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.
Clearly there are many issues facing the accounting industry today -- from attracting and retaining talent to new and evolving technologies to regulation and the economy. That said, I believe that the most important issue facing the accounting profession today is innovation.
Business and society continue to evolve and change at an astounding pace. New technology, big data and 24x7 access to information is changing the way the world operates. Keeping up is a challenge for any profession and particularly for one like accounting, which is naturally skeptical and has been traditionally slow to change. But as we look at what is taking place both inside and outside of our profession, we see that innovation is crucial to our future relevance and success.
Externally, we see companies beginning to use the data they have to make real-time decisions and provide more predictive information to the marketplace. As they continue to do this, our traditional, backward-looking processes are under constant scrutiny. At the same time, we see stakeholders beginning to demand reporting in new areas, such as sustainability and corporate social responsibility. As a profession we must determine if and how to provide assurance on this type of information. Doing so may open up new revenue streams and opportunities, but it may also create new risks.
Internally as a profession, we see continued industry-wide pricing pressures for traditional compliance services and strong growth in consulting-related services. The 24x7 nature of today’s business environment forces us to work faster than ever before, and we’ve already seen automation make some of the traditional entry-level work in our profession obsolete. We will need to continue to find new ways to provide compliance services more efficiently so we can focus more of our attention on consulting services, and we will have to train our people differently so they can deliver these types of higher-level services earlier in their careers.
As we seek to innovate as individual firms and as a profession, we also need to keep a close eye on businesses outside of our traditional competitive set. Technology companies and others already have the ability to mine and quickly report on massive amounts of data. If they decide to move into our market space, they could pose some stiff competition in the future. However, I believe that our reputation for integrity, ability to provide perspective on the data and experience giving business advice will be differentiators that can enable us to stay ahead.
Like any profession, we must continue to innovate and evolve to remain competitive and relevant.
Joe Adams -- Managing partner and CEO, McGladrey
The most important issue facing the accountancy profession is capacity building, not only within the developing and emerging economies, where a strong accountancy profession is essential to fully realize economic potential, but also in the developed economies, where more is being asked of us by the public we serve. We need to continue to recruit, retain and develop the best possible talent into this profession, so all the varying demands placed upon us in the future are able to be discharged with a high level of professionalism, timeliness and within our high ethical framework.
Warren Allen -- President, International Federation of Accountants
How best to accommodate small-business accounting in a global business environment. The AICPA has unveiled an accounting model for small businesses at the same time that FASB has established its Private Company Council, with both seeking to address the issue. When the dust settles, will there be two versions of generally accepted accounting principles?
John Ams -- Executive vice president, National Society of Accountants
The biggest issue and opportunity that I discuss regularly with firms from all over the country is the impact of technology and, more specifically, cloud computing on the profession. The cloud is transforming how firms operate and the services they provide to clients. The firms finding the greatest success are those that are embracing this change and reworking their business processes. However, many firms are just using these disruptive technologies to perform the same processes more efficiently, which, in the end, will not produce even close to the same impact as the firms that seize upon new capabilities to transform how they operate and how they provide client services.
Erik Asgeirsson -- CEO, CPA2Biz
Given improvements made to date, if the PCAOB continues to drive toward a strict compliance model (i.e., compliance with standards) vs. a performance model of audit quality, they will increase the likelihood that the better people (intelligent, independent thinkers, capable of understanding business, etc.) will choose other things to do than perform independent audits.
The ultimate determination of the U.S. adoption of IFRS accounting standards.
The formal determination of who should promulgate U.S. private company accounting standards in the U.S.
Billy Atkinson -- Chairman, Private Company Council
The declining value of the external audit opinion and the external auditor report. Auditor independence is a fiction, an idea which is promoted by external auditors (whose livelihood depends upon the fiction’s acceptance) and professors.
The second-most important issue is the inability of auditors and the industry to change with the times. Too many firms are clinging to a business model that is incongruent with the times.
Dave Albrecht -- Professor of accounting, La Sierra University Zapara School of Business
Succession planning continues to be one of the major issues facing the future of the accounting profession. All surveys indicate that a majority of firms do not have a succession plan. And even if they did, do the people really exist to take over the firm? In addition, firms will need to create a new business model to address the shortage of future leaders and the unfunded retirement obligations that are coming due.
August Aquila -- President and CEO, Aquila Global Advisors LLC.
Developing diversified leadership that reflects the diversity of the people they will lead in the future.
Kenneth Baggett -- Partner and Co-CEO, Reznick Group
People are still 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, their 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 add 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.
Ronald Baker -- Founder, VeraSage Institute
The increase in regulation. Also a need to develop leaders to provide for a changing marketplace and succession in firm management and leadership positions.
William Balhoff -- Incoming chair, AICPA
The most important issue facing the profession is a SALY—the same as last year -- mentality. It brings into question the relevance of many firms in today’s world.
Whether firms recognize it or not, their business model has changed as a result of readily available and rapidly expanding information, as well as the breathtaking changes in technology that have driven the current generation of clients and prospects to expect more from the professions that serve them. Firms can no longer operate as they have in the past.
The new generation of clients has grown up with technology. They’re far more sophisticated than prior generations, who were satisfied with compliance-driven accountants who provided after-the-fact reporting. The new generation demands true data-driven business analytics and business guidance.
These new customers are do-it-yourself oriented. They have a deep understanding of the new world, and little patience to work with professionals who they believe operate in the past. They have tools that they use to analyze their businesses on a regular basis, and they expect much more than compliance from an accounting firm. They expect their accountants to provide guidance beyond what they have found on their own, and they believe that accounting and reporting are only part of a good client relationship. They expect to be served on a 24/7 basis with tools like real-time accountant access to their data, personal client portals accessed through the firm’s Web site, data analysis and benchmarking, and much more. And they expect their consultants to operate in and understand the cloud.
Bottom line: Firms that cannot rid themselves of inertia and alter their business models to become relevant will not survive. They must embrace technology changes, bring in new thinking, and elevate themselves to become connected advisors, rather than after-the-fact reporters of financial or tax information.
It’s also essential for firms to provide a much higher level of customer service. This means redefining what they do, how they do it, and who they serve. Inertia is hindering many firms and threatening their very existence.
As firms think about how they operate -- what their business model needs to be now -- they might consider the words of William Gibson, “The future is already here, it’s just not very evenly distributed.”
This is a very challenging and exciting time to be in the profession. Along with the new business model for firms, we have the accelerating pace of regulatory change, a global economy, and the aging of the profession and related necessity to attract the best and the brightest talent. It’s a great time to be an accountant!
Jonathan Baron -- Managing director, Professional Segment, Thomson Reuters Tax & Accounting
Of all of the issues facing the accounting profession -- succession planning, a dearth of Ph.Ds, ethics, regulatory complexity, diversity -- the common thread laced through all of them is human capital -- people. The accounting profession needs good people and with the number of Baby Boomer generation retirements looming, a lack of real succession planning or transfer practice strategies in place in most CPA firms, the profession as a community must evolve to address these challenges. We know this and that is why the Pathways Commission, a joint project of the AICPA and the American Accounting Association that enlisted the best and brightest from public and corporate accounting, education, and government to study accounting education, proposed six recommendations that, if implemented, may provide a roadmap to address these challenges.
Joanne Barry -- Executive director and CEO, NYSSCPA
I think that it’s showing the next generation of CPAs that there are many career paths to pursue once you have the core competencies of a CPA. “Specialization” is a key part of this discussion, and areas like personal financial planning are becoming more of a core service offered by CPAs. In this area, many of the pioneers of this work will be retiring and transitioning their practices to the next generation in the next decade or two. Now is the time to get the future leaders in the CPA profession involved in this and other areas that will be the most demanded services for clients in the future.
