Mike Federle, then-CEO and current strategic advisor at Forbes, moderates a panel of top CPA honorees: Lexy Kessler, Mid-Atlantic Regional Leader, Aprio, Steven Harris, Managing Partner, RubinBrown and Tony Argiz, South Florida Managing Principal, BDO USA.
Jamel Toppin
As opening day for tax season approaches, heralding the date the IRS begins accepting tax returns, it’s an appropriate time to consider the major issues facing the accounting profession. In the wake of last year’s first-ever Forbes Top 200 CPAs list, a panel discussion involving some of the CPA profession’’s luminaries tackled those issues. That panel included: Tony Argiz, South Florida Managing Principal, BDO USA; Steven Harris, Managing Partner, RubinBrown, and Lexy Kessler, Mid-Atlantic Regional Leader, Aprio. Hosted by Forbes then-CEO and current strategic advisor Mike Federle, the wide-ranging conversation, edited here for length and clarity, holds many insights for the coming year:
[Looking forward, Forbes will celebrate the Top CPAs in each State this year and nominations will be accepted until the end of January. Click here to nominate.]
Artificial Intelligence
Mike Federle: AI is the topic of the day. How are you seeing its impact in the accounting profession, and why do you think it’ll be increasingly important for CPAs to understand?
Lexy Kessler, CPA: There’s no question it’s changing what we’re doing and how we’re doing it. Within our organization, we’ve been adopting and test-piloting some, but there’s one in particular, with 200 individuals in our firm, that we are saving an average of 41 minutes a day. I mean, that’s powerful when you think about that. And with the pipeline of new CPAs which hopefully we’ll talk about in a little bit, we need the tools to be able to do that.
But with that, we need guardrails. I mean, we have to be careful about what we’re doing. I know that, even within our firm, we are actually putting together an AI ethics and compliance policy so that we’re safeguarding and protecting the firm from risks and unknown risks that we probably don’t even know about yet.
Tony Argiz, CPA: I think it’s going to have an impact all over the profession. When you say the number of hours, they’re expecting hours with the investment in AI, jobs to be reduced 25% to 30% in the next five years. So what are they going to do with those 30% of hours? I mean, there’s 135,000 jobs that open up in accounting on an annual basis, and there’s only like 45,000 to 47,000 graduates. So obviously, a lot of firms have gone to India and other places to make up the gap.
But I also see in the audit profession, uninterrupted audits, more precise audits. I think it’s going to be a great way through algorithms to check fraud that we’ve always had issues with. It’s going to look at the controls within the audit and tell you, based on the data and the information that goes through it, whether those controls are really working and that you can depend on them. Not just your interview with management and the testing you do, it’s uninterrupted testing. I mean, if you look at valuations, just to take an area, or litigation and consulting, it’s a great way to test your assumptions by the information and the data that is has. To check it against industry, why did you use this cap rate in the past? How does that compare within the industry?
And with taxes, you look at the ability to summarize agreements and really focus on the main areas of those agreements. And then also, with all the data there to help in complex tax structures and how to do them. And also, a lot of the compliance on the tax returns, I think it’s going to reduce quite a bit the amount of hours.
Steven Harris, CPA: I think, when you look at AI, I like the concept of really trying to make our profession attractive again to young talent. They’re coming in and they want to be excited about what we do each and every day, and so I think AI helps us with that. It helps to really define what we’re trying to do. A lot of these kids are going to colleges, they’re learning skills, they’re coming and they’re using these tools. They want to do it when they come and work for us. And so, if we marry that together, I think it makes our profession much more exciting.
Private Equity
Mike Federle: Yep. Hey, Tony, let me ask you this question. [Given the] recent trend of private equity firms striking deals—what are the consequences of private equity in public accounting?
Tony Argiz, CPA: That’s a good question. Who knows now? But I guess they see a lot of value in the profession. They see a fragmented industry that they can put together or they can bring up firms and consolidate them together. They see that they have the pockets to invest in talent and steal talent from other firms. I think they also look at the AI situation—I mean, look at the stock market. Everyone that’s invested in AI, their stock is way up. I mean, the $3 trillion valuation of Nvidia.
Look, in ’08 and ’09, our profession didn’t feel the hit of the economy. We had one of the greatest recessions we’ve ever had in our country, and the revenues grew, the profits were there. It’s not like anyone went out of business. And they also see that maybe accountants aren’t running the businesses like they should be. Or like we tell our clients how to run their business, maybe we’re not doing the same thing in our businesses, and private equity is looking at all these factors and saying, „Hey, it’s a steady industry. In down times, we’re going to have the income. They’re short of talent, so the investment in AI might really help out.“ So there’s a lot of promise, I think, that they see there.
Taxes
Mike Federle: [Many] financial decisions come down to taxes. How can firms handle dealing with the changing tax laws? Because you get interpretations in all directions.
Steven Harris: You call it changing tax law, we call it job security.
Mike Federle: All right, I’ll give [you] that one.
Steven Harris: You have to embrace it. I mean, again, it creates opportunities for our clients. I think most firms go in and try to embrace those opportunities to learn the tax laws, get their teams involved, get them educated, get them up to speed—and then be very proactive with their clients to make sure they’re out front and making sure how they can optimize and benefit from the different tax laws.
