“It’s your kids. We’ve gotta do something about your kids!”
Doc (Christopher Lloyd), Back to the Future, 1985
Commentators of all stripes are alarmed at a possible impending shortage of young accountants. They cite diminishing university enrollments, declines in candidates for the qualifying examinations, the time and cost commitment for a fifth university year, and post-COVID lack of enthusiasm for the long tradition of burdensome working conditions.
The AICPA’s biennial survey of graduation rates in American universities reported a year-on-year 7.8% decline for 2022 in the number of undergraduate accounting degrees, raising concern, as put by the Wall Street Journal on October 12, “as more workers in the profession retire without an adequate pipeline of entrants to fill the gap.”
The December issue of the estimable Accounting Today pitched “the pipeline problem (as) the most vocalized concern” of its designees as the profession’s 2023 top 100 most influential people (p.16).
To address the angst and agita, the Illinois CPA Society lauunched a survey on October 5, as reported by Going Concern on October 11, “to figure out why modern day accounting students and professionals are so uninterested in pursuing the CPA credential.”
As always prudent, scrutiny is indicated – of the history, the data, and the perspectives being put forward.
To start, history’s long view is that, going back to the invention of trade and commerce, society has recognized and valued the functions of recording, reporting and assuring its quantitative information:
- Verifying for the pharaohs the costs of pyramid construction by matching the size of the labor force with the measures of wheat on which they were fed – an early example of the still-vexing problem of fraud detection and prevention.
- Keeping the books and calculating the profits and losses for the ocean voyages and spice route caravans of the Age of Discovery.
- Inventing independent audit in Victorian England to inform the complex pools of investor capital that funded the corporations building the infrastructure of the Industrial Age – a model that survives to this day.
Those needs are evolving, not going away.
A menu of concerns is offered. The WSJ cited “more onerous workloads … pay and burnout, mundane tasks, lack of meaningful work and the threat of new technology….”
Brutal hours, trailing compensation, dubious advancement opportunities within the firms’ partnership structures, stresses of efficiency and performance quality under the looming presence of regulators and law enforcement – the environment is fraught.
Gen Z aired a plain and simpler view, with two comments in response to the Illinois CPA survey: “Everyone knows compensation is the issue,” and “the pay is crap and the life sucks.”
Notably, however, there is nothing novel in the persistence of the Dickensian work model – the current debate on mandatory return to the office has nothing on the Victorian vision of Bob Cratchit, toiling with quill and ledger on his high stool at Scrooge & Marley, obliged to grovel for permission to spend Christmas Day with his family.
At the same time, inquiry is called for, whether the data cited in ostensible support of the “pipeline problem” are indicative of short-term fluctuations or longer-term trends.
The WSJ article compares, for example, the 65,305 accounting graduates in the US in 2021-2022 with 51,622 in 1994-1995 – a 25% uptick over a generation, with the percentage of universities projecting next-year enrollments to be the same or higher for 2024, increasing to 75% from 58% in the prior report.
Further, Purdue University’s highly-rated undergraduate business program is reported in Accounting Today as “defying the trend and seeing accounting enrollments growing dramatically.”
So it is in order to consider the possibility that there is special pleading in at least some of the hand-wringing.
Over in the UK, Sir Donald Brydon proposed in his lucid but unfortunately disregarded December 2019 “Independent Review Into The Quality and Effectiveness of Audit,” that the future of assurance will belong to professionals whose qualifications are drawn from multiple disciplines, beyond the traditional accountancy curricula. That’s a message for the academics: declining numbers of accounting majors might be viewed as canaries in the mine – signals of necessary academic re-engineering, however traumatic that may be to the career plans of department administrators, entrenched faculty, and tenure-aspirant PhDs.
Sadly, the Brydon proposals were met with indifference by the professional societies, lingering behind the curve of evolution, blinkered at the opportunity to broaden their scope and influence, fixated with the idea that the market should come to them, rather than the other way around.
As one head-scratching alternative instead, the Center for Audit Quality on behalf of the auditors of US public companies announced on October 10 a perhaps unique collaboration – a multi-year partnership with the Pittsburgh Steelers of the National Football League, to foster support of student interest in the field of accounting.
Imagination stirs. The financial statements of a football club could include topics of real-world relevance and also pedagogically engaging: estimating a contingency provision for the impact of unpredictable career-ending injuries, or the amortization period for the cost of player contracts, or the timing of revenue recognition for advance payments to secure season tickets and VIP boxes.
Or, because such arcana might not suit student appetites and attention spans, if given game-day tickets they might apply in the stadium the skills needed as staff auditors - tracking between plays the net effect of in-and-out substitutions to assure that each team had precisely eleven players on the field - reinforcing the core proposition that debits always equal credits.
Student-worthy prizes and inducements might include the opportunity to audition for a Heisman House commercial, or the ultimate, to bring Mean Joe Greene back to Pittsburgh to re-enact his iconic jersey toss to the kid in the Coca-Cola commercial.
As for entry-level and early career compensation, the market would appear to be capable of adjusting. At the top of the curve, Deloitte as the largest of the Big Four announced on September 7 its global 2023 revenue of $ 64.9 billon - under-writing an increase in the percentage of US revenue going to staff compensation to 55.4%, up over four years from less than 50% (Financial Times, October 10, 2023), while at the same time sustaining handsome individual average partner pay, as reported, e.g. in the UK to be £ 1.06 million (about $ 1.3 million).
The agility enabled by Deloitte’s robust results will not translate universally down the size curve. Instead, business models evolve. The structure of the modern profession was developed in the generation after Mr. Deloitte’s pioneering of the now-standard auditor’s opinion in 1850. Public company audits in the post-war decades were provided in the US by the then-Big Eight and Little Eight, now reduced to the surviving Big Four and a smaller handful.
With every other part of the world’s economies fundamentally altered beyond recognition over that period, it would be unthinkable that the long-established assurance delivery model should be expected or entitled to immunity from equally disruptive change.
Professional recognition, respect and legitimacy are not bestowed as of right or entitlement. Instead, the creaking survival of a model fundamentally unchanged for 175 years, when no other sector is recognizable over the same period, suggests that tectonic forces are at work, grinding slowly but building to an inflection point.
That is especially the case because, sitting beside any supply-side concerns for the availability of new CPA feedstock is the symmetrical likelihood that developments in technology and artificial intelligence will influence the demand side. Impacts are coming, from re-definition of the functions and qualifications of the coming generations of accountancy professionals to the elimination of many of their current activities altogether.
The status quo will change. Opportunities will continue to be rich and varied. If there is a clear road to the future, however, it is tracked today on nobody’s map.
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