Lyle Benson -- President and Founder, L.K. Benson & Co.
There are several important issues currently facing the profession.
From a shorter-term perspective, auditors need to recognize the need to expand their role and reporting responsibilities to meet the needs of financial statement users (particularly investors) and maintain the relevance of their role. Users are clamoring for more insights from the auditor about the risks and estimates reflected in the financial statements, as well as timely assurance on information outside of the financial statements (e.g. earnings releases, MD&A). With the growing complexity of financial reporting and the increasing importance to investors of virtually real-time communications, auditors will need to adapt their skill sets to fit this evolving environment.
From a longer-term perspective, the profession will be challenged to maintain a sufficient supply of talented people to meet the growing demand for our services. This will require concentrated initiatives from multiple sources, including universities (where there is a projected shortage of experienced professors) and the firms themselves, which need to adopt programs to continue to make the profession attractive to recruits who may have a significantly different set of values than the historic norm.
Wayne Berson -- CEO, BDO USA
The continuing evolution of the accounting profession both in the United States and globally has been of significant importance this past year. We are witnessing the transition of the Canadian CA credential to CPA amid discussion of the commonality between the U.S. and Canada. While the convergence to IFRS has not occurred, the gradual and methodical consideration of opportunities for similarities and standardization as new standards are developed continues. Domestically, the demand for less onerous standards for small private companies, who should develop them, and whether they should be authoritative, is center stage in the accounting profession.
Ken Bishop -- President and CEO, NASBA
The most important issue currently facing the accounting profession today is -- the cloud. The cloud presents unprecedented opportunities for accountants to raise their professional status and relevance, and make their practices more rewarding. And yet, most accountants will miss this opportunity from a lack of understanding of the power of the cloud, and their fear of change. Our humble request to every accountant: Please use every available resource to learn about the unprecedented power of the cloud and understand how effectively cloud solutions harness that power and can help you revamp your practice.
Chandra Bhansali -- President, AccountantsWorld
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
Accounting students in higher education are not told the truth about the creativity of the public profession of accounting. This profession is for creative entrepreneurs, and students need to be told that.
Jason Blumer -- Chief innovation officer, Blumer & Associates
Talent development. This is both from a retention and pre-employment educational perspective. The world is rapidly changing as are the services clients want and need. This requires a responsive education system as well as continuous learning throughout one's career. Technology in education is becoming more important than bricks and mortar. Massive Open Online Courses or MOOCs and the Kahn Academy are a couple of specific examples that educators and CPAs should be aware of and actively follow the trends.
L. Gary Boomer -- CEO , Boomer Consulting
Finding the next generation of leadership is the most important issue currently facing the accounting profession. With 78 million Baby Boomers approaching retirement age and only 50 million in Generation X, there won’t be a one-to-one replacement. That leaves Generation Y and Millennials to fill in the gap and many of them aren’t yet equipped with the experience and skills to take on leadership roles. And we will not only face this challenge at the firm/business level but also throughout the organizations that serve our profession, such as the AICPA and state societies. To effectively overcome this challenge, organizations need to look for potential (rather than current skills) in the younger generation, provide leadership/management development opportunities and begin engaging them in the leadership process today.
Jim Boomer -- CIO, Boomer Consulting Inc.
The most important issue facing the accounting profession is the continued migration towards international accounting standards and reporting. Some countries are there, but the U.S. is not. From a small-company perspective, it is not first and forefront, but from a large-company perspective it does create a competitive disadvantage with U.S. companies tending to choose GAAP over IFRS.
Another important issue facing the profession is the continued merger activity affecting nearly every region in the U.S. Small, medium, regional and national firms are continuing to join forces. Firms will continue to face challenges in the areas of maintaining firm culture and staff morale.
Jim Bourke -- Partner, WithumSmith+Brown
In my view, it’s ensuring that we continue to attract the brightest and best to our profession. Today, people are attracted to organizations because they want to be part of something meaningful -- part of something that contributes to society in a positive way. They don’t just want to succeed financially -- they want to do good, grow and make a difference. In response, our profession has to show clearly how it contributes to society at large. At EY we have done this by making our purpose clear: building a better working world.
Beth Brooke -- Global vice chair of public policy, EY
Unfortunately, the most important issue facing the accounting profession is not related to financial reporting, technology, succession planning or even sales tax compliance. The most important issue facing our profession is knowing and understanding the complexities surrounding Obamacare. The 1099 ramifications alone are daunting.
Peyton Burch -- Senior channel executive, Intacct
Tax reform. Tax reform may simplify taxes in the long term, but CPAs and tax professionals will need to help clients navigate the changes and plan for the future.
Jim Buttonow -- Cofounder and vice president of product development, Beyond415
Working with Washington, D.C. (and changes Congress may make to the Tax Code to reduce the U.S. deficit) and how that will impact clients.
Edward Caine -- National president, NCCPAP
Speaking as a tax administrator, with the ever-growing complexity of the tax laws and the expanding need for assistance with tax return preparation in all sectors (but especially those not able to afford accountants), having an industry without a minimum standard for competency has to be of great concern to me. We have to recognize that return preparation is a profession. Although there are many knowledgeable, credentialed, service-oriented professionals engaged in this practice, unfortunately for many taxpayers and for tax administration, there are also those who lack any basic knowledge of tax engaged in return preparation. We no longer live in an era where all that is required for return preparation is simple math and the ability to follow basic instructions.
Carol Campbell -- Director, Return Preparer Office, IRS
Complacency. Many Baby Boomer partners are happy enough with their career accomplishments, client bases, and compensation. This makes it difficult to change firm strategy and culture, which is often necessary in today’s competitive marketplace. Partner complacency impacts partner accountability, succession, firm growth, career opportunities for staff, retaining the best people, and keeping current with technology.
Time waits for no one. Firms with complacent partners will not survive in our complex, ever-changing world.
Jean Caragher -- President, Capstone Marketing
Distrust of the IRS, caused by the recent scandals.
Paul Caron -- Publisher and editor-in-chief, TaxProf Blog
In my opinion, the most important issue currently facing the accounting profession is the increased scrutiny of auditor independence, which has become a priority of the U.S. Public Company Accounting Oversight Board. As the PCAOB looks at potential changes to ensure greater auditor independence in the future, the concept of mandatory external auditor rotation has been raised.
As CEO of the IIA, I naturally agree with the institute’s position that mandatory rotation of external auditors is not in the best interest of the corporate sector. Such a requirement could introduce unintended consequences such as reduced audit quality and increased costs for public companies and their investors.
While I recognize that mandatory rotation might enhance auditor independence marginally, I believe that more effective alternatives exist for improving the overall quality of audits -- which is, after all, the underlying reason to consider such a change. It’s important to remember that true audit quality cannot be achieved merely by increasing auditor independence and objectivity.
More favorable alternatives include requiring increased disclosure about the audit committee’s role in overseeing the quality of the audit, including its periodic evaluation of auditor independence, and implementing a system whereby audit committees could request the PCAOB to perform an enhanced inspection of the audit of their company. These alternatives are more likely to result in overall improvement in audit quality, at less risk and at less cost than we would expect from a change to audit rotation requirements.
Richard Chambers --- President and CEO, IIA
The notion of relevancy continues to be the most important challenge facing the accounting profession. Following the financial crisis, a lot of debate arose around independence, objectivity, skepticism, mandatory firm rotation, whether the audit report 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
Last year, I gave a technical answer based around risk management. Although it’s a common pain-point topic I am hearing about constantly and still do believe firms are struggling with taking on questionable clients in a down economy… who the heck am I to say that?
