Accounting Today editor-in-chief Dan Hood outlines the major trends and developments that accountants should be keeping an eye out for over the next 12 months.
Transcription:
Dan Hood (00:03):
Welcome to On the Air with Accounting Today, I'm editor-in-chief Dan Hood. This is our first episode of 2025, and with that in mind, we thought we'd kick off the year by talking about what we at accounting today are going to be keeping an eye on over the next 12 months. The big trends, the big news developments, the big things we're expecting to see impacting the accounting profession throughout 2025. Now, what that means is we're not going to have a guest for it, but I think it'll be a great chance to outline, like I said, what we expect will be the big news stories and the big developments and the things that will most impact the accounting profession over the next year. So I want to dive in, like I said, to the sort of issues that accounting today is going to be thinking about and talking about and covering over the next year as they impact the profession.
(00:41):
Let's start with one that I think is pretty timely given the fact that we're depending on when you're listening to this just before or just after the inauguration of Donald Trump, second inauguration of Donald Trump, I should say, and what we're going to talk about is the regulatory environment. It's been pretty clear over the last, well, for all of this century really, and going back even further, that the pace of regulatory change is increasing enormously. We're seeing more rules, more regulations in more areas promulgated more frequently than ever before, and it seems to just, it's kind of a chart line that just keeps going up and up and up and up and up in a straight line over towards the right of the chart. It's just increasing significantly all the time. That said, there's also another change in the regulatory environment that's more of a sort of a sign wave, a gentle up and down and up and down, and that's the intensity.
(01:30):
I would say maybe good way to put it is the intensity of the regulatory environment, and that changes often with who's in the White House. Literally the party in control of the White House or Congress can dictate how intense the regulatory environment is. Like I said, it's overall we're seeing a lot more rules of regulations, but how much they're enforced, how strongly they're enforced varies with the administration. So for instance, under the Biden administration, we saw Erica Williams at the Public Company Accounting Oversight Board, really cracking down on auditors, really issuing high fee, high fines and lots and lots of them really aggressively going after cracking down on firms to make sure that they're performing at their best. That might well change under the Trump administration if they change the chair of the P-C-A-O-B. Similarly, under the Biden administration that Gary Gensler promulgated a lot of things around, for instance, ESG reporting at public companies, we could probably expect to see that ease up on or halted in its tracks entirely under the administration.
(02:31):
And none of this is a question. You can be on whatever side of the policies you like, but it's just definitely a thing we've noticed is that enforcement tends to be less strict under Republican administrations. Now in many cases, accountants may look at that and go, that's great, and that's fine, but it's just something to be aware of. It may mean that auditors are under less pressure and able to perform more as they like, but we'll see how that plays out. We should expect some changes. We've already seen some moves at bringing in new people by the Trump administration. They've announced some of the people they want, for instance, particularly at the IRS, they've talked about who Billy Long bringing him in to take over there. That may change how the IRS continues its pursuit of enforcement and so on, particularly around high net worth individuals and large corporations.
(03:20):
So we'll see how that plays out. We're going to expect some changes once the new administration is in place and up and running, and it'll be interesting to see how that goes over the course of the next year. Alright, so that's the first thing we're going to be looking at. I think the second thing we're going to be looking at is a little more specific around regulation and legislation, and that's the future of tax laws over the course of the next year. Obviously one of the big issues here is the tax Cuts and Jobs Act, the provisions there, many of them are expected to sunset at the end of this year going into 2026. The administration has already been talking a lot about what they might do. There's also a lot of interest in Congress in getting these issues resolved. All these provisions that might well get sunsetted, but I think the expectation is that given the control that the administration has in Congress, that they'll be able to pass some things.
(04:09):
There's also a lot of things that would be passed with bipartisan support. We know interestingly that president-elect Trump or President Trump, again, depending on when you listen to this, has already summoned a lot of folks from Congress who are from high tax states, New York, California, New Jersey, et cetera, et cetera. Had them down in Mar-a-Lago to talk about the future of the salt cap. Be interested to see what goes on there because that was an area that he had expressed a willingness or an interest in rethinking that because we know that was an issue, particularly for GOP congressmen in those high tax states. That cap on the deduction was a bit of a problem. So we're looking to see how that plays out, what things get changed, what things get extended, how they get extended, the kind of pay fors that go with it. That's going to be a big issue.
