The profession’s biggest challenges
Updated: Feb 8
Editor-In-Chief, Accounting Today
Staffing, succession planning, tax reform, cybersecurity, merger mania, commoditization of core services, the demand for more CPAs, and the search for relevance — as important as all these issues are to accountants, they pale in comparison to two overarching concerns in the minds of the profession’s leaders: the impact of new technologies, and accounting’s ability to adapt to the rapid pace of change.
In a recent Accounting Today survey of a wide range of practitioners, firm leaders, association heads, regulators, consultants and other thought leaders, those two concerns were most frequently cited as the biggest challenges facing the profession, raising a host of subsidiary issues that accountants will need to address in the coming months and years.
At their broadest, developments in technology are having society- and economy-wide effects that will change the way we all conduct business and our lives. “Massive shifts in technology like data automation, blockchain and artificial intelligence are ushering in what some are calling the ‘Fourth Industrial Revolution’ and others (perhaps more accurately) are calling ‘the Transformation Economy,’” explained Joe Woodard, chief executive officer of Woodard Events and the organizer of the annual Scaling New Heights technology conference.
That will mean widespread changes to client demands, employment practices, and how businesses are run, but those technologies will also have very specific effects on accountants.
“The introduction of data analytics and innovative technologies, such as artificial intelligence, bots and drones, provides the opportunity for the greatest change in the accounting profession since the passage of the Securities Act of 1933 and the Securities Exchange Act of 1934,” explained D. Scott Showalter, chair of the Federal Accounting Standards Advisory Board, and professor of practice in the Poole College of Management at North Carolina State University. “No matter the discipline, whether audit, accounting, tax or advisory, all will be affected by these innovations.”
The concerns aren’t limited to the potential for technology to commoditize core services like the audit, bookkeeping and tax prep (though that certainly worries many); they also encompass the potential for those services and the entire role of accountants to be radically reshaped.
“Technology’s exponential advancement is impacting the profession in profound and unprecedented ways,” according to Maryland Association of CPAs chief communications officer Bill Sheridan. “Artificial intelligence, cognitive computing, blockchain, and even more mainstream technologies like cloud computing and social media are transforming what accounting and finance professionals do — and what they need to know. Our very existence depends on our ability to learn the skills that will let us work side-by-side with the machines and do the things they cannot yet do.”
There was little question among accounting’s leaders that advancements in technology were setting the pace, and that the profession needed to do its best to keep up.
“The relevancy of the accounting profession in the next decade will be largely impacted by how capable we are at visualizing and harnessing the potential benefits of new technology, and how willing we are to make the changes necessary to take advantage of the enhanced technology of tomorrow,” said David Vaudt, chairman of the Governmental Accounting Standards Board.
But while Vaudt saw this challenge playing out over a decade, others weren’t so sure there was even that much time. Citing the “exponential rate of change” that blockchain, AI and big data will bring to audit and accounting, IntrapriseTechKnowlogies managing director Donny Shimamoto warned, “Many accountants think it will be a slow change, but because it’s an exponential change curve, it will suddenly be here and people aren’t going to be ready. We need to start getting ready to use these technologies now by better understanding risk and controls (especially IT risk) and data analytics.”
Meanwhile, Janice Gray, vice chair of the National Association of State Boards of Accountancy, was concerned about limits on other relevant resources: “All of this change related to technology and artificial intelligence will affect small firms and require close monitoring,” she said. “With resources limited for small firms, it could affect their abilities to audit clients and thus further diminish the pool of auditors available to provide services to smaller clients in an economical manner.”
Despite widespread belief that advancements in technology represent a major challenge for accountants, there was an almost equally widespread belief that they could also offer solutions to many of the profession’s problems, and opportunities for significant growth.
That raised a red flag, however, for CPA Trendlines CEO (and former Accounting Today editor-in-chief) Rick Telberg, who warned against an over-reliance on non-human solutions.
“Too many firms are looking for solutions from new technology, software and apps, to the detriment of skills-building and process improvements that would better serve clients with broader and deeper services,” he said. “In short, firms are primarily using technology to reduce costs and increase productivity, instead of leveraging technology to get better at doing what clients want most — providing proactive insight, analysis and guidance. Technology can replace people, and it is; you can see it in hiring trends and in per-partner incomes. But technology cannot replace the judgment and wisdom that clients really want from their accountants. This techno-centric behavior is pushing aside the client-centric habits that have made accounting the great profession it remains today. The profession does so at its peril.”
Up the value chain
Telberg’s warning was well-taken by many of the leaders Accounting Today surveyed, who agreed that, in the face of all this technological change, the profession needs to double down on better serving clients, and to move up the value chain in terms of the services it offers.
“The challenge is to switch our roles from that of compliance worker to that of knowledge worker and consultant. By utilizing all of the new digital tools of AI and big data to advise clients, we can give them knowledge they can use, as opposed to just giving them back work products to meet regulatory requirements,” said David Bergstein, digital evangelist for the accountant segment at Intuit. “Accountants need to harness the current technology tools while remembering that we are uniquely qualified to provide answers because of our understanding of how the numbers work and how they are connected.”
Interestingly, the profession’s leaders were divided as to whether they viewed the move to become forward-looking consultants as taking advantage of a major opportunity, or as responding to a major threat.
“By automating parts of the business processes, AI grants accountants more time to serve as a strategic partner to clients and provide data-driven insights to inform business decisions,” said Jennifer Warawa, executive vice president of partners, accountants and alliances at Sage, firmly in the “opportunity” camp. “In the long-term, this emerging technology will empower accountants to provide a higher caliber of services to clients.”
Similarly enthusiastic was Matt Armanino, chief operating officer and managing partner-elect of Top 100 Firm Armanino. “There is a massive opportunity for us to become intensely client-focused and leverage our relationships to transform our businesses,” he said. “We must seek to be more than great tax advisors and consultants, or terrific auditors or accounting experts ... . We need to aspire to broaden the footprint of our relationships, to include not only our accounting technical expertise as a foundation, but to layer on capabilities around strategy, business transformation, IT consulting, data analytics, outsourcing, cybersecurity, and a myriad of other needs that our clients have.”
On the other hand, thanks to technology, “Traditional tax prep and audit work is going to start fading away,” warned Bonnie Buol Ruszczyk, president of BBR Companies. “The profession needs to position itself as knowledgeable business consultants, and those firms that are doing this will be in a better position to survive, and thrive.”
“Our old way of doing business may work for the clients we currently have, but it will not attract the clients of tomorrow,” said Roger Harris, president and COO of Padgett Business Services. “Clients can now take care of most of their compliance needs in many ways and will not turn to us for those services in the same numbers as they did before. ... We must move our companies to advisory and planning services and away from compliance work. ... We either accept the change facing our industry or we may face declining value in the eyes of our clients and successors.”
Either way, most agree that accounting must embrace technology to offer higher-value services — but that may require capabilities they don’t have.