In the past year, I have become increasingly aware of what I believe to be the most important issue currently facing the accounting profession. Guess what? It’s internal.
The big issue we face in the accounting profession is retaining top talent.
The way we track and keep talent is -- and will continue to be -- changing drastically. This is a different generation on our tails. The motivators for this generation to want to work hard are very non-traditional. Breaking away from the non-traditional in the accounting profession has always been a struggle. Firms need to have the right leadership to be able to adapt to these attitudes and communicate these needs to the rest of management. There needs to be a consistent firm-wide culture to reflect the same.
The “carrot” in the accounting profession used to be simple -- to make partner. That’s no longer enough. Are they getting enough recognition? Are you rewarding them intelligently? Are you facilitating their lives outside of work? Are you teaching them? Are you flexible? Are you giving them feedback?
This motivated generation doesn’t understand why they need to work 60 hours in busy season when they can get the work done in 40. What is your firm going to do to make them want to stay the other 20 hours? Are you prepared to deal with this?
Whatever kind of business -- CPA firm or not -- 100-million strong Generation Y is going to be at the heart of your firm’s growth or failure so you have no choice but to figure out what makes them tick. One word -- culture.
Sarah Cirelli -- Marketing manager, interactive marketing, WithumSmith+Brown
Restoring and enhancing the reputation of professional accountants as expert, versatile and acting with high ethical standards.
Fayezul Choudhury -- CEO, International Federation of Accountants
The impact and rapid progression of technology which affects:
• The efficiencies and ability to deliver services to clients and employers;
• Information sharing and security;
• Education delivery systems, both CPE as well as traditional undergraduate and graduate curriculums; and,
• New service opportunities for clients and employers as CPAs embrace new technologies and position themselves as thought leaders in the growth and success of these entities.
Michael Colgan -- CEO and executive director, Pennsylvania Institute of CPAs
The biggest issue is a dearth of leadership at a time when many current leaders are retiring. For years, firms have chosen to under-invest in leadership development. We’ll now be paying the price. Firms will bifurcate into the haves and the have-nots. The haves will prosper. The have-nots will wither and eventually die or get acquired.
Gale Crosley -- President, Crosley+Co.
The most important issue facing the accounting profession is the same today as it has always been: talent.
More than most organizations, the value of a professional services and accounting firm is primarily delivered by its people. Their understanding, knowledge and experience fuel their counsel and inform their judgment, to best serve their clients and magnify the relationship.
For the vast majority of our profession’s heritage, opportunities within the largest organizations were predominantly available to white males, reflecting the nature of the American business landscape at the time.
As we have progressed as a profession, barriers that exclude have been replaced with recognition that there is strength in diversity, that the best solutions benefit from broad and varied perspectives, and that only when we draw from all available talent can we truly thrive.
At Deloitte, we believe that the next “frontier” is to move from diversity to a broader focus around inclusion where we are all encouraged to be our authentic selves at work. That is why my title is chief inclusion officer. That is why this past March we launched the Deloitte University Leadership Center for Inclusion to change the conversation around diversity and inclusion and engage our clients and other thought leaders in the dialogue.
Separately, but of equal importance, is another issue we are working hard to address -- how to attract the next generation of professionals to accounting careers, particularly as the pool of potential candidates becomes more diverse. Many students today gravitate to start-up companies and “cool” jobs in finance, STEM, high tech and social investing. Accounting careers are not being recognized as an attractive destination in particular for African American/Black and Hispanic/Latino candidates. Current data shows that the number of students from those demographics who are studying accounting and becoming CPAs has not increased as a percentage of the profession over the past 20 years and has steadily declined from its high point in the late 1990s. Our challenge is to communicate the benefits and opportunities of an accounting career and elevate the stature of the important role we play in business and the capital markets to ensure the pipeline of top talent coming into Deloitte and the profession is always full.
Said simply, the most important issue facing our profession is to attract the very best talent available and then to create an environment where they and our profession can thrive while continuing to build and maintain public trust and confidence.
Deb DeHaas -- Vice chairman, chief inclusion officer, Deloitte
Creating opportunities for and adapting to the next generation of CPAs and accounting professionals while maintaining the relevancy of the CPA certificate and its inherent value to consumers.
Loretta Doon -- CEO, California Society of CPAs and CA CPA Education Foundation
There are certainly a number of key issues facing the accounting profession. Right there at the top is the profession’s ability to keep up with the fast pace of technology and understanding and guiding how new technologies are transforming the nature of financial reporting, the provision of CPA services and the very role of the CPA.
Robert Durak -- Director, AICPA Private Company Financial Reporting
It’s shaping the services the accounting profession provides to better serve capital markets and investors. In this complex and dynamic global economy, ensuring that our services remain relevant, timely and meaningful is imperative for Deloitte and others in the accounting profession. We share responsibility for the profession’s evolution with our regulators and standard-setters. We are constantly exploring how the audit and other accounting services can support the changing needs of users of financial information.
The accounting profession is acting to improve what we do now and to anticipate the needs of the capital markets. We are working with all financial reporting stakeholders to enhance areas like objectivity, independence and professional skepticism; drive meaningful changes in the auditor’s reporting model; and establish metrics and quality performance indicators for our work, to name just a few. And all of this requires contemplation and coordination with the global community to understand cross-border implications and opportunities to drive greater consistency in the financial arena worldwide.
Joe Echevarria -- CEO, Deloitte
The answer to this question varies depending upon the perspective of the accountant. Smaller firms might view staff retention/development or the simplification of accounting for closely held businesses as the most important issue. Accountants representing larger firms might view convergence of U.S. GAAP and IFRS as the most important. They all might view the myriad of issues that new technology creates as the most important.
But all accountants must constantly deal with the relevance of their role and how they can best serve their clients, while maintaining public trust in the profession.
The increasingly complicated business and economic environment, coupled with ever-changing accounting standards, makes the role of accountants more vital. The move towards a more principles-based accounting system creates a need for accountants to better understand gray areas and to make more informed decisions.
Beyond accurate and informative financial reporting, accountants can help their clients with financial planning, business planning, tax planning and more. Accountants bring a lot to the table, and businesses that fully utilize their services will perform better than those that don’t.
George Farrah -- Executive editor, Tax and Accounting, Bloomberg BNA
I believe one of the most critical issues facing the profession is the relationship that the auditor has with other key stakeholders in the financial statement process -- audit committees, preparers, regulators and investors. At the end of the day, we all want the same thing -- strong, robust markets where investors have confidence putting their money. Auditors have a unique position in these relationships and understand the importance of that position. Through individual firm efforts or collectively through the CAQ, the public company audit profession is looking for ways to strengthen these relationships. For example, a number of organizations joined forces to launch a new tool to assist audit committees in performing an annual evaluation of the external auditor in order to make an informed recommendation to the board whether to retain the auditor. The groups behind the effort are the Association of Audit Committee Members Inc., the CAQ, Corporate Board Member, Independent Directors Council, Mutual Fund Directors Forum, National Association of Corporate Directors, and Tapestry Networks.
Also, and this is always challenging, but we need to focus on what the future holds. I believe the future of the profession is one of the most important issues we should consider. In an age of rapid change and continuous innovation, we need to reflect on what the profession will look like in five, 10 or even 15 years to try to understand how technology will change the way markets operate, what information investors and companies will need, how those changes will impact the regulatory environment and what all of it means to the public company auditing profession. At the CAQ, it is critical to respond to current issues and trends, but we are also actively engaged in efforts to think about and plan for the future of the profession.
