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The Future!
If you’re so inclined, swing by this thread to see r/accounting’s predictions for the profession in the next five years:
What’s your hot take for the next 5 years in the field of Accounting?
byu/cameronarcher inAccounting
There are a lot of highlights, too many to list here. Just some common themes: “Some enormous scandal will happen because of all this offshoring we do,” “The massive AI investments will fizzle as the limits of generative AI are found to not nearly match up with the costs, leading to reinvestment (in offshore workers),” “PE owned firms will go up in flames.” You get the idea.
Talent
Accounting Firms Must Do More Than Make One-Time Salary Bumps [Bloomberg Tax]
Going Concern favorite Hofstra professor Jack Castonguay writes:
Ernst & Young’s plan to increase starting salaries by 10% still isn’t enough to be competitive in the current marketplace for early-career accountants. Accounting and auditing firms need to go the extra mile to bring students back to the profession. The extra mile would require raising salaries above other business fields instead of only matching them. It also would require a commitment to work-life balance and limiting hours during busy seasons, even if that means needing to hire even more staff. And it would include providing funding and/or bonuses for students who obtain the extra 30 hours of college credit required for CPA licensure.
The neurodiversity advantage: How neuroinclusion can unleash innovation and create competitive edge [Deloitte]
Deloitte explains how to exploit neurodivergent people for the benefit of the company.
A vice president of diversity at a large financial services company we interviewed drew the connection to neuroinclusion, saying, “And then of course, there’s the bottom line. If we can be faster, smarter, more innovative, get things done quicker, have fewer errors, all of those things that are highly attributed to those that are neurodiverse … if we can use that to our advantage and have better products in the end, and have faster sprints to our deadlines, we come out ahead in a lot of different ways.”
CFOs turn to AI amid accountant shortage—but experienced talent is still needed [Fortune]
Jenn Ryu, CFO at global consulting firm RGP, shared with me new RGP data that finds 43% of financial decision-makers said their organization is investing more in end-to-end automated accounting processes and AI tools to counter the accountant shortage. But also in this process, companies are replacing a lot of the mundane, manual work that accountants have to do, which in turn could attract more young professionals into the field, she said. However, Ryu notes that she’s also seeing a shortage of mid-to-high-level accountants, “I don’t think that AI is going to replace them,” she said. “I still think that highly skilled accountants are still needed to provide context and to make judgment calls.”
Intuit will lay off 1,800 workers and hire new ones to advance its AI ambitions [Quartz]
As part of the cuts, the company said it has “significantly raised the bar on our expectations of employee performance, resulting in approximately 1,050 employees leaving the company who are not meeting expectations and who we believe will be more successful outside of Intuit.” It also trimmed down its executive headcount by about 10%, consolidated technology roles to key sites, and eliminated more than 300 positions across the company. Despite the cuts, the company plans to grow its overall headcount in the 2025 fiscal year and beyond.
Audit firms have hiring challenges — Is this where technology can help? [Thomson Reuters]
In recent years, the tax, accounting, and audit profession has experienced a staffing crunch. This should be no surprise to any firm or corporate business leaders who have tried to undertake hiring or engaged in succession planning, only to be left waiting for help that may not arrive. Indeed, according to the recently released 2024 Audit Survey Report from the Thomson Reuters Institute, attracting and retaining skilled professionals is indeed a top priority among all audit professionals, with 58% calling it a top challenge that their firms face. Further, among respondents with multiple high priorities, attracting and retaining skilled professionals was ranked as the single highest priority for 43% of survey respondents in the United States and about one-third of those in the United Kingdom and Canada.
Big 4
University of Kentucky to pay Deloitte $1.3M for studies related to governance, curriculum [Lexington Herald Leader]
UK contracted Deloitte, an international consulting firm, at the end of last year for services related to an initiative called Project Accelerate made up of five work groups looking at various aspects of the university and its operations. University of Kentucky spokesperson Jay Blanton said Deloitte was hired because of the company’s experience in higher education, and to provide a broader overview of UK’s structure and general education requirements — called UK Core — compared to other universities and best practices.
