The United States is facing an acute shortage of CPAs. In fact, accountants are leaving their jobs in unprecedented numbers (AICPA, 2021 Trends Report, https://bit.ly/3RmyE4T), at both corporations and audit firms, joining the millions of American workers who are re-evaluating what they want from their careers (“This Country Has the Highest Number of People Planning to Quit their Jobs,” by Stefan Ellerbeck, World Economic Forum, Aug. 11, 2022, https://bit.ly/3USaB0O).

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Compounding this high turnover, fewer accounting majors graduated in 2020, extending a years-long decline in new CPAs (AICPA, 2021). The number of college graduates earning a bachelor’s or master’s degree in accounting has dropped 4% since the onset of the COVID-19 pandemic; the number of graduates sitting for the Uniform CPA Examination has also plummeted. Although there were almost 50,000 candidates in 2010, that number dropped to slightly more than 32,000 in 2021 (AICPA, 2021).

When you add the massive number of baby boomer CPAs retiring, the result is a perfect storm facing the accounting profession, with fewer professionals left to tackle more—and more challenging—work (“Accounting Crisis—CPA Firms Face 75% Retirements,” Controllers Council, Apr. 14, 2022, https://bit.ly/3SDVN4p). Not surprisingly, the SEC is now expressing strong concerns that the shortage of CPAs could increase the risk of serious financial reporting deficiencies across U.S. businesses, big and small (“Accountant Shortage, Resignations Fuel Financial Reporting Risks,” Amanda Iacone, Bloomberg Tax, Feb. 14, 2022, https://bit.ly/3fwaKqb).

How did the accounting profession get here? And which solutions can be implemented now to avoid a downward spiral of fewer CPAs dealing with ever more stressful work?

COVID Exacerbated Longstanding Challenges

The problems confronting the accounting profession did not arise overnight. The number of accounting graduates sitting for the CPA exam year over year has been an ongoing subject of concern within the profession (“Filling the Pipeline,” Daniel Hood, Accounting Today, Oct. 24, 2016, https://bit.ly/3Rsk0ZQ). Trend reports published every two years by the AICPA indicate that total accounting degree completions peaked in 2015/16 (AICPA 2019 Trends report, https://bit.ly/3UMaxzr).

Although the pandemic may not have been the cause of these declines, it certainly accelerated them. The unique stresses workers have faced since 2020 have exacerbated conditions that were already causing young people to think twice about entering the profession: the high number of work hours, high-stress deadlines, high risks associated with the potential for reporting errors, and lower wages compared to other jobs in finance. Furthermore, these conditions are not unique to the Big Four, but have proven to be common in smaller firms and in-house corporate positions as well.

The past few years have also thrown a spotlight on the extreme lack of diversity within the accounting profession. In 2019, the AICPA trends report found that white people make up 84% of CPAs in the United States. Furthermore, women comprise only 23% of partners at CPA firms despite constituting 47% of all professional staff at those firms. Yet millennial and Gen Z professionals are avoiding companies without a diverse workforce and a commitment to embracing diversity, equity, and inclusion (DEI). The National Association of Colleges and Employers (NACE) has asked new graduates to rank the importance of a diverse workforce every year since 2008 (“For Younger Job Seekers, Diversity and Inclusion in the Workplace Aren’t a Preference. They’re a Requirement,” Jennifer Miller, Washington Posthttps://wapo.st/3Su6OoD). In 2020, more than 79% of respondents called it “very important.” Similarly, a McKinsey study found that diverse organizations are better at attracting the talent they need, especially when it comes to hiring Gen Z applicants (“Delivering Through Diversity,” Dame Vivian Hunt, Lareina Yee, Sara Prince, and Sundiatu Dixon-Fyle, McKinsey & Company, https://mck.co/3E3zz7f).

Tighter SEC Scrutiny

If the pandemic stretched thin the supply side of accounting, it lit a fire under the demand side. Corporate accountants have been tasked with challenging new types of work, from reassessing the value of assets that may need to be impaired to determining how supply chain disruptions impact financial statements. Similarly, the rise of private equity has resulted in a sharp increase in complex transactions that reflect new approaches to deal making, financing, agreements, and accounting.