Cindy Fornelli -- Executive director, Center for Audit Quality
Relevance and direction. Backward-looking services are the least valuable services that CPAs currently provide. Too many accountants are stuck in the somewhat-recently commoditized business of compliance, now competing with less-qualified, less-expensive people, sophisticated affordable technology and, dare I say it, even free software. A minority of CPAs have done a good job developing more advisory-level relationships with businesses and individuals alike, but still struggle to understand, quantify and communicate about how essential and valuable the perspective of the CPA as an advisor is. Too few CPAs are equipped to convincingly educate their clients about how to use them more effectively and more strategically. Until we have the vast majority of CPAs positioning themselves to sell and perform strategic-level work -- to unquestionably influence their clients' success and that of their clients' industries -- the accounting profession faces threat of irrelevance via replacement.
Michelle Golden -- President, Golden Practices Inc.
International issues continue to be important to the profession, as incorporation of IFRS remains an important question in the U.S. For the FASB, it means redefining our relationship with the International Accounting Standards Board. Our membership on the IASB’s Accounting Standards Advisory Forum ensures we will continue to have a global role, though one that is much changed from the side-by-side convergence model we have pursued over the past decade.
Balancing complexity with the simplification of accounting standards is another important issue that warrants mention. Through our work with the Private Company Council, the FASB is pursuing ways to reduce the cost burden of certain standards without reducing the usefulness of information they provide to financial statements users. Additionally, we’re looking at ways to improve the FASB Accounting Standards Codification by making it more user-friendly and easier to navigate.
Russell Golden -- Chairman, FASB
Washington’s deadlock. There are no checks and balances by not having a budget. With continuing resolutions, government continues to spend. As a result our national debt will continue to grow. When the Federal Reserve tightens money, interest on notes rise, our debt will expand again.
Larry Gray -- Government liaison, NATP
Leadership and succession continues to be one of the biggest issues facing the accounting profession. With the projected 25 percent of accounting firms expected to change hands in the next five years, there is urgency for firm leaders to plan for this transition. Planning needs to be part of the process of running a firm and it should happening from the beginning. Team members should be trained each year with the future of the firm in mind. People want to be challenged and trusted to grow in their professional life. The lack of focus on building leaders in some firms is a bad business decision. Firm leaders need to realize the importance of this and then be given tools and support to develop their people. The strength of the future of the industry will be dependent on the skill level and readiness of the future leaders.
Angie Grissom -- President, The Rainmaker Companies
Today, there is a severe lack of vision and committed leadership willing to stand up for what it means to be a true professional serving the public interest. In many instances, the result is regulatory capture by highly influential groups promoting their own private interests. We need to put the P(ublic) back in the CPA license to practice!
Gaylen Hansen -- Chairman of the Board of Directors, NASBA
Choosing one issue is rather challenging. While economic globalization and its affects are ever-present, I am becoming more and more concerned with the demographics and numbers within the profession. There seems to be a generation gap, especially as STEM-type programs gain momentum and accounting-based programs may not be seen as “exciting.” Of course, I also remain focused on ensuring we have a diverse (in gender, ethnicity and thought) and inclusive profession. Without focus on generational and diversity and inclusiveness concerns, [I’m concerned] about a shortage of accounting professionals.
Calvin Harris -- Former national president and chairman of the board, NABA
Our company has a heavy focus on small-business taxation and for that reason we believe the problems at the IRS and the potential for tax reform are both issues and opportunities for the profession. We are concerned that an overreaction to the problems at the IRS could make that agencies difficult job more difficult and therefore have a negative impact on both practitioners and taxpayers alike. What we hope will happen is that the problems at the IRS will help draw attention to what all of us already know -- our tax system is broken and needs to be replaced. We hope that the public’s attention on the IRS will give the tax reform efforts currently underway in Congress more momentum and a greater sense of urgency.
Roger Harris -- President and COO, Padgett Business Services
The upcoming converged global standard -- Revenue Recognition, which represents the alignment of the FASB and IASB. Over the last two years, FEI and the Committee on Corporate Reporting have worked together to support the convergence efforts. With a final standard scheduled to be released by end of summer, companies will now need to assess the impact on their respective organizations, from implementation, technology, and financial reporting requirements scheduled to be in effect by end of 2016.
Marie Hollein -- President and CEO, Financial Executives International
Talent and a general lack of bench strength across the entire profession!
This is the "hidden" issue underneath the succession planning (or lack of) issue. I see this manifesting in every segment of our profession -- government, large company finance teams to the public practice arena. There is a general "barbell effect" happening with the heavy weight of Baby Boomers on one side (hoping to retire), a very thin middle (Gen X and management layer), and a big entry-level weight on the other end (Millennials).
Add the rapid changes in the last five years in technology, changing business models and the need for new skills to deal with these changes and you have a Category Six storm to deal with!
Thomas Hood -- CEO and executive director, MACPA
The most important issue currently facing the profession is continuing to balance the rapid pace of technology change with associated, required business model shifts to build sustainable, successful firms. Most firms are spending so much time keeping up with technology that they haven?t had time to build a plan around the skills they need to be successful in the future.
Although technology is an important enabler, it?s just one piece of the puzzle; building the right business model for the future will play an equally important role in overall success.
Pascal Houillon President and CEO, Sage North America
In my opinion, the most important issues facing our profession are (a) the profession and regulators working together to meet stakeholder expectations on audit quality and (b) the ongoing relevancy of our audit service/product and making sure that we communicate with stakeholders in ways that are of importance to them.
Stephen Howe -- Americas managing partner and managing partner/chair of the U.S. Firm, Ernst & Young
Succession. Seventy percent of the profession would like to retire in the next 10 years. With the younger generation of leaders being wired for work/life balance and disinterested in taking the helm, the question most partners are asking is how the transition will be possible.
Trey James -- CEO, Xcentric:
Leadership development. Accounting firms are struggling to retain the top talent they need to run their firms, and more importantly to succeed the current owners. There are a multitude of reasons for this, but I believe communication internally is a big part.
Sarah Johnson --Founder and chief growth strategist, Inovautus Consulting
Creating meaningful management reports that include transparency. Business analytics is back on the forefront. Businesses from small to large can benefit from better information. For public practice CPAs that are providing outsourced CFO services, helping small businesses with appropriate dashboards and reporting add value to their engagements. For larger businesses, business analytics can provide insights to improve client service and increase efficiencies. Leveraging big data to spot trends, including fraud and sales opportunities will be an evolving science.
Randy Johnston -- Executive vice president and partner, K2 Enterprises
The unprecedented level of tax-related identity theft is having a profound impact on my sphere of the accounting world. It obviously impacts taxpayers, but also impacts practitioners in their ability to represent their clients, as well as the tax administration system itself.
Despite the IRS’s successes in combating identity theft, I cannot over-emphasize the staggering dimensions of the tax identity theft problem. According to the National Taxpayer Advocate’s 2012 Annual Report to Congress, identity theft cases handled by the IRS grew exponentially in FY 2012 over the prior year. The IRS’s Identity Protection Specialization Unit received about 450,000 cases in FY 2012, a 78 percent increase over FY 2011. Moreover, the report reveals that identity theft cases amounted to 25 percent of all case receipts for the Taxpayer Advocate Service in FY 2012. The end result is the fight against identity theft fraud is taking a toll on IRS resources, resources that could more productively be deployed to taxpayer service or other compliance initiatives.