PwC starts mass lay-off in China amid exodus of clients in the wake of Evergrande’s fraud [Bloomberg]
PricewaterhouseCoopers LLP is cutting staff across its China operations, according to people familiar with the matter, after an exodus of corporate clients diminished the accounting firm’s revenue prospects in the country. At least 100 staffers from different teams at PwC China’s offices in Beijing, Shanghai and other locations are being let go, the people said, asking not to be identified discussing private matters.
Launch of KPMG’s Clear on Climate Reporting hub [KPMG]
Climate change is driving broader stakeholder scrutiny of financial reporting, with regulators, investors and the public focusing on how companies report on climate-related matters — such as net-zero commitments. And they are demanding clarity about climate. That’s why KPMG has launched its Clear on climate reporting hub to provide insights and guidance to help organisations and their stakeholders understand how to be clear on climate in corporate reporting.
Deloitte, EY China Affiliates Miss Mark in US Audit Inspections [Bloomberg Tax]
You can find the inspection reports from the PCAOB here
Both Deloitte and Ernst & Young’s Chinese affiliates failed to meet basic US audit standards in the second round of US regulatory inspections in the region since a landmark deal in 2022.
EY settles with CT regulators in CPA exam cheating scandal; receives probation and $164K fine [Hartford Business Journal]
On Wednesday morning, EY issued the following statement to the Hartford Business Journal: “At EY, nothing is more important than our integrity and our ethics. These core values are at the forefront of everything we do. We have repeatedly and consistently taken steps to reinforce our culture of compliance, ethics, and integrity in the past, and will continue to take extensive actions that will further strengthen our commitment in the future.”
AI
Embrace the machine, no need to rage against it [ERP Today]
Wonder how the author will feel about writing this article when AI takes his job.
It’s not hard to see why some firms might hesitate before diving into a digital transformation that implements all the latest AI bells and whistles; the latest EY survey about AI anxiety in December 23 revealed 75 percent of employees are worried that AI will make their jobs obsolete, with 65 percent believing AI will outright replace them.
KPMG LLP AI & Digital Innovation Quarter Pulse Survey: the path to sustainable returns [KPMG]
GenAI strategies have hit a new inflection point. As we reach the midpoint of 2024, C-suite and business leaders are no longer just investing in the technology, they are aggressively scaling GenAI to unlock new revenue streams, maximize ROI and cement their competitive advantage. The second KPMG AI & Digital Innovation Quarterly Pulse Survey reveals the majority of leaders (80%) across the U.S. recognize GenAI as important to gaining competitive advantage and market share.
Practice
Embracing technology in accounting: Practical steps for firms [Thomson Reuters]
AI, machine learning, and advanced data analytics are transforming how accounting firms operate, unlocking capabilities that enhance accuracy, efficiency, and client service. With automation streamlining routine tasks, today’s accountants are free to focus on higher-value activities. In addition, cloud computing facilitates real-time collaboration and access to data, while blockchain offers enhanced security and transparency in transactions. While there is no doubt that these advancements are revolutionizing tax preparation, financial planning, and audit processes, they are also requiring firms to rethink traditional workflows and pricing models. As such, many forward-thinking firms are capitalizing on the opportunity to provide personalized advisory services to their clients. This shift is supported by the significant time savings and vast insights that advanced technologies like AI and automation can provide.
Rethinking Accounting Firm Structures: The Pentagon Model for a Sustainable Future [INSIDE Public Accounting]
A pyramid-shaped practice structure has worked well for accounting firms for more than a century, but experts believe the model is breaking down and should be replaced. The reality is that fewer entry-level job candidates are available now and demographic changes show graduating classes will be smaller in the future. Also, the traditional apprenticeship model, with staff learning through observation and face-to-face discussion, has been altered by remote work. Young people aren’t interested in working 80-hour weeks, either – 50 is more reasonable. “That extra 30 has to go somewhere,” notes Jennifer Cryder, CEO of the Pennsylvania Institute of CPAs, who outlined her support of the pentagon in a recent report on retention. [Ed. note: Aren’t they just shipping it overseas?]
