being an election year, I doubt if any conclusion will be announced in 2012.
Judith O'Dell -- Chair, FASB Private Companies Financial Reporting Committee
The most important issue in my eyes is the slow pace of firm transition to next-generation status. That is, moving to a more efficient, social, and collaborative way of conducting business. And not just because it's a better way of working internally, but because clients are demanding it. The era of the digital client is here -- those that demand online options for ease of use and convenience, not to mention heightened security. Today's clients are also socially driven, many choosing to communicate via social media channels and other collaborative forums. This means that a radical change in firm culture is required to meet the needs of both a technologically advanced client base, as well as our new generation professional staffers. For firms that refuse to makes the proper changes in technology, workflow, and overall culture, it's certain they will soon be obsolete. That is the big issue.?
To support today's digitally minded clients (and staff), there are so many innovations available to the profession. Firms need to adeptly implement cloud technologies, social media, advanced practices, and other innovative operational methods. The profession must change with the needs of our clients. And today's clients are digital and social, and desire a way to collaborate with their trusted advisors, not just be advised.
My firm has made the transition to a next-gen firm. We’re different because we’re cloud-based -- using technology to make documents and data accessible remotely. This allows staff to have an interactive, real-time, and collaborative relationship with clients. With traditional practices, we were limited to a manual, static process -- using paper and pencil and some accounting software. This also meant manual delivery of documents and a slow, cumbersome processes. But no more. With technology, we can serve our clients much more efficiently. And having created a socially driven culture within our firm, we are working with clients collaboratively on a day-to-day basis. This is where the profession needs to be.
There’s a whole new generation of accountants coming out with a new state of mind. Small-business owners that demand online service and the ability to work in partnership with their accounting professionals are searching for digital accountants with this advanced mind set. Those who don't get on board will be left behind.
Jody Lee Padar -- CEO and principal, New Vision CPA Group
The increasing pace of globalization is creating new challenges for governments and corporations, as well as the professional accounting firms that serve them. Tax regulations around the world are evolving rapidly to adapt to the new global economy, and at the same time, corporations have increasingly global footprints and supply chains.
Brian Peccarelli -- President, the Tax & Accounting business of Thomson Reuters
In a word: complexity. All of us are challenged to keep up in a complex world. We live in uncertain political and economic times, nationally and globally, which affect all stakeholders in the accounting and financial reporting supply chain. From the FAF perspective, we must continue to ensure that we hear from and listen to those stakeholders during the standard-setting process. While the messages we hear are diverse -- and therefore complex -- those messages are critical to our ability to distill the information and develop standards that provide users the information that is most relevant and useful to them.
Terri Polley -- President and CEO, FAF
Whether it's within firms, corporate practice or the volunteer organizations that serve the profession, we're beginning to experience a significant rollover of leadership and the implications can be far-reaching. The Boomer departure from leadership in CPA firms, as well as corporate leadership roles, is significant. But perhaps more significant is the departure of the Boomer generation as leaders in the volunteer organizations serving the CPA profession. In many instances, the trailing generations have not demonstrated an interest in pursuing volunteer engagement or leadership opportunities/roles and there likely will be an impact on those organizations as they find it more challenging to identify strong leaders who are willing to tackle tough issues. A void in strong leadership can present a significant challenge to all of these firms, employers and organizations.
J. Clarke Price -- President and CEO, Ohio Society of CPAs
There are two significant issues facing the accounting profession. The first is the need to change the profession’s perception. Accountants are more than people in charge of reconciling historical records such as last quarter’s transactions. Accountants need to be seen as contributing to the strategic direction of the businesses they serve. Accountants can do this by providing insight of where the business is and where it’s heading. Accountants can also provide insight into different scenarios of the impact potential changes to the business (acquisitions, new markets, etc.) might have. The second is tied to the first point: The accounting profession has to be seen as forward-thinking, able to deal with new issues, new regulations and new crises. Green eyeshades are out -- real-time information is in.
Steven Pugh -- CEO, UNIT4 CODA Inc.
The profession is facing a serious challenge related to succession of its senior firm leaders; far too many firms are not prepared to provide succession from within their firms for their senior leaders; due to the concentration of ownership in CPA firms in partners that are 55 years of age and older, the vast majority of firms will face a substantial transition in ownership within the next 10 years; as a result, many firms will be forced to combine with other firms and this is already manifesting itself in an unprecedented number of mergers and acquisitions.
