The Accountancy Profession in the New Normal
Every generation has a defining moment. There is little doubt that 2020 was a year when the world experienced a crisis like no other. The COVID-19 pandemic swept across the world, shifting most economic, political and social landscapes.
How any organization responded and performed, was dependent on many factors. One key factor was the strength of the organization’s general resilience. Another factor was the industry it operated within.
At the end of April 2020, as governmental responses to the pandemic were introduced in most jurisdictions, CAPA undertook a survey of its members in or with an interest in the Asia Pacific region to:
- Firstly, understand the magnitude of the challenges faced, both in the immediate period and near future;
- Secondly, examine these challenges, its impacts and organizational responses; and
- Finally, identify trends, learnings and opportunities – thus facilitating the sharing of insights and experiences among its members and the wider profession.
In brief, the responses to the survey – summarized in the report “COVID-19 impacts – Challenges facing the profession and PAOs”, – supported by continued engagement with CAPA members and stakeholders, as well as the monitoring of trends and researches, indicated the focus in the short term was on people, in particular the safety of professional accountancy organization (PAO) employees and how to assist the members of the PAO. This was quickly followed by making any necessary operational changes and carefully managing finances. The focus for the longer term was ensuring organizational sustainability and remaining relevant to the market, which required consideration of what the ‘future accountant’ would look like.
Some six months later, to ascertain further insights, including the views of CAPA members for 2021 and beyond, CAPA undertook a live polling session at a Member Forum organized in December 2020. The session captured the responses of 47 of the attendees expressing views relating to 25 member organizations. This represented close to 80% of CAPA members.
The responses pointed towards the following:
1. A positive outlook for the profession and PAOs
There was a solid sense of optimism across the CAPA membership compared to a year ago, i.e., pre-COVID-19, and this applied almost equally to the profession in a broad sense, and to the PAOs as membership organizations. Only about 10% of respondees expressed any level of pessimism, whilst 50% viewed the outlook ‘a little more optimistically’. The remainder was generally split between being ‘much more optimistic’ and feeling ‘about the same’. The sense was that this was more than just ‘cautious optimism’ – it appeared to reflect the accelerated changes taking place and the opportunities being seized. The positive outlook was supported when looking at some short-term key performance indicators and also taking a longer-term view of a PAO’s financial sustainability.
2. In the short term, expected key performance indicators varied across jurisdictions – though generally remain strong
Student registrations – half of those polled were expecting an increase, generally between 1-5%, in annual student registrations for qualification programs, with a further 20% expecting the position to remain unchanged. This bodes well for the medium-term outlook.
New member growth rates – 34% forecast an increase, 40% to remain the same, and 26% to reduce. On balance, this suggests a positive outlook for PAOs that have had to be innovative in retaining students and staging examinations. However, some PAOs clearly feel they are facing some challenges.
Existing member retention rates – the majority, 56% expected no change, with the remainder split evenly between expected increases and reductions. Again, this is a positive picture, whilst acknowledging some PAOs sense a risk of losing some members, perhaps as a fallout from the economic consequences of the pandemic.
3. The financial sustainability of most PAOs in the medium to long term is unaffected
As an indicator of the resilience of the profession and PAOs, more than 50% of the PAOs are expecting their longer-term financial stability to remain the same, with the balance split fairly evenly between those expecting improvements or deterioration. The positive outlook in student registrations and member retention rates discussed earlier will be a factor. Some PAOs have witnessed a noticeable uptake in professional development programs with amazing attendances at virtual conferences. Accessibility and more offerings due to the online nature of such programs appear to be factors in this uptrend. In addition, significant focus has been applied on containing and reducing operational costs. Many of these developments are expected to continue.
The 25% of PAOs forecasting a deterioration in financial sustainability must not be overlooked. The reasons for this need to be understood, and perhaps lessons learnt, ideas shared and assistance provided, such that the profession can continue to thrive in all jurisdictions.
4. Continued digital transformation
Looking 3 years ahead, it is expected online delivery models for staging examinations and continuing professional development (CPD) will feature prominently. In particular, CPD is expected to be offered always with an online option, though rarely by only online means. In contrast, 23% of respondees forecast only an online offering for examinations, and 16% mainly or only in-person. The latter may reflect the nature of the PAOs and countries involved, or current challenges, including the ability to manage the risks surrounding online examinations such as ensuring proper invigilation in remote settings.
5. Impact of Artificial Intelligence (AI) is of most interest and concern
In response to a selection of statements of interest and concerns, the majority opined that AI will greatly impact the profession. Anecdotal comments included a belief among parents and students that AI will replace the need for accountants. The onset of AI was seen as both a challenge and an opportunity, noting the need for shifts in mindset, including repositioning accountants to be more advisory with the potential for new business lines or services to emerge.
6. The need to change the nature of annual reporting, and the attractiveness of the accountancy profession, are also of interest and concern
The area of greatest ‘interest’ after AI was expressed as: the nature of annual reporting needs to fundamentally change. Curiously, this did not translate into being a ‘concern’. Perhaps this reflected a sense that the profession can and is dealing with it. The call for the emergence of a possible Sustainability Standards Board, and the announcement of the intention to merge by the International Integrated Reporting Council (IIRC) and the Sustainability Accounting Standards Board (SASB) are recent cases in point.
In contrast, the lack of attractiveness of the accountancy profession to students was not viewed as being of significant current interest, but was seen as the highest area of longer-term concern after AI. An attendee at the forum indicated that this is an area of priority in their PAO’s strategy in 2021. Perhaps the profession as a whole will need to consider giving this area a much higher level of attention.
The COVID-19 crisis is far from over, although the emergence of vaccines has given some hope and possibly some light at the end of the tunnel. How far the tunnel goes or whether there is an oncoming train, remains to be seen.
However, the learnings from CAPA’s milestone surveys thus far have provided a strong indication that its member PAOs and the profession is responding and rebounding well. General resilience appears to be the order of the day, with PAOs on track to build back better, and ready to adapt, flex and respond to the future, in the new normal.
This article was first published on the IFAC Knowledge Gateway on 4 February 2021.