The accounting industry is undergoing constant changes. In last year's instalment - Accounting in, and for, a COVID-19 Year (2020), I analyzed the headlines of accounting-related articles to gather insights on the main developments in the accounting industry through text mining. While 2021 has passed us by quickly, a brief recapitulation of last year's key findings:
- A wave of technological advancements possibly induced by the pandemic necessitating remote working.
- The focus of last year's headlines coincided with reporting cycles – our attention is influenced mainly by what we are working on.
- Sustainability is gradually becoming a prominent part of the accounting function for its synergies.
In 2021, many of us continued to grapple with the pandemic. We saw mass vaccination rollouts, which brought some reprieve. Yet, the emergence of new variants – Delta and now Omicron – threaten to be a disrupting force. This begs the question – what were the most present topics in the news concerning accounting throughout 2021?
I analyzed the headlines and brief descriptions of accounting-related articles from January to November 2021 and found three emerging themes. First, this relied on weekly digests from Google Alerts. Generally, 2021 continues and accelerates trends first identified in 2020. However, it is noteworthy that topics on 'accountants' and people-centric issues on diversity and inclusion have gained a foothold in conversations about accounting.
In grouping our findings into themes, I found:
1. Technological transformation remains key despite an attempt to move on from the pandemic
While 'pandemic' was the most often mentioned word in the articles, 'software', 'platform', and 'cloud' appears to be a critical feature in 2021's reports. This reflects that the discussion is still centered around technological developments in the accounting field.
This year, we witnessed an increased prominence of Accounting Technology solutions raising capital. 21% of the articles on technology were about a new accounting solution's successful funding. This is an affirmation from investors on the future, viability, and promise of such solutions. The pursued goal of the solutions is to harness the power of artificial intelligence and better technologies to make the accounting process more efficient.
In the digital transformation cycle, fearmongers said the technology would "replace accountants". The alternate and uplifting view are that automation will augment accountants rather than replace them. The accounting software market's compound annual growth rate is set at 7.1% through 2027, which can only mean a greater emphasis.
2. An increased focus on people and diversity
An attempt to shift the focus away from the pandemic has revealed some revelations. As the proportion of articles on the COVID-19 pandemic wane, there is a growing proportion of articles on people-related topics. Amongst these, there are two especially critical topics: (i) diversity, inclusion and gender equality, and (ii) job movements and skills demand.
This year, we learned about the Great Resignation, a phenomenon that describes a record number of people leaving their jobs as the COVID-19 pandemic subsided. It became a cause of concern for talent retention. This is reflected in the media's discussions. The accounting industry is not just about processes, digital transformation, and standards but also about the people in it. In 2021, the attention turned towards a greater focus on the hopes and aspirations of those in the industry:
Diversity, Inclusion and Gender Equality
The theme for International Women's Day in 2021 was befittingly "Choose to Challenge". This came with a disappointing revelation from CA ANZ in June 2021 that male accountants were paid up to 50% more than women. There have been constructive talks about change, and Deloitte has led the way by announcing a US$75 million commitment to a new initiative – Making Accounting Diverse and Equitable. Their initiative paves the way for more scholarships to be offered to those seeking to pursue an education in accounting and provides career support for aspiring accountants. If COVID-19 has left us with many lessons learnt, we must choose to challenge the status quo to build a better working world.
Diversity and inclusion are strong demands for accountants. Research by CalCPA and IMA found that 49% of respondents from their study's focal areas – race, gender, and LGBTQ+ - left a company due to a "lack of equitable treatment", whereas 40% left due to a "lack of inclusion". A study by the American Accounting Association suggests that (i) training on sensitive issues, (ii) mentoring, and (iii) shaping client behavior are the ways forward. I also believe that a paradigm shift in the attitudes adopted by the incumbents wielding power in the industry is needed. Those in a position of influence need to ally, reject discriminatory behavior, and push for more equitable change.
Job Movements and Skills Demand
The employment figures are promising. At the start of the year, the U.S. Bureau of Labor Statistics reported that employment declined by 140,000 jobs amid the continuing economic fallout, yet the accounting sector added 2,300 jobs. This trend remains consistent throughout the year. However, it may also be interesting to note that new jobs created in the field place higher expectations on accountants – a higher level of analysis are demanded from accountants.
This also is also accompanied by accounting firms reporting difficulties in finding talents. For example, in Australia, accountants are prioritized under the skilled migration list. With these changes, some suggestions for firms to retain talents are to:
- Revisit their compensation and benefits frameworks for accountants, given the additional skills required.
- Focus on improving flexibility and purpose.
- Invest in upskilling their accountants.
In addition, processes that can be defined well should be documented to ensure continuity.
3. Redefining the role of an accountant
Accountants have demonstrated their reliability as business stewards during the pandemic. With a robust numerical grasp of a company's financial performance and the key drivers, they were able to play the role of business advisors and value adders. It is, therefore, no surprise that 70% of accounting firms surveyed in Australia note that they would diversify their services to go beyond typical audit or compliance functions. This was in response to growing industry demand for a more extensive range of services. As a result, the trend is likely to be similar in other jurisdictions.
This, however, comes with the background of the United Kingdom's Financial Reporting Council and other jurisdiction's supervisory bodies, moving accounting firms to order to separate their accounting services from other professional services. While this remains a logistical issue for accounting practices to navigate through, the industry demand for accountants to perform a broader range of tasks – beyond merely being a compliance function but moving on to an advisory and value-adding department for the company. These conversations are not new. Therefore, what remains to be seen is whether talking about a 'new normal' will be enough to usher in change.
There is also a growing interest in accounting for cryptocurrencies. As many cryptocurrencies reached their historical highs in 2021, accountants deliberated on how best to account for this economic phenomenon. The key deliberation is whether to measure it at cost or at the market value – which can be very volatile. As cryptocurrencies continue to gain prominence, accountants will need to exercise their professional judgement in dealing with this topic. There will likely be similarly complex scenarios, which will continue to require accounting judgement.
There is an emphasis on accountants becoming sustainability trailblazers. This year's United Nations Climate Change Conference (COP26) in Glasgow heralded a significant milestone for climate change accounting. The International Financial Reporting Standards Foundation announced the formation of the International Sustainability Standards Board. To quote Peter Drucker – "What gets measured gets managed.". This complements the Sustainability Accounting Standard Board and the Global Reporting Initiative's work. With long-drawn expertise in reporting and disclosures, accountants are well poised to adopt a process-oriented accounting approach to sustainability measurement.
Accounting Trends 2022: The year ahead – a continuation of building on the foundations established
The big wave of change will continue into 2022. Some of these themes have solidified into our considerations for the next few years – (i) digital transformation and (ii) the evolving role of accountants. In doing so, an improvement of the people conditions of accountants in the profession will ensure the continued development of the accounting industry.
In 2022, I anticipate the following with regard to the accounting industry:
- An adoption of more technology, in a greater variety – blockchain, automation is widely applicable. Beyond systems, there are more opportunities for technology to be applied to the accounting practice.
- A shift in work arrangements – remote working, or at least in a hybrid form, is gaining ground and will likely remain a feature of our work lives in the coming months.
- A concrete look at a new Sustainability Standards – given the IFRS Foundation’s establishment of its intention to set sustainability standards, there is room to observe what this might look like.
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Digital accounting offers many benefits for various companies. However, many financial professionals have still not digitalized the accounting process and rely on error-prone manual accounting.