Top 100 Extra: The Biggest Issues Facing the Profession
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.
There are a number of critical issues facing the accounting industry today, including the rapid pace of innovation worldwide, the need to attract and retain high-performing employees, succession planning, increased regulation, etc. One of the areas I will be watching most closely during the next year is M&A in the accounting profession. We’ve seen a lot of activity during the last several years. I anticipate this trend will sustain as Baby Boomers retire and firms continue to face unprecedented regulatory, financial and marketplace changes.
McGladrey was fortunate to welcome the partners and employees of two outstanding firms to our team in 2013 Margolis, Phipps & Wright PC in Houston, and Lanier, Whaley, Craft and Co. in Wilmington, N.C. We were also thrilled to welcome Baker Tilly in the U.K. to our global network, RSM International. We plan to continue to supplement our strong organic growth with the acquisition of firms that are aligned with our vision to be the first-choice advisor to middle market leaders in 2014.
-- Joe Adams, Managing partner and CEO, McGladrey
The succession issues created by the aging Baby Boomers are affecting almost every firm in the country. Some firms will survive it and remain independent. Others who have not successfully built their bench will continue to drive the flurry of M&A activity.
-- Gary Adamson, President, Adamson Advisory
The most important issue is determining what the markets and society want in the future from the profession and right now I believe that is an expanded framework. The opinion audit will continue to be a base service offering, but we need to grow assurance to an expanded framework. More agility is required in a bigger, broader assurance practice. We need to think proactively about what we want to do, being mindful and compliant of standards and regulations while moving forward. Other than the historical look-back reporting and services being provided, assurance services that we see being requested by the market today include integrated enterprise sustainability reporting, conflict materials, cyber security, data security, and predictive analysis. If we do not respond and invest in an expanded framework, the profession faces challenges and risks becoming less relevant.
-- Charles Allen, CEO, Crowe Horwath LLP
How best to accommodate small-business accounting in a global business environment. The movement toward international standards requires changes in processes and data capture that is often expensive for small business while serving no useful purpose for them. When the dust settles, will there be two versions of generally accepted accounting principles?
-- John Ams, Executive vice president, National Society of Accountants
Lack of resources: Both capital and human resources are hindering firms from growing and being more profitable. Many firms do not have the right resources to allocate to internal or external projects. Human resource constraints continue to hamper firms’ ability to complete projects on a timely and profitable basis. The lack of human resources also prohibits the firms from taking on new service areas. Hence, firms become more risk-adverse, which in the long term hurts their growth and profitability even more.
-- August Aquila, President and CEO, Aquila Global Advisors, LLC.
Like last year, we continue to see the impact of technology and cloud computing on the profession as the biggest issue and opportunity.
-- Erik Asgeirsson, CEO, CPA.com
Uncertainty, together with public expectations.
-- Billy Atkinson, Chairman, Private Company Council
Relevancy. Unless our profession continuously innovates and adds value, we deserve irrelevancy. What was the last innovation from the profession? We continue to avoid the tough issues, such as auditor independence. Rather than debating picayune issues like auditor rotation and the difference between a "gift" and "entertainment," if we really believe in serving the public interest, we should relinquish the audit monopoly. Competition spurs innovation, and nowhere is that more needed than in the ossified audit industry.
-- Ron Baker, Founder, VeraSage Institute
Relevance. In this continually changing and increasingly global environment, CPAs risk losing relevance in the marketplace without ensuring our services provide value in a timely and meaningful manner.
Our profession must cast a wide net to address ever-deeper business needs.
-- Tommye Barie,Incoming chair, AICPA
In a word, relevance. Ever-changing technology and regulatory requirements, a global economy, and the aging of the profession make it an exciting time to be in the accounting profession. But those same factors make it increasingly challenging to stay relevant in the face of new technology and a new breed of clients with a vastly different set of expectations.
To meet these expectations, tax and accounting professionals will need to change the way they do business. Today’s clients are used to doing things themselves. They’ve been immersed in technology for most if not all of their lives. They live in a digital world, and they have no patience for professionals who they believe operate in the past.
Today’s clients are far more sophisticated than the generation that came before them. They use technology to analyze their businesses constantly and research issues that affect them. They demand up-to-the-minute information, and they’re not satisfied with accountants who provide only compliance work and after-the-fact reporting.
In short, the new generation of clients expects their accountants to be connected advisors, not just after-the-fact reporters. They’re extremely sophisticated consumers of data, and they expect the professionals they work with to have an even higher level of expertise. They demand true data-driven analytics and business guidance.
This higher level of service also requires a more involved firm-client relationship. Traditional accounting and reporting must be made available 24/7 with tools like personal client portals accessed through the firm’s Web site. This will leave more time for the higher-level analysis, benchmarking, and other value-added services that today’s clients demand.
The bottom line is that firms can no longer operate as they have in the past. If they allow their inertia to lull them into a same-as-last-year mentality, they will not survive. Instead, they need to take proactive steps to upgrade their customer service and build better connections with their clients’ everyday businesses.
I believe that two basic strategies are key to making this happen: Investing heavily in technology and making technological know-how a key consideration in the hiring and retention process. This may even include removing staff members who don’t comprehend the “new” accounting and client service world. This may sound harsh, but the simple truth is that firms that can’t adapt to become relevant to the new breed of client will not survive.
-- Jonathan Baron, Managing director, Professional Segment, Thomson Reuters Tax & Accounting
Succession planning is now the most important issue currently facing the accounting profession, as more than half of the profession’s Baby Boomer senior executives, partners and directors are contemplating retirement within the next 10 years. This and a desire to expand practice areas is leading to an explosion of accounting firm mergers and acquisitions. Any firm that hasn’t yet drafted a succession plan is already behind.
It seems the trusted professionals that so many Americans turn to when planning for their financial futures are hesitant to plan for their own. No one argues that the market’s demand for accounting talent remains strong. But demonstrated practices that prioritize firms’ focus on future leaders have no choice but to catch up quickly. Developing a pool of talent within the firm, not just one individual, is a clear retention tool for individual firms and the best future growth prognosis for the profession.
-- Joanne Barry, Executive director and CEO, NYSSCPA
Accounting, like all professional services, is a people business. Any firm is only as good as the professionals it recruits, trains and retains. As the U.S. economy is improving, the battle for talent will continue to intensify as we seek the best and brightest professionals to help us achieve our growth goals.
-- Wayne Berson, CEO, BDO USA
Accountants help clients make rational, informed decisions based on facts and figures. But unfortunately when it comes to making decisions for their own practices, most accountants’ decisions are driven by fear of change and preconceived notions. (I’d be glad to be proven wrong.)
For instance, the undisputed fact is that the cloud presents unprecedented opportunities for accountants. And yet only a negligible percentage of accountants have used the cloud to better serve their clients and make substantially more money. Why?
-- Chandra Bhansali, President, AccountantsWorld
I believe complacency and lack of leadership is hurting the profession. The profession is losing its relevance, and many accountants have settled for this compromising situation. Accountants need to look confidently towards the future, first by delivering more strategic value to their clients, and second by doing a better job of explaining the unique value they’re providing.
-- Sharada Bhansali, Co-founder and EVP, AcccountantsWorld
One of the most important issues facing the accounting profession, particularly as it relates to regulation, is the evolution of the profession itself. The attestation of reliance and validity goes beyond the historical bailiwick of numbers and money with areas such as information technology and sustainability growing in importance. Current discussions and actions towards changing the definition of “attest” and bringing laws, rules and standards to be relevant and actionable in this new space is demonstrative of the importance of this issue.
-- Ken Bishop, President and CEO, NASBA
The most important issue facing the accounting profession moving into the future will be finding qualified staff for the various types of needs, many specialized, of a professional firm. This problem may be endemic, hitting certain regions of the country and affecting certain positions in that locale. I speak from experience, having run into significant challenges with certain positions, where in order to grow, I need the right type of staff and simply cannot find them. I suspect I am not the only CEO running into this problem.
I surmise that the vacuum is a result of a number of factors affecting our economy and social make-up. One is the growing number of mature workers who are transitioning out of the workforce either because they are retiring or have given up in their attempts at finding a job. Two is the backlog of millions of potentially well-educated workers who have been stalled or deterred in their higher education pursuits due to the rapidly rising cost of getting a college degree. This problem will only get worse as student loans become more difficult to obtain, which they will, because they are spiraling out of control and at some point must be contained.
