A shortage of accountants is pushing the industry to reboot its image to win over young talent: 'You have to sell them'
There are fewer CPA-certified accountants out there, and that poses compliance risks for businesses.
The industry has long suffered image problems and hopes to revamp it with new initiatives.
Major firms and colleges with accounting programs are investing in upskilling.
There's a nationwide shortage of accountants, and it's becoming a problem for businesses.
The American Institute of Certified Public Accountants says fewer people are graduating with accounting degrees than in years past, and the number of people taking and passing the certified public accountant exam is dropping. Meanwhile, a 2022 Deloitte poll found that 82% of hiring managers for accounting and financial positions at public companies and 69% at private companies said talent retention is a challenge.
Accountants manage financial processes and financial reporting and ensure regulatory compliance. If the shortage of these workers continues, accountability and integrity in business could suffer, Steven Kachelmeier, the chair of the accounting department at the University of Texas, told Insider, which could lead to a rise in fraud like the Enron and WorldCom scandals of the early 2000s.
He said that a lack of accountants is like playing sports without a referee.
"We may not always like the referees, but sports is a free-for-all without them," he said. "Accountants and auditors are to business as those people in the black-and-white-striped shirts are to sports. We're the referees of business.
"Without accounting and without finance, there are no rules to the game. It's like playing a game, and you make up your rules as you go along. It keeps the system honest."
To combat shortages, those in the accounting industry are working to attract more people to the field. Advancing technology in the sector, raising awareness about accounting careers, increasing diversity, and changing the profession's image are some of the ways they're tackling the challenge.
Why is accounting experiencing a decline?
Many experts blame the Great Resignation for the decline in available accountants. And, AICPA notes, 75% of CPAs reached retirement age in 2020.
But accounting has long had image problems that's made it difficult for the industry to recruit younger talent, Kachelmeier said, noting that his accounting program has seen majors decline between 20% to 40% over the past few years. Thinking of the profession often conjures up images of number crunchers with mountains of paperwork and endless data entry, when in reality, much of these mundane-sounding tasks have since been automated.
"There's not a lot of high-school students out there who say, 'I'm going to be an accountant,'" he said. "You have to sell them."
Pay is another issue. Starting salaries in accounting tend to be lower than other financial careers — according to the Bureau of Labor Statistics, the median salary for accountants and auditors is $77,250, compared to $95,570 for financial analysts and $131,710 for financial managers. CPAs typically earn more, but obtaining a license requires 150 semester hours of education (more than a typical bachelor's degree) and passing the CPA exam.
To attract employees, some firms are increasing salaries and paying for exam-test-prep materials and time off to study and take the exam.
KPMG, one of the Big Four accounting firms, offers a CPA Kickstart Program, which pays new employees a full-time salary with benefits for two months to study to pass parts of the CPA exam.
Sandy Torchia, the vice chair of talent and culture at KPMG, said the company hasn't been impacted by the accountant shortage yet. "But, certainly, we have it on the horizon as a risk for the future," she said. "It's definitely on our radar."
How a shortage of accountants could impact businesses
With experienced accountants leaving the field and fewer newcomers entering, it could pose an "emerging audit risk," George Botic, the director of inspectors at the Public Company Accounting Oversight Board, said at a conference recently.
Compliance is more important than ever, following recent high-profile accounting scandals. Last year, the crypto exchange FTX was hit with federal charges and an SEC complaint saying the company defrauded customers and investors and improperly used billions of dollars worth of customer deposits to fund its founder's other businesses and political activities. Errors might occur when companies don't have enough qualified staff, and crucial accounting checks may be skipped.
Accounting errors, both small and large, can also cause a company's stock price to drop. SEC fines are possible when errors occur or financial-reporting deadlines are missed, but, as an analysis by Adrian Wooldridge published in The Washington Post found, the SEC is facing its own shortage of accountants.
"Poorer oversight increases the likelihood of another Enron out there: A big company that is playing fast and loose with its finances and will eventually collapse, bringing economic havoc in its wake," Wooldridge wrote.
The landscape could become the "Wild West" without accounting and auditing to ensure business integrity, Kachelmeier added. "It could hurt investors if you invest in companies that don't have financial integrity, and we've seen it," he said.
How the accounting industry is addressing the shortage
Many firms are shifting to remote-work policies and investing in automation and technology to attract and retain talent. Lisa Simpson, AICPA's vice president of firm services, told Insider that frees up staff to focus on "higher-value work," like interpretation, analysis, and compliance.
KPMG launched an initiative to teach teams crucial tech skills like analytics, data visualization, cognitive computing, and machine learning that could be valuable in moving up and around in the accounting field. Smaller firms that are unable to invest in technology are increasingly outsourcing parts of their business to larger companies that can, Simpson said. "This allows our auditors to focus on more strategic, high-level thinking," Torchia from KPMG said. "This is really something that makes this profession more attractive."
The industry is also focusing on diversity and inclusion in recruitment. AICPA and major accounting firms have expanded their presence at historically Black colleges and universities, institutions that serve minority populations, and community colleges to boost hiring among underserved groups and raise awareness about the profession.
Universities are also reaching out to high-school students to educate them about accounting careers to increase enrollment, especially among underrepresented groups, Kachelmeier said. His university has also revamped its accounting curricula to give students more flexibility to focus on specific sectors that interest them, and has added courses on environmental, social, and governance; data analytics; and accounting in the healthcare and energy sectors.
Simpson said the CPA exam is also changing in 2024 to illustrate how tech-focused the accounting profession has become. Candidates can choose a discipline, like analytics, information systems, or compliance, on top of the core curriculum focusing on accounting, taxes, and auditing.
The goal is to show that an accounting career isn't one-size-fits-all, Simpson said. "It's such an interesting profession, and we're really working hard to expand that story."
Read the original article on Business Insider