From audits to firm structure, accountants need to start disrupting most aspects of their profession, or they risk being left behind, according to American Institute of CPAs president and CEO Barry Melancon.
In a keynote address on the state of the accounting profession at last week’s Digital CPA conference in Washington, D.C., Melancon told attendees, “Just because we are where we are and we’ve earned a great position, we can’t stop. You can’t hit the pause button.”
“Being in a great position doesn’t mean we get to be here forever,” he continued. “Even with audit, even though it’s written into all state laws that only CPAs can perform them – that doesn’t have to be forever.
Melancon cited the example of Sears – a company that was both highly innovative (it pioneered mail-order, for instance, and more recently helped create an early Internet service, Prodidy) and a cornerstone of the economy – that failed to keep up the pace.
“They were on the leading edge, but for some reason, in the span of a moment, they missed, they stopped – and they paid the ultimate business price,” he said.
To underscore his point, Melancon noted that since 2000, 41 percent of consumer-centric companies in the S&P 500 have been acquired or gone out of business – while over the same period, 39 percent of members of the AICPA’s Major Firms Group were either merged or acquired out of existence.
Given the pace of change in technology and the broader economy, he explained, it is incumbent on the profession to take up the hard work of disrupting itself based on the profession’s premiere asset: trust.
“We have an incredibly important role in providing trust – we as a society don’t trust anything. We don’t trust our government to a large degree, we don’t trust our media, we don’t trust big companies, we don’t trust religious leaders, we don’t trust the Internet,” he explained. “Accountants have the highest trust factor – right now, today, in today’s fast-paced world, we have earned and enjoy trust we can build on to help the world and to help our clients sort things out. That’s our opportunity – but that means we have to take some risks.”
Risks and opportunities
The profession has already begun exploring new areas, particularly in audit, Melancon noted, and those explorations are themselves pointing to further opportunities.
“Today, tens of thousands of SOC reports are being issued, and we’re looking at building out from that experience to create new services – on smart contracts, for instance, or blockchain,” he said. “So when someone says, ‘My blockchain service does x,’ people will want attestation that it really does.”
To go further, though, will require the profession to create and embrace change.
“When we look at our core services, like auditing – do we have the guts to disrupt those? I think we do,” he said, citing the OnPoint PCR tool created by the AICPA and CPA.com, which puts artificial intelligence and cutting-edge technology at the disposal of smaller firms.
The AICPA has also raised $45 million from the top 80 firms below the Big Four to create a Dynamic Audit Solution aimed at applying the technologies of the future to this core service of the profession. “We went to the next 80 firms and said, ‘Do you want to do something in a new way? And look at it in a big new way?’” Melancon explained.
Audit and beyond
While building its own tech will help the profession manage its own disruption, that isn’t all it will have to do, Melancon warned.
“Reimagining the audit is going to require us to rethink our competencies. We’re going to have to have a thick skin and commit to this change,” he said. “You don’t get permission to evolve what an audit is if you’re not delivering right now – so we’ve had a focus on improving audit quality for the next five years. We have to have that quality to experiment going forward.”
That quality, tied to the profession’s trusted advisor status, should open plenty of doors in the future. “We believe regulators and the consuming public will come to require third-party attestation on whether companies are doing the right thing in cybersecurity,” Melancon offered as an example. “Don’t we as a profession have an obligation to think about how we attest to a broad range of things – what about sustainability, integrated reporting and so on?”
10 years down the road
Looking beyond the near-term, Melancon extrapolated on current trends, like the fact that among the Top 100 Firms (excluding the Big Four), only about 20 percent of service personnel are CPAs.
“How do we actually define ‘CPA?’” he asked, positing a world where changing client needs and demographics lead more and more firms to hire non-CPAs, leading to firms that are CPA-led, as opposed to having CPAs all through the staff.
He also envisioned major changes in the core skill sets of the profession. “In a decade, there won’t be a need for us to have deep learning of an accounting standard,” he said. “We’ll have bots for that. We’ll need higher-level skills.”
Perhaps most important, he thinks accountants will need to be ready to radically reimagine the field.
“In the early days of the profession, tax wasn’t part of our work. It was only after the income tax amendment that we saw the opportunity to bring it in as a core part of our profession. Audit wasn’t either, but in the 1930s, we took that in as a core part of our profession,” he explained. “Our challenge is to see the new opportunities, and to take those on. If we don’t do that, we aren’t guaranteed our space. But if we take them on, our opportunities are endless.”