Thus, the workforce is being squeezed on both the front and back end, so to speak, resulting in fewer qualified workers in the middle. This dynamic is also creating greater competition among employers, like me, with fewer hiring choices.
-- Parnell Black, CEO, NACVA
Building a firm as a strategic company that replaces the traditional partnership model.
-- Jason Blumer, Chief innovation officer, Blumer & Associates
The most important issue is the ability to constantly learn and change in order to take advantage of the many opportunities presented to our profession as trusted business advisors. Those who can identify the opportunities and learn faster than the competition will be more successful and remain relevant in a rapidly changing environment.
-- 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 and shareholder, Boomer Consulting
The profession continues to be challenged by many large and obvious issues, [such as] continued tax law changes, workload compression, legislative oversight, and fee pressures. However, from my technology perspective, an issue flying under the radar relates to the continued threats posed by cyber-attacks and data breaches that occur on a nearly daily basis. So many of our nation’s top companies have been victims of such attacks, with millions of personal and confidential records falling into the wrong hands. With the continued migration of personal and confidential information to the cloud, our profession will continue to be challenged with ensuring that such information is securely stored and that we have exercised best practices to help to insure the continued confidentiality of such data. Our profession will need to continue to be on guard to einsure that they have exercised due professional care over such client data and be ready to respond, not if, but when, a high-profile data breach of personal and private information occurs.
-- Jim Bourke, Partner, WithumSmith+Brown
There’s an important global debate underway on how auditors can provide more confidence to investors and capital markets. Right now, we are starting to see changes in auditor reporting that really will help give investors more insights. But with businesses facing increasing globalization, growing complexity and rapid technology changes, auditors will need to do much more in the future. They will need to be able to provide insights about sector risks and trends that go way beyond the audit’s traditional boundaries. This will require top-notch talent of all types. As a profession, we need to continue to attract the best and brightest and make sure that students and graduates see how rewarding and diverse an accounting career can be.
-- Beth Brooke-Marciniak, Global vice chair, EY
The most important issue facing the accounting profession is the growing responsibility of CPAs as their clients’ trusted advisor. Impending tax reform, global business strategies, growing markets, health care, online security and commerce have all expanded the role of the CPA. This trusted role and increased client demands are requiring us to diversify our skills and build networks to help our clients. For example, I have a client who looks to me, as a CPA, for guidance on human resources, including hiring, firing, and performance evaluation. As our clients’ trusted advisor, we have to know whom we can turn to, to help provide value to our clients. We should not only be experts in the issues that matter to our clients, but we should also have a network of trusted professionals to recommend to our clients to meet their specific needs.
-- Jim Buttonow, Director of tax practice and procedure services and software, H&R Block
- The inability of the IRS to be able to regulate tax return preparers;
- Rapidly changing technology; and,
- The anticipated large number of CPAs who will be retiring over the next five years.
-- Edward Caine, National president, NCCPAP
Accountability. Many firms still operate with partners who aren’t accountable to each other. This not only limits what the firm is able to achieve, but fosters the next generation of unaccountable CPAs.
-- Jean Marie Caragher, President, Capstone Marketing
The erosion in tax administration caused by the IRS scandal.
-- Paul Caron, Publisher and editor-in-chief, TaxProf Blog
There are a number of important issues facing the accounting profession, from understanding the complexities of the Affordable Care Act and its impact on clients to continued discussions about mandatory auditor rotation and the ultimate transition to IFRS.
Each of those issues on its own provides substantial concern for the accounting profession, and merits attention. However, in my opinion, what appears to be more pressing is the PCAOB’s continuing focus on enhancing reporting requirements involving critical audit matters.
The PCAOB has proposed requiring CAMs to be included in annual audit reports — in short, disclosure of all significant issues dealt with in the course of an audit. The proposed requirement has been met with support from some investor groups seeking more transparency from corporations. Not surprisingly, CFOs and audit committees have been somewhat more reluctant to embrace these proposed requirements.
The question for the profession seems to be whether auditors are best suited to independently report information about a company beyond what is required of management under GAAP and SEC regulations.
The Center for Audit Quality supports enhanced auditor reporting models and, in June, submitted to the PCAOB results of voluntary field testing of the proposed requirements. The field test findings point to the potential for inconsistencies in determining what rises to the level of reportable CAMs. It also reveals concern on the part of management and audit committees to the possibility of having to revise disclosures to respond to CAM descriptions by auditors.
As CEO of the IIA, I agree with the CAQ’s conclusion that further refinement is necessary to overcome challenges identified in its field tests. The CAQ’s comment letter includes a number of recommended changes. The jury is still out on whether such refinements can overcome major management and audit committee concerns, but if such new rules ultimately are implemented, they should be phased in.
-- Richard Chambers, President and CEO, The Institute of Internal Auditors
As a profession, we must find a way to reconcile ourselves and embrace big data—vast amounts of seemingly unrelated and unstructured data. The accounting profession must develop and teach methods that extend beyond traditional data analysis. We need to find a way to pull data from traditional financial sources to Facebook posts to the real-time number of products sold off the shelf to employee productivity metrics, such as number of sales calls placed or orders entered. The evolution of technology and our digital worlds has expanded our access to data, while also creating an entirely new pool of data. It’s that new pool of data that we must learn how to sort and analyze to maintain our relevance and add value. Big data is the future of business and we can ensure that it is presented in an accurate and relevant manner, giving stakeholders confidence in the data presented. This does alter our approaches in how we audit, attest and incorporate current information, giving us a unique opportunity to embrace this data in order to produce improved audit quality. It’s the key to our profession being a relied-upon business partner.
-- Stephen Chipman, CEO, Grant Thornton
The single biggest issue / challenge I see is the increasingly complex and burdensome regulatory environment. Frankly, accountants are drowning in a sea of oversight and regulation.
In addition to the constant challenge of providing good services to clients and keeping abreast of the latest technologies, this is no small issue. Trying to understand all of the regulations is difficult enough, let alone remaining compliant. Compounding the issue is that many of the regulations seem to be at odds, which only creates more confusion and distraction.
-- David Cieslak, Principal, Arxis Technology
[Candidates for] Accounting Today’s Top 100 Most Influential People give a buffet of answers to this daunting question. We are, after all, experts in a wide array of subjects. They range from the most technical topics to my 2013 answer, finding and retaining top talent. There’s a common thread that can be woven in and out of each answer, and I believe it’s the thread that builds my entire body. The most important issue currently facing the accounting profession remains
innovation, invention and development.
Being a marketing professional, I’ve seen the smart firms understand the difference between a marketing department and marketing. Consumer behaviors are changing drastically. As a result of social and digital media, consumers have become empowered and demanding, and they don’t trust you right away. Those firms who are able to evolve, present solutions, answers, knowledge and data conveniently, quickly and accurately will be on top. Younger generations will soon rule the world and they’re going to make you work for the relationship.
The issue and solution? Attracting, developing and retaining young leaders will make or break a firm in the coming years. They know how to do this. They know the necessary innovation. They’re not afraid to “push it.” 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. Take it from the lady who encourages her professionals to dance in slow motion for current video marketing trends.
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 the 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 innovation.
-- Sarah Cirelli, Marketing manager, interactive marketing WithumSmith+Brown
Talented professionals. The projected growth in accounting positions, as well as demographic changes within the population, will challenge the profession to attract and retain talented professionals. In addition to demographics (retiring members, changing population diversity), relevancy of the CPA Exam and experience requirements, changing expectations in the workplace, and enhanced educational opportunities and delivery methods are all related. It is critical to keep the pipeline of the best and brightest candidates full by encouraging students to consider careers in accounting, finish their journey to the CPA credential, and become those trusted advisors that play a critical role in establishing trust and confidence in the U.S. marketplace, as well as the global economy.
-- Michael Colgan, CEO and executive director, Pennsylvania Institute of CPAs
The biggest issue is lack of succession. Firms kept their nose to the grindstone for too many years without thinking much about strategy or the future. The future is now here, and the impact is evident - mergers, emergency mergers, and firms with no hope of merging. It’s unfortunate to see practitioners disappointed that their practice is worth far more to them than to others. Lack of succession is going to instigate a significant reshaping of the profession over the next several years.
-- Gale Crosley, President, Crosley+Co.
From my perspective, balancing the demands of work, family and personal commitments are among the most pressing challenges that accounting professionals are facing today.
