New Quality Standard Heightens Fears of Accounting Brain Drain

Fans of Christian Wolff rejoiced earlier this year when news broke that filming had started for the latest installment of the adventures of the autistic CPA and mercenary do-gooder portrayed by Ben Affleck. Nine years after The Accountant first hit theaters, the sequel is set for release in April. It can’t be a coincidence that the film’s arrival coincides with tax season, can it?

While rainy-weekend movie watchers have long embraced Affleck’s pencil-pushing martial artist, the film’s depiction of audit work has apparently done little to persuade students to join the ranks of bean counters. In fact, it would seem accounting has never been less appealing to those entering the workforce. According to research from the American Institute of Certified Public Accountants, the number of students graduating with undergraduate and graduate degrees in accounting has fallen significantly in the last decade. Between the 2021 and 2022 academic years, for instance, students earning bachelor’s degrees in accounting declined nearly 8%.

While the dwindling number of new entrants into accounting has sparked a conversation about how to make the profession cool, a more pertinent issue at the moment might be the latest quality control standard adopted earlier this month by the Securities and Exchange Commission to address growing consternation about deficiencies in audits of public companies.

Much like the follow-up to The Accountant, the QC 1000, A Firm’s System of Quality Control, spent years in development. The Public Company Accounting Oversight Board created the standard as a way for accounting firms to both identify and safeguard against risks. SEC Chief Accountant Paul Munter described it as “an integrated risk-based QC standard that strikes an appropriate balance that can be applied by firms of varying sizes and complexities along with a set of mandates tailored to the size of the firms’ audit practices, which should assure that QC systems are designed, implemented, and operated with an appropriate level of rigor.”

Among the standard’s requirements, key personnel at accounting firms must certify yearly evaluations of the firms’ quality control presented to the PCAOB. Moreover, if a firm produces at least 100 audit reports for issuers annually, it must “establish an external quality control function composed of one or more persons who can exercise independent judgment” regarding its systems for quality control.

In a commentary accompanying her down vote on the SEC adopting QC 1000, Republican-appointed commissioner Hester Peirce gave voice to the most prominent criticisms of the new standard. Pertinent to the effort to recruit new CPAs: Peirce claimed the standard “will pose many implementation challenges and perhaps scare people away from taking leadership roles because the scope of their liability under such a far-reaching and ambiguous standard is unclear.”

On balance, the importance of cleaning up sloppy audits seems to outweigh whatever hiring issues the accounting industry currently faces. If firms really want to attract a larger pool of hiring candidates, they could always try the conventional tactic of offering more competitive salaries.