The accountancy profession
is under fire as rarely seen before. When you consider that 50% of FTSE 100
CEOs have a finance background it's easy to see how the health of the
profession impacts the health of UK business.
moved on and so has the world of the Accountant.
In the 1970s and
1980s 20% of graduates went into finance as a career but today this has
declined dramatically despite salaries for post qualified accountants still
being amongst the highest of all graduates. The Big 4 are finding attracting
enough high calibre entrants to the profession a major problem and have done
for a number of years. This becomes immediately apparent when you look at
the composition of some of the audit teams, which while very talented, often
now include fewer “Brits” and many more Antipodeans who (in the majority)
are of course only here temporarily.
The profession is
moving inextricably towards a more rules based approach.
some CFOs have very publicly been held, at least partly, responsible for the
likes of Carillion, BHS and Patisserie Valerie. At the same time the
accounting firms are accused of conflicts of interest and blamed for not
identifying potential corporate failures. Indeed the Financial Reporting
Council is pushing for bigger fines and this year alone all the Big 4 have
received or are facing, multi million pound fines and for the first time a Big
4 Partner has received a personal fine of over £300,000.
At the latest
in our series of CFO lunches we asked our guests
- Why is the
accountancy profession no longer such an attractive career option and what
can be done to change this?
- How do you feel the role of
the profession has changed in terms of the standard, relevance and value of
service it provides?
Phil Moses, the CFO of Liquid Telecom,
started the conversation by pointing out that the profession is moving
inextricably towards a more rules based approach and becoming less judgement
focused which in turn means it is just not as interesting a profession as it
The Report and Accounts are the Profession's
Fines and regulation have inevitably encouraged this
rules-based approach. If people stick to the rules, they then can't be caught
out if their accounts are misleading because they can prove they stuck to
the rules. Phil believes this will end up with accounts being automated and
you will then not need so many accountants.
This trend of reducing
judgement and added value has inevitably made it a less rewarding career.
After all, it is not massively satisfying if you are just there to police
the rules. Phil commented the whole “true and fair view” seems to have
taken a back seat but suggests that it would be better if finance
professionals were forced to say “I personally believe…”.
The CFO of
a well-known restaurant group, uses PWC as their auditors and can see that
they are trapped in the vicious circle of having their fees squeezed and
therefore, having to “flog” their auditors very hard, often working them
until 9pm or 10pm most of the year. Even then they do not get involved in
the commercial side of the business but are confined to just tick boxing
the balance sheet and spending a lot of time on the Annual Report.
The Annual Report and Accounts are the profession's “shop window” points
out Ian Bull, formally CFO of Parkdean Resorts, however the complexity of
IFRS gives the “back end” of the Accounts a look of being an impenetrable
mass of information which is incomprehensible to anyone other than those who
are technically well qualified. This shop window has become less attractive
to graduates as it moves away from “I can understand that and would like to
be part of it” to “Oh, I don't understand that anymore, it looks too
complicated, I'll do rocket science instead of accountancy!” The good part
is it is pushing accountants to ensure that the front end really describes
the strategy, direction and business performance really well.
whole “true and fair view” seems to have taken a back seat.
reason why accountancy is less attractive to graduate entrants is that all
they see is the initial low value add accounting work that's involved, says
David Gerrard the CFO of Veolia UK. They don't see the more strategic and
commercial role you play later in your career as a CFO. He points out that
if they simply want to be an accountant they may as well qualify as an
Actuary and just work on numbers and technical stuff.
Woodhouse, VP at Sabre, commented that accountancy provides an important
foundation to business and can be a route out of finance into other
interesting career paths. He believes however, that this is not readily
identified by today's graduates and that the profession should more actively
market this as a benefit. David Doyle, CFO at Global Switch, agreed and
recounted that he went into accountancy in order to learn about business,
however today the millennials do not look at accountancy as the preferred
profession, being more interested in Technology, Cyber etc.
have an unrealistic understanding of what a degree will give them.