Across gender and generations, the need for increased balance is cited as a necessity. Gen Y, which is expected to make up 75 percent of the workforce by 2025, says job flexibility is a top priority. Once seen as mainly a women’s issue, fusing careers and personal lives is now everyone’s concern. Men report increasing levels of work-life conflict. And according to the Bureau of Labor Statistics, both parents work in nearly 60 percent of married families with children.
This is not an issue unique to the accounting industry. Corporate America and our country’s leaders are grappling with how to address it as the demographics and priorities of the 21st century workforce evolve.
I recently attended the White House Summit on Working Families that brought together business and government leaders to discuss best practices for helping working families succeed. My key takeaway? Many companies in our profession are leading the way with family-friendly policies and practices to build flexibility into how, when and where their employees’ work is done. It’s critical that our profession continues to lead from the front to attract the best talent going forward.
At Deloitte, we are recognized within the industry for our innovative approach to work life, but we know we haven’t cracked the code. We are constantly looking at ways we can update our approach and help our people build predictability into their schedules. We’re moving beyond programs and policies to a new mindset, behaviors and processes that support the integration of work and life, well-being and peace-of-mind.
The benefits have broad business and talent implications. Professionals who have more control over the management of their own work-life integration report lower levels of stress and better health. This translates directly to measurable benefits for employers in terms of reduced absenteeism, turnover, and sick leave usage, as well as increased productivity during the workday.
It’s a challenge that will need the collective brainpower of our business and government leaders to solve. The accounting industry certainly has an important role to play as a model for best practices and innovation.
-- Deborah DeHaas, Vice chairman, chief inclusion officer, and national managing partner of the Center for Corporate Governance, Deloitte
The seemingly inability to simplify. The ability to present things simply is complicated. The complexity of standards and regulations impacting the accounting profession is enormous and growing. The challenge of how to manage or simplify how we operate and how we communicate is an important issue.
-- Loretta Doon, CEO, California Society of CPAs
The high expectations of the public for the integrity of the audit cannot appear to be subordinated to the business goals of the global network firms.
-- James Doty, Chairman, PCAOB
As a profession, we have an opportunity and an obligation to provide the investing public with audits they can trust so they can make investment decisions with confidence. We must be open to adopting new approaches that better meet the evolving needs of investors, including revolutionizing the role of the auditor. It is important for accounting professionals to continue to engage with a variety of external parties, including management, audit committees, regulators, standard-setters, and investor groups to assess 21st century needs and bring into focus the key features of the audit of the future.
The accounting profession provides an essential public service, and it is one that must change with the times. The basic model of annual reporting and the accompanying annual audit report have not undergone fundamental change in more than a half-century. Consider the changes in our capital markets over the past 50 years -- changes in technology, changes in the way stocks are traded, changes in the size, complexity, and geographical span of companies, and changes in the investor base itself. It is evident that further change is on the horizon, and if anything the pace is accelerating. We are utilizing the advances of technology and the global environment to drive innovation and enhance the services we deliver every day. As we change, the accounting profession must keep our public interest responsibility top of mind, and we must maintain the highest integrity when performing an independent, professionally skeptical, and objective audit. We can do it.
-- Joe Echevarria, Immediate past CEO, Deloitte
Accounting professionals must evolve from rules-based accounting to principles-based accounting, which are, for example, fundamental in the new revenue recognition standard. The elimination of industry-specific guidance in the standard in favor of broad principles necessitates greater reliance on professional judgment.
-- George Farrah, Executive editor, Tax and Accounting, Bloomberg BNA
Change management. New-college graduates are looking to work for progressive organizations. Client accounting services are beginning to displace in-house accounting teams. The pace of change in the industry will accelerate and adaptable organizations are thriving.
-- Chris Farrell, CEO, Tallie
One of the most important issues facing the profession -- particularly for audits of large public enterprises is the need to develop appropriate ways to use data, including new tools for analyzing data. These tools are likely to change the nature of the audit itself. This could be a positive development, but it raises new challenges for the profession and regulators as well.
-- Lewis Ferguson, Board member, PCAOB
The increasing interconnectedness of global markets remains one of the most important issues facing the profession and issuers. As technology and other forces shape the global economy, accountants and auditors must engage more than ever with key stakeholders to identify effective practices, to replicate them where it makes sense, and to learn from failed or problematic efforts.
In this global context, U.S. regulators need to help ensure the primacy and the competitiveness of our markets by carefully weighing the costs and benefits of new rules and coordinating with counterparts overseas. These efforts will help U.S. markets continue to provide companies with deep sources of financing and investors with myriad ways to participate in economic growth.
-- Cindy Fornelli, Executive director, Center for Audit Quality
Staying relevant in the face of technology change is the most important issue facing our profession today. Being viewed as thinkers and not doers or taskmasters is the only thing that will keep our profession relevant tomorrow.
Technology is and should replace the rote tasks that our profession used to be known for. Tax, audit and accounting have all been significantly impacted and that trend will only continue. Today the majority of tax returns are done by non-CPA firms or the individuals themselves with free or inexpensive software and cheap labor. Many CPA firms themselves now actually outsource tax work to third parties with cheap labor off-shore. Cloud-based accounting packages make it simple for small businesses to keep their own books without the help of a CPA. Electronic auditing tools have dramatically increased efficiency, while at the same time improving quality.
But this actually leaves our profession right where we should have been all along in the position to help individuals and businesses understand their financial information and to assist them in preparing for their future. This isn’t just the role for consultants, it is the role that all CPAs must take on if they and their firms are to be the relevant tax, auditing and accounting professionals in the future.
-- Brian Fox, Founder and president, Confirmation.com
Given the increased complexity and global interconnectedness of the business environment and financial markets, and the rise of innovative and disruptive technologies, the profession’s ability to effectively fulfill its trusted role has become increasingly challenging. And given the accelerating pace of change in these areas, I believe the most important issue today is how, and to what extent, the profession will be capable of adapting to the shifting landscape and the evolving risks to achieve high-quality auditing and provide assurance to investors about the integrity of financial reporting. It is critical for the accounting profession to work with stakeholders and other gatekeepers -- including audit committees, internal audit, corporate senior management, investors, and regulators -- to develop innovative approaches to urgently address these issues.
Also essential to the profession meeting these challenges is its ability to attract, retain and develop talented people from diverse backgrounds. To achieve a diverse and multidisciplinary workforce, audit firms must radically change their approach to attracting and managing talent. The current representation of women and people from various ethnic groups is dismal in the partnership and top leadership levels of the large firms. This status quo persists despite decades of a strong supply of women entering the profession. In the U.S., where the supply of graduates in certain ethnic groups may not be representative, the firms are competing with each other to hire from limited pools, rather than working to solve the underlying problem of why certain ethnic groups are not fully represented among accounting graduates. The profession must work creatively with colleges (including community colleges) and universities to provide a strong pipeline of talent into the profession and help eliminate the disparities in access to accounting education that currently exist for young people from different backgrounds. The firms also must make it a top priority to attract, retain and promote highly qualified women and ethnically diverse candidates.
Our economy and way of life in the United States and globally depend on reliable financial information to support the flow of capital and lending. The accounting profession is the backbone of the entire system. The public interest may be at stake if the profession cannot effectively address the current issues it faces.
-- Jeanette Franzel, Board member, PCAOB
Most people will say staffing, but that misses the point. Short of allowing in several hundred thousand qualified immigrants, there are not and will not be enough “good” people. The real issue is making the huge paradigm shift to the new model which includes insourcing, outsourcing, virtual offices, mobile and cloud technology.
-- Chris Frederiksen, Chairman, The 2020 Group
Our leadership must continue it commitment to improve the integrity and transparency of financial reporting. It must also encourage all businesses to focus more on sustainability and its related reporting.
-- Timothy Gearty, National lead instructor and national editor-in-chief, Becker Professional Education
Our public accounting profession still struggles mightily with cultural resistance to change. Yet the only constant these days seems to be that pace of external change continues to accelerate. But internally, within the profession, firms still create and adopt change at a snail’s pace by comparison. “Same as last year” isn’t cutting it anymore.
Passing peer review is a table stake, and so is simply knocking out our low number of required CPE hours. Those are inadequate investments in the present, much less the future.
Whether competing as one of many comparable firms within an average marketplace or truly attempting to be the No. 1 go-to firm for a given industry, it’s becoming nearly impossible without dedicating ourselves to constant innovation. The energy it takes to participate in shaping change—not just within our firms but in business as a whole—is vast, but absolutely necessary if we are to be relevant over time. Our firms have to encourage and even require continuous creativity; we have to become comfortable with being fluid.