(04:54):
We're sort of expecting it to happen relatively early in the year, maybe certainly by mid-year, but that's probably a fool's game to predict that kind of thing. You never know what's going to happen in Congress or in the White House, but the expectation is, again, given the GOP's position in Congress and in the White House and their control of all three pages that they may well be able to get done what they want to do. So we'll keep an eye on that. We'll be reporting on that throughout the year and accountants are going to be wanting to talk to their clients about that, get some certainty around those issues as soon as they can because it will impact things like tax planning for 2026 and so on. So keeping an eye on that. So that's the two first issues I should at this point out, these are not in any particular order of importance or what we think matters most.
(05:37):
They're just a little bit of as they came to me and I started with the regulatory environment in part because the new administration is coming in soon, but there are a lot of other issues that are just as important that aren't really tied to a particular time of year. One of them, I would say is my third big topic here, and that's private equity and its impact on the profession. There can be no question, right? Everyone is aware unless you've been living in a cave on Mars, everyone's aware that private equity has come into the accounting landscape gangbusters. They're buying up firms all over the place. They're creating platforms of firms that can acquire other firms. They're working on three or four different models of ways to get involved in the profession, all of which are being continued to pursue in a big way. The interesting thing is how that's going to play out over the course of the next year.
(06:25):
We've already seen at the started this year, the very first turn of a PE firm that had invested in an accounting firm. That's where they close their investment window and sell their stake or pass their stake on in one way or another. Usually that's a three to five to seven year sort of thing. The first one we saw was happening at the very beginning of this year when Citrin Cooperman the stake that was owned by New Mountain Capital that got moved to Blackstone, the biggest private equity firm in the country as far as I know, and that was interesting because it's a little unusual because New Mountain Capital had, in addition to having invested in Citrin Cooperman in 2022, had last year in 2024, had invested in Grant Thornton, a much larger firm than Citrin Cooperman. So there may be a little bit of unraveling of their, not unraveling, but untangling of their investments there where they said, well, we've got a big investment in Grand Thornton.
(07:20):
Let's do something else with our investment in New Mountain in CIT and Cooperman, move that along. But either way, it shows that there is appetite, continuing appetite among private equity firms for purchases in the accounting space, right? If the biggest private equity firm in the world is looking at a big accounting firm and saying, that's a good bet for us, that's something we want to be involved in, that tells you that we should expect to see lots more PE deals. We kind of knew that was going to happen anyways, this is just confirmation of it, let's put it that way. The question is, and well we think is going to be interesting is on two levels. One is a question that came up at a lot at our private equity summit last November was we had a number of panels of accounting firms that had taken on private equity investments, and we had them report on what it was like and what the experience was like, and it was generally and genuinely very positive.
(08:08):
Most of the firms were super happy, or all the firms I should say were super happy and one of the questions we got from the audience was, this was great, but we hear from some firms where the deals didn't go well. And what is interesting is that we don't know of any deals that haven't gone well. The deals that have been set up so far have been with top-notch accounting firms matched up with top-notch private equity firms, the firms that are on both sides that are doing this because they believe in the deals and they're not doing these deals because other firms on either side are doing the deals. But what we expect to see over the course of somewhat this year, but probably more as we go into the next year, is to see more deals where it's not necessarily a top-notch accounting firm and a top-notch private equity firm that are doing it because this really makes sense.
(08:53):
We're probably going to see a lot more Me too deals, deals where folks say, I want to be involved in this. Yeah, let me be in here too. Me too. And we're going to see more of that and what that means is we're going to see firms where accounting firms where it might not necessarily be the best fit or we may not be as top performing in some of the earlier deals, and we're going to see private equity firms whose thesis is thesis in getting involved in accounting may not be as strong or may not be as carefully thought through. So we're probably going to see some of those deals go from the high level high strong performing deals that we've seen so far with firms like Citrin, Cooperman, Eisner, Eisner Amper or Cherry Becker for instance. And we may see, and I'm not going to name any firms, I don't know any of them, but there may be firms that don't do as well, aren't as successful in their private equity deals.
