2022 was not exactly a banner year for accounting but if you don’t count the collapse of FTX, it wasn’t terrible for public perception either. Oh wait, there was that whole EY cheating thing. And a big IRS raid tied to tax incentives. That’s it though right? IDK, if I missed something big let me know.
Point is things could be worse. Sure, firms can’t find people and will soon — if they aren’t already — have to start turning down client work. But all four Big 4 firms remain intact and are making more money than ever, one of them is even trying to break free of independence rules so it can make even MORE money. That’s good news right?
Well, in case firms were looking forward to a fun and profitable 2023 here’s a little piss for their Cheerios. Jack Castonguay, PhD, CPA — who btw thinks CPA Evolution might kill accounting as a stand-alone major — tweeted his predictions for the year ahead. Prepare your small violins, we shall arrange a symphony for firm leaders.
The #accounting profession is in for a bumpy road in 2023:
1. Staff shortages will persist – salaries remain low & hours high
2. CPA Evolution will depress the pipeline further
3. Audit failures will become more frequent & high profile (#FTX now, what next year?)— Jack Castonguay, PhD, CPA (@profjackc) January 4, 2023
4. Turnover will likely increase – the dam is cracking & will break
5. Regulators will increase pressure to improve audit quality, as they should
6. More pressure = more hours = more turnover = more pressure…But it’s not inevitable:
7. This is preventable – will we prevent it?— Jack Castonguay, PhD, CPA (@profjackc) January 4, 2023
I asked him to elaborate on #2 because we’d expect to see a flood of CPA exam candidates this year as we saw in 2010 ahead of the CBT-e exam changes. It’s predictable and well-documented behavior that candidates who intend to pursue the CPA will make extra effort to do so before big changes take place should they be eligible to do so. The 2021 AICPA Trends report confirms this expectation:
The number of unique candidates sitting for any CPA Exam section in a year is an indicator of overall CPA pipeline strength. Any analysis of this data needs to acknowledge the rapid increases and decreases of candidates that occur with the launch of an updated Exam following a Practice Analysis, as evidenced by the increases and decreases in 2010–2011 and 2016–2017. The number of unique candidates in the pipeline has steadily declined since 2017 (where previous ebbs and flows have occurred).
Here are Jack’s thoughts on that, dispersed over three tweets.
TW: Total collapse of the pipeline
They are expecting that based on periods but we aren’t seeing it yet. Ignoring 2020, each year since 2016 has gotten worse and been the lowest new candidate year since. 2022 will be the lowest in that time frame too. We might see an incremental uptick in ‘23.
But I don’t think we’ll see the flood. And then I expect we’ll see a total collapse in ‘24 & ‘25 as candidates wait out the changes. The AICPA is reinstalling blackout months & disciplines can only be taken one month per quarter in ‘24. Any pipeline gains in ‘23 will be wiped out.
Lastly, the pipeline of new accounting majors and current majors is already so depressed there isn’t the ability to have a flood. There’s just not enough eligible CPA candidates with 150 hours sitting on the sidelines like there used to be.
If you think about it, he’s right. It’s not like someone is going to get an accounting degree and fast track an exam application just to take it before it is transformed in 2024 if they aren’t already on that path. The expected rush comes from people who are already in the pipeline. And the pipeline is, well, we know what it is.
Anyway, Happy New Year!