It also has the potential to transform the tax system as we know it. On a shorter-term basis, Congress is considering needed legislative solutions to mitigate the problems, some of which are innocuous, such as expanded PIN uses and single points of contacts at IRS, but some have unknown and possibly detrimental side effects, such as punitive and untargeted penalties. More dramatically, however, is IRS’s consideration of a “Real Time Tax System” which would re-shape the processes of matching information returns with tax return information.
Edward Karl -- Vice president of taxation, AICPA
Creating a clear roadmap for the future of firms as “historical” services such as tax, write-up, audit, etc., continue to face increasing pricing pressure, commoditization, and regulatory requirements that increase the costs firms incur to provide these services. Cloud technology has created a global, level playing field for small, midsized and leading national firms who are providing Client Accounting Services (transaction processing, controller, CFO, advisory services, etc.). This has created tremendous opportunities but also a great deal of confusion as practices now try to figure out how to build a brand and differentiate themselves, even as clients also become more mobile and have the opportunity to access the industry experts they need in their own town or thousands of miles away.
Jennifer Katrulya -- Managing partner, BMRG
As a member of the CPA Consultants' Alliance, I agreed with the other members that leadership is the most important issue currently facing the accounting profession. The issues surrounding succession within accounting firms can be traced back to poor or lacking leadership from the current firm owners. Many firms are getting a very late start on developing the next generation of leaders and time is passing by quickly.
Rita Keller -- President, Keller Advisors
Succession requires new accounting blood -- with so many retirements on the horizon it will be increasingly important to encourage accounting students into the profession to develop practice expertise. This will create epic opportunities for entrepreneurial accountants to start their own practices, which will explode as firms with no succession planning just close shop.
Roman Kepczyk -- Director of consulting, Xcentric LLC
Since PCPS just recently asked this question of the profession it is easy to answer, though the answer varies by firm size. One common theme in the top five of each firm segment is firm growth with bringing in new clients. It was top three for four of the five segments.
Smaller-firm issues also centered on tax issues given the bad tax season this year, with tax complexity and compression being issues for firms with under five professionals.
Larger-firm issues centered also on people issues such as succession, partner accountability and finding and retaining talent.
Mark Koziel -- Vice president of firm services & global alliances, AICPA
With Hostess Brands emerging from bankruptcy, CPA firms must work diligently to reinstate Hostess Fruit Pies, Cupcakes and Twinkies to a place of prominence in their vending machines; unfortunately that can’t happen until slots open up, and it doesn’t look like those Almond Joys are going anywhere soon. It’s either that or the commoditization of our core services rendering us irrelevant and unprofitable. But probably the Twinkies thing.
Greg Kyte -- Comedian and accountant
The three biggest issues facing the accounting profession are organic growth, talent and succession.
In terms of organic growth, clearly firms that have a well-developed growth engine will have a competitive advantage over other firms. Additionally, those firms that have built out industry specialization and a deep bandwidth of products and services will also have an advantage over those firms that are strictly compliance.
In terms of talent, private industry again is aggressively recruiting talent away from CPA firms and firms will need to be extra careful that they are “overpaying” their superstars or run the risk of losing them.
Lastly, succession planning, and hence the merger frenzy, is not a passing fad. If anything, it will continue well into the next decade.
Allan Koltin -- CEO, Koltin Consulting Group
As technology continues to increase productivity and automate basic functions, the profession is challenged with how to remain strategic and even relevant in some consumer’s/businesses’ lives. For example, online tax returns can be filled out taking a picture of your W2, which means less work for tax preparers. It also means more opportunity to focus on the strategic advising that all of us need. The success and growth of the profession depends on how well members adopt to a more strategic advisor role away from a tactical doer role. I also think this is a unique opportunity for the profession to create more value for their customers, whether it be tax advice, general business advice or even financial planning for consumers. Once the mundane tasks are outsourced and automated, the accountant can become far more strategic. If we don't adopt this philosophy, I do believe that the profession will be at risk.
Rene Lacerte -- CEO and Founder, Bill.com
Changes in technology continue to impact accounting professionals and our clients, creating opportunities and challenges for us. With the increase in mobile devices (tablets and smart phones) and related apps, there are opportunities to streamline and improve the workflow for ourselves and clients. There is an opportunity for us to provide consulting services to help clients implement new apps to improve their business processes (“APPify the Processes”) and integrate the apps with the accounting system.
However, technology changes also present challenges for accountants. The increase in mobile devices and apps creates security concerns to ensure confidentiality of sensitive financial information. Plus, it is difficult for accountants to keep up with technology changes and to identify what is important and relevant for us and our clients. This is where I try to help accountants via informative webinars, seminars, blog posts and more.
It is important for accountants to keep up with changing technology to remain competitive and to be relevant and valuable as trusted advisors to our clients.
Michelle Long -- Founder, Long for Success
One of the key issues facing the profession is the continued conflict of GAAP rules for non-public SMB companies.
Taylor Macdonald -- Vice president of channels, Intacct
I will cheat here by summarizing the most important issue facing the accounting profession as complexity. The intensified pace of technological and demographic change is changing the way CPAs work, where they work, the faces of the populations entering the profession as well as those they work with and for. It is no longer enough to be a technical expert, combining integrity, competence and objectivity. While these values underpin the profession, today’s CPA has to be able to connect the dots between finance, strategy, technological infrastructure, and people of increasing diversity. These are exciting times, and as the profession successfully adapts to address the pressing issues of the day, it will no doubt emerge with greater vitality and global relevance.
Janice Maiman -- Senior vice president of communications, media, news & professional pathways, AICPA
Staying ahead of key trends impacting the industry and changing client dynamics is always vital. What’s particularly important is how professionals are reacting to the macro trends of mobility, consumerization, an increased regulatory environment, the need for efficiency and globalization. The globalization macro trend encompasses the growing concern of international reciprocity for accountants. Compliance agreements between certifying accounting organizations in various countries are essential for firm professionals to serve clients beyond their own borders. Staffing needs are also becoming magnified, with firms seeking accredited professionals experienced in working with individuals and businesses in different areas around the world.
Additionally, we have been focused on the demographic shifts happening within the industry and what’s been described as the “graying of the profession.” Based on feedback from our customer firms and what we’re seeing overall, we need to ensure that the professional community stays in step with the changing needs of clients to navigate through these macro trends in order to grow, manage and protect their businesses.
Teresa Mackintosh -- President of U.S. Software, CCH
The most important issue facing the accounting profession is the increasing level of regulatory compliance oversight and legislative complexity. The velocity at which compliance is changing has increased, and the continued compression of the tax season compounds the impact of those changes. On top of that, the implementation of late legislation, increasingly robust and expansive legislation like ACA, and the attention to new due diligence requirements continues to expand, increasing the burden on accounting professionals who must keep up with all the changes in order to best serve their clients.
Jason Marx -- President, CCH Small Firm Services, a Wolters Kluwer business
I believe that responding to legislation that results in new requirements for clients of accounting and tax firms will be the greatest challenge facing the accounting profession. The most recent example is the requirements associated with the Affordable Care Act.
Charles McCabe -- Founder, president and CEO, The Income Tax School Inc.
The most important issue facing the accounting profession is the ability to fully adapt to the cloud, especially for firms and businesses that work and serve clients in SMB space. The Big Four and large regional firms understand the advantages, but local firms remain skeptical of the cloud in its availability, reliability and security. I think it’s up to providers to continue educating the accounting community on the cloud and its nearly unlimited solutions -- because, as we know, the advantages for accessing content, utilities and applications are endless.