David then made the interesting observation that an increasing trend is
for people to retrain in mid-career and so maybe the profession should look
at encouraging computer science graduates to retrain in finance
mid-career. Ian Bull agreed with David but developed the point further by
saying that business information (BI) and data analytics should belong to
finance as they are natural bed-fellows for finance skills. It is also a
natural recruiting ground for millennials where they can see information
and business side-by-side before becoming accountants. He sees these
business information, data analytics and accountancy as natural adjacencies
that provide powerful insights into the business and are intrinsic to how
a business operates. He said he would certainly be confident of hiring
into finance if he could offer time in data science first before going on
to qualify as an accountant through such as CIMA.
data analytics and accountancy are natural bed-fellows.
the CFO of City Airport, pointed out that the profession was not confined
to Chartered Accountants and that she had chosen the CIMA route as she
wanted to be involved in the business and commercial aspects from an early
stage. David Doyle picked up on this point saying he has not experienced
any problems in attracting students to study for CIMA and that they liked
the idea of going through the organisation gaining different experiences
There was general agreement when Wilma said she
believes that part of the problem lies with the millennials who have an
unrealistic understanding of what a degree will give them.
don't trust our youngsters to do the things that we took for granted.
The discussion then moved on to some of the changes in the Profession,
some of which have also impacted its attraction to the next generation.
Phil Dennis, the CFO at Bizspace, drew attention to the change in the
role of the CFO over the last 10-20 years whereby it has become
significantly more strategic and you are expected to make a much wider
contribution to the future of your business. However, at the same time the
profession, through its focus on IFRS and other rules and regulations gives
the perception that it is going in the opposite direction as has already
been pointed out.
Toby Woolrych, CFO of Renewi, reminisced about his
training in the then Big 8 where in your second year you would run a pension
audit and in your third year would be given a small business audit to run.
By the time you were a Junior Manager you were really comfortable with
having regular interaction with the CFO. He compares that with his
experience today as the client CFO where he rarely sees anyone. Audit
Directors tend not to interact extensively with the CFO and all major
conversations are held with the Partner.. He finished off by saying that as
a profession we don't trust our youngsters to do the things that we took
Partners used to spend time in the business
and with the CFO in order to properly understand it.
the CFO at Bristol Airport, agreed with Toby saying that when he was in
the profession, Partners used to spend time in the business and with the
CFO in order to properly understand it. They would then essentially also
act as an advisor to the CFO. However, now he doesn't see his Audit Partner
for more than an hour. He believes that if they had taken time to
understand their client's businesses they would have spotted many of the
problems at BHS, Carillion and others.
People need to
take more ownership for their actions.
Jason went on to suggest that
business is partly to blame as they continue to screw down the audit fees
which results in the profession not being able to afford to add much value,
which in turn leads to business not wanting to pay as much for the audit,
thus becoming a vicious circle. Jo Baker the CFO of the RAC agreed but
points out this is a false economy, because as audit fees are screwed down
to the bear minimum, you now get what you pay for. She has found that one
consequence of this is that as a Board of Directors, they have gone out for
assurance from other third parties. While these may be on a much narrower
scope to cover, for example new regulations, she points out that they are
spending more money on assurance on things that they would previously have
got from the auditors. You end up paying more as you've got the risk of fines
and personal liability. She asked if we were all looking at this the wrong
The closing comments were on the fines that are
increasingly being awarded not just to organisations but individuals too.
There was limited sympathy in the room for those being fined, with Mark
Gardiner, Group Finance Director at Penguin Random House, saying there has
not been enough personal liability and that people need to take more
ownership for their actions. David Doyle reminded us that it is very hard to
find a partner at an audit firm who is earning less than their client.
To conclude, a rich and vibrant debate took place which centred around
how the commercial and regulatory pressures on the accounting profession
are having a negative impact on new talent joining the profession as well
as the value added service that clients receive from their Auditors. This
led to the discussion having a big focus on how the role of the CFO has
changed to become significantly more business focused and strategic in
nature. The challenge for the profession is to ensure that in a more rules
based environment the next generation of CFOs have the breadth of
experience and training to continue this trend.