The accounting profession will change beyond recognition over the next 10 years, according to American Institute of CPAs president and CEO Barry Melancon—except he really thinks it will come much more quickly than that.

“I really mean five years, but people get scared when I say that,” he said during a keynote address on “The State of the Profession” at the 2017 Digital CPA Conference, held in San Francisco by AICPA technology subsidiary CPA.com.

“In a world in which everything is changing, who are we to believe that we won’t have to change as well?” he asked. “The speed of change in our profession—and in our lives—is at an all-time high, and we need to think in a more complex way about change.”

Technology is driving much of the disruption in the profession and the wider world as well, he noted, citing the driverless car as an example of complex ramifications: While it’s easy to see how it will affect professional drivers and auto manufacturers, Melancon explained, it will also affect local governments (who rely on traffic, parking and speeding tickets for much of their revenue), law enforcement (who spend much of their time in traffic enforcement), city planners, the real estate industry, and even health care (through fewer accidents, smarter cars will significantly reduce the number of organs available for transplant).

“It isn’t about thinking about any one technology,” he concluded. “It’s about the implications of technology, and we need to be helping our clients understand and deal with these.”

All too many businesses think they’re exempt from change, Melancon said, citing surveys where more than half of business respondents think their competitors will be disrupted by technology, but that they themselves won’t be.

“We see too many people saying, ‘Yeah, but not us,’” he said—and that includes too many accountants. “We face the challenge of making sure that we continue to be successful. We have to be smarter and more passionate and more committed to change.”

As a cautionary tale of the depth of commitment required, he talked about Kodak, which failed to make the transition to digital photography. In fact, the company had made a serious commitment to changing over to digital photography, but was caught flat-footed when the change it expected to take 10 years only took two, and more nimble competitors beat it to market.

Changing services

In the accounting space, technology is already affecting every aspect of what CPAs do. “One of the Big Four firms is one of the three largest users of bot technology in the world—not just accounting, but the whole world,” Melancon said. “They apply them in tax, and get a 40 percent efficiency rate with a 98 percent accuracy rate.”

Similarly, he noted, “I’ve seen the audit of accounts receivable changed to where there are only two points of human interaction—setting the scope, and checking exceptions.”

The largest firms are driving many of the changes in audit, applying artificial intelligence and cognitive computing to automate much of the grunt work and allowing auditors to discern new patterns and focus on higher-level services. “But how do we harness that change and bring it down to the 44,000 small firms?” Melancon asked.

“Who should transform auditing? Should we own that as a profession?” he went on. “We need to imagine a different approach to auditing. We need to imagine the technology we need, and to challenge the standards-setters to keep up, and to look at our methodology for auditing.”

Among the other changes facing the profession, Melancon noted that the challenge of cybersecurity is a major concern for both public accountants and those in industry, while the growing demand for sustainability information is reshaping corporate reporting.

In tax, technology is changing client expectations and empowering competitors. “Young people will think about tax and planning differently from the way Baby Boomers do,” he said. “Young people are using algorithmic advisors instead of financial planners, so brokers and financial advisors are going to give away tax return preparation to draw the young people in.”

“Tax practices that focus on simpler returns are at significant risk, when you combine technology, our competitors, and the new tax act,” he warned.

Skill sets

One major component of adapting to significant change will be learning to develop new and relevant skill sets, Melancon said, citing a World Economic Forum report that suggested that in five years’ time, more than a third of the skills currently considered important today will no longer be relevant.

“I worry about the entry-level people in our profession” who will have to develop new and different talents, he said, “but I worry more about the skills of people in the middle of their careers.” They may find it difficult to adapt to new demands—and that will cause problems for firms, he pointed out, mentioning a survey that found two-thirds of auditing firms reported difficulties finding job candidates with the needed skills in technology, communications, critical thinking and judgement.

“We need to learn new skills, but we also need to unlearn old ways of thinking,” he continued. Firm models will need to change, both internally—in terms of the ratio of entry-level to more experienced staff, for instance—and externally, in terms of how firms manage their relationships with clients. As an example, he said that he has seen more firms experimenting with subscription-based relationships, where for a flat monthly fee, the outside accountant takes care of all of a client’s accounting needs.

