PRACTICE 21

The Future of CPAs in Financial Services: A Survey

By Mary Ellen Oliverio and Bernard H. Newman

The role of the accountant in industry is changing, and more people are becoming aware of this new reality. For example, “the new finance” was coined by the AICPA Management Accounting Executive Committee (now Business and Industry Executive Committee) to better reflect the evolutionary global changes that have taken place in financial management during the last decade. The Institute of Management Accountants (IMA) renamed its publication Strategic Finance for the same reason.

Wide awareness of the profession’s changing role notwithstanding, questions remain about the future demand for accountants in industry. Research conducted by various accounting organizations highlights the need for a broader understanding of business and greater participation in nontraditional activities outside the traditional accounting function—but relies almost exclusively on the perceptions of accountants.

Survey Methodology

In order to discover employers’ perception of the need for accountants, a survey was planned to focus on—

  • CPAs only, because this is a group with a common identity.
  • a single industry, financial services, which, at the macro level, may have common needs and expectations.
  • the current employment situation, and what the need for CPAs will be in 2005.

    A search of the 1999 Fortune 500 identified the 83 largest financial services companies. Each CEO in these 83 companies received a covering letter, a second letter for a person designated to respond, and a two-page questionnaire. The first mailing was in July 1999; a follow-up was mailed in October 1999. Twenty-six (31%) usable responses were received.

    Findings

    The first section of the questionnaire sought information about the current employment of CPAs, the extent to which such positions will be eliminated, the need for new positions, and sources for recruitment. The second section asked about the strengths and weaknesses of CPAs employed at the highest level of the company and asked for suggestions regarding the preparation of students. All of the second section questions were open-ended.

    Positions held by CPAs. Respondents indicated the positions in their organizations which were held currently by CPAs. The numbers below are the number of respondents indicating a specific title.

    Controller 25
    Internal auditor 22
    Senior accountant 22
    Manager 22
    Underwriter 19
    Business development manager 17
    Field examiner 16
    Tax manager 16
    Financial analyst 14
    Risk management 11
    Chief financial officer 9

    Sources for recruitment. The questionnaire also asked respondents to identify sources of recruitment for CPAs. The respondents noted a variety of sources, as listed below.

    Employee recommendations 26
    Internet 19
    Public accounting firm 15
    Executive recruiters 15
    Newspaper 14

    Demand for current and new positions in 2005. When asked which of the positions identified in Question 1 could be eliminated by 2005, the overwhelming response was “none.” Three respondents qualified their responses with the following comments:

  • “We will continue to need people well trained in accounting policy and practice around our company.”
  • “We anticipate continuing to need CPAs in these positions: chief financial officer, principal finance officer, general auditor, controller, and treasurer.”
  • “We will probably see some shift in roles among the CFO and various financial and tax staff.”

    The respondents were not of one mind in assessing the need for CPAs in new positions in 2005. Eleven respondents stated, “No, there would be no need for CPAs in new positions.” The other 15 stated, “Yes, CPAs would be needed in new positions.” The following comments were received:

  • “We will need more managers with accounting backgrounds.”
  • “We will need CPAs with more business orientation, with higher levels of understanding of technology.”
  • “An accounting or financial background will always be required in yet-to-be-defined positions.”
  • “We continue to diversify and acquire new entity structures which require accounting knowledge.”

    Positions held by recent accounting graduates. Respondents were asked to list positions currently held by recent accounting graduates planning to become CPAs. The number of responses for each classification is indicated below.

    Staff accountant 19
    Junior accountant 19
    Financial analyst 1 19
    Auditor (entry level) 16
    Finance and risk management 11
    Field examiner 9
    Management trainee 8
    None 7

    Strengths and weaknesses of CPAs at the highest levels. The open-ended questions assessed the strengths and weaknesses of CPAs employed at the highest levels of the company. The strengths, identified below, varied greatly. Interestingly, the most commonly identified strength was accounting theory.

