2005 Could Be a Banner Year for the Profession

Barring more global calamities or professional scandals, forecasters paint a rosy scenario.


by Rick Telberg
At Large

With the national accounting scandals comfortably in the past and hopes for an economic recovery in the future, 2005 could be a great business year for CPAs and their firms, say executives from across the accounting profession.

Tax, attest and financial planning services stand out as the areas most likely to enjoy the boom. This is one of the key issues raised in the series of reports that began Jan. 3 with the views of AICPA Chair Bob Bunting, in "Bunting Sets Agenda for New Year."

"2005 should shape up as another banner year for the CPA profession as the image is back to pre-Enron highs and demand for CPA services continues to grow;" Maryland Association of CPAs chief executive Thomas Hood said. He expects to see corporations increase their hiring of CPAs for their financial reporting expertise, and lessen their recruitment of MBAs and "finance gurus."

Among the vendors expecting big things in 2005, Mark Schlageter, chief operations officer of Thomson Tax and Accounting in New York, predicted that the time is ripe for accountants to "restate and reinforce the profession's value proposition as trusted advisor."

A boom in tax planning work is being predicted thanks to tax reform legislation and hopes for additional reform.

"People do not like change; this in turn leads to increased opportunity for accountants," said Bruce Clark chief executive of New Clients Inc., a Mullica Hill, N.J.-based provider of marketing services.

The Baby Boom generation's advancement toward retirement age will help fill CPAs' financial planning plates. David Reedy of Richmond, Va.-based financial planning services organization, Genworth Financial predicts that "an ever increasing number of CPAs" will be adding financial planning services in 2005 and those with established services will see an uptick in clients seeking to build cash reserves or to distribute funds already accumulated.

Practitioners themselves are bullish, such as Thomas Marino, managing partner of New York-based regional giant J.H. Cohn, who predicted that 2005 will be "a very good to great year" economically, and Jerry Esselstein, an Ohio CPA and past president of that state's CPA society, who said that demand for services will be high.

However, there's also a good deal of caution as you might expect from our sample of experienced CPAs.

St. Joseph, Mo.-based CPA and practice-management guru Charles Larson is hopeful about a banner 2005, but added that global politics and terrorism threaten to spoil the party.

"Everyone needs to have done some contingency thinking and be prepared for the unexpected," he said.

"While accountants got some bad initial press because of all the audit failures, in the end it was the accountants who were the winners," added Steve Albrecht, associate dean at Brigham Young University's Marriott School of Management.

Albrecht noted that CPA firms of all sizes will be performing more services related to audits and, because corporations have become more hands-on in attest services, "accountants now deal directly with audit committees and CFOs instead of controllers, and audit fees have been increased."

Russell Flagg, president of New York-based conference organizer Flagg Management thought "cautious optimism" best described the mood of the profession. "We should pray that Iraq, Iran and North Korea will not provide any surprises in 2005."

Too Much Work, or Not Enough People?

Or both? The CPA community struggles with a new surge in demand for services, talent... and bodies.


by Rick Telberg
At Large

At the same time they're boasting about the prospects of a big boom for tax and accounting work in 2005, CPAs and other parties keenly interested in the accounting profession are worrying about whether firms will have enough qualified people to handle all the additional business.

Practitioners, business school professors and vendors who serve the profession told us they are concerned about the lack of resources to meet the pending boom. They're also nervous about the dearth of leaders who appear ready to take over firms in the wake of anticipated massive retirements of partners from the Baby Boom generation. This is one of the key issues raised in the series of reports that began January 3 with the views of AICPA Chair Bob Bunting, in "Bunting Sets Agenda for New Year."

Every CPA we surveyed predicted a business boom in 2005, and Thomas Marino, managing partner of J.H. Cohn in New York, added, "The challenge, because of all the extra work, is managing the limited number of staff that exists today."

Firms with limited staff and expanding workloads are increasingly being forced to rid themselves of clients who "don't match their ideal client profile," said Jean Marie Caragher, president of Capstone Marketing in Marietta, Ga.

The talent shortage spells good news for vendors of technology systems. "There continues to be a high demand for staff accountants, but there has been a decline in accounting graduates," said Richard Walker, director of accountant and advisor relations for QuickBooks developer Intuit Inc.