Despite his many warnings, Melancon remains optimistic about the future, and CPAs’ prospects in it.

“These are extraordinary times for our profession, with extraordinary opportunities,” he said. “The opportunities in a complex world for new types of attest, audit and tax work are significant. We are so well-positioned for the future—but we need to have the willingness to think differently, to be bold, and to have tolerance for occasional failure.”

Companies Will Also Collaborate on Broader Audit Solution

SAN FRANCISCO (Dec. 4, 2017) – CPA.com, the technology subsidiary of the American Institute of CPAs, and CaseWare, a global provider of audit and analytic software, today announced they have teamed up to create a new solution for CPAs that will make preparation, compilation and review engagements more dynamic, intelligent and efficient.

The cloud-based solution, called OnPoint, eliminates repetitive tasks and integrates information from AICPA technical guides, giving practitioners a powerful, all-in-one tool for serving clients.

“Technology is reshaping the accounting practice, and the next big area to be transformed by automation, artificial intelligence and other innovation is audit and attest services,” said Erik Asgeirsson, president and CEO of CPA.com. “Today we’re announcing a solution geared toward the more than 20,000 firms that provide preparation, compilation and review services. This solution, which uses dynamic checklists to structure and manage engagements, will help CPA firms deliver the highest level of service to clients.”

OnPoint features include:

• Intelligent checklists to guide practitioners step-by-step through the engagement process, starting with customizable engagement letters
• Seamless collaboration between the firm and clients, with the ability to share files more securely than through email attachments
• Delivery over the CaseWare Cloud platform, which allows anywhere, anytime access with bank-grade encryption and other security features
• Integration with the latest AICPA technical guides
• Financial statement data and footnotes that can be updated with one click
• Dedicated on-boarding support for firms through CPA.com

“The marketplace is moving toward automated services faster than most practitioners recognize,” said Dwight Wainman, CEO of CaseWare. “OnPoint offers all the advantages of an intelligent solution, but also has the added benefit of integrating with the AICPA’s highly regarded technical guides. That’s difficult to match.”

As a cloud-based solution, OnPoint permits timely updates as technical issues change.

“Quality of service is a defining characteristic of the CPA profession, which is why the AICPA launched the Enhancing Audit Quality initiative and is collaborating on solutions such as OnPoint,” said Susan Coffey, CPA, CGMA, executive vice president of public practice for the Association of International Certified Professional Accountants. “Having the relevant technical information on hand while managing engagements is critical to providing the consistency and quality the profession requires in the preparation, compilation and review service lines.”

The collaboration between CPA.com and CaseWare was announced at the Digital CPA Conference, a leading event for driving technology adoption and practice management improvement within the accounting profession. More details about OnPoint will be available in early 2018. As part of their work together, the two companies are developing a broader audit solution for CPA firms.

Firms interested in more information about OnPoint can send inquiries to onpoint@hq.cpa.com.

About CaseWare

CaseWare International Inc. is the leading global provider of cloud enabled audit, financial reporting and data analytics solutions. With efficiency, quality and value in mind, CaseWare provides cutting-edge technology to accounting firms, businesses and government entities. Over 400,000 users, in 130 countries and in 16 languages, use CaseWare solutions.

About CPA.com

CPA.com offers a growing list of products and services for practice management, client advisory services and professional development. The company has established itself as a thought leader on cloud technology and has been a driving force around the reemergence of virtual CFO/controller services by firms. In addition, CPA.com – in partnership with Confirmation.com – has developed the RIVIO Clearinghouse, an online financial document clearinghouse that enables private businesses to exchange key financial information with lenders and investors. CPA.com is a subsidiary of the American Institute of CPAs, the world’s largest member body representing the accounting profession. For more information, visit CPA.com.