With the rise of remote and hybrid work, companies have had to alter their internal controls and safety checks; these also fall under the purview of CPAs. This work is especially critical at public companies that need to comply with SEC regulations, but companies of all types are scrambling to manage accounting teams that were probably understaffed to begin with and are now experiencing significant churn.

These factors taken together threaten the reliability of corporate financial reporting. And they are all colliding within an SEC and regulatory environment that has made clear its intentions to crack down on how companies report their errors (“Ernst & Young to Pay $100 Million Penalty for Employees Cheating on CPA Ethics Exams and Misleading Investigation: Largest Penalty Ever Imposed by SEC Against an Audit Firm,” SEC Release 2022-114, https://bit.ly/3UQxtxC).

Five Steps to Attracting Tomorrow’s CPAs

Can CPAs, accounting firms, and corporations meet the array of challenges that threaten the profession’s viability, and the integrity of the nation’s corporate financial systems as well? The answer is unquestionably: Yes. Here are five ways that accountants—including corporate accounting and finance teams, accounting and consulting firms, and professional organizations—can tackle this problem:

Automate.

The solution that is most easily and frequently proposed is to implement more technology. This involves automating more of the manual processes of accounting through software-as-a-service (SaaS)-based platforms and software. There are many reporting consolidation and reconciliation tools that can take over tedious work. Technology can also automate some administrative and auditing tasks.

Focus on high-risk areas.

From a risk advisory perspective, a dynamic top-down risk assessment is more effective than a scattershot approach. Companies need to identify areas of greater risk within their financial reporting and target those with more precise controls. In areas of potentially lower risk, they can implement entity-wide controls or use more automated processes and procedures. Oversight and review can then be focused on the high-risk areas that deserve manual attention.

Tap into expert support.

Many companies can function well most of the time with a small in-house accounting team. When complex challenges including acquisitions or financing transactions emerge, however, an accounting advisory firm can navigate the complicated accounting ramifications, providing well-documented, audit-ready results. Tapping into expert support can also be meaningful as companies navigate operational changes, ensuring that any newly created financial reporting risks are mitigated by the proper internal controls. Whatever the need, interactions with an advisory firm can be relatively short term and include upskilling of in-house teams, enabling the organization to move forward without sustained third-party involvement.

Respond to stakeholder expectations.

In order to stay competitive as a profession, audit and accounting advisory firms, as well as corporate organizations, must address what matters most to current and potential workers. This may relate to the work hours or the availability of hybrid and remote options. It may also center on automating lower-level tasks so that the work is more interesting. Most importantly, shareholders are asking to see real change with respect to DEI; these expectations need to be addressed. Corporations and consulting firms alike must intentionally seek out people with diverse backgrounds and viewpoints in order to 1) attract and retain high-value workers with more collaborative work environments, and 2) achieve stronger business results, because studies have shown that the most diverse companies are now more likely than ever to outperform less diverse peers on profitability (“Diversity Wins: How Inclusion Matters,” McKinsey & Company, May 19, 2020, https://mck.co/3Cl6FhB).

Focus on accountancy’s branding problem.

Individuals, companies, and professional organizations need to be more intentional in getting young people excited about joining the accounting profession. Accounting is the language of business: If you understand this language, you can work creatively across the world of finance. CPAs are now involved in strategic planning, finance, human capital and people management, and technology, and are taking leadership roles in all these areas. This broad horizon of opportunities is what needs to be emphasized in any outreach to students and to CPA exam candidates.

Success in the accounting profession requires significant investments of time, dedication, and perseverance. The field is rapidly evolving, thanks to emerging global opportunities, ever-changing regulatory requirements, and complex new business models. Businesses will continue to need greater numbers of accounting professionals. We must be ready to commit to dismantling the hurdles that impede entry into the profession. Only in doing so will we be able to attract the talented, motivated CPAs needed by the businesses of today—and tomorrow.

Drew Niehaus is a managing director at Riveron, Dallas, Texas.