The Future Skilld CPA

Visions of the Future

In recent years, a number of reports have been commissioned by the various accounting bodies, with the brief to examine the drivers of change that will impact on the role of accountants in the future. Examples of influential reports include the following:
Added Value Professionals - Chartered Accountants in 2005 by the Institute of Chartered Accountants of England and Wales (ICAEW)
The Elliott Report by the American Institute of CPAs (AICPA)The AICPA’s CPA Visioning projectThe Mori Report commissioned by the Association of Chartered Certified Accountants (ACCA).
A study of the above reports reveals a common consensus on the drivers of change which include:
· The global economy
· Information technology
· The empowered consumer
· The demand for greater accountability
· Environmental and sustainability issues
· New work patterns
· New sources of competition
· Demands of small business
· Concentration of capital markets
· Intellectual capital issues.

One illustration of the above drivers is the view of the Elliot Report on the empowered consumer. It points out that it is unreasonable to expect CPAs to be exempt from this world-wide phenomenon. The concept of a one-size-fits-all product, like traditional CPA services, is rapidly becoming obsolete. The profession needs to focus on customers’ needs and provide services that each customer considers valuable for its own use. Another illustration of the drivers of change is in the area of information technology. As the ICAEW Report points out, the shift to an information economy will place greater value on workers who are skilled at identifying and solving complex problems and acquiring marketable knowledge. The knowledge workers, who add value through interpretation, analysis and presentation of information, will become more valuable as the economy becomes more service-based.

The accountant of the future will face, and is in many instances already facing, competition from tax agents, business advisors, unqualified accountants, financial planners, engineers and various consultants. Accountants need to capitalise on traditional strengths such as independence and concern for the public interest, through migrating to higher value-added activities, developing broader skills and being committed to lifelong learning.

Audit and Assurance

The ICAEW Report points out that the key in the field of auditing and assurance, is to recognise that auditing can be of even greater value if it looks beyond the traditional financial issues and focuses on issues that matter to a wider range of stakeholders and the public. Furthermore, the KPMG International report on The Financial Statement Audit acknowledges that many auditors now believe the audit methodology that was appropriate for the industrial age may not be sufficiently broad for the information age, when assets are intangible, commerce is electronic, markets are global and the pace of change is ever-accelerating.

What value should auditors offer? Is it the traditional audit approach of periodic reviews, historic data, cost-based data and financial information statements? Or is it a new assurance-based approach that is based on real time/continuous, prospective or value-based data and the provision of comprehensive information?

However, in moving to the latter assurance-based approach, auditors face credibility issues that go beyond the much discussed expectation gap. There are widespread perceptions of lack of independence. In the United States, the Securities and Exchange Commission has been critical of the business activities of accounting firms. There has been considerable criticism of auditors in Australia, such as in the recent HIH Insurance collapse, with former partners of its auditors being on the HIH board. The auditors also came in for harsh criticism in the Harris Scarfe “two sets of books” receivership. In the UK, questions have been asked on where were the auditors in the collapse of the Mirror Group Newspapers and also their role in the reporting by Equitable Life to its policyholders.

These criticisms are reinforced by the massive successful claims against auditors in the past, especially in Australia. These include the $136 million settlement in the Tricontinental collapse, the $145 million settlement on Cambridge Credit and the $31 million settlement in the Estate Mortgage case. Nevertheless, the auditing profession must move on and establish its credentials for the new assurance-based approach of the future.

Tax Advice and Planning

The impact of technology is becoming increasingly evident in the traditional taxation work undertaken by accountants. As noted by the ICAEW Report, the work in the tax compliance sector will increasingly be driven by technology and will need only a small number of trained staff in supervisory roles. In addition, margins will be low because of the competition from tax shops such as ITP and H & R Block and unqualified advisors, made possible by the low barriers to entry. The Elliot Report surmises that practices with low-level work are stuck in a death spiral.

