The age of the "full service" public accounting firm may be drawing to a close. Firms are becoming more strategic in how they use their resources, the types of services they provide, and to whom. The adjustments are hitting auditors in unanticipated ways, and there could be repercussions for governments and nonprofits.
By Pamela W. Baker, CPA, CGFM
Public accounting firms have long been known for being “full service,” providing tax, advisory, and audit services to virtually every sector of our economy. This is changing. Public accounting firms increasingly are becoming more strategic in how they use their resources and the types of services they will provide and to whom. This trend is the result of a number of converging factors: fewer new accountants, more retirements, increasing compliance standards, and cultural shifts.
Fewer accounting professionals entering the workforce – According to the American Institute of Certified Public Accountants (AICPA) Trend Report for 2021, the number of accounting graduates dropped for the 2019-2020 academic year, and the number of new CPA Exam candidates entering the pipeline has been declining since 2020. The closures of testing centers because of the pandemic may or may not be a significant factor, but the fact remains that there are fewer trained professionals entering the accounting field. Projections indicate this trend is expected to continue for the foreseeable future, so it’s not fully a testing center issue.
Retirements of public accounting firm leaders – The public accounting field is not immune to the “great resignation” or to the large numbers of normal retirements of the baby boom generation, a very large group of individuals who are aging out of the workforce.
Increased compliance requirements and more complexity – While the profession has had requirements for continuing education for generations, most CPA’s find it necessary to go above and beyond the basic requirements to stay abreast of a rapidly changing business environment, driven in large part by advances in technology. CPAs are forced to make a choice in where they will focus the use and development of their skills.
Changes in the way that people work – A healthy integration of career and personal goals has become the focus of the workplace. Public accounting firms that want to remain current, relevant, and attract and keep talent have decreased the traditional 60- to 80-hour work weeks to more flexible schedules and fewer work hours.
All of these adjustments are hitting auditors in unanticipated ways. Here are several examples of how these trends are playing out in the audit arena:
The trends and consequences noted above will not reverse in the near term (if ever). Several simply represent an evolving society.
In the specific sectors of government and not-for-profit audits, the shrinking pool of service providers will have a ripple effect through society. Independent audits provide an important “report card” on the financial health and compliance of governments and nonprofits that are heavily relied upon by others, such as concerned citizens, legislators, and bondholders.
Here are some suggestions for how to move forward if you operate in the government/nonprofit audit space:
Building a bench of well-trained auditors is the responsibility of all of us. It is vital that you get involved! The PICPA’s Pennsylvania CPA Foundation’s mission is to “inspire students to pursue careers in accounting and to provide educational, motivational, and financial support to those working to attain the CPA credential.” Last year 7,000 high school students participated in virtual events. This is great, but we need more. If you can contribute to building the pipeline today, in any way, it will help ensure more auditors in the future.
Pamela W. Baker, CPA, CGFM, is managing partner with Barbacane, Thornton & Company LLP in Wilmington, Del. She can be reached at pbaker@btcpa.com.
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Statements of fact and opinion are the authors’ responsibility alone and do not imply an opinion on the part of the PICPA's officers or members. The information contained herein does not constitute accounting, legal, or professional advice. For actionable advice, you must engage or consult with a qualified professional.
Statements of fact and opinion are the authors’ responsibility alone and do not imply an opinion on the part of PICPA officers or members. The information contained in herein does not constitute accounting, legal, or professional advice. For professional advice, please engage or consult a qualified professional.