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There was a generational divide in a critical report on the workplace culture of major US auditing firms last month.
Based on interviews with managers and partners at Deloitte, EY, PwC, KPMG, Grant Thornton and BDO, it has shown complaints that firms are in danger of losing the old “learning model” where entry-level employees learn from their elders.
The new model of remote work and joint work has created training challenges that have yet to be fully overcome, according to several senior figures, whose interviews have been reported anonymously. One firm's respondents even complained that managers and partners should step down in performance audit jobs traditionally done by small workers, meaning that a particular job didn't get the second pair of eyes needed to check its accuracy.
Conflict between generations is not uncommon in accounting firms as Gen Z – the age group born between 1997 and 2012 – makes its presence felt in the workplace, but it has particular meaning for audit firms given their central role in the financial system. Last month's report was produced by the Corporate Governance Board, which is trying to puzzle out why its auditors have seen an increase in wrongful audit activity after the pandemic. The deficiency rate has stabilized over the past year and is beginning to decline, but the PCAOB says it remains unacceptable, due to the risk that auditors failure to find errors or fraud in public companies.
“The audit firm's culture contributes to the audit firm's ability to deliver quality audits,” the PCAOB wrote, explaining its focus on the matter. “Leaders of an audit firm, through the tone they set and the culture they foster, have a responsibility to ensure that their professionals maintain independence, integrity and professional skepticism.”
The report noted, strangely, that “the younger generation has different views on employment than their older counterparts, and many view their work as a job, rather than a job, and therefore they are more likely to leave this job if they find it too much work. attractive opportunities”.
Surprisingly, it also noted that the audit firms with the highest attrition rate in recent years appear to have a higher percentage of senior managers and partners employed by other firms rather than starting their own work in-house. This suggests that firms that can retain employees for a long time have an advantage in building a strong culture and maintaining high standards.
That is not easy in such a task they struggle to attract talent first, amid competition for better-paying jobs in finance and technology. Firms have been trying to shed the accounting reputation at brutal hours, especially during the busy season after the end of the financial year. But not everyone in a management position on the board is focusing on firms' work-life balance initiatives. More than a third of partners interviewed by the PCAOB said that such efforts have reduced productivity and delayed the professional development of young workers.
Firms like BDO and EY ranked in the bottom half of the PCAOB standard league tables 2022 and 2023 and high shortage rates, focus on centralizing and standardizing audit processes. But centralization and standardization aren't the stuff of anyone's dream job, let alone Gen Z. It risks robbing auditors of their ability to make professional judgments and potentially reducing their work in checking the box. There are already many disincentives for people to engage in public company audits and the PCAOB report acknowledges this including the scrutiny of its auditors, making the job more stressful and the job risk lower if employees slip up.
Another trend in many firms has been to outsource more routine tasks overseas institutions in India and elsewhere, but this presents another problem. It risks depriving young people of a foundation in business processes and accounting principles, the very kind of training that some of their elders have complained about is being lost.
The most forward-thinking firms are rethinking auditing from the bottom up. This includes ingesting and verifying financial data in real-time, as well as deploying new AI tools to highlight the unusual. Such measures will allow staff to focus on addressing issues that raise “red flags” and addressing sensitive statistical issues that require the most difficult decisions. That's a generational shift that can't come soon enough.