(09:36):
That's something we're keeping an eye on because we're sort of curious to see how that works. It can't possibly be that every one of these, as Alan Colton who's an expert in these areas often says Not all of these are going to be home runs, but so far we've seen a lot of home runs and triples, so we're going to keep keeping an eye out for some of those singles and walks and outs to mangle a terrible baseball metaphor. Sorry for that. But anyway, so that's one thing we're going to be looking at. The other thing is to watch the general impact of private equity on the accounting profession as a whole, and it's really interesting because the overwhelming majority of accounting firms will never do a private equity deal. There's 44,000 accounting firms and there's not enough private equity firms to buy all of them, and many of those firms are too small to rate being bought by a private equity firm.
(10:21):
That doesn't mean that they aren't being impacted by private equity. We are going to see things like valuations of firms are going up. If you're a firm that's trying to do a regular sort of acquisition or merger with another accounting firm, you're going to have to bring cash to the table in a way you didn't have to and they're going to be expected to pay more than you used to have to pay. It's changing things around salary. It's going to cause all kinds of ripple effects we expect in the workforce and in the job candidate pool as people whose firms that have been acquired by pe. They were going to see a small, but I don't think insignificant flow of people out of those because they just don't want to be involved in a private equity owned firm even before they even know whether it's going to have a significant impact on the workplace.
(11:01):
We're seeing people who just say, that's not an area I want to be involved in, but we're going to see I think a lot more impacts of private equity rippling out throughout the profession over the course of the next year and changing a lot of things even for firms again that aren't necessarily taking a private equity investment. So we're looking forward to seeing all the ramifications of that and teasing them out and figuring out how exactly it's impacting things that it's going to be very interesting and it's certainly worth paying attention to over the next year or so. Next up, probably number four would be tied to that, tied to the private equity idea, which is that we expect to see more and more changes in the way firms are structured constant with all private equity deals is that they involve accounting firms being split into an alternative practice structure, right?
(11:46):
Where you have one group that's the non attest services, it's the tax and advisory services and everything that's not a test and assurance not regulated at the state level, doesn't require CPA ownership, that sort of thing. So that's a given. We're seeing that structure has just started going gangbusters. It's about 20, 25 years old, but it's really gotten a new lease on life over the past three to four years as private equity comes in. We've also seen a number of firms adopt ESOP structures, employee stock ownership plan structures, and that's one we see more and more of since BDO and Grassy adopted it last year, we're seeing more and more firms take on that structure as a way to manage their partnerships and to help among other things, to help encourage younger generations of people to stick with firms and to stay with them and to help manage some of those recruiting and retention issues.
(12:32):
But I think we're going to see other areas in which firm structures change. We're going to see as, again, I think we're going to see some people leaving firms that have taken on PE money, we're going to see them starting up firms that they may take on whole new firms we don't even know yet, and they may say, you know what? I didn't like the old partnership model, but I don't like the PE model either. What's new, what can be different? And I think there's going to be lawyers and deal advisors and incorporation experts working with accountants of all kinds to come up with new ways to structure an accounting firm. I think another example of this that we're going to see is more true international firms. I am always sort of surprised when we think about, I have to remind myself when we think about the international firms, the big four firms and so on, realize those are not actually single owned firms.
(13:15):
It is, they are networks and associations of firms that share the same name but that are for all kinds of legal and incorporation purposes separate. But we've seen just this year we saw Grant Thornton in a deal, grant Thornton us to partner up with Grant Thornton in Ireland. We know that RSM US is looking over the course of 2025 to form a single firm with the UK arm of RSM. I think we're going to see more of that. Those true international firms, that's a new structure. How that's going to work for firms is going to be interesting to see what it means in terms of liability, what it means in terms of service areas and all that sort of thing going to be very interesting. So I think we're going to see more and more changes in firm structure and people being willing to experiment in with what a firm structure means.
(13:59):
That brings me sort of similarly to the fifth point that I think we're going to be paying attention to, which we're just calling sort of blanket new ways to CPA. We know for a long time that people have been concerned about the relative lack of new CPAs coming along, new people taking the CPA exam, getting their CPA licensure. That's a problem for the profession. Lots of different people have been working on it and one of the conclusions they've reached is we need to have multiple ways for people to be able to take and achieve CPA licensure. We've seen the National Pipeline Advisory Group report strongly recommended this and the AI CPA has after a relatively strong stance against changing those rules has shifted its position a little bit and said, we may have to do this just to make sure that we can get enough people to come in.