-- Michelle Golden, Member, Kennedy and Coe LLP
The future of international standard-setting is one of the most important issues facing the profession. For the FASB, the question is how international standard-setters will work together to achieve the goal of issuing more comparable standards, while also addressing the specific needs of the capital markets for which they set standards.
Another important issue we face is complexity in accounting standards. Today, we have complex accounting because we haven’t been consistent in our solutions to accounting problems. The FASB’s simplification initiative will address this problem. Through our renewed focus on foundational projects--like our conceptual framework project—we are laying the groundwork so that future decisions will be more consistent, and so that old problems can be corrected.
-- Russell Golden, Chairman, FASB
Client’s demands are much broader now than ever before. They want their CPA to be more involved in the business and not just post mortem activities. CPAs are being asked questions about technology, social media, online sales, platform choices etc., now more than ever before. Firms that embrace this change and interact with their clients to solve these challenges and create opportunities are the firms that are winning.
-- Jeff Gramlich, President, AccountantsWorld
Firm leadership and succession is a critical issue and will continue to be in the coming years. A great opportunity exists for firm leadership to develop their team into high value, consultative true business advisors and hold strong in the role of the most trusted advisor. Work must be done to develop the next tier of leadership and it should start earlier in their careers. The focus on recruiting the best and the brightest from school should be made a priority. The profession should be open to recruiting students who both are and are not focused in accounting. Students in general business, technology and other areas can add a tremendous amount of insight, innovation and talent to firms. We must begin to think this way.
-- Angie Grissom, President, The Rainmaker Companies
Leadership void standing up for what it means to be a professional. Put the 'P'(ublic) back in the CPA license to practice!
-- Gaylen Hansen, Immediate past chair, NASBA
There are many paths accountants choose for their careers. Given my history and current position, my focus is on public accounting, and, particularly, auditors of public companies. The most important issue currently facing the public accounting profession surely is the difficult balance between “public accounting as a business,” which comes with the challenges of keeping a “client” happy, and “public accounting as a profession,” which requires accountants to act in the public interest to protect the interests of investors.
As a profession, public accounting has a long and rich tradition of members who are smart, diligent, reliable, ethical and trustworthy. As a business, however, public accounting has been subject to criticism, some of it deserved, for blurring the lines between the independence that public accountants need to have and the business relationships, including engagements for non-audit services, that sometimes erode the necessary skepticism and objectivity.
Accounting firms are, and in our history always have been, profit-making businesses that attract the best and the brightest. At the same time, in connection with much of their work, they occupy a position of public trust. I know that many firms struggle with this balance on a daily basis. I challenge firm leaders frequently by asking them what they are doing to instill in all their professionals, especially the junior staff, the focus on independence, objectivity and skepticism that is so critical to the functioning of the capital markets and investor confidence. I believe that the profession has made progress since the passage of the Sarbanes-Oxley Act in their efforts to put investor protection first, but this will be an ongoing challenge. The firms and the PCAOB must continue to focus on this important issue.
-- Jay Hanson, Board member, PCAOB
For those of us that are predominately in the tax business, I believe the next few years could bring some real challenges. The Internal Revenue Service is in the middle of a scandal that could reduce whatever confidence the public has in the agency. The IRS is also faced with reduced budgets and increased workloads. All of this could lead to significant challenges for taxpayers and practitioners. Can the IRS fill its role in the implementation of the Affordable Care Act? Will a lack of resources cause a continued decline in taxpayer services not to mention services to the practitioner community? Will IRS enforcement efforts decline or shift in a manner that makes the average person no longer believe they must comply with the law? And finally, will tax preparers be asked to do more to ensure compliance to help cover for reduced IRS activity? All of these issues have the potential to make life much more difficult for all of us, but they may also provide us with great opportunities.
-- Roger Harris, President and COO, Padgett Business Services
I think that the most important issue right now has to do with work-life balance -- or more like work-life integration.
Today’s technology advances make it easier than ever to be connected --virtually 24/7 from anywhere in the world. Of course there are numerous benefits to having anytime/anywhere access to data that helps us all do our job better; however, the danger in that comes when managers, customers, or even oneself begin to demand to be served “in real time.” What used to be going the extra mile is now expected by customers because of technology.
With this new always-accessible standard, there’s the constant debate of whether to keep work life separate from personal life and “turn it off” when work is done, or to always have your door open to anyone who needs you (even if it means working weekends or evenings).
Finding -- and maintaining -- that fine-line balancing act (or deciding to blur the lines completely and live a transparent work/personal life) can be challenging to any professional. I firmly believe those who do so successfully will be the future of the profession.
-- Kim Hogan, Business development manager, strategic accounts, Intuit
Managing the complexity; regulatory environment; disclosures and audit reporting.
-- Marie Hollein, President and CEO, Financial Executives International
I call it the shift change, the changeover from the current generation of leaders, Baby Boomers to the next generation(s). It revolves around succession planning, but is much larger than that. It involves the major drivers of change -- technology and globalization -- and is showing up in five major “shifts” in leadership, learning, technology, generations and the workplace.
-- Tom Hood, CEO and executive director, MACPA
The greatest challenge we see at Sage in the accounting profession is the rapid pace of change, and it’s not just about technology. For a long time, accountants felt they couldn’t keep up with new technology, but now clients’ expectations are changing as well, and those need to be factored into consideration as well. Clients want increased engagement from their accountant, as well as deeper insights and action plans. Basically, they see value in partnering with their accountant on a more frequent basis to help them navigate their business direction. In order to keep up, a firm needs to adapt their business model. They need to identify how they can add increased value to their clients, and secondly, evaluate how they need to change their firm’s business model to support delivering on that value. It’s about positioning themselves as not just as a trusted business advisor, but a trusted, valued business advisor.
-- Pascal Houillon, President and CEO, Sage North America
The biggest issue facing the accounting profession is effectively fulfilling its public purpose.
At EY, we know that the insights and quality of services we deliver help build trust and confidence in the capital markets and in economies the world over. We also develop outstanding leaders who team to deliver on our promises to all of our stakeholders. In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities.
We also know that having a strong audit practice at EY is critical to achieving that public purpose. EY’s industry-leading audit market share in the Fortune 500, Fortune 1000, Russell 3000, and leadership in IPOs reflects the investment towards developing the teams, processes, analytics and insights that allow us to deliver on that public purpose.
This sense of enterprise-wide commitment to fulfilling the public trust is something that I am passionate about, whether speaking with our teams with EY and in my work as a leader on the Governing Board of the Center for Audit Quality (with the other leaders of the largest firms), my fellow trustees of the Financial Accounting Foundation, with Audit Committee Chairs, the academic community and most especially with the young people of the profession.
The challenge in this is having everyone committed to that purpose at all times, striving to build a better working world one audit, one team, and one client at a time. When we do so effectively, we help make capital to flow more smoothly, investors to make better decisions, and business to grow in a more sustainable manner. That is a vital role to play.
-- Stephen Howe, Managing partner, Ernst & Young
New client acquisition — our firms frequently discuss their challenges in marketing and bringing on new clients. For many, marketing is an unknown realm and requires scale to afford the expertise and efforts required to do it well.
-- Trey James, CEO and Co-founder, Xcentric
Development of the next generation of leaders. Firms need leaders, and many leaders are landing in a managing partner or partner role without much idea how to lead. We are getting tons of questions from young partners wanting to know what to do next.
-- Sarah Johnson Dobek, President and founder, Inovautus Consulting
Uniformity: The concept of uniformity applies to the global community relating to: an international recruiting program to attract the best and the brightest into the profession, an agreement among the accounting regulatory authorities of the leading economic countries as to the Common Body of Knowledge to be acquired to enter the profession and the entry level requirements to be earned for entrance into the profession (education, examination and experience), one set of accounting principles used by all countries, each of the regulatory bodies in each country agreeing to a base set of regulatory guidelines, an international code of ethics, an international definition of assurance standards, and global practice monitoring standards among others.
-- Carlos Johnson, Chair, National Association of State Boards of Accountancy
Complexity of regulations that require increased time and sophistication to handle. This issue in conjunction with fee increase resistance is putting firms in the position that traditional services are being squeezed. A reasonable response might be to choose two or more value-added services to provide to your client base that are highly valued and can produce recurring revenue.
