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Barry Melancon, who has been called “the most important man in accounting” in his 30-year leadership of the professional body in the US, has sent a stern warning to his successors not to compromise standards in an effort to attract more people to the profession. .
Melancon is retiring this month as the longest-serving director of the American Institute for Certified Public Policy, overseeing a profession that has been transformed by new technology and private investment but finds itself in a labor crisis.
With young people attracted by high salaries and low entry requirements for finance and technology, the number of people taking the CPA exam administered by the institute has fall sharplyand accounting firms have sought reform to make it cheaper and faster to get qualified.
In a wide-ranging interview with the Financial Times, Melancon expressed skepticism about some of the firm's claims, and said the race to the “lowest common class” could come back to disrupt work.
“We're a very trusted profession and we live in a world where there's not a lot of trust,” he said. “We have to respect the respect we get from the community and the businesses and the administration.”
The lack 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 it is difficult to find auditors.
After initially resisting pressure from the profession, the AICPA in September proposed to delete the requirement that accountants have the equivalent of five years of university education, known as the 150-hour rule—a year in excess of the 120 hours of regular undergraduate courses.
Melacon made it clear that he had doubts about the need for such a change. “The 150-hour rule promoted our work, which in the 1970s was more of a craft than a craft. It raised the standard of people in our work, and the standing of our work, and to deny that is to deny history. “
Melancon was the youngest head of the AICPA when he took over in 1995 at the age of 37, and he has not shied away from driving change in the past. He pushed for the computerization of the CPA exam when others in the profession resisted, and made the certification available internationally. He also supported the creation of audit systems and other technologies that could be shared between firms. Accounting Today magazine has consistently ranked him as the most influential person in the profession.
The new concept goes beyond the details of on-the-job training developed by the AICPA as an alternative to a fifth year of university education for CPA candidates.
The FT reported that a group representing major accounting firms wanted a simple process than the proposed one, which would require supervisors to ensure that new hires have acquired a set of specific skills, or “competencies”.
Critics say the plan is too complicated, expensive and dependent, but Mlancon said ensuring new accountants have specialized skills is important to avoid the “lowest common denominator problem” where an untrained professional can bring dignity to the job.
“Firms don't take their investment in the people they hire lightly, so it shouldn't be a big change for most firms,” he said.
These proposed changes come against the backdrop of a rapidly changing workplace, with little need for armies of young workers performing repetitive tasks and new opportunities for accountants to use their business and financial skills to help clients.
“There will be a reduction in the positions of beginners in our work. . . because of technology, and the traditional pyramid shape of the reporting firm is not going to be the structure of the future,” Melacon said.
“We need to develop investments in improving the skills that lead people quickly to the middle of the firm or the financial work, where the work is very important.”
Also changing the nature of work is the arrival of private equity, which has acquired a third of the 30 largest US firms since 2022. As well as promising to fund technology investments, the deals provide windfalls for older partners and equity to encourage younger ones. . Regulators, however, have warned that private ownership threatens the purpose of the audit work, while the need to maximize profits may lower standards.
“I don't think a traditional partnership structure is the only way our work can work,” Melacon said. While he welcomed the assessment, he added that “anyone who thinks (private contracts) will all be marriages made in heaven is wrong”.
Ultimately, accounting firms can find investors who can hold them longer than they do, he said.
In a final draft before he retires, Mlancon uses a quote he's had in his office for decades. He says: “Change can never be as slow as it is today.”