Much of course depends on the tax regime itself, such as the future of personal tax returns, which have already been basically eliminated for many taxpayers in countries such as New Zealand. The recent introduction of the Goods and Services Tax in Australia has created considerable work for accountants, but that could all change as Business Activity Statements are simplified and electronically lodged. However, despite the attempts to reform taxation in Australia, experience to date has shown that the taxation legislation is becoming increasingly complex. This is also happening in many other countries and accountants of the future working in the taxation field may need to become increasingly specialised.

Commerce and Industry

Research has found that industry chiefs around the world are increasingly worried that their company’s key financial managers lack the skills necessary to adapt to a changing global environment. The Mori Report points out that the inability of finance professionals to take a broad strategic perspective, and to see the bigger picture, is the corporate chiefs’ greatest fear.

Nevertheless, accountants of the future working in commerce and industry will have the opportunity to become the key source of business advice within their organizations. However, to be successful in their new challenges, they will need to diversify their skill base beyond traditional financial analysis into areas such as information technology, non-financial performance measurement and general management. Chief executives will increasingly expect their accounting and finance people to take on a strategic involvement well beyond the numbers.

Accountants with a commerce and industry or public accounting background, will increasingly become involved in management consultancy. The ICAEW Report observes that the broad skills of accountants make them ideally placed to provide management consultancy services. Services that accountants are now offering include corporate finance, corporate recovery, forensic and litigation activities, E Business advice, knowledge management and also management assurance.

Electronic Commerce

The developments in E Commerce pose a big challenge to traditional business systems and the accountants that support them and are worthy of separate consideration. The internet will play an increasingly important role in the dissemination of business and financial information. It removes the international boundaries on information and conveys an expectation of up-to-date information dissemination and timely reporting. This will be of particular importance in the future for auditors, who will need to evolve a continuous model, where assurance is given on the system rather than the data.

As noted by Garthwaite and Wallace in Accounting & Business, April, 2001, business and financial reporting will become more user friendly as companies begin to use Extensible Business Reporting Language (XBRL). XBRL will enable real-time reporting by companies to the marketplace of their financial and reporting data. Users will be able to access this information and use it for their own purposes. These developments through the use of XBRL and the internet will have long term implications for the accountancy profession. Areas of work requiring expert assistance, such as translation of financial statements from one country’s GAAP to another’s, will be dramatically reduced in scope. The annual audit may see its impact diluted, as shareholders and investors begin to rely more on day-to-day information for decisions and a proper understanding of a company’s position. Also, key elements of statutory and regulatory reporting will be automated.

However, there are also opportunities for the accountant of the future. There will be increased work in other potentially more value-adding areas of business, such as more involvement in strategic decision-making. Statutory auditors will need to be involved in the provision of ongoing assurance on real-time numbers being generated and relied on heavily by investors and shareholders. E Commerce will change forever the way accountants work.

Role of the Professional Association

As the future role of the accountant changes, there will also be changes in the role of the professional association in servicing its members. The professional association will need to identify, understand and influence the trends occurring in business ( e.g., the Mori Report ) and communicate these trends to its members. It will need to facilitate the development of its members to meet the new demands of the market, through the continuing development of programmes such as professional development on line.

The role of the professional association will move from one of regulator and administrator concerned with setting standards and providing administrative infrastructure, to one of business partner. As a business partner, the professional association will provide its members with education and training, marketing support, branding, intellectual capital and standard setting in the public interest.

Attributes of the Accountant of the Future

The attributes of the accountant of the future will include:
· Personal attributes, which include insight, good professional judgment, project management skills, integrity and ethics.
· Leadership qualities of strategic thinking, planning and a cross-functional perspective
· Broad business perspective, which includes a good understanding of one’s organization and industry, risk management and organisational systems and processes
· Functional expertise in the traditional technical skills, including financial analysis and taxation.

Accordingly, the successful ACCA of the future will be a strong communicator,
be well versed in IT, be able to combine technical skills with strategic vision, see him or herself as a professional advisor, be committed to life time learning and learn from the profession’s mistakes of the past. As once articulated by the Past President of the ACCA, John Brockwell, the professionals who will add greatest value are those whose minds are open, who can interpret, understand and communicate the meaning of numbers, who thrive on challenges, who relish the opportunities for lifelong learning and who embrace change.