    Knowledge of accounting theory and practice 25
    Career-oriented 19
    Focused, decisive 17
    Highly technically skilled 13
    Able to make decisions in fast-paced environment 12
    Strong leadership 10

    The weaknesses of CPAs at the highest levels mirror many of the conclusions of previous surveys.

    Weak communication skills 21
    Too technically driven 13
    Failure to get the big picture 13
    Inability to maintain broad focus 10
    Lack of information technology skills 10
    Lack of contemporary management skills 9

    One comment summarized the perceived weaknesses of CPAs in industry: “While overall the group is very good, many do not fully understand all of the company.... there is a persistence of ‘tunnel vision.’”

    Thirteen respondents considered it a strength that their CPAs were “highly technically skilled”; exactly the same number believed it a weakness that their CPAs were “too technically driven.”

    Preparation of accounting students. An open-ended question asking for suggestions for the preparation of CPA-track accounting students beginning their freshman year of study elicited a variety of responses.

    Accounting theory is a must 22
    Provide internships—students should gain exposure early 16
    Writing is as critical as accounting 15
    Knowledge of finance as well as accounting 11
    Analytical skills needed 11
    Ethics and integrity required 8

    Again, the need for a sound foundation in accounting is identified. Although no question addressed the 150-hour requirement, one respondent commented: “The five-year program seems to require students to stay in school another year without a commensurate reward, and we worry that it will cause enrollment to drop and reduce the number of CPA candidates.... If you look at our company, it is the skills and knowledge that a CPA program in the university offers that we need, not the designation.”

    Overall Conclusions

    As indicated by the survey, employers in the financial services industry are aware of CPA employees and value them without exception. They believe that the positions in place today will, for the most part, be needed in 2005.

    Accounting knowledge is important. There seems to be no question about the value placed on accounting knowledge by the responding financial services employers, which is surprising given recent pronouncements from the profession.

    For example, the AICPA’s Core Competency Framework for entry into the accounting profession “supports a paradigm shift from a content-driven to a skills-based curriculum.” This framework, while provocative, fails to clearly explain how content, if any, is to be taught, and provides no input about the sufficiency of attention to accounting theory and practice. Yet, the respondents believed that accounting knowledge is critical.

    Understandings beyond content. Employers noted that accountants need improved communication skills and a broader understanding of the total business. The AICPA Core Competency Model clearly identified the importance of communication skills and a broad business perspective.

    Need for Reconciliation

    There are three critical unresolved issues highlighted by this exploratory research survey:

  • While survey respondents expressed that there is a need for CPAs in current positions and in new positions which will continue to be maintained into the future, there is much discussion within the profession about whether the CPA designation has lost its usefulness. The AICPA has even developed a new designation, currently identified by the placeholder name XYZ. Does the CPA have future value or is it becoming too limited to be considered useful? The results of this exploratory survey imply it has a future viability; the AICPA seems to think otherwise.
  • While survey respondents identified “knowledge of accounting theory and practice” as an essential goal of accounting education, an important AICPA committee devoted to curriculum design developed a core competency framework that failed to answer a number of questions about content, including: “What content is prerequisite to functional competencies? “Are students to learn content incidentally while developing skills?” “Will such learning be sufficient to provide future accountants with comprehensive knowledge of accounting theory and practice?” This exploratory survey indicates strongly that such knowledge is critical; the AICPA committee did not even specify the role of content.
  • While survey respondents believe that accountants need communication skills and a broader understanding of the total business—and the AICPA’s Core Competencies Committee identified a need for such skills—it is not clear how those skills will be developed within the context of the technical education and internship experience that respondents also think are highly important. Is accounting theory to be central to learning or incidental?
    Mary Ellen Oliverio, PhD, CPA, and Bernard H. Newman, PhD, CPA, are professors of accounting at the Lubin School of Business, Pace University, New York City.

    Editor:
    Thomas W. Morris
     The CPA Journal

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