"Great demand for accountants' services with fewer staff accountants will require better tools for the experienced accountants and their clients," Walker said.

Academics are sounding the biggest alarm about the profession's lack of fresh blood. "The challenge is finding enough qualified people to do all of the audit work now," added Dana R. Hermanson, accounting professor at Kennesaw State University in Georgia. "We need to attract people to the profession."

Dale L. Flesher, Arthur Andersen Alumni Professor of Accountancy at the University of Mississippi, predicted, "It will be a great year for students to find jobs in accounting. All firms - large and small - are adding more people than usual; every prospective candidate is getting multiple offers."

Redwood, Calif.-based Camico, one of the accounting profession's professional liability insurers, is worried about whether there will be skilled people at the helm of firms as current partners from the Baby Boom generation -- aged 45 to 60 -- start retiring in large numbers.

"As many CPA firm partners in this generation are interested in retiring in the near term, the problem is that there is a demographic trough between [Boomer-age partners] and the next generation," said John Dodsworth, president of. "It is very likely that in just a few years, the CPAs interested in retiring will outnumber the CPAs capable of, or interested in, succeeding them."

Joel Sinkin and Terrence Putney, principals at mergers and acquisitions consulting firm Blacklake Transition Solutions, added, "As the Baby Boomers age and the crunch for talent tightens, the trend toward needing to plan for succession is clearly a rising issue."

CAREER ADVISER:CPAs Primed to Find a New Job

CPA employers had better watch out. Our new study found that four in five accountants or financial managers could be considering a job change in 2005.

by Rick Telberg
for Career Insider

The last time we asked the question, only about half of the respondents said they'd be considering a job change in 2004.

So 2005 could be a year of major staff upheavals in many firms and companies.

"I have a broad base of business experience, a history of making sound decisions and an overdose of tenacity," says one middle manager at a small business. "I will search to find that organization which recognizes and rewards the value of those attributes."

The signs are good that it's a seller's market for job hunters. On the other hand, think of the impact on your firm or accounting department if most of your staff takes a hike and never comes back.

"I have been working with start-up companies for many years, and have considered a job change to a more stable environment with concrete benefits -- other than the questionable value of stock options," says Donna Maynard of Sanford, Fla.

So Maynard, like many others, has updated her resume, references and cover letters, has activated e-mail agents on a major job board and is tapping into her own personal network. She figures she could be ensconced in a new controllership position relatively soon.

Would they find greener pastures? Seventeen percent thought the job market would be "excellent," and another 68 percent described it as "good." That opinion accounts for all but 15 percent of survey respondents. Significantly, not one respondent saw the market as "poor."

What are job seekers looking for?

Asked which criteria are most important in a job, a surprising 81 percent specified the integrity and ethics of management as "essential," and another 17 percent called it "important." The next most popular requirement is job description, with 58 percent terming it "essential" and 40 percent calling it "important." That was followed by geographic location, with 87 percent calling it essential or important.

Salary pulled a 97 percent importance rating. Company stability followed with 96 percent. Benefits ranked slightly lower, with a 94 percent importance rating.

"I'm looking for a 'great boss' - one who mentors and grooms talent for leadership positions," states one junior manager in a large health system. "I'm also looking for a corporate culture that truly lives 'work-life balance' and applies the same value to single, childless employees as to married parents. But it's tough to assess during the search process since you really don't know a company's true colors until after you sign the dotted line."

In all, CPAs ranked these 10 job-satisfaction criteria as "essential":

• 81% Integrity/ethics of the management
• 58% Job duties
• 57% Company stability/strength
• 56% Opportunity for advancement
• 55% Geographic location
• 48% Salary offer
• 47% A good benefits package
• 42% Continuing education and training
• 35% Co-workers
• 24% Chance for equity/partnership

Job seekers weren't waiting for the jobs to come to them. Forty-six percent said they'd follow up on leads. Thirty-six percent would be taking business cards to holiday parties. Sixty-seven percent planned to conduct a self-assessment and check their skill sets. Sixty-eight percent said they'd work to foresee opportunities, demands and crises.

Still, despite these aggressive intentions, the greatest number - 68 percent - put their priority on balancing work and life.

