The accounting profession has undergone significant transformation in recent years, driven in part by retirements, technological advancements and a shortage of accounting graduates.
Firms are seeking to reduce overhead costs, expand their workforce and add geographic and niche practice areas. A growing shortage of accountants has intensified competition, leading to higher salaries across the profession.
Consolidation Trends
These shifts have accelerated industry trends, particularly in the areas of mergers and acquisitions. Stable revenue and strong client retention make accounting firms a desirable investment choice for private equity (PE) firms. Subsequently, PE firms have made substantial investments in accounting firms over the past few years, with these cash infusions accelerating industry consolidation. Private equity-backed accounting firms have been able to acquire additional firms that are looking to expand their practices and/or fund retiring partner buy-outs. The increasing number of retirements has also created a steady stream of accounting practices for sale. Alternatively, some accounting firms have adopted employee stock ownership plans (ESOPs) to incentivize long-term retention and motivate employees.
Addressing the CPA Shortage
In addition to the surge in retirements, CPA licensure has been on the decline, compounding the CPA shortage. The 2007-2009 Great Recession led to a surge in accounting majors, as students sought stable careers insulated from economic downturns. According to data from the American Institute of CPAs (AICPA), 2010 saw one of the highest numbers of CPA candidates in history. However, the U.S. has enjoyed a relatively stable economy in recent years, reducing the appeal of accounting as a “safe” career choice.
The 150-credit-hour requirement has also deterred some aspiring accountants, as the additional year of tuition and schooling presents a financial burden. Many states, including New Jersey, are pursuing additional pathways to licensure, such as experience-based licensing, to encourage more people to pursue a CPA designation.
Many larger accounting firms have embraced the usage of right-shoring, shifting certain work to lower-cost jurisdictions to find the balance of both efficiency and expense. This approach requires significant upfront investment, making it inaccessible for some firms. The talent shortage has also led firms to consider hiring non-CPAs for certain roles.
Technological Advancements
When I began my career more than 17 years ago, the transition to the paperless office was transforming the profession. Since then, accounting technology has advanced significantly, improving efficiency, automation and user experience. The emergence of artificial intelligence (AI) and automation has rendered many traditional data entry tasks obsolete. These recent advancements have required CPAs to adapt and embrace modern technologies.
AI will not replace CPAs; rather, it should serve as a tool that enhances their capabilities. To fully leverage AI, accountants must first receive proper training to understand both its advantages and limitations. AI functions like an autopilot system in a car — designed to assist, not replace, the driver. Just as a driver must be fully trained before using autopilot, CPAs must develop expertise in their field before integrating AI into their work.
The widespread acceptance of remote and hybrid work models has given firms and CPAs tremendous flexibility. With appropriate security measures, firms can now rely on virtual meeting platforms not only for internal collaboration and client interactions but also for business development and thought leadership. Virtual events such as webinars have expanded firms’ reach, enhancing branding and client engagement. Historically, accounting firms were limited by their geographic footprint when hiring talent. Today, remote work allows firms to recruit employees from across the country, further transforming workforce dynamics.
Cybersecurity has also emerged as a critical priority, as cyber and ransomware attacks have become more frequent and sophisticated. Large firms allocate technology budgets ranging from hundreds of thousands to millions of dollars to stay competitive and online. Smaller firms with smaller technology budgets have sought to merge with their larger counterparts to stay competitive and ahead of cyber threats.
Specialization and the Shift Away from Generalists
As businesses grow more complex, clients increasingly look to their CPAs as trusted advisors. This evolving role has led to expanded service offerings beyond traditional tax and accounting functions, with advisory services becoming a key area of growth. Some examples of nontraditional services now offered by accounting firms include the following:
- Outsourced CFO services
- Financial planning
- Cybersecurity assessment and planning
- HR outsourcing
- Wealth management
- Compensation consulting
- Outsourced IT services
The era of the CPA generalist is fading. Accounting, tax and audit have all grown too complex for professionals to maintain broad-based expertise. Legislative changes and evolving accounting standards make it nearly impossible to master all aspects of tax, audit and accounting simultaneously. From both a risk management and client service perspective, specialization is a welcome and needed change for the profession.
As a tax professional, I have witnessed firsthand how rising complexity has driven specialization. The 2018 Supreme Court decision in South Dakota v. Wayfair eliminated the physical presence requirement for state sales tax collection. This ruling spurred widespread adoption of new tax policies by state and local governments, making state nexus analysis studies an essential service. The 2017 Tax Cuts and Jobs Act marked the first major tax overhaul since the 1986 Tax Reform Act and introduced sweeping tax changes. Many provisions from that legislation are now set to expire after Dec. 31, 2025, giving the new Congress and administration the opportunity to introduce additional tax changes to address those provisions. Any new tax law changes will present additional opportunities and difficulties for tax professionals.
While the transformation of the accounting industry presents challenges, it has also brought significant benefits, such as increased job security and wage growth. It is essential that we embrace these changes and position ourselves as leaders. The next generation of CPAs will rely on us to navigate and shape the future of the profession.