Back to the Future - Revisiting the CPA Vision Project

Flash back to the late nineties. It was a boom time for many - the Dot Com gold rush. CEOs became the new rock stars. A new breed of billionaires emerged and vast amounts of new wealth were created by the “new economy.” Not everyone bought into it though. Warren Buffet claimed he didn’t get it and stayed on the sidelines. Alan Greenspan called it irrational exuberance. We now know they were right. The internet bubble burst and by 2001 a recession had ensued. We saw the complete economic cycle in about five years.

Those were interesting times for the CPA profession too. We were feeling threatened by forces of change – technology, globalization, nontraditional competitors, and a sense that our traditional service mix – accounting, auditing, and tax return preparation - was not as valued as it once had been. We were concerned about our image…and our relevance. The consolidators, led by American Express, began acquiring high profile firms. Some firms bifurcated their practices, spinning off the so-called growth services into new entities and leaving the attest practices with the CPA firm, as we thought the public wanted one-stop shopping and multidisciplinary practices.

Against that backdrop, in 1997 approximately 3,400 CPA thought leaders from across the country participated in a series of structured, day-long “Future Forums” in their local communities to envision the profession in 2011. Building on the profession’s enduring core values that would serve as its foundation, participants identified the core services CPAs would be providing in 2011 and the core competencies needed to ensure success. With the input received at the local level at these Future Forums, each state sent a delegate to a national level Future Forum in January 1998, where a consensus emerged for a vision of the future of the accounting profession. In a nutshell, this Vision Project, which was a collaborative effort between the AICPA and state societies, concluded that the most successful CPAs would be the ones who could transition or reposition themselves, to move up the value chain from provider of historical information-based services to higher value, market-driven services, including management consulting, technology consulting, financial planning, and international services. The competencies, or skill-sets required to deliver such services were also identified in the Vision Project.

So where are we today, more than a decade later, relative to the vision of the future forged in 1997-1998?

It’s not a straightforward answer, as one might expect. Let’s look at what has happened in the interim. First was the dot-com crash as noted above. Then came epic business scandals like Enron, WorldCom, Adelphia, and others. The Big 5 became the Big 4, as the federal government chose to indict the Andersen firm for the deeds of a few. Congress reacted in 2002 with the Sarbanes-Oxley Act, which required CEOs and CFOs to personally certify financial statements under a threat of jail time if the financials proved to be misleading. Also included were Section 404, requiring corporations and their auditors to opine on the effectiveness of internal controls, and the creation of the PCAOB. The SarbOx legislation became a huge growth driver for firms of all sizes, as the 404 requirements created new opportunities for larger firms, which were forced to transition their smaller clients to smaller firms, a trend that continued in domino-like fashion. Double-digit growth was the norm for firms of all sizes, based predominately on core, traditional services. Many CPAs claimed to have all the business they could handle. The number one issue confronting firms was a shortage of qualified staff to do the work.

On a parallel path, the country emerged from the 2001-2002 recession, the stock market recovered and reached new highs, the economy turned robust once again, and unemployment became practically nonexistent. Then the great recession hit around December 2007 and continues today, leading us into what Ian Davis, worldwide managing director of McKinsey & Co., calls the New Normal. Davis suggests we’ve experienced a fundamental change in the business landscape, a restructuring of the economic order. Davis believes we will emerge from this restructuring in a different place, one unlike the world we’ve known in recent years. While this may seem a bit unsettling, Davis concludes the new normal will be a world that is no less rich in possibilities for those who are prepared.

Has the accounting profession entered into a new normal?

The 2009 PCPS CPA Firm Top Issues Survey provides some interesting insights. For the first time in many years, the staffing shortage is no longer the number one issue facing public accounting firms. For firms of all sizes, client retention is now the number one issue, indicating the recession is having an impact on the profession. As a result, firms can expect downward fee pressure on conventional compliance services, which is unfortunate because nobody likes to compete on price. Competing effectively in the new normal may require CPAs to move beyond compliance and into a most trusted advisor role. Clients in the new normal have new and emerging needs, which provides CPAs with fresh opportunities to provide advisory services - management consulting, technology consulting, financial planning, and international services – just as the Vision Project suggested.

With the recession potentially lasting another year or two, the Vision Project’s view of the profession in 2011 may prove to be clairvoyant, except for one thing. In light of the Enrons and Worldcoms, and more recently the Madeoffs and Stanfords, core CPA services will be as relevant as ever. High-growth firms will find a way to leverage traditional services with high- value advisory services that clients in the new normal desperately need.