"Having flexibility is vital," says a middle manager at a large public accounting firm.

What does it all boil down to? Accountants know the job market is in their favor, and they're willing to work to move ahead. But they want an honest employer who respects a variety of professional needs.

Colleges Share Burden for Profession's Future

Integrity and ethics must become a part of every course in every curriculum.

by Rick Telberg
At Large

Accounting academia is shouldering some of the responsibility for the audit scandals of a few years ago and in 2005 will be doing more to safeguard against future financial reporting fraud, according to our ongoing study of practicing CPAs, educators and other accounting professionals.

"As academics, we have to continue asking ourselves how we contributed to the attitudes that caused the profession's problems," said Gary L. Sundem, an accounting professor at the University of Washington in Seattle. "What caused a few of our accounting graduates to become villains -- the perpetrators of the scandals -- while others were heroes -- those who identified wrongdoing and brought them to light?"

Professor Sundem's remarks are part of broad survey opinion among visionaries and leaders in the profession as part of our 2005 Outlook Study. We began reporting January 3rd on the results of the study with the views of AICPA Chair Bob Bunting, in "Bunting Sets Agenda for New Year."

"I don't think it was because most accounting programs ignored ethics; it was more because we were not effective in conveying its importance," Sundem said.

How will academic leaders respond to the key trends in 2005? "I don't think more ethics classes are the answer, though they may be helpful," Sundem replied,. "Rather, we need to make integrity an important part of everything in our accounting programs, from faculty role models to discussing the ethical implications that underlie most of what accountants do."

Dana R. Hermanson, accounting professor at Kennesaw State University in Kennesaw, Ga., said that in his classroom he is stressing ethics, fraud prevention, corporate governance and the pressures that auditors and accountants face on the job.

"It is critical that students understand the role of auditors in the economy and that they do not lose sight of this role once they are in practice," Hermanson said. He also has increased his personal research focus on issues related to fraud, internal reporting controls and corporate governance. "I want to learn more about what works and what doesn't work and carry the message of sound governance and control to the practice community," Hermanson explained.

Because of an increased interest in corporate fraud brought on by the Sarbanes-Oxley Act, University of Mississippi's Dale A. Flesher said that he and his fellow business educators are being encouraged to implement new courses in fraud and to incorporate more fraud and ethics training in existing courses. They are also encouraging younger students to major in accounting.

Steve Albrecht, the associate dean of Marriott School of Business at Brigham Young University, noted that because of the scandals and the Sarbanes-Oxley Act, accounting firms' audit-related services work has been increasing rapidly. In response, he is encouraging his students to become "more proactive in the profession."

The professors seem enthusiastic about the accounting profession's business prospects in 2005, but are wary of the potential for more auditing scandals.

"As long as we don't have another big accounting fraud in the U.S., I see 2005 as a very good year," Hermanson said. "The profession can further rebuild its credibility, and investors and others hopefully will appreciate the new internal control audits" required by Sarbanes-Oxley.

Sundem added, "We can't afford major setbacks. Unfortunately, audits are not perfect and never will be, so there is always the chance of what some may call audit failures."

New years resolution #1: secure that data!

Are you one of the many accountants whose systems are vulnerable to catastrophic outages?

By Rick Telberg
Special for HP
HP/CPA Tech Advisor
News and Trends Exclusively for CPAs from HP

Losing computer system data can be financially devastating, and small and medium sized businesses are vulnerable to the point that their very existence is at stake.

The events that can damage computers and rob businesses of their data are expanding faster than technology itself. Here are just a few: fires, explosions, computer viruses, hackers, disgruntled employees, sprinkler alarm malfunctions, vandalism or theft, tornadoes, earthquakes, blizzards and forced evacuations, such as what occurred during the Anthrax mail scare shortly after the Sept. 11 terrorist attacks.

SMBs unprepared for such threats can suffer dearly. The American Red Cross estimates that at least 40 percent of SMBs never reopen after disasters such as floods and tornadoes, and in many cases its because they failed to protect customer information, financials and other key data that had been in their computer systems.

Just because your offices are not in an area prone to tornadoes or heavy rain, don't think your data is secure. The threat of a direct technological attack is greater than ever.