Scott McFarlane -- Co-founder, CEO, Avalara
I believe complexity continues to be the both the greatest opportunity and the biggest potential challenge for CPAs. Clients and employers turn to CPAs for help understanding an increasingly complex and interconnected global business environment, which has increased regulations and changes from technology. While this presents an opportunity, keeping abreast of all the complexity will continue to be incredibly challenging.
In the near term, an economy which is able to foster business activity will remain the biggest issue facing the profession.
Barry Melancon -- President and CEO, AICPA
The most important issue facing the profession is also its biggest opportunity -- complexity. We are living in a time of massive regulatory and legislative changes that drastically effect businesses of all sizes. A few examples are Affordable Care Act, Dodd-Frank, tax laws with expiration dates, aggressive state and local regulatory oversight and more.
James Metzler -- Vice president of small firm interests, AICPA
My focus is the technology side of the accounting profession and I think the most important issue from a technology perspective is how CPAs and IT consulting firm members are going to serve their clients in the new “cloud”-dominated world. Our ITA member firms are trying to define how they will be able to profitably provide consulting services to small to medium-sized businesses in this new subscription-based cloud revenue model, and CPA firms are focused on how they will best serve their clients while maintaining information security, etc., using cloud-based technologies.
Another issue within our Information Technology Alliance membership is leadership development. Our membership is aging and we aren’t seeing a lot of young leaders enter the IT consulting/accounting system implementation business. We need to make sure that we are developing the future generation of business professionals who will be able to help small-to-medium-sized businesses implement their financial accounting systems.
Stan Mork --President, Information Technology Alliance
The impunity of Big Four audit firms. Or the slowly disappearing ampersand.
Caleb Newquist -- Founding editor, Going Concern
The most important issue currently facing the accounting profession is the succession planning dilemma. As I visit dozens of firms annually, this dilemma is prolific to most practitioners. The fundamental concerns include:
• How will I monetize the value of my firm or my equity in my firm?
• Should I be merging or selling my practice?
• Can my younger partners continue to build the firm, attract quality people and "pay me" a retirement benefit?
• Should we be funding retirement benefits and if so, how? (I think there is another answer available.)
• Can my younger, high-potential staff help insure a legacy practice?
• Do younger partners and high-potential people want to continue the practice and are they capable?
These are the concerns and questions most frequently discussed as I wander the CPA community annually. The most prolific implication to this succession planning dilemma is the amazing number of firm amalgamations in both mergers and acquisitions. While there are other implications and many more issues, this is the most troublesome and certainly most obvious.
Jay Nisberg -- President, Jay Nisberg & Associates
Relevance. If we don’t do a better job of defining, delivering and communicating our value the small-business market, will be cannibalized by the DIYers (Do It Yourselfers). And for the lack of value that some CPAs offer clients, you can't blame clients for turning into DIYers.
I represent the next generation of accounting professional. Myself, along with other progressive thinkers, are on the vanguard of a new movement of “digital CPAs” -- those helping to move the profession forward by embracing cloud services and social media to shift the way CPAs serve their clients -- with ultimate convenience and as a true trusted advisor. (This group of progressive CPAs are also including collaboration with vendors and extreme fun, such as CPA dodgeball on trampolines, into the new business model.)
I believe that the CPA profession has gotten it wrong for the last hundred years, because it is designed to push clients away -- that is, by charging by the hour, once the transaction is complete and billed, there is no reason for further interaction. That's the old mindset I'm referring to. The new generation of CPAs are offering services that are value-priced, so that we work in a partnership with clients all year. It’s not a transaction-based kind of thing; it’s more like an intellectual capital kind of sharing.
There’s a whole new generation of accountants coming out and it’s not an age thing; it’s a state of mind. Small-business owners that want to work digitally with their accounting professional are searching for accountants with the same mindset. That means they are coming to the new set of professionals who are embracing technology, and that also means that traditional accountants, then, are rendered obsolete. So, Top 100 Firms watch out!
Jody Padar -- CEO and principal, New Vision CPA Group
Complexity -- doing business across international boundaries and state lines has never been harder. With the scramble on for every last tax dollar, today’s CPA must help clients successfully navigate a minefield of legislation and regulation.
Jeffrey Pawlow -- CEO and managing shareholder, The Growth Partnership
Globalization continues to present tax and accounting practitioners with unprecedented and rapidly evolving challenges. It is no longer enough to understand the tax codes of an individual country, but practitioners need to understand the complex interplay of the tax regulations of multiple countries.
Brian Peccarelli -- President, the Tax & Accounting business of Thomson Reuters
One of the perennial top issues is the supply of talented young entrants to the profession. My industry, higher education, is the source of that supply. Today, higher education has some real financial model problems to fix, but also has the hope that advances in technology may provide solutions that bring us to a better equilibrium. The risk, of course, is that if the changes are not managed well, we may decrease the flow of qualified new entrants to the profession -- so the entire accounting profession has a stake in the outcome. The Pathways Commission, jointly sponsored by the American Accounting Association and the American Institute of CPAs, is working now on implementing recommendations for the future of accounting education.
Karen Pincus -- Doyle Z. and Maynette Derr Williams Professor of Professional Accounting, Sam M. Walton College of Business, University of Arkansas
Complexity in financial reporting is the No. 1 concern we hear from public companies, private companies, and state and local governments. We’ve taken steps to address complexity by creating the Private Company Council, which recommends alternatives with U.S. GAAP for private companies. While its efforts are focused on improving financial reporting for private company stakeholders, we expect that its recommendations will result in improvements for public companies as well. The FASB and the GASB also are looking at this issue as part of their standard-setting processes.
Terri Polley -- President and CEO, FAF
The profession faces an unprecedented challenge as the ownership of a majority of CPA firms will pass to a new generation over the next 10 years. The lack of leaders in place to take over in many firms will lead to these firms ceasing to exist as they are absorbed by larger firms that are in a better position to provide succession for the owners.
A secondary issue that is critical to the profession is the need to maintain the relevancy of its primary product, which is financial information for business. The relevancy of GAAP-based financial audits is waning as users look for more timely and pertinent information on which to base financial decisions.
Terry Putney, CEO, Transition Advisors
The proliferation of accounting fraud in our markets is the most important issue facing the profession today. From opaque financial statements and disclosures to rogue auditors, the profession must move beyond mere compliance and checklists to more principles-based models for the public to fully respect the work accountants perform. The ACFE continues to train and educate in this arena, and the SEC has renewed its vigor in examining those companies that commit such acts.
Jim Ratley -- President and CEO, ACFE
Succession planning, by a wide margin. Virtually every firm is doing something about it, talking about it or worrying about it. This has spawned powerful trends:
• Merger activity that is at a fever pitch;
• Last-ditch efforts by firms at leadership development as a means to stave off the inevitable -- merging out of existence; and,
• A steadily increasing volume of partners working past 65 because they love what they do and don’t want to retire, they’re healthy and there are no young people at their firms to take their place.
And there is no sign that any of these trends are letting up any time soon.
Marc Rosenberg -- President, The Rosenberg Associates
My view on this is probably skewed since I am more focused on marketing for CPAs, but I think one of the biggest issues facing the profession is communicating the value of the services they provide and making connections that will lead to long-lasting relationships and firm growth.
Bonnie Buol Ruszczyk -- President, BBR Marketing
The most important issue currently facing the accounting profession is hiring and developing the right people who are passionate about our profession and have the ability to serve our clients in a complex and ever-changing world. At Moss Adams, we place a premium on being not only experts at the functional aspects of our business, but also having extremely deep industry expertise so that our clients are confident we know everything there is to know about their business. It takes a special type of person to succeed, but it is critically important that we do.