About the American Institute of CPAs

The American Institute of CPAs (AICPA) is the world’s largest member association representing the CPA profession, with more than 418,000 members in 143 countries, and a history of serving the public interest since 1887. AICPA members represent many areas of practice, including business and industry, public practice, government, education and consulting. The AICPA sets ethical standards for its members and U.S. auditing standards for private companies, nonprofit organizations, federal, state and local governments. It develops and grades the Uniform CPA Examination, offers specialized credentials, builds the pipeline of future talent and drives professional competency development to advance the vitality, relevance and quality of the profession.

The AICPA maintains offices in New York, Washington, DC, Durham, NC, and Ewing, NJ.

Media representatives are invited to visit the AICPA Press Center at www.aicpa.org/press.

About the Association of International Certified Professional Accountants

The Association of International Certified Professional Accountants (the Association) is the most influential body of professional accountants, combining the strengths of the American Institute of CPAs (AICPA) and The Chartered Institute of Management Accountants (CIMA) to power opportunity, trust and prosperity for people, businesses and economies worldwide. It represents 650,000 members and students in public and management accounting and advocates for the public interest and business sustainability on current and emerging issues. With broad reach, rigor and resources, the Association advances the reputation, employability and quality of CPAs, CGMAs and accounting and finance professionals globally.

As the new year approaches, Accounting Today asked a panel of industry thought leaders and experts to paint a picture of what accountants can expect from the next 12 months in terms of important trends, big surprises and key initiatives to undertake.

What trends should accountants keep an eye out for in 2018?

Jim Boomer (CEO, Boomer Consulting): The first is changing business models. Every conference, article and webinar talks about becoming more advisory and consultative. This isn’t something that’s coming; it’s already here. And the pace at which firms will transform is only going to accelerate from here.

Angie Grissom (president, The Rainmaker Companies): Accounting firms are getting even more serious about growth and competition. We are seeing firms increasing investment in programs relating to staying competitive. This includes increasing their footprint nationally and globally through talent and, in some cases, new physical offices. This includes hiring non-CPAs in roles such including business development, consulting and even firm management.

This is no shock as we see the move towards advisory services in the industry. Firms must compete in a new way with new talent and an increased focus on accountability. In a growth survey that Rainmaker completed this year, the focus on accountability came as the top benefit. Firms are finally starting to focus on accountability and understand the impacts a culture of accountability can have on retention, service, profitability and growth.

Rita Keller (president, Keller Advisors): I am becoming more and more concerned about how smaller firms and sole proprietors are reacting to the speed of change needed to keep pace. So many are aware that change is needed but seem so bogged down by the day-to-day workload that they are almost to the point of seeing no way out. Many of us (consultants, media, etc.) could see this coming but I think the ability for small firms to change declines with each passing year.

Steve Mankowski (president, the National Conference of CPA Practitioners): As we head into 2018, I believe that one of the primary trends is cybersecurity. Accounting firms continue to get breached at an alarming rate due to the personal identifying information that we maintain within our tax software. With input from the IRS Security Summit, the tax software companies have implemented password protocols, including required changes every 90 days. However, most practitioners have several years of tax software on their systems and have not applied the same security measures as they must for more current software.

Many practitioners are still under the belief that, “I’m a small firm and the bad guys won’t target me.” This can be no further from the truth. The hackers don’t know how much data is on a practitioner system and really don’t care. They simply download the data and sell it. In fact, smaller firms that have fewer security measures are easy targets. On the other hand, if there are too many deterrents, cyber-criminals simply move on.

Erik Asgeirsson (president and CEO, CPA.com): I think 2018 is going to be the year that the buzzwords we’ve been talking about in the past couple of years – artificial intelligence, machine learning, blockchain – will lead to some serious products and beta trials that will impact the profession.

Gary Bolinger (president and CEO, the Indiana CPA Society): CPAs will need to pay close attention to increasing demands for reporting on non-financial information — the kinds of information that really describe the ability of an organization to create value over the short and long term. Clients, employers and other stakeholders are increasingly interested in non-financial information and the profession must respond in order to maintain relevance. If clients and employers aren’t asking for it, the professional needs to be aggressive in explaining the value of that kind of information. Intangible assets of the S&P 500 were 17 percent in 1975 and 84 percent in 2015. It’s a trend that [profession simply can’t ignore.

