Financial reporting used to be about historical results—but business owners and stakeholders increasingly want their trusted advisers to look forward. NJBIZ spoke with some accounting leaders to find out how the profession is changing, and what it means for business owners.
“The complexity of financial reporting has increased significantly over the last few years, and having to implement new revenue recognition, lease rules, and disclosures has been challenging for companies,” noted Neal Rotenberg, partner-in-charge of Marcum’s Saddle Brook office. “The changing landscape of state and local taxation has not only caused tax compliance challenges but also financial disclosure issues.”
The changes have affected both private and public companies, he said. “Although public companies usually have more resources in their accounting departments to handle the new rules, they are subject to more disclosure requirements than private companies,” he explained. “In addition, public companies must assess the effectiveness of their internal controls over financial reporting in their annual reports to the SEC.”
The profession is going through a lot of changes, Rotenberg added. “There is just more to know in accounting. Areas of accounting are becoming more specialized. Our practice has focused on specific industries so that our professional staff working on engagements will understand the nuances of the clients’ businesses.”
Educational institutions are doing their part to help prepare the next generation of CPAs, according to Rotenberg, who sits on the accounting advisory board at Syracuse University. “Like many other schools, Syracuse University has been active with its alumni in public accounting to make sure their programs keep up with the changing environment,” he said. “We need more students, though. There is a large demand for accountants in both public accounting and the private sector.”
And as business becomes more tech-driven, the accounting profession has kept up. “Marcum is hiring people with degrees in a number of fields, he noted. “Technology is driving the modern audit practice, and complexity in new technology-driven financial products is causing a shift to find ‘non-accountant’ professionals who have expertise in these areas. For instance, financial statement audit efficiency has increased the need for data science and data analytics professionals; and as cryptocurrency use expands, professionals who understand blockchain technology are needed to assist auditors.”
The competitive business environment is also driving changes in the profession, noted Goldstein Lieberman and Co. LLC CEO Phillip Goldstein. “CPAs don’t just take a historical look at a business’ activities,” he said. “Clients want us to be strategic advisers, and we do that, with activities like analyzing business segments for divisions that are winners and losers, digging into product lines to identify loss leaders, and providing M&A studies and real-time information so owners can run their companies even better.”
A digital revolution
Why is this change happening now? Goldstein cited the digital revolution as a catalyst. “It used to be that you’d send a [postal] mail to someone and wait three days for a response,” he said. “Now people want answers instantly. Business is moving faster, and CPAs are keeping pace with it.”
At the same time, he added, “Businesses are utilizing new metrics that are often specific to the industry and the needs of the user. For example, supermarkets used to focus on department-specific metrics like turnover, retail sales per square foot, and gross profit. Today, there are new KPIs [Key Performance Indicators] that they require.”
According to industry publications, these new indicators include metrics like fulfillment cost per order — direct labor required to pick, pack and hand over each order and interface with customers, as well as indirect labor like processing returns — and extra packing supplies, allocated facility costs, delivery service providers, and the cost of managing online order sites and applications.
To keep with these and other changes, firms like Goldstein Lieberman have expanded their hiring beyond traditional accountants, according to Goldstein. “As our role has dramatically changed, we’re increasingly hiring individuals with IT consulting, business consulting, HR and other backgrounds,” he said. “We work with a variety of industries that have specialized needs, so we need people with skill sets that can satisfy those needs. It’s all part of an evolution”
Sungsoo Kim, a professor of accounting at Rutgers School of Business–Camden, also acknowledged the updates. “The emergence of innovative technologies has changed the manner in which audits are conducted, and with it, the role of the CPA, especially over the last five years or so,” he said.
And auditors are increasingly integrating analytics software into their field work, “to help them perform substantive testing and derive inferences about the financial data they are examining,” he added. “The nature of the audit has also changed because auditors can now, in many cases, test entire populations of data instead of examining relatively small samples. What this means for CPAs is that they are now able to perform audits that are more effective and more efficient than ever. However, it also means that CPAs are being challenged to quickly learn new technologies in order to perform their work. In the last few years there has been a boom in clients seeking guidance on issues relating to emerging technologies such as blockchain, digital assets, and cryptocurrencies.”
Educational institutions are helping to prepare students for the technological revolution in accounting, observed Ethan Kinory, assistant professor of accounting at Rutgers School of Business–Camden. “We have introduced a new course in audit analytics,” he said. “Students in that course learn about audit data analytics and apply this knowledge to financial data using tools such as Alteryx, Mindbridge, and Tableau. At the graduate level, we expand on these core skills by teaching tools that enable students to perform robotic process automation and process mining. Collectively, students now graduate with much more technical agility and a higher level of preparedness for the profession. Together with the audit analytic course we also introduced Accounting Analytics and reintroduced an Accounting Information System course to deal with these rapid technological changes in the accounting profession.”
The increased responsibilities aren’t a fit for everyone, however. “Consistent with the trend [national studies indicate fewer students choosing accounting majors], we are also seeing a decline in accounting majors at our university,” said Kim. “Accounting might never have been perceived as a fun major but it has traditionally offered relative job security and a modicum of prestige.
Despite the fact that the Big Four typically rank among the top 40 companies in the country to work for, it is no secret that the job is a demanding one. This perception, combined with the 150-credit hour requirement [to sit for the CPA exam], may be deterring more students than it had in the past because students are increasingly aware of alternative employment options that did not exist until recently.”
He added that students today have a lot of options. “The gig economy, social media, fintech, and other career paths can be enticing options to entrepreneurial students who might otherwise have pursued accounting,” said Kim. “Compared to demanding prep for CPA exam there are some easy jobs — such as the high-tech area — that are available without any rigorous certification preparation.”
Ralph Thomas — CEO and executive director of the New Jersey Society of CPAs — has had a ringside seat to the changes and challenges buffeting the accounting profession. “The accounting profession has been evolving for years, but the pandemic gave CPA firms a chance to really show that they’re about more than audits and taxes,” he said. “It was a rushed process, and accountants were a big help to small business who had to deal with applications for stimulus payments — counseling them on forms and processes, and on required information and who to contact. Businesses will continue to look to their CPAs for more help navigating different kinds of issues, and CPA firms, in turn will continue to offer more advisory services.”
As CPA firms gear up to meet the demand for these enhanced skills, the NJCPA is helping out with its educational foundation and a variety of courses. “We keep up with changes and then we educate members on technology and other issues,” Thomas said. “We also assist them with ways to bring aboard non-CPAs who have a thorough under-standing of the technology that CPAs firms increasingly have to utilize.”