-- Randy Johnston, Executive vice president and partner, K2 Enterprises, CEO, Network Management Group, Inc.
The severely constrained IRS budget. The IRS budget is oftentimes the subject of debate, and may be even more so now given current allegations regarding the handling of certain exempt-organization matters. Congressional oversight of the IRS is a critical function and one that contributes to the success of the system and elevates the American taxpayer’s perception of the IRS’s objectivity and its ability to effectively manage the tax administration process. Likewise, the proper funding of the IRS’s budget is essential to the IRS’s ability to carry out its mission. The collection of tax revenues and the administration of tax laws, as well as the need to provide assistance to taxpayers and tax practitioners, are important responsibilities. I have significant concerns that a severely challenged IRS budget will continue to lead to a degradation of services to both taxpayers and tax practitioners alike, and significantly impact tax practitioners’ ability to represent their clients.
-- Edward Karl, Vice president of taxation, AICPA
Staying relevant to our clients as they work in this highly mobile, “on demand” environment, while also staying compliant and profitable. As cloud technology gives our clients access to an increasing number of technology solutions that help them automate tasks that accountants used to complete manually, such as day-to-day bookkeeping, payroll processing, etc., many accountants are more hesitant about adopting new technology, or feel that they simply do not have the time to become proficient enough in it that they feel comfortable recommending relevant services to their clients. As a result, many firms continue to provide “traditional,” highly manual write-up services and feel the need to discount pricing as these services become increasingly commoditized.
Firms have amazing opportunities to transform the way that they work with clients by taking advantage of the opportunities these integrated cloud solutions provide to streamline workflow, and support a highly profitable outsourced accounting and business advisory model. The focus in that setting is on the advisory piece, where accountants use the transaction and resulting financial reports to provide clients with guidance they can use to improve their business performance today, set goals for the months and years ahead, and track performance. This creates an excellent model that supports value-based, fixed-fee pricing structures and the flexibily to work with clients anywhere, at any time.
The percentage of accountants who are successfully leveraging these opportunities is alarmingly small, and clients are rapidly shifting from the firms who are falling behind to the firms who are able to meet their “on the go” needs. The survival of some firms will truly depend on their ability to catch up and stay relevant.
-- Jennifer Katrulya, Accounting operations director, H&R Block Small Business; founder and managing partner, BMRG Advisory Services
While leadership is the umbrella over it, succession planning is critical. Coaching, mentoring and sponsoring non-partner CPAs for future ownership roles continues to lag behind the actual need for future owners. Many current owners seem unwilling to truly embrace change. The “I’m near retirement so why would I spend money on (fill-in the blank
things like technology, social media training, etc.)” attitude is, sadly, too widespread. Lack of change could prove fatal for many firms.
-- Rita Keller, President, Keller Advisors
Succession issues are a priority in many firms because the senior partners ran their practices a little longer and leaner because of the recession and did not invest in training the next level of managers who can build and run a practice and are willing to take on the senior partners’ retirement burden. Firms are scrambling to train these people, which is evidenced by just about every consulting group, CPA firm association and even the AICPA having two- and three-year partner training institutes. To make the problem worse, disenchanted employees have never had an easier time of going out and starting their own practice, many “virtually,” which can be done with minimal barriers to entry.
-- Roman Kepczyk, Director of consulting, Xcentric LLC
I think we all know the industry is changing -- in the last five years, my company has morphed into something I never expected. We do the analysis on their setup, provide clean-up, and offer solutions on how to increase productivity and efficiency. I started out as “just a bookkeeper.” Although I still process the payroll for all of our payroll clients, I still cut checks or schedule online bill payments and do bank recs for some clients. My account manager, Shannon, handles the majority of it. I’ve transitioned into more workflow/business process consulting, helping SMBs determine what software their back office will use.
Clients expect us to know this stuff, so I think it’s going to take a bit more work for those coming into the industry to get up to speed. I had years to learn the bookkeeping and accounting aspect of it, which is integral in being able to recommend solutions for clients.
Being aware of new apps, new technology, and having the accounting chops to back it up, this is what is going to be necessary to succeed, moving forward. The days of billing a client to install software are pretty much gone, and I think many of the small accounting professionals that have relied on providing services like that (not that they built their businesses solely on installing software!) are going to need to really look at what they’re offering in order to remain relative and keep attracting new clients.
-- Stacy Kildal, Owner, Kildal Services
The most important issues facing the profession are growth and people. In terms of growth, many firms continue to see traditional compliance services being commoditized and are building out consulting, advisory and industry-specialized services. Additionally, many of these same firms are focused on alternative growth strategies, such as mergers and acquisitions, as well as the hiring of high-level lateral talent. In terms of people, the war for talent is at a level I’ve never seen before. Whether it’s recruiting experienced talent, retaining talent, or growing high-level talent into future leaders and partners of the firm, most CPA firms nationally have made this a No. 1 strategic initiative within their firms.
-- Allan Koltin, CEO, Koltin Consulting Group
Talent management is and will continue to be the greatest issue for both public accounting and CPAs in business, industry and government. It appears the U.S. is well out of the recession and demand for CPAs has increased in all aspects of the profession. As Boomers continue to retire, demand will continue to rise.
Retention has been a growing concern for most firms in the profession. Those who focus on their people providing flexibility in how we do things, flexibility in where we do things, flexibility in when we do things and flexibility in career paths will win the talent war and keep their good people.
-- Mark Koziel, Vice president of firm services & global alliances, AICPA
One of the most important issues facing the profession is fostering a state in which accounting standards are understandable for the average accountant diligently trying to apply them in the real world. The FASB’s simplification initiative is intended to lead us to that goal.
Another important issue we face is how to promote greater alignment of standards on a global basis. Legal, regulatory, and cultural differences around the world have forced us to re-examine the feasibility of a single set of global accounting standards. The question we now face is how to execute on a medium-to-long term strategy to achieve something more realistic.
-- Jim Kroeker, Vice chairman, FASB
A lack of succession planning in many firms (over the course of decades) has pushed many firms into an uncomfortable position, with limited choices. It will be interesting to see if the cycle repeats itself with the next generation of ownership or if it will be a “lesson learned” and Xers will be better prepared with their succession plans.
-- Art Kuesel, President and owner, Kuesel Consulting Inc.
We have yet to promulgate standards regarding the optimal number of computer monitors. Another important issue is the non-sustainability of the increasing complexity of everything from the Tax Code to professional ethics. But dragging a document across six screens to drop it into a folder most likely negates any marginal efficiencies gained beyond five monitors.
-- Greg Kyte, Founder, Comedy CPE
The accounting profession has become more commoditized, with businesses and individuals evaluating service based solely on price as opposed to insight from experienced practitioners. Now, more than ever, accountants must evolve their contributions from a tactical level (“I’ll file your tax return”) to an elevated, valued and strategic level (“Let’s discuss how your business can grow in the next five years based on your financial performance.”)
Technology holds the key to this transformation. Just as the consumer world is realizing the importance and convenience of the Internet of things, the accounting world is realizing a greater level of technology-enabled automation, communications and integrations that will reduce or eliminate time-consuming manual tasks. Accounting professionals must take advantage of this technology now to emphasize and produce the necessary strategic insight on relevant and important big-picture issues.
-- Rene Lacerte, Founder and CEO, Bill.com
The most important issue facing the accounting profession is the focus of many schools on preparing their accounting majors for their first job, rather than their life-long careers. Not only is this a disservice to their students, it also results in a growing inability of companies to hire staff with essential skills and abilities, thereby impacting the competitiveness of those organizations. This is especially true in the U.S. as companies here struggle to compete in an increasingly global economy.
-- Raef Lawson, Vice president of research & policy, IMA
Advances in technology and the proliferation of available information have created a new landscape for financial reporting. With investors having access to a seemingly unlimited breadth and depth of information, the need has never been greater for the audit process to evolve by providing deeper and more relevant insights about an organization’s financial condition and performance—while maintaining and continually improving audit quality. Our profession has reached an inflection point, and we are enhancing the power of the audit to help assess risks and identify trends through the process. Combining all aspects of a data-driven audit can allow auditors to spend more of their time on the estimates, judgments and unique transactions that require more rigor and attention. This can provide greater value for companies and the capital markets, while building confidence and more exciting careers for auditors.
-- James Liddy, U.S. vice chair and regional head of audit, KPMG
Accounting for small private companies and publicly traded companies.