A whopping 53 percent of computer security executives surveyed in 2004 by the Federal Bureau of Investigation and the Computer Security Institute reported that there was at least one unauthorized use of their organizations' information systems in the past year and close to 60 percent reported virus attacks. A more recent study by a digital security firm found that during the third quarter of 2004, the number of technology security events jumped 150 percent over the same period in 2003 fueled by "more sophisticated hackers writing better code."

Large well-capitalized corporations are investing millions of dollars to fend off hackers and the viruses, worms and other "malware" technologies popping up almost everyday. Still, in some cases, technology break-ins just cannot be effectively countered as 12 percent of the companies in the FBI-CSI study experienced more than ten computer security incidents.

While SMBs are not the victims of direct attacks as often as larger companies, there are at least three frightening reasons for them to be concerned: First off, smaller businesses are often the end part of larger attacks, including Internet worms or credit card theft scams. Secondly is the simple fact that as larger, highly capitalized companies invest in tighter technology safeguards, attackers will increasingly look at the less expensive systems that are easier to break into.

And all companies are subject to data loss caused from within their organizations by disgruntled employees breaking into systems to intentionally wreak damage or by happy campers making honest mistakes. Gartner Group once estimated that employees are responsible for more than 70 of the unauthorized access to businesses' information systems. For SMBs relying on the traditional method of having employees backup their PCs or duplicate computer data to tape once a day, the only way to eliminate all risk is to have them do that backup 24 x 7.

Unfortunately, even insurance is not an answer because while it covers the loss of physical assets, it often excludes the even greater asset of the computer data that represents an SMB's pooled knowledge and often it's future. It's up to SMB managers to make sure that data is kept safely.

Could SOX Really Be CPA-Friendly?

As CPAs shoulder new requirements, workloads shift through the profession.

by Rick Telberg
At Large

Considered by some a slap across the accounting profession's face when it was enacted in 2002, the Sarbanes-Oxley accounting reform law may have become a business ally for accounting firms of all sizes and finance professionals of all types.

In addition to heightening the public's appreciation of audit services, the law's multitude of new financial reporting requirements has created new work for the larger firms that typically handle public-company reporting, and they have passed some of the work to their smaller brethren. Last week, we began reporting on the results of the study with the views of AICPA Chair Bob Bunting, in "Bunting Sets Agenda for New Year." [See some reader responses below.]

"The Sarbanes-Oxley Act should have been called the Full Employment Act for CPAs," said Thomas Marino, managing partner of New York-based JH Cohn, one of the profession's 10 largest firms. He notes that because they are unable to handle all the new reporting requirements for all of their clients, the national firms are culling clients, which are then picked up by regionals like his, who, in turn, are culling clients being picked up by smaller firms.

Joel Sinkin and Terrence Putney, principals with Blacklake Transition Solutions, a M&A consultancy for accounting firms, say the SOX phenomenon has created a supply/demand imbalance at larger firms that is indeed trickling work down to smaller firms. Local and regional firms able to muster the necessary resources will be positioned for more growth in the near term, they add.

Dana R. Hermanson, accounting professor at Kennesaw State University in Georgia, noted that the law's additional reporting rules, particularly its section 404 requirement that companies audit and sign off on the integrity of their financial reporting systems, will ultimately improve the accounting process and rein in the potential for Enron-like accounting scandals.

Joseph Eckelkamp, president of Eckelkamp and Associates, a St. Louis-based regional CPA firm, said he's been handling a lot of new audit clients as "the big guys move away from my marketplace, increase their prices and focus on SOX services I don't provide." He noted that a big part of his new work is internal audit assignments referred by external auditors whom SOX precludes from serving as both an internal and external auditor for the same company.

Likewise, Gary L. Sundem, Julius A. Roller professor at the University of Washington Business School in Seattle, called the law "the Accountant's Employment Act of 2002," and notes that the profession is scrambling to carry out all the new work it has created.

But Sundem warns, "There remains much to do to recreate confidence in the accounting profession. We are moving in the right direction, and I only hope it is fast enough to avoid future scandals."

That warning is not lost on practitioners. Jake L. Netterville, chairman of Baton Rouge, La.-based regional firm, Postlethwaite & Netterville, said, "We must remember that Sarbanes-Oxley was passed with great haste and is imperfect at best. The profession should continue its quest to improve on it."