Tax
Project 2025 would overhaul the U.S. tax system. Here’s how it could impact you. [CBS News]
For his part, Trump has distanced himself from the blueprint, writing on Truth Social early Thursday that he isn’t familiar with the plan. His campaign has proposed its own goals through “Agenda 47,” which tends to focus on social and political issues such as homelessness and immigration rather than taxes.”I know nothing about Project 2025. I have not seen it, have no idea who is in charge of it, and, unlike our very well received Republican Platform, had nothing to do with it,” Trump wrote Thursday.
Supreme Court Left the Door Open for a Wealth Tax. But It’s Still a Terrible Idea. [Reason]
“Many developed countries have repealed their net wealth taxes in recent years,” Cristina Enache wrote for the Tax Foundation in a June report on such levies around the world. “They raise little revenue, create high administrative costs, and induce an outflow of wealthy individuals and their money. Many policymakers have also recognized that high taxes on capital and wealth damage economic growth.”Depending on how high the tax is set, Enache cautioned, it can erase any gains people might make on their investments. “For safe investments like bonds or bank deposits, a wealth tax of 2 or 3 percent may confiscate all interest earnings, leaving no increase in savings over time.” Worse, wealth taxes depend on government officials’ ability to accurately assess the value of fluctuating holdings in stocks, property, businesses, and the like. That’s a big ask even if you pretend that tax officials are likely to be honest in such efforts.
Tariffs, Tax Debt, And Billionaires [Tax Policy Center]
The Biden administration announced the tariffs this week, which aim to prevent China from avoiding levies by routing their goods through other trading partners. For materials crossing the southern border, there will be a 25 percent tariff on steel not melted or poured in Mexico and a 10 percent tariff on aluminum not made in Mexico. The tariffs are possible under section 232 of the Trade Expansion Act, which applies to imports deemed a threat to national security.
News
Audit of state auditor delayed; Gallion calls it ‘redundant, unnecessary’ [North Dakota Monitor via Yahoo! News]
An audit of the North Dakota’s Auditor’s Office is delayed several months after the lowest bidder backed out, upping the cost of a review the state auditor calls a waste of taxpayer money. The first request for proposals, which Legislative Council issued in July 2023, received no bids. After that, Legislative Council opened up bidding to a wider area, said Allen Knudson, Legislative Council’s legislative budget analyst and auditor. Two companies responded: Minneapolis-based firm RSM submitted a bid for $40,000, and Forvis, based in Denver, put in a bid for $285,000. Lefor said he and Legislative Council staff had a conference call with RSM to make sure the firm understood the project before they signed the contract. “The bid, as we look back, was very low, but they assured us they could do it,” House Majority Leader Mike Lefor said.
Burke, one of Cincinnati’s largest accounting firms, changes name, sees investment unit double in assets [Cincinnati Business Courier]
Accounting firm Burke & Schindler has changed its name in the wake of the retirement of one of its partners while the firm has experienced explosive growth in a key business unit. The firm, located at Adams Landing, changed its name to Burke CPAs & Advisors as of July 1. It made the move a year after Burke’s business partner, Gene Schindler, retired. “People were trying to coax me into rebranding and the trend is toward using just one name,” Burke said.
Grant Thornton names new D.C.-area leader [Washington Business Journal]
Accounting and consulting firm Grant Thornton has named Bill Marx as its new managing principal for the D.C. region. Marx is a 13-year veteran of Grant Thornton. From 2015 to 2020, he led the firm’s tax accounting and risk advisory practices in the Atlantic Coast region, which includes the D.C. market.
Kenya MPs flaunting wealth on social media added fuel to tax protests [Reuters]
Luxury cars, private helicopters, mounds of cash. The lavish lifestyles of Kenya’s lawmakers, splashed across TikTok and X, added fuel to anger simmering last month among a young, plugged-in population over proposed tax hikes. Weeks-long protests about the tax measures have increasingly drawn attention to the large salaries, perks and ostentation of members of parliament (MPs) in a country where three quarters of the population is young and well-paid work is scarce. Fury boiled over on June 25, when protesters stormed parliament and set it ablaze, pelting fleeing politicians’ vehicles with stones. Since then, private residences and businesses of several MPs, mainly those associated with the ruling coalition, have been attacked.
