The Evolution of Tomorrow's Accountant

In the aftermath of the Enron affair, what will tomorrow’s Accountant look like and how will they behave?

Will there be a limit on how much additional work one firm can do for an audit client?

Will newly qualified CAs leave public accounting in droves for the bright lights of industry, or will accounting firms find another way to retain their young talent?

Will the CICA step-in and take the moral high ground, or will they side-step the real issues, as many commentators expect?

In an ideal world, we might see new rules restricting the amount of additional services accounting firms can provide to their publicly listed audit clients.

The trouble is, we don’t live in an ideal world. Far from it.

To understand where we are going, it is important to know where we came from in the first place.

The origin of the word "auditor" comes from the times when a group of entrepreneurs would provide financial backing for a ship to sail to foreign shores. The mission was simple - conduct trade and return with a ship full of spices, tea, fruit or the latest craving of the day (this is how the tobacco industry started), to be sold upon the ship’s return.

After the consignment of goods was sold, the merchant would make the financial results available to his investors and divide the profits according to their agreement. This was a time when the general public could not read and write, so the accountant would read out the financial results to the shareholders.

"Audit" comes from the Latin to hear.

Today’s Accountant spends more of their time listening to commercial problems and designing solutions that get results. It’s all about adding value - a far cry from the stereotypical Monty Python caricature of the Chartered Accountant.

They are also more evenly divided among the sexes. Spin back to the 1960’s and you wouldn’t be able to find a female accountant. Today there are women partners in all of the big 4 (for that is what they will surely become) and the UFE results are very evenly split between male and female candidates.

It’s a truly rewarding career, but which direction should it take you?

Broadly speaking there are two distinct choices: public accounting or industry.

The attraction to many is the higher salaries available in industry and the prospect of making it all the way to CFO or even CEO. Candidates often quoted stock options and company cars, more vacation time and a better health plan as motivators to move.

And so we saw something of a “brain-drain” of bright new talent migrating in numbers from public accounting to industry as soon as they had qualified.

In recognition of this the bigger accounting firms raised their salaries and benefits to entice people to stay, resulting in an inflationary effect on salaries.

Working in industry is seen by many as exciting, fast-paced, and some would even say it’s sexy, especially if stock options are a part of the deal.

In public accounting, if you have what it takes to make it all the way to the top, you could expect to become a partner in a firm within five to ten years after qualifying, but there are a lot of variables that will determine your destiny.

For example, how good are you at attracting new business into the firm? It’s something they don’t teach you during your professional studies.

Rainmakers earn more, are promoted faster, and make it to partnership more often than their “ordinary” peers. These skills become essential if you decide to branch out and open your own firm.

There’s nothing like impending starvation as a motivator to generate new business, but that’s not the best way to learn. Thankfully, there are resources on the web that can help.

Assuming you intend to stay in practice there are a few other issues you will face:

Didn’t see your CA buddy cheering on the Leafs in the early stages of the playoffs? They were far too busy getting through a huge number of tax returns.

The volume of regulation in the profession is set to escalate yet again.

There are still excessive restrictions on how an accounting firm can promote and market itself.

You will need to continue with your professional education to make sure you keep up to date with the latest issues and practices.

You will need professional indemnity insurance. Just watch as premiums go through the roof next year, again.
So, will your firm be ordering a new shredder this year? The jury is still very much “out” on the effect of the Enron case, but one thing is for sure – more changes for both the Audit Partner and the CFO to deal with.

At present, only 36 of the TSE 100 disclose how much they pay their auditors. Of those, 14 said that 2/3rds or more of the fees paid were for services other than audit.

So what? Well, let’s put that into perspective. Petro-Canada paid Arthur Andersen $5m in fees in 2001, but only $711,000 was for the audit, and that’s not unusual.

It seems every few years we see a scandal that requires regulatory change. Enron is a perfect example, but I could also add YBM Magnex, Livent, Philip Services and others as cases where the auditors allegedly could and should have taken stronger action to protect the public.
Tomorrow’s public accountant will need to be even more vigilant over independence, have great people skills, and have a flair for bringing more work into their firm.

The accountant in industry will need to add value to their employer and create more shareholder value – without window dressing the balance sheet – otherwise they may have chosen the wrong career altogether.

© 2004, MFA Group.com