Accounting: Take the Long View
Christen, Timothy L
Managing balance-sheet snapshots and taking the long view. The accounting profession prides itself on doing both for its clients, in practice and in principle. Accounting’s own long view for 2008 shows a profession more outward looking than in recent years.
Years of regulatory drama and market realignment have improved the confidence of the accounting profession. The time is right for such confidence. Accounting firms come out of a year where business remained pretty robust to face the reality that growth is soft and competition stiff.
Absent another Shockwave, we see accountants and firms seizing the moment to be proactive, to individualize their response to the marketplace. Many firms are adopting efficiencies to counter price resistance and staff shortages. They also are gaining promotional polish-getting comfortable with projecting a stronger public persona.
Other visible business strategies include development of targeted client services and finding innovative ways to become the employer of choice.
Consulting is a burgeoning service line in this scenario. The push of technology on every aspect of business and commerce accelerates the demand for knowledgeable advisors from the accounting sector. And the chance to apply these think-on-your-feet skills attracts strong talent to firms that have consulting in the mix.
One “double take” here is the fact the Big Four accounting firms are back in the line up. They virtually jettisoned consulting to concentrate on audit work after Enron. As the impact of Sarbanes-Oxley (SOX) flattens, firms of every size are converging on the middle market with an expanded array of services. For clients, that promises competitive fees and plenty of choice.
Succession planning is a hot-button issue in almost every industry today. The accounting profession is no exception. Executive transition is about to pre-empt personnel scarcity as a major challenge for many firms.
The numbers truly call the question. In 2006, 74 percent of AICPA (American Institute of Certified Public Accountants) membership was over 40 years of age compared with 47 percent in 1993.
A succession survey from 2004 reported that of 500 firms in the private companies practice section of the AICPA, more than 60 percent of them had partners aged 55 to 65. Only 19 percent of these firms had a documented succession plan. The implication for future-focused firms is to get serious now about ensuring their vitality and growth, to develop and empower the next generation of partners.
Lobbying by the accounting profession for liability reform will continue in 2008. In the wake of SOX, firms doing audits for large companies have been frequent targets of lawsuits. Ongoing efforts to educate the public help to some degree to close the perception gap about what an audit is and what it is not. However, without legislation, it is not enough to mitigate the risk of providing audit services to this sector.
Finally, the ever-shrinking world that influences everything from communications to product recalls is a volatile one for accounting, too. Many large and mid-size firms eye growth through mergers that open the door to a huge global market.
China, for example, with a real growth rate in its GDP of 10.5 percent in 2006 according to Baker Tilly International, Virchow Krause’s global partner, attracts foreign investors in droves. Accounting firms planning to be on the ground there are evaluating the risks and going in.
Critical to success here and the attraction of foreign capital to the U.S. market, is the rapid move toward international rules of accounting. Chances are good we will see resolution on this initiative in the near future.
The opportunity to gain greater perspective on these and other advances, to help accounting thrive nationally, also comes in 2008 as I join the board of AICPA. It is an honor for me and for Virchow Krause, dedicated as we both are to taking the long view of a profession weathered by change but alert to achieving its full potential.
Timothy L. Christen is CEO of Virchow, Krause & Co. LLP. A CPA with over 25 years of experience, he became CEO in 1999.Virchow Krause is ranked as the 15th largest accounting and consulting firm in the U.S.*, and is recognized as one of the fastest-growing in the industry.
* Public Accounting Report’s Top 100 for 2007
Copyright Trails Media Group Dec 2007
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