Christopher Schmidt -- Chairman, CEO Moss Adams
The aging of the profession, and the need to develop new leaders for CPA firms and the businesses and organizations where they serve. We will see a significant number of CPAs conclude their careers and retire in the near future. Firms and other organizations where CPAs work need to prepare for this major demographic transition and develop the next generation to lead the profession.
John Sharbaugh -- CEO and executive director, Texas Society of CPAs
Brand realignment. The CPA brand is so strongly tied to audit, tax and finance that it is like trying to move a mountain to rebrand to enable CPAs to shift into the role of the ultimate trusted business advisor (business as whole, not just finance).
Donny Shimamoto -- Managing director, Intraprise TechKnowlogies
Talent. Talent is quickly becoming the greatest commodity in accounting. If you have talent on your bench, succession, another huge issue, can be handled internally with less stress. Talent can also help firms handle the organic growth that we are once again starting to see.
With Baby Boomers aging, we hear a lot of talk about the partner-level talent being lost, but we rarely hear much about the managers, non-equity partners, seniors, etc. … who fall into the same age bracket.
The right talent will also help firms with critical areas such as transitioning to the cloud and developing new niches
Joel Sinkin -- President, Transition Advisors
The profession must become much more agile with technology. Cloud solutions allow accountants and SMBs to pick from a variety of options for storing, sharing and syncing data. While this is good, it does make it difficult to standardize on one system to do all client work.
Douglas Sleeter -- Founder and president, The Sleeter Group Inc.
Cloud computing and mobile applications continue to play a critical role in advancing the accounting profession. We see our small-business customers adopting cloud solutions at a faster adoption rate than accountants, and in order to stay relevant in today’s virtual world, accountants need to embrace cloud technologies. This is not just a U.S. trend but a global trend -- in less than a year we have added more than 1.3 million QuickBooks Online users around the globe since launching. Client expectations have shifted with the advance of the virtual world 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. The virtual office is an important tool for accountant to best serve their client and simultaneously grow their business.
Data is also going to play a big role in this shift to a virtual office. We already see 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.
Cloud will also allow Intuit to develop an open platform that enables third parties to add value by provided additional solutions to the platform; and through that to the accountants. This will lead to a more customizable offering that works seamlessly together and allows accountants to leverage solutions that are right for their firm.
Brad Smith -- President and CEO, Intuit
I think it’s time for some tough self-reflection. The core of the most common problems in our profession -- change, relevance, talent -- is that most of us are technicians at heart (and quite comfortable ones), not managers, entrepreneurs or business leaders. It’s not that we’re not good at change; we’re great at learning new tax, reporting and audit rules, etc. It’s that we need to re-prioritize and re-value the skills, changes and improved functionality that we need to focus on to bring the most value to our clients, our businesses, our profession, and the business world.
One thing that can be looked at is the traditional accounting firm business model (circa 1970), which is broken. Most firms are still not client-centric because of inadequate functionality in marketing, pricing, sales, innovation, and new service/product development. Many could eliminate their talent shortages by improving their HR, compensation and training functions and addressing chronic under-delegation. Many accounting practices could significantly increase production if leaders’ skills were improved in the areas of resource allocation and hard-core (not pseudo) project management. We’re making good headway getting past these issues in the tiny firms I work with.
Sandi Smith -- President, Sandra L Leyva Inc.
Technological change. The cloud has changed the face of almost every industry on the planet and it is changing the face of accounting. The ability to access data, anywhere, anytime on any device, the interoperability of online apps, and the rapid deployment of software are all contributing to technologies that are making the lives of accounting professionals easier, more efficient, and more profitable. Part of this change is driven by clients who have grown up in this era and are looking for accounting professionals that can work with them online and on-the-go. I'd expect we'll see a rapid shift to mobile and cloud computing in the accounting industry in the near term.
Jamie Sutherland -- President of U.S. operations, Xero
The most important issue facing the accounting profession is attracting, developing and retaining quality accounting professionals. In fact, the problem starts with a shortage of accounting professors at colleges and universities, which will severely affect the supply of entry level accountants beyond 2020.
Firms of all sizes (especially below the Top 100) are dealing with competitive issues to attract and retain quality professionals for growth initiatives and for succession planning.
The economic recovery in many parts of the country is drawing public accounting professionals to private industry again.
Compounding the issue is the lack of formal career development training in most of the country’s CPA firms.
Many of these issues have fueled the consolidation of the profession, especially in the last 10 years, and will continue to do so for at least the next 10 years.
Joseph Tarasco -- President, Accountants Advisory Group
The single most important issue facing the accounting profession today is the threat of irrelevancy. Whether you’re in public accounting or private industry, you face several existential threats:
• The basic accounting, tax and assurance tasks are fast becoming automated. Soon we’ll see the government preparing basic 1040s. The SEC is already scanning for problem financial filings with ever-smarter algorithms. And the banking industry is consolidating all personal and business financial activities into online dashboards.
• The profession's constituencies (clients, financial statement users and preparers, taxpayers, investors, lenders, etc.) are finding less to rely on from the profession. The financial crash exposed the inadequacies of accounting (as well as ratings agencies). Some banks are doing their own audits -- programmatic questionnaires, really -- making business credit as systemized as personal credit. And the number of do-it-yourself tax preparers may have passed a watershed this year -- the growth in e-filing by the profession has flat-lined; but e-filing by self-preparers continues to grow.
• An additional threat to the profession in the U.S. comes from no less than the rest of the world. To be sure, the AICPA has embraced the CGMA in order to remain globally relevant. But that only illustrates the problem, not the solution. In fact, China is producing 500,000 new trained accountants per year; compare that to the 1 million public practitioners in the U.S. or the 330,000 members of the institute. India may be next, as the profession there begins to throw off the constraints all-too-familiar in the U.S. until about 40 years ago. It won't take India 40 years to catch up in competitiveness. The U.S. is already training accountants all over the world to become CPAs and licensing is but a short step away.
• We can already see the strains of irrelevancy in the U.S. A new generation of business owner and client is learning that, with the right app or URL, they don't need to "do" accounting or "do" taxes. Demographics is destiny.
• The answer, of course, requires a revolution in the profession. It's happening already. And there's little reason for abject despair. But that's another topic altogether.
Rick Telberg -- President and CEO, CPA Trendlines Research
Embracing that the accounting profession is a collection of individuals who play important dynamic roles. CPAs working within corporations, NPOs or governmental agencies should broaden their skill sets to turn data into insights. To have CPAs known for innovation and driving sustainable business success is key to our global business success. CPAs who serve clients are trusted advisors and they too turn data into insights, and what we do in the area of innovation helps drive a stronger economy. CPAs in public accounting are the independent filter that adds confidence to our capital markets. Each is different and each is critical.
Arleen Thomas -- Senior vice president of management accounting and global markets AICPA
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 crucial in developing the talent necessary to fully protect investors and drive business performance.
Jeffrey Thomson -- President and CEO, IMA
It’s critical that we address two important issues to ensure that the profession continues to grow and prosper.
First, with a large number of Baby Boomers facing retirement, succession planning has become a top concern at many CPA firms. Yet the 2012 AICPA PCPS Succession Survey reveals that only 46 percent of multi-owner firms have a written, approved succession plan. We have to start thinking about how that succession plan is going to work in order to ensure that practices survive and that individuals who are retiring get maximum value for their investments that they’ve made over all these years.