Terry Putney -- CEO, Transition Advisors LLC
Accountants need to be better educated to help them identify potential fraud perpetrators and their work product more effectively. Accountants in general are trained to exercise professional skepticism, yet, as front-page headlines continue to show us, there are many obvious signs of fraud that are frequently missed. It is essential that they learn to recognize the red flags and symptoms of fraud.
James Ratley -- President/CEO, Association of Certified Fraud Examiners
FASB and the IASB must determine whether to, and how to, incorporate IFRS in the US, and provide the transparency to the profession related to the observations, issues and plan. What must weigh in on the decision is the cost of adaption, and the potential direct benefits.
Robert Reid -- CEO, Intacct
I feel the most important issue facing accounting marketers is getting accountants comfortable with embracing creative and edgy branding campaigns and marketing strategies. Our industry needs to break away from the old ways of thinking about how to market professional services.
Kari Lynn Reynolds -- Marketing specialist, Macias Gini & O'Connell LLP
Globalization of small business and how the profession will organize itself to provide quality services abroad for domestic clients who begin to expand their businesses internationally.
Rick Richardson -- Managing partner, Richardson Media & Technologie
Not sure just one, I would say:
• Future of auditing.
Daryl Ritchie -- CEO, MNP
A critical issue facing the profession today is the transformation of the CPA. There are many divergent opportunities available to pursue based upon the trends in the market. Opportunities exist in traditional arenas, including dealing with ever-changing accounting and auditing standards and tax regulation, while tax automation, cloud computing, mobility and Big Data also present opportunities for the profession to significantly evolve. Choosing the desired path, leveraging the core competencies and values of the CPA, and defining the future to maximize value in the current shift is key for the profession to recognize, act upon and secure a seat at the table to drive a successful future.
Kevin Robert -- CEO, Wolters Kluwer Tax & Accounting
It has to be succession planning, hands down. Virtually every firm is talking about it and worrying about it. The plethora of Baby Boomer partners nearing or at retirement age combined with a dearth of young talent willing and able to replace them, will end up being an unsolvable problem for the vast majority of firms. This area naturally spawns initiatives in other related areas such mergers and leadership development. As the succession planning conundrum continues (and there is no sign of a let-up any time soon), more and more partners will work well past normal retirement age, earning extra income to offset their possible inability to sell or merge their firm when they can no longer work. Because most CPA firm partners have few hobbies (other than golf) and love their jobs, for many, the “work forever” exit strategy isn’t as bad as it once sounded.
Marc Rosenberg -- President, The Rosenberg Associates
The aging of the profession. This includes the CPAs that serve in firms and industry, as well as the academic community (accounting professors) that trains the next generation of CPAs. As Baby Boomer CPAs and academics begin to retire, the profession will be challenged to deal with that loss of leadership. This will put a strain on CPA firms and companies that employ CPAs, as well as universities that require Ph.Ds to teach accounting students. The next decade or more will be a challenging time for the profession to deal with this “brain drain.”
John Sharbaugh -- CEO and executive director, Texas Society of CPAs
The aging of the CPA population. This factor will cause an imbalance between practitioners looking to leave the profession and those interested in being owners.
David Sibits -- President, Financial Services, CBIZ Inc.
The most important challenge/issue facing the accounting profession today is the ability of CPAs firms to change. Because of increasing competition and pressures to decrease fees for some work, many firms are seeing margins decrease and are struggling to maintain a stable client base. Firms need to embrace technological advancements to not only improve performance but also to market and communicate to their client base.
Change is also needed in order to maintain and grow top talent in CPA firms. Firms who want to attract and retain only the best need a great culture, a learning-and-development program, a clear career path for CPAs, and a long-term firm vision.
James Sikich -- CEO and managing partner, Sikich LLP
With someone turning 65 every seven seconds, the aging of the accounting community and succession issues that result from it are the No. 1 issue facing the profession. A decade ago, we had a drought of accounting college graduates entering the public accounting arena (although that has changed in recent years) but now we face a large exodus of partners, including the founding partners who still run over 75 percent of today’s accounting firms! In 2008, the PCPS survey told us that over 70 percent of today’s accountants are over 40 years old; 63 percent of the firms stated they expected at least one partner to retire within five years and more than 50 percent said more than one partner will retire. They expect the 2012 survey to be even worse from an aging of the profession perspective. Most accounting firms are ignoring the issue hoping it goes away or falsely assuming they have the talent on the bench to replace senior partners. But when many are forced to face the reality that they do not have an internal succession solution, the market will be flooded with firms seeking young talent and merger opportunities for succession.