Marino added, "I think the big uncertainty that exists is what will happen when we have the first accounting failure on a company that has received a clean opinion on their 404 work?"

That's a thought to make one shudder anew. All CPAs have a stake in seeing that it doesn't happen.

READER REACTION TO "BUNTING SETS AGENDA FOR NEW YEAR"

He's right on track.
-- Neil Galanti, CPA
Dunwoody, GA

I agree with the AICPA agenda; however, as finance director for a city of 20,000 I am finding it very difficult to explain why we should be reporting under GASB. The response I get is, "There is no law that says we have to, so we don't want to." I understand the purpose of GASB and I am trying to comply. The only problem I have with the statements is the Statement of Activities. I find it to be very confusing and not very informative.
-- Dale Walker

I agree with Mr. Bunting that small business regulation should be appropriate to the environment that this segment of business and industry is operating within. If we apply the level of regulation now required of publicly held companies, small business will be overwhelmed and become ineffective. This will have a negative effect on the part of business that keeps this country competitive.
-- Ed Henderson
Montgomery, Texas

Bunting Sets Agenda for New Year

AICPA chief scans horizon for perils, opportunities.

Rick Telberg
At Large

Welcome to 2005! It's a year that may bring unparalleled opportunities for the CPA profession...or unprecedented peril. Or both?

In this edition of At Large, we wanted to talk to the person who is perhaps the premier leader of the profession.

It's only fitting, then, that we start with Bob Bunting, chair of the AICPA, and long the driving force and senior partner at Moss Adams, which he built from a local firm in the northwestern United States into an international presence.

To Bunting, the top long-term trend facing the profession is "the demographic dynamic" between the aging boomer generation - those roughly 40 to 60 years old -- and new entrants from university accounting programs.

"The good news," he says, "is the growing upward mobility of women in the profession, which more than doubles our access to great talent."

He knows all too well, however, that the continuing challenge is for public accounting and industry employers to get the work/life balance dilemma sorted out so the profession keeps more of the talent it initially attracts.

The most immediate challenge, nevertheless, is "to get regulators to address the fundamental difference between the public interest need for regulatory and reporting controls of private business and other smaller organizations compared to public companies," according to the chairman.

While many regulators acknowledge the powerful contribution of private enterprise to the nation's social and economic health, they sometimes seem resistant to, in Bunting's words, "addressing the unique needs and issues of this segment when it comes to how they should be regulated."

Too often, Bunting says, "this leads to 'one-size-fits-all' thinking regarding every new regulatory initiative."

Bunting wants to ensure that those who wish to regulate the private and small enterprise segments of the U.S. economy "give appropriate representation to those segments in the deliberative process."

Despite the issues and challenges, Bunting is very optimistic about the profession in both the near and longer term.

"We are making progress in attracting top talent into accounting programs," he notes. "Events of the past three years have reinforced the critical role that CPAs play in the economy in our two principal disciplines, financial reporting and tax services. The demand for CPA services and, therefore, CPAs, has grown and should continue to do so over the next few years. And, the profession has heard and is answering the wake-up call that led to Sarbanes-Oxley. Our members in public practice, industry, government and academia have an enhanced sense of their importance in the economy and society and they are acting on this understanding."

The largest risk to the profession, he avers, is that the public will misinterpret reports of restatements, disclosures or allegations of past misdeeds, as indications that recent regulatory changes have not been productive. In fact, enterprises of all kinds are struggling to cope with the new regulations.

"We need to allow these changes to filter through American business before we can truly assess their impact," he says. "A new round of laws and rule-making would not be helpful or appropriate at this point."

As a member of AICPA leadership, Bunting is a part of a broad-based outreach and communications program. In partnership with state CPA associations, and other interested parties, the AICPA is reaching out to regulators, state and federal legislatures, public interest groups and others.

"Our goal is to have regular, clear and respectful communications with those who have influential opinions about how we carry out our public interest responsibilities," he says. "While surprises are always a possibility, they are less likely if we have frequent and open communications with the groups who have the potential to spring surprises."

The profession has a big stake in seeing Bunting's efforts come to fruition.