-- Taylor MacDonald, Vice president of channels, Intacct
Finding qualified staff is back at or near the top of every survey these days. It is not surprising that this is the case given the hiring slowdown during the economic recession. However, there is something different this time. The senior staff with three-to-five years of experience that so many firms desire, for the most part, do not exist. Since they were not hired during the recession, few people have three-to-five years of experience today. What does that mean for accounting firms?
They either have to complete client work with expensive and more experienced staff, or with under-experienced staff. Both choices mean that firms need to be highly efficient and carefully control the flow of work. For many firms, this is a significant departure from their historic culture. Change management has become incredibly important.
Understanding the changing expectations from professionals is a critical component to a firm’s success in today’s world. Firm partners and management need to adapt and be open to change to ensure that they are engaging younger business leaders and addressing their evolving needs. It’s a fine balancing act, really, because those same firms must stay ahead of key trends impacting the industry and changing client dynamics, such as the application and adoption of new technologies. It’s a true lesson in agility that many firms are learning.
-- Teresa Mackintosh, President and CEO, Wolters Kluwer, CCH
Quality. The PCAOB and AICPA have driven the fastest increase in the toughness of our auditing standards we have ever seen. Some “betterments” are problematic, but the goal is unwavering - with technological advances in accounting and auditing software continuing to give us more time efficiencies, we need to better our end product for the benefit of investors and other end users of financial information.
-- John Malone, Founding partner, MaloneBailey LLp
As a long-time practicing CPA and firm owner, I believe that the rapid pace of change (and being afraid of it) is one of the biggest issues facing the profession. Change is a powerful influencer in the accounting world—that is, changes in technology, workflow, staffing, and practice management included. However, I also believe that there has never been a better time to leverage change to drive growth and increase the level of service offered to clients and the business community.
Everyone from senior-level professionals to those new to the industry have the ability and tools to properly leverage change. Another thing to remember is that it’s just not about technology, but professionals also need to consider change in terms of being a better leader, employee, advisor and individual. Those that look at change as opportunity take on a new perspective and empower themselves and the people around them they will be the influencers in the future.
My advice is to be a “leader of change” and turn the anxiety and concern around change into opportunity and excitement!
-- Sean Manning, CEO, Payroll Vault Franchising LLC
The economy is starting to indicate that the worst recession that many of us have seen may be behind us. Yet for accounting professionals, 2014 will prove to be a complex year as there is an increasing level of regulatory and legislative compliance. The accelerated pace of legislation and oversight requirements put an enormous burden on accounting professionals who must sustain an understanding of the most current tax and compliance requirements while providing the best quality service to meet the needs of their clients.
Additionally, the trends of 24x7 access, mobility and workflow efficiency are also having profound impacts on the way that professional firms provide services. Customers have expectations for around-the-clock accessibility to an accounting professional’s time. As a result, it remains important for accounting professionals to deploy advanced technologies so that they can remain competitive, knowledgeable and valuable as trusted advisors.
-- Jason Marx, President, CCH Small Firm Services
Keeping up with exponential change driven by legislation, technology and demographics.
-- Charles McCabe, Founder, president/CEO, The Income Tax School Inc.
We’re continuing to see a behavioral shift in accounting professionals when it comes to the use of cloud-based and mobile technologies. For example, many of those now entering the workforce have enjoyed nonstop connectivity most of their lives, from campuses with wireless networks to smart phones.
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. Accounting professionals and small businesses want to be able to leverage mobile devices to run their payroll, gain insights into their business’s performance and manage their customers from one device on the go.
-- Jim McGinnis, Vice president, Accountant and Advisor Group, Intuit Inc.
Our greatest challenge is actually twofold: Preparing the CPA profession for the future and addressing commitment to quality. The future involves mapping new opportunities for growth, outthinking conventional views, and pursuing thoughtful and substantial initiatives that keep our members at the top of the game, competitive, committed, serving the public interest, and helping people and business succeed. This profession is extraordinarily resilient and to maintain our standing as a profession at the heart of finance and business, we have to constantly adjust and evolve our competencies.
The quality issues are also part of the continuous change process. This is evidenced by our two-fold approach of short-term quality enhancers in the August invitation to comment and the longer-term practice monitoring of the future work. Both are critical issues today.
It’s no secret there are many dramatic forces at work today, from globalization to the changing demographics of the workplace to rapid shifts in technology. Successfully negotiating these transformations will ensure that this remains a progressive, dynamic profession.
The good news is we’ve taken some strong steps already. We’ve begun to re-imagine our system of lifelong learning. We’re pursuing greater diversity in our ranks. And the profession is creating new resources and capabilities to help clients and employers navigate a more complex world.
-- Barry Melancon, President and CEO, AICPA
Succession in CPA firms. No question that we are still only seeing the tip of the iceberg of the effect of aging Baby Boomers and the lack of readiness in the profession to deal with it.
-- James Metzler, Founder, Metzler Advisory Group LLC
Leadership development We need to focus on continuing to develop the future accounting leaders. The leadership teams of many of the larger firms are getting older and closer to retirement, and there appears to be a lack of future leaders moving up within the ranks. We really need to focus on developing future leaders who are innovative, can bring new ideas and approaches to the industry, and can continue to move the profession forward.
-- Stan Mork, President, Information Technology Alliance
Coming up with plausible explanations for how growing their consulting businesses don’t compromise auditor independence.
-- Caleb Newquist, Editor-in-chief, Sift Media U.S.
Today’s most important issue facing the profession is increasing profitability to shareholders, partners and stakeholders. As firms become more profitable that will fix a number of subset problems such as: the ability to keep and attract good people to their firms; thwart the need to merge or sell to ensure security, continuity and build a legacy firm; fund partner retirement; avoid low-balling client engagements; lessen the fears of client attrition and a whole host of other subset issues. “Making money” solves a lot of problems and will make the profession even more attractive. My perspective is partners continue to be under-compensated for the service and advice they provide their clients. Non-traditional income streams must be further embraced such as asset management; insurance sales; R&D tax credit work; and cost segregation studies.
-- Jay Nisberg, President, Jay Nisberg & Associates
Given the endless complexity of regulatory policy, globalization, and market contraction, growth is a key issue facing both individual accounting firms and the industry as a whole. Keeping up with technological innovation is also a competitive differentiator for firms. Technology is essential in attracting new talent and retaining and pursuing clients, so firms should make sure they’re staying up to speed on the latest trends.
-- Brian Peccarelli, President, the Tax & Accounting business of Thomson Reuters
Government regulation changes at a pace rivaling changes in technology that creates an inordinate amount of pressure on practitioners. The fast pace for both financial reporting and tax laws puts small firms in a position of risk and exposure to what they do not know or cannot keep up with in this increasingly complex regulatory environment.
-- Carl Peterson, Vice president of small firm interests, AICPA
The most important issue the accounting industry is currently facing is keeping up with the ever-changing economic environment, which has not only created new parts on the CPA Exam, such as Business Environment Concepts, but also the implementation of new rules and laws. The difficult part is interpreting and learning the new information, and then incorporating it into the profession.
-- Roger Phillip, CEO and owner, Roger CPA Review
It’s probably not a surprise that I would say the most important issue is the current state of the public accounting talent pipeline. It is a critical problem that needs attention now. The AICPA’s recent “issues” survey tells the story. Of firms with two CPAs and greater, “finding qualified talent” is among the top five issues facing the firms. It’s hard to attract experienced talent to public accounting firms. And thanks to rising interest in private industry, coming retirements, and niche opportunities, it’s only going to get more difficult.
-- Jeff Phillips, CEO, Accountingfly
The future of international convergence in the U.S. remains an important issue for the profession. From the FASB perspective, this means balancing the demands of international convergence with improvements to GAAP. We’ve pledged to work with the IASB and other international standard-setters to make standards as comparable as possible. However, our primary responsibility—and obligation—is first to improve and protect the quality of GAAP.
On the state and local government front, overcoming challenges related to the rollout of the new pension accounting standards will keep the GASB—and practitioners—busy. The GASB also will be focused on improving financial reporting of other postemployment benefits. While these changes certainly will have an impact on state and local governments, the end result—improved transparency—will be worth the resources and effort required to provide this information.
