Challenges and Solutions in Addressing Turnover in Public Accounting Firms
The presentation by Loren Schwartz, a Partner in a public accounting firm, delves into the impact of turnover within the industry, highlighting issues such as decreased efficiency, higher costs, and challenges in maintaining consistency. It explores reasons for high turnover, including low supply of accountants and increasing demand driven by factors like audit requirements and technology. The presentation also suggests solutions like attracting new professionals through educational reforms and retaining current staff by reducing workload during busy seasons.
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Presentation Transcript
Turnover In Public Accounting Firm Presented by Loren Schwartz Partner May 2022
Table of Contents 1 Is Turnover Really that Bad? 2 Supply 3 Demand 4 How d We Get Here?: In a Nutshell 5 Solutions
Is Turnover Really that Bad? My History: o Started with Big 4 firm in the 1990s with team of 23 o After 5 years, only two still with the firm This was and is the norm CPA Journal: o Reported turnover in large CPA firms (i.e., revenues more than $75 million) at 17% o One in every six firms experienced turnover of over 20% Likely understated most firms saw decreased turnover during first year of pandemic Larger cities have had higher turnover than smaller urban areas Why is this a problem? o Continuity on projects increases efficiencies and lowers audit costs Reverse true with high turnover o Consistency on audit execution/methodology within firms is harder to achieve with high turnover 3
Supply Supply is low and getting lower o Bureau of Labor Statistics: Unemployment rate for accountants and auditors: 2% in Q3 2019 and 1.5% in Q2 2019 Lower than national unemployment rate (3.5%) o National Student Clearinghouse Research Center: Colleges and universities in U.S. saw total undergraduate fall enrollment decline 7.8% between 2019 and 2022 o James Madison University: Enrollment in intermediate accounting course sequence dropped 34% over 4 years o AICPA: Recent study shows over 75% of CPAs will retire in next 15 years Pandemic resignations and job changes 4
Demand Demand is high and getting higher o May 2021: Median annual wage for accountants/auditors? $77,250 o DoD decided it was time to get audited Audit year 2020: DoD spent nearly $1 billion 20% for audits 80% accounting and audit support/readiness Expects to spend $1.281 billion in FY 2022 These audits are mostly in disclaimer positions; full audit costs not yet realized o Technology has increased churn dramatically 5
Howd We Get Here?: In a Nutshell Department of Defense o Decided to get audited and started spending (a lot) accordingly Technology o Improved recruiting, which led to increasing churn CPA Certification o Goal of many young accountants o Now requires 150 credits Possible contributing factor in decreased accounting majors Lost potential accountant before they even got to the profession 6
Solutions Attract new professionals o Go back to 4-year degree Retain current professionals o Reduce busy season We did not have to force federal financial statements due date of November 15 we brought that on ourselves o Permanently embrace remote workforce Increase part-time work opportunities Improve tools and techniques o Embrace and leverage technology Expect o DoD audits will become routine and stabilize = natural equalizing of supply/demand (all other things being equal) 7