Joel Sinkin (president, Transition Advisors): For larger firms it is the addition of new niches. We have seen firms acquiring cyber-security departments, human resources niches and other nontraditional services that those firms are currently not offering. This includes embracing a future where IT reduces many traditional accounting and tax services, and consulting becomes the key to attracting and retaining clients and revenues. That said, one way to offset the one-stop shopping strategy is to become highly specialized in one or two in-demand areas and market them accordingly.

Keller: I also expect to see more and more firms hire non-CPA track people. Bookkeepers and paraprofessionals are happier doing the outsourced accounting/controller work and do not have expectations of becoming an owner some day.

Boomer: Also, the pace of change in tech in technology is also accelerating. Firms should pay attention and seek to understand artificial intelligence and blockchain. Considerable investments in both are already happening at vendors, in larger organizations (including CPA firms), and at the American Institute of CPAs.

Mankowski: Blockchain is an entirely different trend. Blockchain is the latest buzz word to enter accounting and if it gets implemented correctly, can provide audit details that have never been seen before – on both sides of the transactions. Not only will an auditor be able to verify the dollar amount of a transaction, but they will also be able to verify the other parties involved in the transaction, and then trace ownership back to the source documents. This revolutionary technology could end up as a major deterrent to fraud or other types of theft due to its multi-faceted audit trail.

What do you think will be the most surprising thing for accountants in the coming year?

Sinkin: How age is catching up to them. We are reaching the heights in the Baby Boomer aging scenario, and while the focus has been on partners who seek to slow down, we need to widen our scope to include key staff members also seeking a role reduction. Asking key staff and partners how long they expect to work full time, instead of asking them when they want to retire, may unveil exit timings the firm wasn’t expecting. Clearly, mandatory retirement impacts this as well.

Asgeirsson: To me, it’s how quickly client expectations about service will change once we begin to see more mature automated solutions in the marketplace. Firms are going to be experiencing much higher client expectations.

Bolinger: Technology will outpace any expectation that most CPAs have. Technologies like artificial intelligence and blockchain are just two examples of technologies that will be a major factor for firms and companies of all sizes much sooner than most professionals expect.

Boomer:The biggest surprise for many firms will be how quickly the emerging trends and technology they’ve been hearing about in the last year or two will come to fruition. The pace of change is becoming exponential.

Grissom: Continued consolidation of some firms and new competition emerging. Firm leadership must continue to focus on retaining their best talent and clients, and this is becoming more difficult. We are seeing firms make concerted efforts to expand service offerings in an effort to differentiate themselves from others. We are also seeing firms start to personalize the career paths for their individuals in order to create the best environment. This may include specialized training and development, flexible working arrangements and unique perks and incentives.

It all comes down to communicating with clients and team members in an impactful and meaningful way and making course corrections as you move along. This creates a strong culture of service (both internal and external) in a firm.

Keller: Not sure if it will happen much in 2018, but with all we are reading and hearing about AI and the predictions that accounting is something that robots will take over, I imagine we will see a decline in college students majoring in accounting. Why focus on a career that might be phased out in the not too distant future? It appears in the near future the accounting profession will have a great need for people with data analytics skills and a need for skilled business consultants - not so much need for compliance skills.

Do you expect anything to get radically worse for accountants? Radically better?

Bolinger: Opportunity will be better than ever. The profession has so much to offer. But practitioners must prepare for meeting expectations and understanding needs that that are not clearly articulated. New skill sets must be cultivated and practitioners must be innovative in responding to a rapidly evolving business environment. There is a huge need for the profession to ask provocative questions and seek unconventional solutions.

Boomer: Whether things get better or worse depends on your mindset. If you have a growth mindset, you’re willing and taking action to transform yourself and your firm to prepare for what’s coming. In that case, things will be radically better than what we started with.

However, if you stick with what you’ve always known and done, it will likely get worse.

Keller: In 2018, I think the larger firms will continue to do better. In 2018, I believe that many of the smaller firms will continue to struggle with the decision of what to do about the future of their firm.