Joel Sinkin -- President, Transition Advisors LLC
We’re in the middle of a revolutionary paradigm shift in how businesses operate and interact with their customers and vendors. Accounting professionals, along with their small-business clients, struggle to keep up with this technology and process revolution. The cloud and mobile technologies are driving us to rethink all of our processes and service offerings. For the first time ever, the accounting profession can realistically drive collaborative relationships with their clients. This changes everything.
Douglas Sleeter -- Founder and president, The Sleeter Group Inc.
Cloud computing and mobile applications are reshaping the accounting profession, which when combined with advanced analytical tools and ever-larger data sets offers a great opportunity for accounting professionals to save time, grow their practice and better serve their clients. Client expectations have shifted with the advent of these new technologies to the point where “I’ll get back to you and answer your question when I’m in the office” is no longer an acceptable response to a client need.
Products like Intuit Online Payroll and Intuit Tax Online are greatly reducing the amount of time and effort required for data collection and validation -- in turn greatly increasing the speed at which accounting professionals can access client data and answer questions anytime, from anywhere. This is the expectation of clients today and many accounting professionals are meeting those needs; those that aren’t adapting to these new technologies run the risk of being at a competitive disadvantage and may see practice growth slow down.
There are additional opportunities using data and the cloud for accountants to provide clients with better ways of organization, monitoring and analysis of their finances and businesses. Understanding how to leverage big data and the latest technologies for one’s clients will be a competitive skill and truly exemplifies the potential for growth in the accounting profession that technology enables.
We are already seeing that data has leveled the playing field for small businesses, arming them with insights and capabilities once only available to corporate giants, and this same phenomenon will only help the accounting industry provide better service to their clients.
Brad Smith -- President and CEO, Intuit
The Internet has given rise to a flurry of innovation that impacts all aspects of our lives, including the accounting industry. Nimble companies have been able to create software that was previously too expensive or too complicated for small businesses. The result are that accounting professionals and small businesses today have access to more powerful solutions that allow them to run their businesses more efficiently and more cost-effectively. However, not all accountants are embracing these technological changes.
Take for instance how collaborative cloud computing systems have changed the way accounting firms are doing business with their clients. Those that aren't learning these new technologies are at a competitive disadvantage.
Keeping pace with technological change is an investment for a firm. It's also an important part of being a trusted advisor. More and more small businesses are looking to their accountant for advice on how these technologies can improve efficiency and make them more profitable.
Jamie Sutherland -- President of US operations, Xero Inc.
The most important issue facing the profession is the future of the audit and attest process, which includes the ongoing debate about mandatory audit firm rotation. The profession recognizes that change is needed and is prepared to embrace responsible calls for change, but alternatives must be clearly defined and fully vetted to ensure that they will produce the desired results. I’m concerned about the unintended consequences of changes proposed by some outside the profession, such as audit firm rotation or auditors providing their impressions or views regarding the quality of a company’s policies and practices, notions that will only serve to make audits riskier and more expensive. In short, any changes to the audit and attest model require a framework that clearly defines expectations for auditors and provides sufficient clarity of roles among the auditors, management and audit committees.
Ralph Thomas -- Executive director, New Jersey Society of CPAs
I continue to believe that we are not adequately addressing the talent management gap articulated by CEOs, CFOs and controllers around the globe. Simply put, finance teams are leaders in both value preservation and value creation, but key competencies driving the latter role are lacking. Transformational approaches in academia in terms of broader curricula, and a call to action by associations and employers, are necessary to develop the talent necessary to fully protect investors and drive business performance.
Jeffrey Thomson -- President and CEO, IMA
For many years, much of the work within accounting departments has been rote and manual-labor intensive. As a result, there’s been a tidal wave of outsourcing designed to cut costs and increase corporate efficiency. But the result has been “throwing the baby out with the bathwater,” so to speak. By outsourcing accounting jobs to less skilled labor offshore, companies lose the valuable analytical skills and strategic value that accountants should be adding to companies. Corporate accounting leaders should be focused on utilizing technology to automate repetitive job functions so that companies can both run leanly and provide tremendous business value to a company through various metrics and analytics on how a company’s finance function can be improved.
Therese Tucker -- CEO and founder, BlackLine Systems
In my opinion, the most important issue facing our profession is the relevancy of our audit service/product and making sure that we communicate with stakeholders in ways that are of importance to them. When almost every set of financial statements are correct, yet the world experiences the biggest financial surprise in decades, something is wrong.
