Stay informed with free updates
Just log in accounting myFT Digest — delivered straight to your inbox.
Barry Melancon, dubbed “the most important man in accounting” for his 30-year leadership of the US professional body, has sent a stark warning to his successors that they must not compromise standards in an effort to attract more people to the profession. .
Melancon will retire this month as the longest-serving chief executive of the American Institute of Certified Public Accountants, overseeing a profession that has been transformed by new technology and private equity investment but finds itself in the throes of a recruiting crisis.
With young people lured by higher salaries and lower entry requirements in finance and technology, the number of people taking the institute-run CPA exam has fallen sharply, and accounting firms have called for reforms to make it more accessible. cheaper and faster to qualify.
In a wide-ranging interview with the Financial Times, Melancon expressed skepticism about some of the firms’ claims and said a race to the “lowest common denominator” could return to haunt the profession.
“We’re a very trusting profession and we live in a world that doesn’t have many touchstones for trust,” he said. “We have to respect the respect we get from the public and from the business community and from regulators.”
The lack of accountants has been blamed by some companies for potential flaws in their financial statements, and some local governments and US companies have complained that auditors are harder to find.
After initially resisting pressure from the profession, the AICPA in September proposed dropping a requirement that accountants have the equivalent of five years of college education, known as the 150-hour rule — one year more than the 120 hours of coursework in a typical college degree.
Melancon made it clear that he had doubts about the need for such a change. “The 150-hour rule elevated our profession, which in the 1970s was more craft-oriented than profession. It raised the quality of people in our profession, and the standing of our profession, and to deny that is to deny history.”
Melancon was the AICPA’s youngest head when he took over in 1995 at age 37, and he hasn’t shied away from pushing for change in the past. He insisted on computerizing the CPA exam when some in the profession resisted and made the qualification available internationally. He also advocated the creation of audit systems and other technologies that could be shared between firms. Accounting Today magazine has consistently ranked him as the most influential person in the profession.
A new flashpoint concerns the details of on-the-job training that the AICPA has designed as an alternative to a fifth year of college education for CPA candidates.
The FT has reported that the group representing major accountancy firms wanted a simpler system than the one proposed, which would require supervisors to certify that new recruits have acquired dozens of specific skills or “competencies”.
Critics say the plan is too complex, costly and subjective, but Melancon said ensuring new accountants had specific competencies was vital to prevent a “lowest common denominator problem” that an unqualified practitioner could lead to. reputable profession.
“Firms don’t take their investment in the people they hire lightly, so it shouldn’t be a big change for the vast majority of firms,” he said.
The proposed changes come against a backdrop of a rapidly evolving workplace, with less need for armies of new employees performing repetitive tasks and new opportunities for accountants to use their business and financial acumen to help customers.
“The entry-level positions in our profession will be reduced. . . because of technology and the traditional pyramid shape of a public accounting firm will not be the structure of the future,” predicted Melancon.
“We need to develop investment in upskilling to get people more quickly into that middle part of the firm or the finance function, where the profession is so valuable.”
Also changing the shape of the profession is the arrival of private equity, which has bought a third of the 30 largest US firms by 2022. In addition to promising funding for technology investments, the deals offer windfalls for older partners and capital to encourage young people. Regulators, however, have warned that private equity ownership threatens the objectivity of audit work, while the need to maximize profits could lower standards.
“I don’t think the traditional partnership structure is the only way our profession can function,” Melancon says. While he welcomed the experimentation, he added that “anyone who thinks (private equity deals) are all going to be marriages made in heaven is wrong.”
Ultimately, accounting firms are likely to find investors who can hold them for the long term rather than flip them, he said.
For a final prediction before retirement, Melancon uses a quote he’s had in his office for decades. “Change,” he says, “will never be as slow as it is today.”