-- Teresa Polley, President and CEO, FAF
It is a combination of the demographic bubble created by the concentration of ownership of CPA firms within the Baby Boom generation coupled with a lack of investment in leadership development made by firms of all sizes, but especially small to midsized firms. The unprecedented level of financial success many firms are currently enjoying has led too many to lose focus on their long-term organizational needs. We will see the number of mergers & acquisitions increase as more and more firms realize they are not positioned to sustain themselves with internal succession tactics.
-- Terry Putney, CEO, Transition Advisors
As technology continues to evolve, more companies will expand their reach as worldwide operations. Maintaining adequate cybersecurity will require a major investment.
As individuals around the globe continue to attempt to breach systems and steal data, the protection of the computer systems used in business operations is necessary to maintain a successful operation and compete in the world market.
Additionally, employees now access and store data on smart phones and tablets, all of which are vulnerable to loss or theft.
Accountants and auditors will face the challenge of ensuring the security and dependability of financial data whether it is residing on a company’s servers or on an iPad in another country. Protecting financial information, while assuring its availability to people who need it, will be a challenge for the accounting profession for years to come.
-- James Ratley, President and CEO, ACFE
By far, the rapid pace of change in technology is the most critical issue facing practitioners and firm leaders today. A firm’s ability to strategically evaluate and adopt new technologies and train staff to use them, given all of the other complexities they face, is the critical factor that impacts how successful a firm will be in today’s market.
-- Darren Root, President and CEO, RootWorks
The ever-changing income tax laws and complexity of them and as to how they affect our business clients.
-- Harlan Rose, Past president, National Society of Accountants
Anyone involved with the CPA firm industry sees firsthand that succession planning is the most important issue facing the accounting profession -- hands down. A paltry 20 percent of CPA firms make it to the second generation. The blame for this lies in the relentless aging of Baby Boomer partners coupled with a stunning shortage of young talent with the right stuff, to replace them. This, in turn, has spawned a feverish level of merger activity, the likes of which have never been seen before in the history of the profession.
-- Marc Rosenberg, President, The Rosenberg Associates
A lack of differentiation among firms has led to some commoditization in the industry. If clients don’t know what makes a firm different, they will choose the lowest price provider. Those firms that have figured out how to stand apart from the rest are able to set their own prices and have an easier time marketing themselves as well, since the audience they are trying to reach is more targeted.
-- Bonnie Buol Ruszczyk, President, BBR Marketing
Positioning our practices to adapt and thrive in an increasingly complicated and demanding global business environment is by far the most important issue facing the accounting profession. We’ve got to move away from business as usual and focus on value, creating services across all service lines. If we don’t, we run the risk of becoming irrelevant.
-- G. Brint Ryan, Chairman and CEO, Ryan
Transitioning Baby Boomers out of firms.
-- John Sensiba, Managing partner, Sensiba San Filippo LLP
The accounting profession today has a “grow or die” mentality that has led to the unprecedented consolidation of accounting firms through M&A activity. Small accounting firms, by and large, are finding it more difficult, and only the growth that a merger can bring will enable firms to expand their service offerings, compete for the top talent that clients demand, and fund deferred-compensation payments to the growing universe of retiring partners. Succession planning is also a major impetus for accounting firm mergers, as firms attempt to transition older partners out and younger ones—the future of the profession—in.
-- Russell Shapiro, Partner, Levenfeld Pearlstein LLC
Dysfunction of the AICPA and state societies; both aren’t able to keep up with the needs of their members (CPAs), unable to recruit enough competent staff, and are entrenched with the old guard of leadership and thinking.
-- Donny Shimamoto, Managing Director, Intraprise TechKnowlogies
I believe the most important issue facing the accounting profession is increased regulation and oversight by those government bodies with jurisdiction over the various elements of accounting practice. On the traditional “audit side,” this would include increased input and regulation by the PCAOB and SEC insofar as audit committee and audit reporting continues to evolve and change. For those, like me, on the “tax side,” we continue to face increasing regulation on many facets of our practice from how we prepare our written work, signing tax returns, and the way we may charge our clients. In some cases, regulation of the tax practice has been challenged and in those cases, the uncertainty of the future of these regulations itself presents challenges.
-- Todd Simmens, National managing partner of tax risk management, BDO USA LLP
Undoubtedly succession planning or lack thereof. Because succession planning, whether good or bad, affects everyone from the sole practitioner to the large firms. Countless surveys have documented the shocking number of firms who do not have a formal succession plan in place so when a principal wants to slow down or the firm is hit with an unexpected event - i.e., the death or disability of a partner -- they are forced into a hastily arranged merger usually under not favorable terms.
-- Joel Sinkin, President, Transition Advisors
The evolution that is taking place with the Baby Boomers starting to exit the profession and a much smaller generation following in the Gen X generation then followed by a larger Millennial generation; each of which have significantly differing work and relationship styles. The leaders of tomorrow -- where do they come from, what does what they are leading look like?
-- Greg Skoda, Chairman, Skoda Minotti
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, and we see great opportunity for accountants and those they serve enabled by connected services. Currently our small business customers are 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.
Additionally, in a world without borders, we see increasingly a greater number of companies conducting operations internationally and building workforces comprised of individuals from multiple countries. In order to adapt to the economic, demographic and technology shifts at a global scale, accounting professionals will need to understand different cultures and business perspectives. Foreign companies listed on U.S. exchanges as well as U.S.-based businesses with multinational operations seek accountants who are familiar with international laws and regulations and can help their organizations both adapt to new legislation and also grow internationally.
Finally, as financial activities are more intensely scrutinized by shareholders and government agencies, the demand for skilled forensic accountants has increased. These professionals previously were brought in after a misdeed had been committed, but organizations are now hiring them to tighten procedures to prevent fraud before it occurs.
-- Brad Smith, President and CEO, Intuit
Two issues stand out to me. First is our challenge to remain relevant to our clients as advancements in technology commoditize traditional service offerings. We need to be looking for additional ways to bring value to our client relationships. Second and equally important is staffing. Finding and, most important, retaining a new generation of staff that will be the future leaders of our firms and in the accounting industry. We need to break out of old-school work-life balance models to attract and retain the best and brightest.
-- Kerry Sullivan-Lechner, Marketing director, Anderson ZurMuehlen & Co.
Improved technologies will drive the value of compliance work to zero. The firms that will survive are those that adapt to this change and the firms that get ahead of the curve will benefit greatly. To quote Marc Andreessen, "Software is eating much of the value chain of industries that are widely viewed as primarily existing in the physical world". Simply put: Software is eating the world. We have seen this shift in many industries already: retail, media, telecommunications to name a few. It is now playing out in the accounting industry. And it isn't just about software; it is a mindset shift. Firms will need to change their business models. Value based billing or not, the firm of the future is thinking about online collaboration, packaging, productization, and pricing in a way that benefits the customer first and foremost. Knowledge and know-how of the right technologies for clients is now a strategic imperative. In a Web software environment, the connectivity and integrations are drastically improved so that working with multiple applications becomes a benefit, not a burden. A firm that can recommend a set of online solutions that address the needs of a specific vertical will be ahead of the game. Differentiation will be paramount over the next few years.
-- Jamie Sutherland, President of U.S. operations, Xero
The most important issue currently facing the accounting profession, in a nutshell: the battle between obsolescence and innovation. The profession as a whole, across the globe, in public practice and in industry, teeters on the brink of competitive irrelevancy and irreversible obsolescence.
Businesses are increasingly recognizing that they don’t necessarily need a CPA (CGMA, CA, CAA, or XYZ, for that matter) to do what they need most profoundly: apply a discipline of metrics and controls to provide operational insight and strategic leadership.
The U.S. profession, represented by the AICPA, understands this and is seeking to compete globally by, among other things, internationalizing the CPA qualifying exam, merging and consolidating with non-U.S. non-CPA associations, and developing and marketing new branded specialties.
But business, investors, lenders and the global public constituencies are more concerned, and understandably so, with outcomes and results. And for that, they are increasingly turning away from the supposedly self-regulated accountancy profession to government regulators for new mandates and requirements, such as green reporting, increased transparency and accountability (such as auditor rotation), consistency (IFRS), reliability, and, of course, relevancy.
That said, public practice in the U.S. is thriving. A new generation is taking the reins and changing the face of the old-line CPA firm. New business models are springing up. New cultures of diversity and inclusion are spreading. And a sweeping openness to experimentation and innovation, none of which they teach in college, is taking hold, driven by a particularly American style of entrepreneurialism.