James Turley -- Ernst & Young
Clearly, making the transition from the traditional role of “service provider” to “growth consultant” is the most important issue the profession is facing. Boomers are aging and retiring, so as firms plan for their future, they need to understand that their younger staff -- and even their clients -- expect them to be more than tax and accounting advisors. Clients want advice, leadership and a plan detailing how they can grow their companies, and will trust their CPA to help them achieve their goals. Clients have always relied on their CPA for advice -- and that will not change. What does need to change is the way the profession approaches an engagement, from something that occurs once or only a few times annually to more of a year-round, consultative environment. Not only will clients appreciate advice throughout the year; the profession’s reputation will be enhanced as a result of the changing role.
Pascal Van Dooren -- Executive vice president of sales & marketing, Avalara
The war for the best talent. Attracting and retaining the best and the brightest is a critical issue we all face. We all aim to bring into our organizations the best young recruits and experienced professionals, and then develop them into high-performers who will stay and have great careers with our firms. In addition, many firms, including KPMG, are working hard to recruit diverse professionals as the need for greater diversity in the accounting profession is critical. An organization’s true assets are its people. The total contributions of our people are the enabler and key to performance. That’s why having a diverse firm that’s a great place to work and build a career is a key priority for KPMG.
John Veihmeyer -- Chairman and CEO, KPMG
Meeting the career aspirations of future generations, while modifying our business model to meet the ever-increasing complexity of the business climate, will be a huge challenge and opportunity for our profession.
Gordon Viere -- CEO, CliftonLarsonAllen LLP
I feel one of the most important issues facing the accounting profession right now is simply keeping up with change. Whether the change is technology (for example, adopting cloud solutions), understanding all the new tools coming to market that their clients are asking about or how they will need to evolve their accounting firm’s business model in order to ensure they are sustainably successful, it all comes back to managing change. Accountants are pulled in so many directions right now and prioritizing which change is the most relevant and has the most potential for their practice and clients is critical, as is their willingness to adopt and embrace change.
Jennifer Warawa --Vice president of partner programs & channel sales, Sage North America
We’re seeing a behavioral shift in accounting professionals when it comes to the use of cloud-based and mobile technologies. Up until recently, firms were required to buy, build and maintain their IT infrastructures despite exponential costs. Practitioners now have access to a broad range of cloud-based applications whose benefits include: anytime and anywhere access, time savings, affordable client collaboration, and increased productivity due to shorter deployment time. The future is here, it’s just not evenly distributed, as some firms are benefiting from these new technologies, while others are slower to adapt.
In addition, accounting professionals and their clients are increasingly looking to smart phones and tablets as necessary tools for managing the complex choreography of work and life. In fact, an Intuit survey conducted in 2011 found that 48 percent of accountants feel that it is very important to have the ability to run their business on a mobile device. Accounting professionals and small businesses want to be able to leverage mobile devices to run their payroll, gain insights into their business’ performance and manage their customers from one device on the go.
These new technologies are re-inventing work and the workplace, allowing greater flexibility around when, where and how work is done. While client service will remain of paramount importance, being onsite will become much less important, and these tools will enable, and often require, anytime, anyplace work.
Jill Ward -- Senior vice president and general manager, Accounting Professionals Division, Intuit Inc.
The first issue is the transition from compliance into advisory services. CPAs are uniquely qualified to help clients with financial decisions affecting their businesses and lives, but many are slow to initiate advisory opportunities.
The second, the pending retirements of thousands of CPA firm founders and the succession of younger accountants who are ill prepared to be owners is a major issue.
Troy Waugh -- CEO, The Rainmaker Companies
To stop the bickering over the adoption of International Financial Reporting Standards and bring this matter to a resolution. We live in a global economy and the U.S. can ill afford to go its own way.
Dr. Joseph Wells -- Founder and chairman, ACFE
Relevance with our clients. As a profession we need to provide real value and do more to help businesses succeed. We have spent so much time going paperless (and looking at efficiencies) that we have failed to consider what matters to our customers. We need to address our perceived value.
Geni Whitehouse -- Countess of communication, Brotemarkle, Davis & Co. LLP; CMO, Yupana Inc.
Changing the accounting firm business model is the most important issue facing our profession. Learning to run the practice:
• With a collaborative workforce;
• With a focus on growth through niche development and better processes;
• By moving to value pricing; and,
• By developing leaders at all levels to decrease the stress of succession challenges.
are all pieces of changing the entire business model. Will this be easy or a quick change -- absolutely not. Will we see new models emerge and prosper in the next five to 10 years -- absolutely yes!