(14:46):
What it's starting to involve right now is finding new ways for people to get their A 50 hours. The exam itself, well the exam always sort of changes a little bit. It's still going to be the capstone of licensure process, but how you get to the point where you're allowed to take that right in terms of the education requirements is probably going to be the biggest area of change. So how you get your 150 hours is going to change. There are going to be way more options for that. There's going to be in terms of work study and turning internships into credit hours and all that sort of thing, we're going to see a lot more of that. There's already programs in place, the ELE Education Learning and Experience Program, I'm going to mangle that, but it's a big program from the A-I-C-P-A called ELE that's really leading the way in terms of helping people get 150 hours in a less expensive, more efficient way.
(15:35):
There's a lot of people out there who might consider CPA licensure if they didn't have to do a straightforward 30 credit hours that fifth year of school. If you can do it while you're working somewhere working in an accounting firm and that work counts as for credit hours, that's going to be huge for a lot of people. But I think we're also should start looking at longer term, much different ways to become A CPA, not just this straightforward, how do we make it easier for people to get their 150 hours, but I think we're going to find the profession looking differently at again, how you become A CPA. And that's part of one of the things that makes me think this is there's a fascinating thing that came out of the National Pipeline Advisory Group report, which is fantastic, you should take a look at it was they had talked a lot to academics and the things they noticed was that academics and universities and people in that world were starting to look very differently at what an undergraduate college experience looks like.
(16:29):
And then in many cases they were thinking about saying, does it have to be four years? Couldn't it be three? Which is a fascinating idea and starts to bring into play all sorts of ideas about what we think and a college education is, what it's for, what it does, and then specifically to accounting, how that plays into the process of getting licensed as a CPA. So I expect we'll see Interesting, at least thinking around that. We'll see the short term flourishing of ideas and ways for people to get their 150 credit hours, but I think long-term we're going to be seeing a lot of thinking and philosophizing and maybe some agonizing over what role education plays in becoming A CPA and what that education should look like. So it's going to be interesting stuff. A lot of changes going on there. Very an exciting period of time for that. But again, going to bring lots of changes and be worth paying attention to. Alright, that's gets us through five points. That's halfway through. I've got five more I want to talk about, but I'm going to take a quick break so if you're tired of listening to my voice, you can go listen to something else or just blessed silence for a couple of seconds or listen to our advertiser. So pay attention to what they're talking about.
(17:34):
Alright, and we're back. Our guest today is me, Dan Hood, editor in chief of accounting today, yapping at you for a little bit more. I went to our first five big areas that we're going to be covering. I should point out, we're going to be covering everything that's going on in the profession. That's kind of what we do. But these areas that we think are worth paying a lot of attention to, and again, these are not in any particular order. They're a little bit based on chronology, but they're also just to a certain extent how they came to my mind. So sorry about that. But don't take it just because mentioning the thing here in the second half of the podcast that it isn't as important as the things that happened in the first half. And a great example of that is the first thing, number six that I want to talk about is staffing.
(18:12):
Obviously this is the biggest issue in the profession on a bunch of different levels, both at the professional level, at the individual firm level, at the career level of individual accountants. Staffing is a huge issue. We're going to see, continue to see firms finding lots and lots of different ways to get around the pipeline problem, the capacity issues that they're facing. We're going to see more and more firms experimenting with outsourcing. We've already seen firms experimenting with creating their own outsourcing or organizations. I know firms that have built outsourcing organizations in Mexico or Philippines or wherever, where it's an affiliate of theirs. It gets their work done, but they can also offer those services to other accounting firms or non-accountants entirely. So we're going to see a lot of people exploring a lot of interesting and different ways to handle the staffing issue. I certainly expect that we'll see firms looking at the roles and within their firm and saying, does this need to be done by a CPA?
(19:05):
Can I hire somebody else who isn't an accountant to do this? We're going to see, again, more and more firms getting into outsourcing and offshoring. We're going to see more and more firms bringing in technology as a major enabler of what they do, a streamliner, an efficiency maker, all those sorts of things. We're going to continue to see that be an issue, and I think that's one thing that firms should bear in mind is that is going to be an issue for a long time. Most of the long-term solutions to deal with the pipeline problem often won't bear fruit for a couple of years at most. If it involves going back. One of the big things they talk about is going to high schools and talking in high schools. If you do that, that's great. It's, it's a great way to build interest in the profession.