Asgeirsson: CPA firms over the past decade have been fortunate to have two kinds of years – good ones or very good ones. And I don’t think that’s going to change soon. I do think that opportunities will get radically better for firms that embrace change, specialize and figure out a path to high-end advisory services. While I wouldn’t say things will get radically worse for those firms who stay the course, automation, artificial intelligence and other innovations will have an impact on growth prospects for traditionalists down the line.

Sinkin: Succession for the medium to larger firms will get measurably more difficult. For one, the valuations of those firms will continue to trend downward. For example, take firms that are generating between $3 million to $15 million in annual revenues who may have succession issues. Then ask yourself how many firms in their local area would be big enough to absorb them while also having the capacity and skill set to step into the shoes of the retiring partners? The answer is not many, if any.

Too many firms lack the talent on their respective “benches” to execute an internal succession plan for all their soon-to-be-retiring partners, and are forced to look externally for a solution. As a result, supply will outstrip demand and it will become an even greater “buyer’s marketplace.”

Conversely, what will get radically better for the profession next year and beyond is technology. Applications and systems what were once perceived as unaffordable for smaller firms have and will continue to become the rule rather than the exception for those smaller practices.

Mankowski: I don’t know if I would say that anything would get radically worse or better for accountants. However, the timing of tax reform is an area that could impact tax season for accountants. Specifically, just with the first rounds of tax reform getting released, clients have already begun asking questions about the potential impact on their taxes. This will only increase once tax reform is passed. The result to accountants is that our already time-compressed tax season will get more compressed as we will be spending time answering additional client questions.

Accountants should see this as an opportunity to meet with clients, after tax season, to discuss the impact while not in tax season. This should also create a billing opportunity for accountants who perform this service for their clients.

Therefore, tax reform will make things worse but also create some revenue opportunities for accountants.

Grissom: Those firms who are lagging in the adoption of technology and are “change resistors” will continue to struggle and the pace of this struggle with increase as those who embrace technology benefit. While there is a cost associated with investing in new software and implementing and learning new processes, the cost of falling behind is greater. So, staying in sync with what your firm, clients and team need will become radically worse for those who have their heads buried in the sand and will become radically better for those who are researching, investing and adopting technology to run their practices more effectively.

What one piece of advice would you give firms going into next year?

Mankowski: The primary piece of advice that I would give to firms going into next year is to stay abreast of the changes in technology. The added emphasis on cloud-based technology will continue to allow smaller firms to have the same access to technology as large firms, without incurring large capital outlays. As firms shift to the cloud, there is an immediate improvement in the security of our data — even though, conceptually, that may be counterintuitive to some. Regardless, firms need to realize that they are ultimately responsible for the security of client data. Cybersecurity is still an issue that many firms still have not taken seriously enough. The accounting industry is under attack for the personal data that we maintain and we must improve our level of diligence in order to protect this data.

Grissom: Take a look at your firm as if it is brand new. Determine what has made you successful (a culture of client service, or technical talent, for example.) Determine what is holding you back (disorganization around growth, lack of processes, training, technology, or talent, for example.) Make a decision to continue to focus on and strengthen the areas of strength and to work on and strengthen the areas of weakness. Put good people in charge of these initiatives. Seek experts. Stay the path. Set the tone. Go after it.

Bolinger: Pay close attention to trends that you aren’t thinking much about. The rate of change in terms of client and employer expectations for relevant, forward-looking information will accelerate dramatically in the near term. The traditional roles of the accounting professional will quickly shift with additional demands for strategic insight for future success.

Keller: My one piece of advice for CPA firms is to push their partners to read everything they can about AI, blockchain, etc. Attend conferences where you can learn from experts and understand what accountants will be facing in the not-too-distant future. Then develop an action plan for how your firm will survive, short-term and long-term.

Boomer: Focus on relationships. When we think about technology and automation replacing what a CPA brings to the table, there are three functions that humans provide: hand, head, and heart. We’ve seen automation replace the hand in manufacturing and it’s already starting to happen in professional services. AI is replacing a lot of what the head can do. But what can’t be replaced is the heart and our relationships with clients. Make sure you’re delivering not only what your clients need but what they want. Deepening those relationships is essential for remaining relevant in the face of automation.