Second, diversity in the CPA profession has changed very little in the last 40 years. According to the AICPA 2011 Trends in the Supply of Accounting Graduates and the Demand for Public Accounting Recruits, minority hiring in the profession has seen slight improvements, but overall stagnation. Demographic changes are making diversity a business imperative. To keep pace with population demographics and client/employer needs, the profession needs to continue to act. The best and brightest are going to be attracted to professions and companies that value and embrace diversity and inclusion.
Ralph Albert Thomas -- CEO and executive director, NJSCPA
Staffing. This issue runs the gamut from succession to new hires to holes in the hierarchy.
As more of our rainmaking partners are retiring, have firms developed the future partners they need? Those entrepreneurial individuals who built firms are now leaving. Do firms have an adequate number of future rainmakers to take their place? Have firms spent as much time developing rainmaking skills as they have technical skills? And how about client service skills? Firms need to have rainmaking, client service and technical partners. If they don’t have the right ratio of up-and-comers in place to replace those partners that are leaving, the firm will struggle to maintain the growth rates it has come to expect over time.
Hiring in the profession is also on the rise. New graduates are being actively recruited and firms will have to work harder to find the top talent they need. This is a reversal of just a few years ago when firms weren’t hiring at all. As a result, many firms now have a “hole” in their staffing. As seniors and managers are being recruited to take controller and CFO jobs in industry, firms can’t find anyone to replace them. That will present even more problems in terms of delegating work to the right level and training of professionals who need to no fulfill those roles.
Katie Tolin -- Director of practice growth, Rea & Associates
The most important issue is “service.” I find that the members of the profession who excel in providing great service are the ones I admire the most -- and I know their clients admire them as well. When the accountant goes the extra step to provide not only an exceptional experience, but the kind of experience clients talk about with their friends and associates, this, in turn, will drive more business. The ones who excel at providing great service are the ones who will survive for the long haul.
Pascal Van Dooren -- Executive vice president of sales and marketing, Avalara
Making sure accounting and financial reporting information continues to provide timely, relevant and decision-useful information for users of financial statements in today’s fast-paced and ever-changing environment.
David Vaudt -- Chairman, GASB
The most significant issue facing the profession is the ever-increasing pressure on pricing for our more mature service offerings. We will need to develop different staffing and business operating models to grow our firms while serving the public interest and our clients. New career paths and opportunities for people will need to be part of the solution. Firms addressing these matters with a willingness to see the future through a different lens will have the competitive advantage.
Gordon Viere -- CEO, LarsonAllen
Attracting and retaining the best talent continues to be vital for our firm, and a top priority. It’s important to ensuring that our profession remains on the cutting edge and meets the growing demands of an increasingly complex economy. Diversity is an especially critical component. We seek the broadest possible range of ideas, creativity and experiences because they drive our firm’s success in serving global clients. The challenge for every enterprise and any organization, including KPMG, is to create a culture that enables and rewards high performance. That includes having the opportunity to work with some of the world’s leading companies, receive great training, and collaborate with other professionals in an environment that embraces the strengths of each individual as the foundation of creating high-performing teams.
John Veihmeyer -- Chairman and CEO, KPMG
I believe the most important issue currently facing the profession is balancing the rapid pace of changes in technology with the business model shifts required to build sustainable, successful firms. I’ve talked to many firm leaders who spend so much time keeping up with technology that they haven’t had time to build a plan around the core competencies that will be required of them to be successful in the future. Although technology is an important enabler, it’s just one piece of the puzzle; building the right business model for the future will play an equally important role in overall success.
Jennifer Warawa -- Vice president of partner programs & channel sales, Sage North America
The most important issue accounting professionals face today is how to stay relevant and grow their practices. Technology is rapidly changing and migration to the cloud is happening at lightning speed -- much faster than accountants and their clients anticipated -- but with greater benefits for both than expected too. New technologies -- that drive greater efficiency, real--time advice and collaboration, and the lifestyle flexibility that allows them to serve clients needs anywhere at anytime and work on their own terms -- are driving this rapid adoption.
More and more, clients want (and expect) real-time feedback and responses from their accountant (text, emails, phone), and staff want the flexibility to work when and where they are most comfortable (late nights, from home, on the road). When used in either a connected desktop environment or being 100 percent online, mobile and apps provide the ability to work anytime, anywhere in a seamless, efficient way. This will enable accountants to stay current and focus more of their time on strategies to help them grow and to help their clients grow.
Jill Ward -- Senior vice president and general manager, Accountant & Advisor Group, Intuit Inc.
Accountant’s complacency. Most countries and businesses fail from within, and I think the most important issue facing the accounting profession is the threat from within. Many accountants have become comfortable waiting for clients to call, waiting for clients to express needs and waiting for clients to make decisions. This waiting mentality makes the accountant complacent. Complacency leads to being vulnerable to other professions and businesses encroaching on the business of accounting.
Troy Waugh -- CEO, The Rainmaker Companies
The retirement of the Baby Boomers and the transition of the 44,000+ accounting practices in the U.S. There will be tremendous consolidation and a loss of many experienced practitioners.
Jeffrey Weiner -- Managing partner, Marcum LLP
I would say adapting to change. The business environment has become increasingly complex and dynamic -- and that’s something that our profession has had to adapt to in the way we serve our clients and our own operating models. This dynamism is driven by trends that include globalization, demographic shifts, technological advances, and regulatory change.
In terms of the pace of change, the last decade has been particularly challenging. We’re still seeing the after-effects of the banking crisis, which became an economic crisis and then a sovereign debt crisis, ripple around the world -- through a patchy global economic recovery and regulatory adjustment, and the uncertainty that brings. But the best organizations use change to challenge themselves, to start a conversation with their stakeholders and to re-affirm their sense of purpose.
Mark Weinberger -- Global chairman and CEO, EY
We need to keep up with the needs of our clients so we can stay relevant. Other service providers are stepping in to provide the kinds of consulting services that we should be delivering. We need to become better communicators and connect with clients more frequently so we can help business people and their teams achieve their goals. It is high time we stop avoiding technology discussions. We need to be showing our clients how to apply top technologies to business problems. We have the skills and the knowledge; we need to use them.
Geni Whitehouse -- Founder, Even a Nerd Can Be Heard
The transition of firm ownership from current leaders who are entrenched in doing things in a way that worked and made them successful as they grew in their career to new leaders who are waiting in the wings for their chance to do things their way. Today, it feels like a shootout at the OK Corral and both sides are just staring at each other daring the other to shoot first. If it is the old guard, then the next generation will bolt and start a new firm, or find a new opportunity in the private sector. If it is the next generation, the old guard will dig their heels in and slow progress of new projects by withholding budgets or not supporting new initiatives. In the end, our entire profession suffers.
Sandra Wiley -- Shareholder, and COO, Boomer Consulting
Succession! It is showing up everywhere, with the “brain drain” or loss of knowledge facing firms, issues in the effective transition of clients, retiring partners struggling to let go, up-and-comers frustrated with the lack of influence or power they have in firm decisions, increasing options for all those under 40 as the labor market tightens leading to turnover and more brain drain from that, increasing labor costs and a renewed, almost zealous focus on recruiting and retention in firms and finance departments. It is everywhere!
Jennifer Lee Wilson -- Co-founder and owner, ConvergenceCoaching
One of the most important issues is staff development and finding the leaders of the next generation. Since staff levels have been reduced for a number of years, mentoring has fallen off and workloads have made it difficult for today’s leaders to really groom and grow the next generation.
In addition, from the state tax perspective, the federal Marketplace Fairness Act and other proposed federal acts related to state income and sales/use tax.
Diane Yetter -- President, YETTER
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