‘The most important person in accounting’ warns against lowering standards

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Barry Melancon, dubbed “the most important person in accounting” by his professional body in the US for 30 years, has issued a stern warning that his successors must not compromise standards in an effort to attract more people to the profession. .

Melancon is retiring this month as the longtime CEO of the American Institute of Certified Public Accountants, having overseen a profession transformed by new technology and private equity investment but mired in a recruiting crisis.

Young people lured by high salaries and low financial and technological entry requirements, the number of people taking the institute-administered CPA exam He fell heavilyAnd accounting firms have asked for reforms to make it cheaper and faster to qualify.

In a wide-ranging interview with the Financial Times, Melancon expressed skepticism about some of his firms’ claims, and said the “lowest common denominator” competition could be making a comeback in the profession.

“We’re a very trusting profession and we live in a world where there’s not much touch on trust,” he said. “We have to respect the respect we get from the public and the business community and regulators.”

A shortage of accountants is to blame for some companies’ accounting deficiencies, and some U.S. local governments and companies have complained that it is difficult to find auditors.

After facing pressure from the profession, the AICPA proposed in September to scrap the requirement for accountants to have five years of college education, known as the 150-hour guideline — more than the standard undergraduate’s 120 hours of courses per year.

Melancon made it clear that he doubted the need for such a change. “The 150-hour rule elevated our profession, which in the 1970s was more of a business than a profession. It has raised the quality of people in our profession and the standard of our profession, and to deny this is to deny history.

Melancon He was the AICPA’s youngest leader when he took the helm in 1995 at the age of 37, and he has never shied away from pushing for change before. When some in the profession objected, he insisted on computerizing the CPA exam and made the qualification available internationally. It also encouraged the creation of audit systems and other technologies that could be shared between organizations. Accounting Today magazine has consistently named him the most influential person in the profession.

A new flashpoint is on the list of on-the-job training that the AICPA has proposed as an alternative to a fifth year of university education for CPA candidates.

The FT reports that it is looking for a team representing large accounting firms A simple system Instead of requiring supervisors to verify that new recruits have acquired dozens of specific skills or “qualifications,”

Critics say the plan is too complicated, expensive and impractical, but Melancon says ensuring new accountants have specialized skills is vital to prevent the “low common problem” that could see an uneducated professional lose the profession.

“Companies don’t underestimate the investment they make in the people they hire, so it shouldn’t be a big change for most companies,” he said.

The proposed changes come against the backdrop of a rapidly evolving workplace, with armies of junior staff performing repetitive tasks no longer needed and new opportunities for accountants to use their business and financial skills to help clients.

“The entry level in our profession will decrease . . . because of technology and the traditional pyramid shape of the public accounting firm will not be the structure of the future,” Melancon predicted.

“We need to develop investments in skills development that will allow people to quickly enter the middle part of the company or the financial function, which is the most important profession.”

Also changing the shape of the profession is the arrival of private equity, from 2022 it has acquired a third of the 30 largest American companies. As well as pledging to support technology investment, the agreement provides equal incentives for older partners and young people. . Regulators, however, warn that private equity ownership threatens the objectivity of audit work, while the need to generate high profits may lower the standard.

“I don’t think the traditional partnership structure is the only way we do our profession,” Melancon said. While welcoming the experiment, he added, “Anyone who thinks (private equity deals) are all going to be a match made in heaven is wrong.”

Finally, he said, accounting firms can find investors who can hold them for a long time instead of flipping them.

For one final prediction before he retires, Melancon uses a quote from his decades in office. “Change will never be as late as it is today,” he said.