In the past year (2018), have you noticed any trends in practice at your firm/organization? For example, changing workloads; challenges in recruitment, retention, training, promotion, exiting; the outsourcing of accounting services; shortages of staff; difficulty recruiting experienced professionals; tapping into retirees?
We still have the same challenges the profession’s been facing for the last five or ten years. A shortage of staff with experience (i.e., who have been around at least five or seven years) is still a challenge that affects audit quality. Partners and senior managers have to step down their responsibilities—or junior people have to step up theirs—to fill that void, and they’re trying to figure out ways to make their audits a lot more streamlined, build efficiencies, and leverage technology. But there’s risk on both sides that, because of that type of environment and the volume of work, firms may be issuing products that they didn’t cover completely.
I’m seeing a lot of activity with some of the new opportunities that are emerging, especially dealing with blockchain and cryptocurrency. People are starting to learn more about them and thinking about what kind of impact they will have for their clients and even their own practices. An enhanced IT environment could help, but it’s still not going to solve the issue completely.
According to the 2018 Rosenberg Survey, the accounting profession is aging—how does this impact your practice? How have you seen it impact colleagues, other firms, or clients?
I would say there is an impact, especially for those looking to exit the profession. You’re going to see a lot of mergers where small firms are going to go to larger ones to be bought out. The problem is that these individuals didn’t necessarily create a legacy or a succession plan because they hadn’t really thought about it 20 years ago. People are scrambling as they’re getting closer to retirement age and have no one to succeed them. I think that’s going to be a huge problem in the profession going forward.
From what I see, people are just doing the work that’s here and now, and not thinking about the future and retirement. That’s going to continue unless we raise this issue to people who are going to be retiring five or ten years from now, because now is when they should start thinking about whom they’re going to pass the baton to. It takes a lot of proper planning to groom your successor. If you’re rushed, you could potentially lose the value of your practice because you’re just looking to dump it.
People are scrambling as they’re getting closer to retirement age and have no one to succeed them.
The people who are starting to age out have got to go out there and talk about who the potential candidates could be. If they don’t have a plan where someone internal is going to buy them out, they should get familiar with the players and the consulting firms that are involved, so when the time comes, they know who could possibly get them the right match and the top dollar.
According to the 2018 Rosenberg Survey, the percentage of women partners continues to grow very slowly (especially at large firms), and continues to lag behind the percentage of staff. Anecdotally, what evidence have you seen of this (or that contradicts this)? What explains the challenges the profession faces in achieving greater gender parity?
I’m not sure the profession is doing enough to accommodate women and add more flexibility and opportunity. I think the profession has to come up with a way to keep talented women on board in leadership roles.
Flexibility is important at every CPA firm, because you don’t want to lose talent because of not accommodating someone. In every facet of someone’s career, there are other responsibilities that come their way. You have to balance your life. I think that if firms don’t tap into that and understand it, that’s where you’re going to see a lot of women—the ones who do finally make it up to that upper management level—dealing with the politics of it all. I think there’s a great opportunity for firms to start examining how to cultivate and keep talented women who get to be partners.
I think you’re at a tremendous disadvantage in the marketplace if you don’t have high-quality women partners in the firm who will give different dimensions to a client. Having strong, high-quality women on your team is crucial. I don’t think any firm in the future could survive without them. Smart firms will definitely find a way to keep them.
According to the Rosenberg Survey, revenue per partner and equity per partner are increasing. What do you think some of the reasons for that might be?
It seems like the last couple of years, the economy’s on an upswing. I would think that would also be in line with an increase in revenues, and hopefully that will translate to more equity to partners. If you had asked me this ten years ago, I would have found that very strange. But in this environment, I think it’s moving in tandem with the economy, and if the economy’s doing well, firms should be doing well.
To me, it makes sense that more businesses are flourishing, new businesses are emerging, and CPA firms are getting more opportunities to provide multiple types of professional services to a growing economy. You would think that would translate to more equity and more revenue to partners, as well as to employees.
Could you talk about what you’ve seen in the past year (2018) in terms of new practice areas, new regulation, legislation headaches, and new emerging areas of growth?
The growth’s going to be in blockchain and cryptocurrency, understanding how to trade those instruments and how to account for and monitor them.
You’re also going to see more businesses developing outsourcing capabilities. A lot of consultants will be coming on board in boutique companies that want to handle the compliance matters that firms have to deal with. Instead of paying someone a full-time salary and benefits, they will hire a specialist to only take care of what they need when they need it. These types of business are emerging to be lean and mean, and you’re going to start seeing all kinds of outsourcing services emerging in the marketplace.
CPA firms will play to their strengths—financial reporting, tax, bookkeeping, financial statements, preparation. As long as there’s not an independence or ethics impairment issue, they could provide all these kinds of services. There are opportunities where firms could use their existing staff and help companies who don’t have an audit or a review relationship with the CPA firm.
I think it’s pretty lucrative. It’s more about volume, getting a lot of smaller projects. Companies need experts immediately, but don’t need them to be there for the whole time. Outsourcing a CFO function, tax work, financial statement preparation, IT work, valuation work—these are the kinds of services CPA firms might provide.
What concerns do you have about the professional marketplace? Do you think there has been a dilution of the profession, or of the value of the CPA license?
The profession has to be very careful to protect the CPA license as much as possible without giving it to other people who don’t have a degree in accounting, did not pass the CPA exam, and do not have a certain level of experience in what the CPA license really represents. My worry is that if the profession’s going to start giving out the CPA license to individuals who come from a different profession, it will lose its real value.
The value of the CPA license is that you have the authority to issue an audit opinion in the state where you’re licensed. This great opportunity was given to us many years ago by the federal government, for us to be the gate-keeper for the economy, for auditing private companies and publicly traded companies. I think variations of the license will sacrifice the integrity of what it’s about. If you’re going to do any other type of service, maybe they should create another type of designation for that.
If the profession is going to try to make changes, we’ve got to be very careful about how it’s perceived by the public, because the public has a certain expectation of what a CPA is. Most people perceive a CPA as being an auditor or a tax person, even though the license itself was just made for audit. That’s what people see a CPA as: someone who’s a trusted advisor and is there for the public interest.
Is it possible that one day we will lose the right to issue audit opinions, and then maybe the government could take over that function?
My concern is that other types of services are emerging from firms that one might want to try to bring non-CPA experts into the firm to handle. I’m not sure how the public’s going to see that. Partners who are not in the traditional role should have a distinct license that the public would understand to mean they work in a CPA firm, but they’re not CPAs and they don’t sign audit opinions.
We’re at a crossroads in the profession about how we’re taking care of our designation. I think that auditors are putting that right at risk by not really performing their job as they should. A lot of times, there are questions about the type of pressures that auditors face, and whether they’re able to stay objective and independent as they do their work. Is it possible that one day we will lose the right to issue audit opinions, and then maybe the government could take over that function? I’m hoping that our leaders are recognizing this possibility, and understand that audit quality is paramount.
I know that a lot of firms do other types of consulting work and other types of special services for companies. But you’ve got to treat the audit function at a higher level. There’s a lot more responsibility to the public versus the other type of services that you offer to management. You’ve got to be careful not to let consulting work and other professional services take over the essence of why you have the CPA license to begin with. Hopefully we’ll see some sort of a change and a renewed commitment to doing the right thing for the public.