Previously, financial reporting focused on historical results, but business owners and stakeholders increasingly want their trusted advisors to look to the future. 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 dramatically over the past few years, and implementing new rules for revenue recognition, leases and disclosures has been a challenge for companies,” noted Neal Rotenberg, partner in charge of Marcum’s office in Saddle Brook. “The changing national and local tax landscape has not only caused tax compliance issues, but also financial disclosure issues.”
The changes affected both private and public companies, he said. “Although public companies generally have more resources in their accounting departments to manage 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 many changes, Rotenberg added. “There is just more to know in accounting. The fields of accounting are increasingly specialized. Our practice has focused on specific industries so that our professional staff working on assignments understand the nuances of clients’ businesses.
Educational institutions are doing their part to help prepare the next generation of CPAs, according to Rotenberg, who serves on Syracuse University’s accounting advisory board. “Like many other schools, Syracuse University has been active with its public accounting alumni to ensure their programs keep up with the changing environment,” he said. “But we need more students. There is a high demand for accountants both in public accounting and in the private sector.
And as business becomes increasingly technology-driven, the accounting profession has kept pace. “Marcum hires people with degrees in several fields,” he noted. “Technology is driving the modern audit practice, and the complexity of new technology-enabled financial products is driving a shift to finding ‘non-accounting’ professionals who have expertise in these areas. For example, the effectiveness of auditing financial statements has increased the need for data science and data analytics professionals; and as the use of cryptocurrency grows, professionals who understand blockchain technology are needed to help auditors.
The competitive business environment is also driving changes in the profession, noted Phillip Goldstein, CEO of Goldstein Lieberman and Co. LLC. “CPAs don’t just take a historical look at a company’s operations,” he said. “Clients want us to be strategic advisors, and we do, with activities such as analyzing business segments for winning and losing divisions, exploring product lines to identify loss leaders and providing M&A research and real-time insights so owners can run their businesses even better.
A digital revolution
Why is this change happening now? Goldstein cited the digital revolution as a catalyst. “Previously, you sent a [postal] mail someone and wait three days for a response,” he said. “Now people want answers instantly. Business moves faster and CPAs keep pace.
At the same time, he added, “companies are using new metrics that are often specific to the industry and user needs. For example, supermarkets focused on department-specific metrics like revenue, retail sales per square foot, and gross profit. Today there are new KPIs [Key Performance Indicators] that they need.
According to industry publications, these new metrics include metrics such as cost of fulfillment per order – the direct labor required to pick, pack and deliver each order and interface with customers, as well as indirect labor such as processing returns – and additional packaging supplies, allocated installation costs, delivery service providers, and the cost of managing online ordering sites and applications.
To keep up with these and other changes, companies like Goldstein Lieberman have expanded their recruitment beyond traditional accountants, according to Goldstein. “As our role has changed dramatically, we are hiring more and more people with skills in IT consulting, business consulting, HR and other areas,” he said. “We work with a variety of industries that have specialized needs, so we need people with skills that can meet those needs. It’s all part of an evolution.
Sungsoo Kim, an accounting professor at Rutgers School of Business–Camden, also acknowledged the updates. “The emergence of innovative technologies has changed the way audits are conducted and with it the role of the CPA, particularly over the past five years or so,” he said.
And auditors are increasingly incorporating analytics software into their fieldwork, “to help them perform substantive testing and draw conclusions about the financial data they’re reviewing,” he said. added. “The nature of auditing has also changed as auditors can now, in many cases, test entire populations of data instead of examining relatively small samples. This means for CPAs that they are now able to perform more effective and efficient audits than ever before. However, it also means that CPAs are challenged to quickly learn new technologies in order to perform their jobs. In recent years, there has been a boom in the number of clients seeking advice on issues related to emerging technologies such as blockchain, digital assets and cryptocurrencies.
Educational institutions are helping 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 audit analytics course,” he said. “Students in this course learn audit data analysis and apply this knowledge to financial data using tools such as Alteryx, Mindbridge and Tableau. At the graduate level, we develop these foundational skills by teaching tools that enable students to perform robotic process automation and process mining. Collectively, students are now graduating with much more technical agility and a higher level of preparation for the profession. Along with the audit analysis course, we have also introduced accounting analysis and reintroduced an accounting information system course to cope with these rapid technological changes in the accountancy profession.
However, increased responsibilities are not for everyone. “In line with the trend [national studies indicate fewer students choosing accounting majors], we also see a decline in accounting majors at our university,” Kim said. “Accounting may never have been seen as a fun specialty, but it traditionally offers relative job security and a modicum of prestige.
Despite the fact that the Big Four generally rank among the top 40 companies in the country to work for, it’s no secret that the work is demanding. This perception, combined with the requirement of 150 credit hours [to sit for the CPA exam]may deter more students than in the past because students are increasingly aware of alternative employment options that did not exist until recently.
He added that students today have many options. “The gig economy, social media, fintech, and other career paths can be attractive options for student entrepreneurs who might otherwise have pursued an accounting degree,” Kim said. “Compared to the demanding preparation for the CPA exam, there are easy jobs – such as the high-tech field – that are available without any rigorous preparation for certification.”
Ralph Thomas – CEO and Executive Director of the New Jersey Society of CPAs – has been at the forefront of the changes and challenges rocking the accounting profession. “The accounting profession has been evolving for years, but the pandemic has given accounting firms a chance to really show that they’re not just about audits and taxes,” he said. “It was a rushed process, and the accountants were a big help to small businesses dealing with requests for stimulus payments – advising them on forms and processes, as well as information required and people. To contact. Companies will continue to look to their CPAs for help with different types of issues, and CPA firms, in turn, will continue to offer more consulting services.
As CPA firms prepare to meet the demand for these enhanced skills, the NJCPA helps with its educational base and a variety of courses. “We track changes and then educate members on technology and other issues,” Thomas said. “We also help them find ways to onboard non-CPAs who have a deep understanding of the technology that CPA companies increasingly need to use.”