The Greek philosopher Heraclitus once said ‘The only constant in life is change’. He was right, and it certainly applies to public accounting practices too. The industry is constantly changing. The threats and opportunities are completely different to what they were just a decade ago.
It’s vital to keep up with what’s going on, as you don’t want to be using the 21st century equivalent of an abacus when everyone else has evolved past that.
Keep reading for a detailed look at what we believe are the 5 top trends that are shaping the future of public accounting.
As technology has become more integrated into everyday life there has been a lot of uncertainty about job security. What would be the role of public accounting firms now that easy to use software can do so much, so well, and at such a low cost?
The ‘rise of the machines’ is happening, but thankfully not in the way that some professionals feared. For example, US CPA journal archives show that in 1960 there were around 69,000 registered accountants. However, in 2020, there were over 658,000 registered accountants.
This suggests that even as automation has become increasingly prominent, it hasn’t prevented a significant increase in the number of accountants entering the industry.
According to global research conducted by Sage in 2019, 58% of accountancy professionals are expecting to automate tasks using AI solutions within the next three years. Instead of replacing public accounting firms, it has helped them to do more advisory work for their clients.
Now it’s possible for firms to become fully integrated into a client’s business strategy and tactics. They can now become a more holistic financial consultant, who has the capacity to look ahead for potential roadblocks that could hurt their clients and plan to minimise the impact or avoid them altogether.
For example, if a client wants to expand to another region with a different tax system, the firm now has more time to plan ahead to ensure that the operation is seamless. This helps to ensure that all future operations within that region are as tax efficient as possible.
Mistakes are also far more likely to be prevented with human and machine working together instead of just a human. In an arena where one mistake could mean a drop in stock price or public humiliation, this is highly valuable to clients.
As mentioned in the previous section, it’s now easier for public accounting firms to offer more advisory services to clients. Automation has made compliance easier to execute and harder to pitch to clients as a point of difference.
Wolters Kluwer carried out research into this trend by asking 700 accounting practices about their approach to advisory services. 50% said that they were looking to bolster their billing hours by offering value-added services to clients.
Advisory services could make up an increasing percentage of the services public accounting firms offer in the future as automation improves and the financial landscape becomes more complicated.
Every industry changes with the times to survive, this includes those who operate in the types that are illegal. Financial crime has now merged with cybercrime.
The two are now deeply intertwined as so much of the world’s financial activity is now carried out on the internet. The bank robbers of the 1960s are gone, the hackers of the 21st century are here, and they’re much better at their job.
Accounting firms need to be vigilant and pragmatic when it comes to the potential vulnerabilities of their systems. Reliable preventative measures must be put in place, regularly iterated and tested to try and prevent them.
The effects of cybercrime in public accounting are amplified due to the visibility of the targets. A crash in stock prices, a reputation valued in the hundreds of millions that have taken decades to build, could be ruined in an afternoon, all because a technical vulnerability was overlooked.
This is not to mention the financial cost of trying to repair the damage of an attack. One of the most notable examples of this is the 2013 Yahoo data breach which wiped $350m off the value of the company.
Trust in the financial industry is paramount and accountants have to do everything in their power to build and maintain it.
Criminals are now working with or are elite IT professionals to do this.
Public accounting firms need to counter this by working closely with elite cybersecurity professionals who are motivated to stop their nefarious counterparts from succeeding to ensure the following:
- Their practices are compliant with the latest cybersecurity countermeasures.
- Kept up to date with the latest cybercrime strategies and tactics through regular training sessions.
- Their clients are also educated about cybersecurity tactics.
Many of today’s top accounting platforms are cloud-based. This means that the technological burden on organisations has been reduced.
Downloading and installing programs directly onto a computer is no longer necessary. This puts less digital stress on individual machines and allows for far more flexibility in the way that firms can operate:
- Remote working — is now easier to implement, meaning that hiring policies can be changed to accommodate employees from further afield, which levels the playing field for talent.
- Lower costs — The software costs have dramatically decreased over time. In addition to this, having the option to work remotely can reduce overheads as there is less need for office space.
There are numerous infamous cases in the history of inappropriate financial activities happening at scale such as:
This has led to increased scrutiny on larger organisations that have public-facing accounts. The fallout if they make mistakes or fall foul of their respective national laws can be catastrophic for people who aren’t at fault.
Public accounting firms now have to be more mindful to obey stricter compliance rules of their client's respective fields. One misstep, because of historical events can cause an untold amount of tangible and intangible damage to their client’s operations.
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