Sinkin: Be realistic as to where you are and what can be done in terms of succession. Take a holistic view of your practice in terms of working timeliness and who is in your bullpen. We continue to see far too many firms suggest they will conquer their succession needs by recruiting young talent to groom into future partner roles. While this is a goal for all firms, is it a realistic goal? Absolutely not. Rather, it’s a fantasy. Proper transition requires years of proactive planning.

For the majority of firms, they are physically in front of the bulk of their clients once a year – tax time. You cannot transition clients through the cloud, portals, e-mails or by phone. A proper transition requires face to face meetings. If you only see a client once a year in person, three years from slowing down translates to three visits. If you have been trying for years to develop the internal talent to execute your succession plan and still haven’t, don’t wait until it is too late to find an external solution.

Asgeirsson: Before you decide on the technology you plan to adopt or the sectors you plan to pursue, you need to do an in-depth strategic review of your firm – know your strengths and weaknesses and plan for the future based on that assessment. What separates firms that are successful in implementing technology is making sure they aren’t implementing the latest technology just to be cutting edge.

The emergence of blockchain technology has led to a concern in the CPA profession that is perfectly understandable.

Technological advances can threaten people’s livelihoods in any number of professions. The development of the internet had a devastating effect on newspaper journalists, and some experts say self-driving vehicles may cause huge job losses among truck drivers.

Blockchain, meanwhile, has implications for the accounting profession. Blockchain is a digital ledger on which transactions are recorded chronologically and can be viewed by all who have access. The technology is expected to affect auditing, cybersecurity, and financial planning and analysis.

Erik Asgeirsson, president and CEO of CPA.com, the technology arm of the AICPA, said that some CPAs have anxiety that blockchain might put audit professionals out of business. But while blockchain is likely to change the way CPAs work, he said, he is telling accounting firm leaders that the accounting profession can continue to thrive through the use of blockchain technology.

“It’s going to be a fantastic, secure database that will have uses,” he said during a panel presentation Tuesday at the Wall Street Blockchain Alliance’s Blockchain for Wall Street education day in New York City. “But it’s not going to put them out of work.”

Large and medium-size CPA firms already are seeing the implications of blockchain for their clients, Amy Pawlicki, CPA, vice president–Assurance & Advisory Innovation for the Association of International Certified Professional Accountants, said during the panel session. Companies are implementing blockchain into their enterprise resource planning (ERP) systems, particularly for tasks such as procurement and supplier management.

Blockchain’s ledger-based technology can simplify the procurement process because it enables secure recording of transactions in a way that can lead to unprecedented transparency and increased operational efficiency.

“Our auditors are already auditing transactions in the blockchain,” Pawlicki said.

Blockchain’s transparency gives visibility to all transactions for approved users, and this may decrease auditors’ work with sampling and validating transactions. But this allows auditors more time to focus on controls and investigating anomalies. Meanwhile, opportunities are emerging for CPAs to use blockchain technology as they expand their assurance services to areas such as cybersecurity and sustainability.

“We’ve got a lot of work to do … it’s a great opportunity in an area where CPAs can add a lot of value,” Pawlicki said.

An important next step for the profession in the use of blockchain is accommodations for the technology from standard setters and regulators. SEC Chief Accountant Wesley Bricker, CPA, J.D, said Tuesday that the commission’s Office of the Chief Accountant is investing time in understanding blockchain technologies, and suggested that accounting professionals do the same.

“It is important that those in the accounting profession invest the time to understand new trends and developments in technology and commerce to identify their potential effects on financial reporting to investors,” Bricker said during a speech at a Financial Executives International conference in New York City.

Past developments such as the emergence of computers, ERP systems, and cloud computing have merely changed CPAs’ work instead of making them irrelevant. The same can be true with blockchain, Asgeirsson said.

“Through every phase,” Asgeirsson said, “what’s really happened is that the accountant’s and the auditor’s role has just evolved.”