The CPA Industry – A Profession in Transition
by Dr. Sean Stein Smith, DBA, CPA, CMA, CGMA, CFE, Lehman College –
February 8, 2018
As CPAs begin to look at the first quarter of 2018, albeit in the middle of busy season, there is an undeniable fact that must be addressed — the CPA profession is undergoing dramatic changes from virtually every angle. While it’s true that accounting professionals will experience these changes in different ways, the implications are the same. Here are some of the most important trends influencing the profession.
The millennial generation is the focus of numerous articles, podcasts and media stories, and that is for a logical reason. According to the Pew Research Center, millennials already constitute the largest percentage of the workforce and are projected to only increase in influence over time. Drilling into the specific changes that are occurring within the profession, research conducted by PWC projected that, as of 2016, approximately 80 percent of their total workforce would be comprised of millennials. Even if this figure is off by a few percentage points, the overarching trend is clear — millennials are, in a not so gradual way, taking over the profession. According to NASBA, the average age of CPA exam candidates over the last seven years has been 29, which is directly in the mid-range of what constitutes the millennial generation. As more experienced members of the profession retire or sell practices, the influence of this generation will only grow. In the PWC data, the top issue (71 percent) for millennial employees was that they felt work demands excessively interfered with their personal lives, which corresponds with 66 percent of millennials seeking the ability to work flexible hours or to work from home. There is even a quiz that anyone can take to figure out just how millennial you are — the results may surprise you.
As the demographics of the profession continue to radically shift, and as millennials assume more leadership roles within firms, a key question is how to retain institutional, and client, knowledge. Replacing the collective knowledge of the profession, setting up a succession planning methodology that makes sense for either the firm or the organization, and dealing with cross-generational workflow issues represent potential issues. Research conducted by EY reinforces the key finding from the PWC research — according to EY, 75 percent of millennials want the ability to work remotely or have flexible hours without a negative impact on their career track. As EY has dubbed millennials “Generation Go,” retaining these increasingly important employees is an ongoing management challenge. Top ways, according to this research, is to have competitive benefits (80 percent), encourage flexibility at all levels (74 percent), and offer paid parental leave for women and men (86 percent).
Technology and Automation
Technology, the increased digitization of the broader economy, and the rising specter that automation or artificial intelligence (AI) will replace practitioners is no longer a worry for the future — these possibilities are here now. According to a McKinsey study, large percentages of workplace activities are candidates for automation, with up to 69 percent of data processing jobs at the risk of being automating away, and the accounting profession is not immune from these technological pressures. Drilling specifically into accounting implications, research and evidence collected by Deloitte shows that blockchain technology is, and will continue to, revolutionize the work performed by CPAs. To put it simply, every transaction that is conducted using blockchain technology is encrypted, the involved participants are identified by a string of characters, and after a certain period of time has passed (which may vary), all of these transactions become part of the block. After this block has been finalized, it is broadcasted to all parties associated with that network, or chain. If it is altered at a future date, reviewers of the block (record) will be able to identify when due to time stamp functionality.
Further research and study, especially on the implications of the decentralized ledger structure, was compiled by the Chartered Accountants of Australia and New Zealand. Put simply, the increased integration of technology into the accounting function will only continue to highlight the importance of cybersecurity, audits and training. Evidence exists in related fields as well; beginning after 2019, any candidate seeking to pass the CFA exam will require AI expertise to do so, and this surely is only the proverbial tip of the iceberg. AI is already being put into place by financial institutions and banking firms, with dramatic implications. Examples include JP Morgan deploying a software system that sorted through 12,000 commercial loan contracts in seconds, versus 360,000 hours by using lawyers, and Monzo (a UK based financial institution) building an AI model that reduced fraud on pre-paid cards from 0.85% to 0.1% in six months. Turning to audit and attest implications, with larger amounts of organizational information digitized, it is not beyond expectation that auditors will be able to review entire businesses, instead of just samples. There is even an annual accounting blockchain conference if practitioners would like to learn more.
The above changes and the changing nature of the profession necessitates that education, training and professional development keep pace with the rapidly evolving business landscape. Data analytics, artificial intelligence and the increasing importance of structuring data for decision making create opportunities for CPAs, but also new areas of competition. The profession clearly is the primary source of expertise when it comes to audit, attest and tax services, but those are potentially overshadowed by the other advisory and analytical services expected by clients and customers. In a recent report from the AICPA, an encouraging fact was the increase in the number of students enrolled in bachelor’s accounting degree programs, to 215,482 in 2015/16. An increase in enrollment, and interest, in the accounting field bodes well for the profession. Unfortunately, however, the number of accounting students enrolled in master’s degrees fell 21 percent, which is possibly a cause for concern moving forward, especially as many states require 150[KH1] credit hours to attain icensure[SSS2] . Interestingly, according to the most recent data available from the Council of Graduate Schools (2014/15), enrollment in master’s degree programs increased 3.8 percent during an equivalent period. Whether students are simply taking more undergraduate courses to reduce educational expenses or some larger issue is at play remains an open issue, but it is an issue that educators should research.
The technological changes, including but not limited to blockchain technology and artificial intelligence, are already being included in accounting classrooms, independent courses and continuing education courses. There are numerous courses offered at universities across the U.S., including Bitcoin and cryptocurrency courses offered at UC – Berkeley, MIT and Stanford. Of course, there are other ways to integrate technology into the accounting educational experience, with numerous colleges and universities building online tools and technology into the educational experience. AI is also becoming further integrated into the classroom with the College Board outlining information regarding the major, careers in the field and where to find more information on specific course offerings. Regardless of whether the courses are offered online or in-person format, the movement toward increased integration of technology into the accounting profession is moving from the profession to the academic landscape. Additional evidence citing the rise of additional professional certifications, and post-graduate continuing education, aligns with actions underway at the AICPA in terms of new certificate and program development. The trend, while still emerging, is clear — technology, AI and blockchain will become part of the core accounting curriculum.
The Changing Profession
Virtually all CPAs, and CPA firms, continually express a desire to be not just number crunchers, but to truly evolve into business advisors and business partners. The CPA profession has an excellent brand, an established track record of excellence and a strong market position. In order to maintain this unique position, however, changes and effort are required of practitioners, employers and educators alike. Employers, both in public practice and private industry, should be supportive of employee development and foster environments where experimentation and creativity are supported. Educators and academics must ensure that the CPA pipeline remains viable and valuable to the marketplace by keeping abreast of these many changes. Integrating technological and broader business trends into educational activities is the only way to ensure that graduates have both the skills and the mindset to thrive and lead in such a rapidly transitioning business environment.