We can all go out and do tax returns and we can do these things, but the value of what we provide is advisory and the consulting services that goes into, „Hey, I’m thinking about doing X. How do you help me avoid some taxes?“ And then when we are at our best, is when we go and we help them do those things, staying within the guardrails that we need to. We don’t want any issues. No issues or anything. IRS people in the audience, I just want to say that. But you want to make sure that you’re providing that type of value.
Public Company Accounting Oversight Board (PCAOB)
Mike Federle: So Lexy, I’m not deep on this subject, but I understand the PCAOB has really imposed, I think, more than $20 million or so in civil penalties, an 80% increase year-over-year from ’23 to ’22. And public disciplinary actions have gone up. How is that affecting the profession? The cost of insurance, I guess, is one of the questions. But how is that affecting the industry overall?
Lexy Kessler: Well, I think first of all, they’re very clear that they’re going to continue on that path, if not accelerate. So that does have an impact from a firm business perspective, and how are firms going to be willing to take on that risk? And from a public interest, we need firms to be able to continue to do audits on publicly traded companies. So, there’s a need that we have, and there’s also this kind of pushing back on it. And will insurance go up? Yes. I don’t know how it can’t.
Mike Federle: Yeah. Again, the ignorance I have is how that works in Washington. Will that be affected by whatever administration is in?
Lexy Kessler: I mean, you never know, what the administration comes in and what ends up happening with the leadership of PCAOB, that’s what will decide it. But I think that there’s this tone that’s been set, and it’s going to take something to derail that tone.
Steven Harris: One thing I would add to the regulatory issue, what I think is really having an impact inside the firms, you’re seeing a lot of people, senior partners, they’re getting burned out because they’re going through these different challenges; everybody has a fear factor of making that big mistake and costing the firm some significant resources. And so if you’re a senior partner, you’re 58, 59, 60, potentially you’re like, „Man, I have to do these regulatory audits. It’s time for me to take a seat and retire early.“ So we’re seeing a lot of that.
Tony Argiz: And that’s important, what Steven is saying. I mean, people are [saying], „Do I want to tackle this? I’m 58 years old. Do I really want to jump in this industry? This client has had issues, and at the end of the day, it’s my name on the line.“ So, it’s really scary out there, the whole situation.
The Pipeline of New CPAs
Mike Federle: Yes, that’s my understanding. Probably the topic I heard the most during the cocktail hour was about the pipeline and the future. I think almost 75% of the CPA workforce met the retirement age in 2020. Is that possible? That seems like a very high number. But as estimated by the American Institute of Certified Public Accountants. So Steven, I’ll start with you:what are the possible solutions to staffing?
Steven Harris: There’s a lot of solutions to staffing when you’re looking at numbers like that, people leaving the profession. The first thing that comes to mind is outsourcing. You see a lot of firms that are shipping resources over to India and other countries to see if we can leverage those countries to help us with some of the mundane tasks that we do. It’s really helping on two fronts. You’re shipping work away that’s really bogged down a lot of your younger staff. But then at the same time, you’re getting better profits from doing so. So it’s checking a couple of boxes from that perspective.
I would say the other thing is that we’re looking outside of the accounting profession and saying, „Where can we go grab talent and get them excited about being a part of our profession, as well?“ So if you get that economics major or if you get that finance major or if you get that marketing major and then flip them into accounting, I think we’re all winning in that space, as well.
I take my own son, he’s a marketing major, he’s living his best life in Denver, and he came home for the weekend and he’s talking about, „Maybe I’ll look at accounting.“ I said, „Well, maybe you should to get off my payroll.“ But you’re trying to find different ways to get all these young, talented individuals excited about what we do each and every day.
Lexy Kessler: Yeah, so the timing is really exceptional on this because, yesterday, the National Pipeline Advisory Group did issue its report from our year’s work of really digging into understanding what the root cause is and looking at data to what is causing our pipeline issues, and there are six things that came up to the top on it. And from the firm perspective it’s to make that employee experience more engaging. And what the data is showing is that starting salaries coming out of college are not competitive with other professions. And the work-life balance isn’t there. And certainly the perception of the hours. We’re really not competitive until about five years in, but this generation doesn’t care. They don’t want to wait for it.
And we keep hearing about this war on talent, and how certainly my generation is, „Well, we did that. What do you mean work-life balance? What does that mean?“ Well, but the reality is the war on talent is over and talent won. And that’s just where we are, and we have to accept and move on. And the firms that do that will be more successful.
So there’s that. There’s support for the (CPA) exam, with more time off to be able to study for the exam and get through the exam. There’s a lot of need where our profession does not represent our population, and really focusing on underserved communities and helping to bring them along, and maybe helping them transition from two-year colleges to four-year colleges. Making the academic experience more engaging so that we’re not weeding out students in classes, we are pulling them through. So that’s just a few.
And then one more for everybody in this room, which is why I said celebrating our profession, is that we all need to tell a more compelling story. We need to celebrate. When you talk about tax season, when you talk about the successes of what we’re doing, the strategies of what we’re bringing to our clients and the difference that we’re making in the lives of our clients, we don’t talk about that. And that’s what’s so rewarding about what we do, and we need to celebrate what we do. So everybody on LinkedIn, change your language, please.
To nominate America’s Best In State CPAs, click here.