Sandra Wiley -- Shareholder, senior consultant and COO, Boomer Consulting
From my perspective, it is the landmark changes that are underway 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 in place for all federal tax return preparers. For the first time, we know how many tax return preparers there are -- about 740,000. But we’ve really focused on those so-called un-enrolled preparers, the 350,000 folks who had no official standards whatsoever. We have created a new credential for them -- Registered Tax Return Preparer. And we’re saying here are your new requirements: You must pass a Registered Tax Return Preparer test, a basic competency exam, by December 2013. You must complete 15 hours of continuing education annually. Finally, you must adhere to ethical standards outlined by Circular 230.
And let me just add, we’re not trying to push anyone out of the profession. But we want those who are in the profession to demonstrate some degree of competency; taxpayers deserve no less. CPAs, EAs, and attorneys demonstrate professional competency through exams. That’s why we created the RTRP test. And we are urging the 350,000 preparers to take it as soon as possible and get their RTRP certificates. If they wait until the deadline, they may find limited slots available.
Starting in 2014, only CPAs, EAs, attorneys and Registered Tax Return Preparers will be authorized to prepare individual federal returns for compensation. This is a huge change. We believe these new standards will improve the entire tax preparation industry by promoting competent and ethical tax professionals. We also are focused on the unscrupulous preparers who are a burden on the treasury and the industry. Enforcement and compliance are huge components of this effort.
David Williams -- Outgoing director, Return Preparer Office, IRS
The most important issue facing the profession continues to be succession -- but with an added twist. A June 2012 Journal of Accountancy article put the number of Baby Boomer CPAs expected to retire in the next two decades at over 100,000, which I think is conservative. The intellectual capital set to retire in the profession -- and in this country -- is staggering! And Baby Boomer CPAs are not doing what they need to in terms of leadership development and delegation to develop the next generation -- in all segments of the profession.
Beside the need for real succession planning, honest and open communication about intended transitions, and development of the successors, the added twist I refer to above is the greater-than-usual restlessness I sense in the Millennial CPAs at the staff and senior levels. They come to the profession very excited and full of possibility, but then they find that they are relegated to “mind-numbing” tasks and not included in “meaningful” discussions and they become disappointed … disenchanted. Baby Boomer leaders must find new ways to engage their young, capitalize on their potential earlier, compress their learning, indulge their need for flexibility and technology, and involve them in challenging projects and engagements in order to retain them. If we don’t, addressing succession will be moot, as the top talent in the profession will seek more meaningful options elsewhere.
Jennifer Lee Wilson -- Co-founder and owner, ConvergenceCoaching
Technology now enables formerly paper-based workflows to be moved into the cloud. This means secure anytime/anywhere access, improved collaboration with engagement team members and clients, and automation of manual tasks. Effectively leveraging technology also helps recruit and retain qualified professionals who don’t want to work with outdated technology or processes. Firms must embrace this change if they want to grow and remain competitive.
David Wyle -- President and CEO, SurePrep
From the sales and use tax perspective, it is the expansion of nexus and whether the U.S. Congress will pass one of the pending bills which would eliminate the Quill standard of substantial physical presences as a determination of whether a state can require a remote seller to collect sales tax. Passage of this could see widespread simplification in states previously opposed to the SST efforts, and also the expansion of alternative tax calculation and remittance providers.
Diane Yetter -- President, Yetter
Maintaining a strong knowledge base in the profession to help clients make the most informed and correct decisions in their businesses.
Sanford Zinman -- President, Sanford E. Zinman CPA PC
In this day and age, I feel that there are a few major issues that accounting firms need to focus on, one of which is adapting to the changing needs of the modern workforce through work-life balance and/or work-life integration. Another includes retaining the ability to deliver value to clients in a world where so many traditional accounting services have become “commoditized.”
However, I feel that the most important issue currently facing the profession is succession planning. With a continuing rise in the number of mergers and acquisitions in our industry, the accounting firm model is changing. Many of these mergers and acquisitions are happening very quickly and back to back, which leaves the effected firms in a time crunch that leads to mistakes. One major mistake that I’m seeing is that many firms are putting their succession plans last on the list in the hopes of revisiting them at a later date. This becomes a major issue when there is a need for that plan before it’s been revisited. It creates turmoil with both clients and staff and makes the adjustments extremely difficult.
Janine Zirrith -- Firm administrator, Wilkin & Guttenplan PC
The convergence of U.S. GAAP and IFRS, particularly how it will impact private companies.
Mark Zyla -- Managing director, Acuitas Inc.
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