The new next-generation firm is appearing before our eyes. If you pay close attention, you can discern a new army of next-generation practitioners. Where past generations built firms, they are building networks. Where past generations understood that knowledge is power, the new generation understands that the sharing of knowledge is power. Where past generations acquired technical skills to serve clients, the new generation hones skills of observation, analysis and communication.
But the new generation is not defined by age. It’s a function of mindset that transcends age.
-- Rick Telberg, President and CEO, Trendlines
Relevance. When you look over the last 10 years, disruptive technologies and new business models have produced new, powerful companies. Every publicly traded company depends on the audit to provide confidence in the company’s financial position. The audit is essential. Continuing to innovate in the audit space is critical to the capital markets and our global economies. Companies are continuing down the path of finance transformation—improving how decisions are made using extensive data. The relationship between the CFO and the CEO is stronger than ever. The CFO and the finance team are adding value—yet still keeping focused on controls. They have moved from pure compliance to value add. An innovative audit function is critical to our capital markets.
-- Arleen Thomas, Senior vice president of management accounting and global markets, AICPA
I’m concerned that the profession isn’t producing enough CPAs to replace the Baby Boomers who will reach retirement age in the next 5-15 years. Despite the record number of students majoring in accounting and graduating with accounting degrees, the number of CPA Exam sections is flat. We know that some of this trend can be attributed to the move to the computer-based exam 10 years ago. With more flexibility comes more procrastination by CPA candidates. But there are other factors that the profession and state societies need to address, such as providing more time for candidates to study and helping with the costs of the exam and study courses. We need to motivate and incentivize accounting graduates to sit for the exam to ensure that our profession doesn’t suffer from a talent shortage in the future. I’m particularly concerned that the profession won’t be able to attract, retain and advance minority candidates if these issues aren’t addressed.
-- Ralph Albert Thomas, CEO and executive director, New Jersey Society of CPAs
The talent gap in accounting, which is a global issue and especially impacts aspiring young professionals. Simply put, undergraduate accounting curriculum is not keeping pace with the evolving expectation of the CFO team to focus not only on value preservation (i.e., financial accounting like tax, audit, compliance, statutory reporting) but also on value creation (i.e., management accounting like financial planning and analysis, mergers and acquisition activity, predictive analytics and more). Employers and academics must work together to align accounting curriculum with the needs of business.
-- Jeffrey Thomson, President and CEO, IMA
The mass retirement of partners is still a big issue for firms, and will be for a bit longer. This presents numerous issues from client retention to staff training to revenue generation. Competitors are targeting companies that worked with a partner that just retired. Unfortunately, not all retiring partners transitioned their clients in an ideal way, opening the door for a competitor to win the business over. A fewer number of younger partners are as savvy at rainmaking, leaving a big hole in future revenue streams. That’s causing firms to focus on managers, and below, for training. Sales skills, cross-selling and niche development are key areas of focus, as is leadership development. In addition, many other firms are deciding their best succession plan is to merge, which is really mixing up the ecosystem of our profession.
-- Katie Tolin, Director of practice growth, SS&G
We see tremendous opportunities for CPAs and accountants to transition from commodity-based tax practices offering nuts-and-bolts accounting to what’s become known as Client Advisory Services. These more holistic practice models enable CPAs to work with their clients as a true business partner to enable and drive growth. As clients and their companies want an increased level of advice, guidance and services, traditional tax and accounting practices benefit from adopting and offering these CAS practice services.
-- Pascal Van Dooren, Chief revenue officer, Avalara
Making sure financial accounting and reporting continues to appropriately provide the most useful information in a neutral, unbiased fashion.
-- David Vaudt, Chairman, GASB
Attracting and retaining the best talent continues to be a top priority. With the growing relevance of data and analytics to financial reporting and the audit, and so much change in the needs of our clients and the economy overall, it is critical that we have a robust and diverse pool of audit, tax and advisory professionals who are technologically savvy and comfortable with taking on new challenges. In a landscape with so many uncertainties, we need the best and brightest people to grow, innovate, stay competitive, and serve our clients. That is why KPMG puts so much focus on building an inclusive culture that enables and rewards high performance, and creates great career opportunities for our people.
-- John Veihmeyer, Chairman and CEO, KPMG
The most important issue facing the accounting profession right now is that clients are ahead of their accountant with their move to technology, mobile and the cloud for their business operations. This is a major concern because it is important for clients to feel their accountant is ahead of them with the latest tools and technology so they can look to them for advice on the best way to set up their business processes and accounting. Even if the accountant is not a technologist, they should have contacts in their network that they can refer their clients to so they are still looked to as a strategic partner for those clients.
Additionally, a long time struggle in the accounting profession is lack of time and the focus on the billable hour. Without taking the time in their business to work on their business and transform it for the new age of technology, they are going to fall behind the firms that moved first and have their practices transformed, as well as the next generation of accountants coming up in the digital world. For accountants that are eventually looking to sell their practice or retire, this is a critical step to be taken to protect the value of what they offer and have created in their practice.
-- Amy Vetter, Global vice president of education and enablement, Xero
Most work environments in accounting still don't allow people to have a life outside of work (due to the hours required) if they want to be promoted, so young professionals choose not to go the partner route and end up leaving for private industry. It’s time that they create a modern workplace where there is workplace flexibility, remote location working, part-time partners and much more. There is no succession plan other than by acquisition and a race to attract fewer good candidates. This does not bode well for the future of the independent accounting profession, as we've seen with more consolidation. Change the work environment, and you will retain good talent and grow.
-- Dawn Wagenaar, Principal and COO, Ingenuity Marketing Group
The greatest challenge we see at Sage among the accounting profession is the rapid pace of change, and it’s not just about technology. For a long time, accountants felt they couldn’t keep up with new technology, but now there’s also changing expectations from their clients to factor in. Clients are starting to demand increased engagement from their accountant, as well as deeper insights and action plans. Basically, they see value in partnering with their accountant on a more frequent basis to help them navigate their business direction. In order to keep up, a firm needs to adapt their business model. How do they do this? First they need to identify how they can add increased value to their clients, and secondly, evaluate how they need to change their firm’s business model to support delivering on that value. It’s about positioning themselves as not just as a trusted business advisor, but a trusted, valued business advisor.
-- Jennifer Warawa, Vice president and general manager, Sage Accountant Solutions, Sage North America
The profession is in a war for talent that is going to continue to grow in concern for firms of all sizes. Talent affects literally all aspects of the business growth, leadership, clients, service offerings, education, processes and succession. We must put our time, our attention and our personal experience into the development of new talent immediately and continue to morph new initiatives in this area in the years ahead.
-- Sandra Wiley, Shareholder, and COO, Boomer Consulting
Succession! Still! While the pipeline of new recruits into the profession is at an all-time high, a first-year person cannot replace the 100,000 or so retiring CPAs with 30+ years of experience and technical ability. Complicate that with the estimated 16-18 percent growth in jobs in the segment projected and I believe we will need to remain a top major in business schools for the next decade and find a way to make white-collar immigration reform so that non-U.S. citizens with accounting degrees can make up for the shortage of people we’re going to experience in all sectors of the profession. When you couple that with the issue that the super-control personality of the CPA, it does not make for a good developer of people, delegator of client relationships or instiller of ownership in others. The result is under-developed leadership and difficulty in making a seamless transition. CPAs hold on to too much for too long, and we’ll need to do just the opposite compress learning by delegating more, earlier, and being there to coach and advise as the young up-and-comers make mistakes.
-- Jennifer Wilson, Co-founder and owner, ConvergenceCoaching
Automation technology is creating a paradigm shift for the industry by taking much of the data entry out of the equation. As the burden of data entry is eliminated, we can focus our time and our client’s accounting budgets on pro-active advisory services that contribute to small-business success. This is a positive disruption. If accounting professionals do not embrace the change and remain focused on data entry/data collection, they will be competing with the technology, instead of leveraging it to elevate their practices.
-- Joe Woodard, CEO, Woodard Consulting Group and Woodard Events
I think as the economy is improving, one of the most important issues facing the accounting industry is how to plan and budget. Not only are laws changing sometimes retroactively -- but how we do business is changing. There are so many new things that accountants need to be aware of in order to advise their clients or management. From telecommuting, to “the cloud,” and different sales models, accountants need to stay on top of not only the accounting and tax laws but also business trends. The government is always going to be behind and accountants have to be able to give reasonable advice so that the business can proceed with the least amount of risk.
-- Diane Yetter, President, YETTER