Other issues such as quality of life, more challenging work, and opportunities for advancement also place pressure on escalating labor costs. Trying to maintain quality standards while dealing with increasing labor costs and lowball competitive pricing has already placed CPA firms in tenuous financial positions.

Using Accounting Paraprofessionals

Given the existing operating environment, large and small CPA firms are utilizing accounting paraprofessionals to an even greater degree than 15 to 20 years ago. According to a 1973 study by Loeb and Rymer, a significant number of firms were utilizing paraprofessionals. A 1991 AICPA survey revealed that the utilization of accounting paraprofessionals had a notable increase over the last 20 years. The most dramatic increase has been with the larger firms. The AICPA study indicated that 96% of the responding firms, employing between 50 to 200 professionals, were utilizing paraprofessionals. The utilization rate for the very largest firms (over 200 professionals) was 84%. In 1973, the utilization rate for regional and national firms was 66% and 35% respectively.

Many practitioners feel that the number of paraprofessionals will continue to increase. To gain a better perspective on this trend and how firms are using these individuals, a series of detailed interviews were conducted with accounting paraprofessionals and their respective managers and partners. One common objective shared by most managers and partners interviewed was maintaining the same levels of quality and proficiency while lowering staffing costs.

Advantages of Using Paraprofessionals

Those interviewed cited reduced costs as the major advantage for utilizing paraprofessionals. These savings are realized in a number of ways.

There are significant savings in the salaries of paraprofessionals when compared with new staff professionals. In addition to the lower hourly pay rates, a large number of paraprofessionals are employed part-time. The result is a significant reduction in fringe benefit costs, greater flexibility in scheduling work during peak periods, and a decrease in non-billable hours.

Another major benefit is much of the work being done by paraprofessionals was previously done by professional staff. Because highly motivated professionals generally do not like to repeat assignments, training and learning can be reduced by assigning paraprofessionals to routine recurring work.

One partner reported that because paraprofessionals are assigned to specific clients and projects for extended periods of time, they are able to build strong and close relationships. Another partner from a smaller firm stated that, "Our clients are happy with the paraprofessional arrangement. There seems to be an increased level of trust because our (paraprofessional) staff person is assigned to their accounts on a permanent basis."

Most of the interviewees reported at least two more advantages because paraprofessionals are willing to perform basic, repetitive tasks over longer periods of time. First, requiring professional personnel to perform routine tasks contributes to decreased levels of job satisfaction and increased turnover. Notwithstanding the fact that many routine job assignments provide valuable training, many young professionals feel over-exposed to that kind of work experience. The second positive effect relates to the quality of work done on repetitive tasks over longer periods of time. As one manager stated, "The quality of work of our paraprofessionals far exceeds that of our new staff professionals."

Some Shortcomings

There are some shortcomings associated with the use of paraprofessionals. The nature of public accounting practice requires reviewing and evaluating large amounts of data and making independent judgments. Assigning work to a paraprofessional where professional judgment is needed appears to be the greatest concern expressed by partners and managers.

A number of the practitioners interviewed expressed some concern about utilizing paraprofessionals on audits because of the possible legal implications of using less than qualified personnel or personnel lacking the traditional credentials of competence. The real question to be answered in each case is: Does the paraprofessional being assigned possess the attributes normally expected of an individual working in that capacity?

Career Tracks in the 1990's

Nearly all those interviewed believed that the increasing use of paraprofessionals by CPA firms will continue. As one partner of a small accounting firm stated, "We have to get a handle on billing rates, using paraprofessionals is one way of doing that." Also, many of the practitioners interviewed felt that the 150-hour requirement will force firms to consider an increased use of paraprofessionals. Because of the advanced level of training and increased compensation packages of the 150-hour graduates, their training and work assignments will be more carefully scrutinized to assure that they are better utilized. This could mean that the career path to a senior professional status would be shortened and that firms may hire fewer professionals. One interesting twist to this dilemma is that the reduced hiring of 150-hour program graduates is likely to bring the demand for and supply of these individuals to a more manageable level.

How might a new career track for paraprofessionals work? As an alternative to remaining a paraprofessional, some of these individuals may want to continue their education by attending evening or weekend classes, become eligible to sit for the CPA exam, and join the professional ranks. Because the professional track in all firms will eventually be designed for 150-hour graduates, it could provide for the advancement of paraprofessionals to professional status.

Some Human Resource Concerns

Lack of participation and the feeling of isolation seemed to be the major concerns expressed by most of the paraprofessionals interviewed. One paraprofessional stated, "We are on the bottom of the totem pole, and they make us feel like it." Most of them reported that they do not fully participate in training sponsored by their firms. Very few paraprofessionals attend staff meetings. Formal programs for periodic evaluation and feedback are lacking. One paraprofessional stated that she did not report to anyone and felt isolated. If employers expect to be successful in utilizing the services of paraprofessionals, they must consider the consequences of their attitudes and actions, and implement appropriate human resource programs.

Redesigning Work Assignments

With increasing numbers of paraprofessionals entering the ranks of CPA firms, more thought must be given to work methods and design. With a fresh approach it may be possible to make more extensive and better use of accounting paraprofessionals. Some of the partners and managers felt that greater utilization of paraprofessionals and computers could generate significant labor savings. My research on this topic suggests that the use of paraprofessionals on audit engagements can generate a substantial reduction in the dollar value of time charged to the engagement. I found that up to 25% of the tasks performed on the audit of a small manufacturing firm could have been performed by paraprofessionals.

The argument for increased efficiencies resulting from the use of paraprofessionals and computers is best illustrated by an example. A paraprofessional possessed an associate's degree and had received most of his training on the job. He had been with a firm for a number of years and had built up a wealth of knowledge about using the firm's audit guide. As one manager said, "When we want to take an inventory, we always try to get this individual because of his experience in the use of the audit guide, insights on inventory procedures, and level of training."

Innovation in Recruiting

Constantly increasing competitive pressures and a potentially short supply of professional accountants are forcing many CPA firms to consider new ways of doing business. In addressing the dwindling supply of qualified accounting recruits, CPA firms must become innovative in their approach to recruiting. Multiple entry-level recruiting programs that recognize the contributions of accounting paraprofessionals could assist in dealing with some of the human resource problems that many firms are likely to face.

As we go through the 1990's, changing demographics and the impact of the 150-hour program will certainly continue to influence the way many firms approach their recruiting efforts.

PROFILE OF A PARAPROFESSIONAL

Education

The level of education for paraprofessionals varies. Some possess only a knowledge of bookkeeping, others have associate's degrees in accounting, and a significant number have bachelor's degrees in accounting.

Working Status

While a significant minority work full time, most work part time for two or three days a week. Their work schedules increase substantially during the busy season.

Rate of Pay and Billing Rates

Both vary according to geographic area, however employers indicated that very few fringe benefits are paid.

Examples of Work Performed

* Write-up work (maintaining computerized general ledger records)

* Maintaining client pension records

* Preparation of individual and corporate returns (with no major tax issues)

* Maintaining client payroll records (computerized)

* Preparing payroll tax reports and returns

* Variety of data gathering assignments

* Testing vouchers for footings

* Test footings on general ledger accounts

* Prove footings of bank

* Reconciliations prepared by client

* Physical inventory test counts