(19:41):
But those kids need to go to college for four years, maybe five, and then they need to get a job. So that's a five, six year solution for right now, it's technology, it's offshoring, it's finding new ways to get the work done, maybe by non-accountants. We're going to see a lot of work on that front and continue to see it's going to be an issue for the long-term. There is no sign that the amount of work that accountants are being asked to do, both on the compliance front and the advisory front continues to increase. So this is something that people should really be thinking about as a long-term problem, almost just think of it as part of the environment. This will always be a problem. Unless you're looking over a 20 or 30 year course of a firm, you should be expecting that your firm will always be struggling to find staff, and the quicker you can find alternative solutions, the better.
(20:27):
It's not something that's going to fix itself in the next couple of years. So that's a little gloomy, but I think it's worth changing our thinking around to just assume that that will be a somewhat perpetual problem on an upside thing. On a brighter note, let's talk a little bit about number seven. The issue there or the area there is advisory. The move to advisory. We found a fascinating thing in a survey we did last year of accounting firms that while in the previous year they had expected to increase the amount of time they spent on advisory services, they actually spent less time on advisory services and actually more time on compliance because again, we talked earlier about the regulatory landscape and the increase in that area, which is all leads itself to more and more compliance work. Listen, compliance work is work and it's great and accountants are great at it.
(21:15):
So there's a positive angle there, but it is getting in the way of the long-term shift to advisory work. It makes it harder for firms to do, and that's something that's important. Firms need to continue to make that move. The important thing there is the realization that when we say make the move to advisory, and I'm as guilty of this as anybody else, we need to make it clear that we're not talking about getting rid of the compliance work. What we need to do is make the compliance work to streamlined and efficient as possible and then use it as the foundation for the advisory work that accounting firms should be doing. I expect we're going to continue to see more and more accounting firms get better and better at that and better at better at selling advisory services to clients. One of the things that's leading the way there is cas client accounting services, client advisory services, whatever you call it.
(22:03):
We're continually to see tremendous growth there. More and more firms taking it on. More and more firms seeing profitability from it and more and more firms getting really good at it. That I think is going to help a lot of firms figure out the overall approach to advisory that they need to take because it is a great mix of compliance work and the potential for advisory work for clients. So keep an eye on Cass as always. It's been a great success over the last five to 10 years. It'll continue to be so going forward. Moving on to number eight, which is ESGI talked about in the regulatory environment section that Gary Gensler, the outgoing head of the SEC, presumably had pushed for rules for ESG reporting for public companies that may well be put on the back burner for a while under the new administration.
(22:50):
I would expect that it probably will, but ESG remains a huge issue and a huge area of interest for in Europe. So they're going to keep putting out rules. So anybody who wants to work there or trade there or do business there is going to have to abide by some of those rules. California similarly is putting up rules around ESG, different elements of ESG, and for those of you who are like ESG, what's that? Environmental, social and governance reporting. This is going to happen. It may be slow to be implemented in the United States because of the current administration. May, like I said, put it on a back burner, but this is something that accountants should be expecting to happen and expecting for their clients to have to deal with at some point over the next five to 10 years. It's simply that's just the way the markets and the regulators are headed.
(23:38):
Generally speaking, barring a major change in the way the whole world is thinking, it's going to be a big and it's going to be a big potential opportunity for accountants. So one thing that might be a positive, and again, it doesn't matter what your policies on are around ESG for accountants, one thing that may be a positive about if it does get put on the back burner by this administration as we sort of expect that it will, this will give you more time to wrap your hands around it because it's going to be something that firms can offer both in terms of helping their clients set up their ESG reporting, but also then the follow on a test work and that a test work is the long-term opportunity, right? To be the assurer of the value and accuracy and meaningfulness of ESG reporting is going to be a tremendous position.
(24:24):
It is not necessarily guaranteed to accountants, but if they take advantage of it and make the most of it, it could be a tremendous extra source of income, right? I think it would be absolutely fair to say that in the long-term, this could be an area that is absolutely as big as financial attest services and equal area. So some for firms to bear in mind. Like I said, we'll probably see a little bit of a slowdown of implementation here in the United States, but that may be just gives you an opportunity to get involved in it. Next up, number nine is artificial intelligence. This is a huge issue. This, if anything, we'll prove to you that this set of concerns or areas that we're going to be covering isn't in order of importance. The fact that I'm talking about AI second to last should tell you this is going to be a huge issue for accounting firms.
