‘Most important man in accounting’ warns against lowering standards

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Barry Melancon, dubbed “the most important person in accountancy” for his 30 years leading the professional body in the US, has sent a stark warning to his successors that they must not compromise standards in an effort to attract more people to the profession. .

Melancon retires this month as the longest-serving executive director of the American Institute of Certified Public Accountants, overseeing a profession that has been transformed by new technology and private equity investment but has been mired in a recruiting crisis.

As young people are lured by higher salaries and lower entry requirements for finance and technology, the number of people taking the institute’s CPA exam has increased. has fallen sharplyand accountancy firms have called for reforms to make it cheaper and quicker to qualify.

In a wide-ranging interview with the Financial Times, Melancon expressed skepticism about some of the firms’ claims and said the race for the “lowest common denominator” could come back to haunt the profession.

“We’re a profession with a lot of trust and we live in a world where there aren’t many touchstones for trust,” he said.

A shortage of accountants has been blamed by some companies for potential flaws in their financial statements, and some US local governments and companies have complained that auditors are harder to find.

After initially resisting professional pressure, the AICPA proposed in September to drop the requirement that accountants complete five years of college, known as the 150-hour rule, one year more than the typical 120 hours of undergraduate coursework.

Melancon made it clear that he had doubts about the need for such a change. “The 150-hour rule raised our profession, which in the 1970s was more about a craft than a profession. It raised the quality of people in our profession and the prestige of our profession, and to deny that is to deny it the story.”

Melancon was the youngest ever head of the AICPA when he took the helm in 1995 at the age of 37, and he has not shied away from pushing for change in the past also advocated for the creation of auditing systems and other technologies that could be shared between companies.Accounting Today magazine ranked him consistently to the most influential person in the profession.

Details of the on-the-job training that the AICPA has designed as an alternative to a 5-year university education for CPA candidates is a new flashpoint.

The FT reported that a group representing major accountancy firms wants a simpler system than the proposed one, which would require supervisors to certify that recruits have acquired dozens of specific skills or “abilities.”

Critics say the plan is overly complicated, costly and subjective, but Melancon said ensuring new accountants have specific qualifications is vital to prevent the “lowest common denominator problem” where an unskilled professional can bring the profession into disrepute.

“Companies don’t take their investment in the people they hire lightly, so it really shouldn’t be a huge change for the vast majority of companies,” he said.

The proposed changes come amid a rapidly evolving workplace, with less need for armies of junior staff performing repetitive tasks and new opportunities for accountants to use their business and financial acumen to help clients.

“The initial positions of our profession will be reduced. . Thanks to technology, the traditional pyramid shape of a public accounting firm will not be the structure of the future,” predicted Melancon.

“We need to invest in upskilling that will bring people more quickly into the middle of the company or the finance function, where the profession is so valuable.”

The profession is also changing the way private capital has been acquired since 2022. As well as promising to fund technology investments, the deals provide big returns for older partners and equity to encourage younger ones. Regulators have warned, however, that private equity ownership threatens the objectivity of audit work, while the need to maximize profits could lower standards.

“I don’t think the traditional partnership structure is the only way we can operate our profession,” says Melancon. While he welcomed the experiment, he added that “anyone who thinks [private equity deals] all are going to be marriages made in heaven, right?’

Ultimately, accounting firms are likely to find investors who can hold them for the long term rather than flip them, he said.

For one final prediction before his retirement, Melanko uses a quote he’s had in his office for decades: “Change,” he says, “will never be as slow as it is today.”