Paul Emery | Co-Founder | Head | Strategy | Makosi | mail me |
The accounting profession may be at a crossroads, but perhaps the choice of direction is one that can reshape the future and its reputation.
The challenge facing the accounting profession is nuanced. On one hand, the profession is attracting fewer people and struggling to retain those are in it. On the other, new technologies are disrupting how the profession works and the skills required from this dwindling workforce.
Recent incidents
It is complex, and perhaps a sign that it is time to interrogate the role of the public accountant and whether accounting standards and regulations are delivering the assurance they should.
The recent incident at Silicon Valley Bank has significant implications for the public accounting industry and highlights some of the challenges it faces. The bank had invested a large number of deposits in long-dated instruments that included U.S treasuries and mortgage-backed securities, all secured with short-term variable deposits. However, when the interest rates went up, the bonds and treasury values fell so the company’s bond portfolio dropped accordingly.
The bank decided to sell a portion of its securities at a loss as it was short on capital and this triggered a customer run on bank deposits and the company’s stock was shorted within hours.
It was an unprecedented event and one that resulted in the bank collapsing only 48-hours after making its decision to sell bonds at a loss. And it was an event that forced the industry to ask some serious questions around auditing, securities measurement, risk management and accounting principles. The latter were clearly not up to vagaries of the modern economy.
Regulations also didn’t support the bank and their shortcomings became rapidly apparent as Silicon Valley Bank sank.
Yet, this is a scenario that can very easily happen again, and very probably will. At a time when artificial general intelligence (AGI) undergoing rapid adoption throughout the sector, it won’t take long for a hedge fund or trading platform to short stock and for a collapse to happen in real time.
Regulations & emerging technologies
Currently, there is little that regulators can do to manage this situation as existing standards are not designed to help regulators identify red flags.
On the other side of this coin is the accountant. Professionals have to understand the technologies and the risks while navigating an increasingly complex banking and financial ecosystem. In addition, U.S. authorities have reduced the number of hours required to become a chartered accountant and fewer people are doing the work because companies are trying to cut costs. This means that the very people who are responsible for managing the checks and balances of the organisation are not as qualified, don’t have enough experience and are expected to deal with huge volumes of work.
In South Africa, it still takes seven years to qualify to become a CA compared with three in the UK and 18 months in the USA, but talent is leaving the country because of the current economic and political situation. All those left behind are left with the workload while their careers are fast-tracked due to a limited supply of talent.
Wedded to this complexity is the slow technology burn in the sector. Many of the innovative tools and technologies designed to relieve accountants of mundane and repetitive tasks are eyed with suspicion which means that these tasks remain a burden and a problem.
Moving forward into the technology revolution
Skilled individuals are dissuaded from remaining in the profession because they still have to do the repetitive tasks because companies are hesitant to move forward into the technology revolution.
Overcoming these challenges asks that:
- The role of public accounting is re-evaluated, incentivising skilled professionals to provide more efficient services and the ways in which organisations provide assurances on financial data and statements.
- Technology is introduced intelligently so as not to replace people, but to rather empower them to use the technology to achieve their goals more effectively.
- Public accountants are given the recognition, tools and incentives they need to play a bigger oversight role in governance.
- There is a commitment to retaining accountants by reducing the mundane workload and allowing for them to leverage their skillsets on higher critical thinking objectives.
- Organisations show they have a purpose and how the accountant plays a significant role in achieving this purpose. They need to automate tasks and fully realise the potential of graduates and employees by giving them work that has meaning and purpose.
- Providing upskilling opportunities to accountants across all levels so they can fill upcoming gaps and keep people engaged and committed to the business.
Moving forward, there has to be sustainable change. The ostrich trick isn’t going to work. Technology, people and companies need to revise how they approach the role, the value it adds, and the importance it has in ensuring the future of the country, companies and the economy.