(25:10):
We've seen enormous strides forward just in the past year, just in the year or so since chat GPT became a big deal. It's only going to get more important, more quickly going forward. The tools are going to get stronger. They're going to be more tied to specifically what accountants need and want from them, and is absolutely super critical for accounting firms to wrap their heads around artificial intelligence and how it can work for them and for their clients. It's worth knowing that you don't have to become an artificial intelligence expert yourself. This is one of those things where the old metaphor about you don't need to know how to build a watch. You just need to know how to tell time. It absolutely applies. In this case, you're not going to have to code or interact with or train an AI necessarily, but you do need to know how it can impact your work and how you can use it to improve what you do to make it more efficient.
(26:01):
Again, this goes to capacity issues that the profession is suffering under. This is going to be a huge fixture of that. It's also going to be a huge enabler of ai, sorry, of advisory services. AI is going to be an enabler of advisory services. I will say that we hear a lot of concerns from people always going to replace this. Is it going to take the work of accountants away, et cetera, et cetera. I think the best description of this I've ever heard is it is not, AI is not going to beat accountants. What's going to happen is that accountants who use AI are going to be more successful than accountants who don't, and I think that's a great way to think about it. What you should be doing to make sure that doesn't happen to you over the next year or so. Maybe just education, just wrapping your heads around it, thinking about where is being used in the tools that I use?
(26:45):
Where is it? Have potential applications in the work that I do or the clients that I serve. Spending your time thinking about it, figuring out what it is, how it's going to impact you as a firm. So devote some time to that. We're going to be covering it a lot so you can read what we've got going on about it. But I would also say there's lots of other educational opportunities for you beyond what we're going to be covering. Finally, I would just talk a little bit about some new leaders who are coming into the profession. We expect to see a number of changes in a number of different offices. Donald Trump has already named a number of people to new positions who will be considered for new positions. For instance, Billy Long has already talked about Billy Long as a representative from Missouri as a new head of the IRS.
(27:28):
That'll be very different from the current commissioner Danny Wiffle. See what happens there. Obviously it's going to be changes at the SEC. Wouldn't be surprised if a lot of the regulatory environment changes with new leadership. There are some other areas, obviously, where we're going to expect new names and new leaders. I just think in general, it's worth bearing in mind that as the baby boomers moving to retirement, we're going to see a lot of high profile positions, turnover. We just at the very beginning of this year had a sort of surprise our retirement of Seth Siegel at Grand Thornton just after the completion of the deal with Grand Thornton, us and Ireland. A little bit of a surprise as he stepped down, but I wouldn't be surprised if we see more and more firm leaders of long standing step down just as a natural result of people get older.
(28:15):
We've had a lot of baby boomer leaders in the profession, so we're going to see a lot of that. I would also mention in particular, one turnover that's particularly important and that we think is exciting is the introduction of Mark Koziel as head of the American Institute of CPAs taking up the mantle that Barry Melancon had had filled so admirably over the course of 30 years. Mark is deeply informed on the profession well liked and highly respected around the world. So he's a great choice to take up the mantle, as I said, from Barry, and we're looking forward to seeing what he does there. So that's going to be very interesting and particularly given the whole range of challenges that the profession faces. It'll be interesting to see Mark's approach to that, and we're looking forward to that and wishing well. That's about it.
(29:05):
I'd say, in terms of what we're not, it's not all we're going to be covering. As I said, we're going to be covering a lot of other things. There's always going to be surprises coming along, but those are 10 big issues and big areas that we're focusing on over the course of the next year and that we think you could probably profitably pay attention to as well. But there's obviously plenty more. We hope to cover those. Let us know if there's areas you think we missed here that you think are important that we need to be paying attention to. But otherwise, thanks again for listening to us and we hope you'll join us for a future podcast where it won't just be me yapping. We'll have actual experts here to talk about things. With that, thanks very much. This episode On the Air was produced by Accounting Today. Rate us and review us on your favorite podcast platform and see the rest of our content on accountingtoday.com. Thanks for listening.