The United States is currently experiencing a severe shortage of certified public accountants (CPAs) due to a rising trend of accountants leaving their positions at both corporations and audit firms. This trend is coupled with a decline in the number of new graduates entering the field, leading to a critical shortage of professionals. This growing issue has many questioning the reasons behind the shortage and the impact it will have on the accounting profession.
This phenomenon leaves many asking questions such as: Where have all the CPAs gone?
Let’s take a look at why this trend is occurring, what this could mean for U.S. businesses, and how we can help support CPAs.
According to a Bloomberg Tax analysis, there has been a 17% decrease in the number of employed accountants and auditors from a peak in 2019. Despite this decrease, the demand for accountants has not slowed down.
On average, the U.S. Bureau of Labor Statistics (BLS) predicts that there will be approximately 136,400 job openings for accountants and auditors annually between 2021 and 2031. These openings will be a result of current professionals leaving the field for other occupations or retiring.
The BLS states in their occupational outlook handbook that the employment growth of accountants and auditors is closely tied to the overall health of the economy.
Why Is There a CPA Shortage?
There are several reasons why there is a shortage of certified public accountants (CPAs) in the United States, including:
- High turnover and increasing demand
- Decreasing number of graduates earning a degree in accounting
- Effects of the COVID-19 pandemic
Let’s take a look at each of these in detail.
The shortage of CPAs is being exacerbated by both high turnover and increasing demand. Many accountants are leaving their jobs at corporations and audit firms in unprecedented numbers, due to factors such as low morale and early retirement. While the accounting profession has long anticipated a shortage of talent due to the retirement of the large baby boomer generation, this crunch has occurred earlier and more severely than expected, as a result of the widespread trend of resignations.
The number of college graduates earning a degree in accounting has dropped 4% since the onset of the COVID-19 pandemic and the number of graduates sitting for the CPA exam has also decreased. This is compounded by the large number of baby boomer CPAs retiring, resulting in a shortage of professionals to tackle more and more challenging work.
Effects of the COVID-19 Pandemic
The unique stresses workers have faced since 2020 have exacerbated conditions that were already causing young people to think twice about entering the profession such as high work hours, high-stress deadlines, high risks associated with potential reporting errors and lower wages compared to other jobs in finance. Furthermore, the accounting profession has been criticized for its lack of diversity and failure to embrace diversity, equity and inclusion.
What Will the Effects of the CPA Shortage Be?
As the shortage of CPAs continues, the potential consequences are vast and far-reaching. The SEC’s concerns about the risk of financial reporting deficiencies across U.S. businesses is a major concern, as it could lead to unreliable financial information and mistrust in the financial system. This can negatively impact not just businesses but also investors, stakeholders and the public.
Additionally, with fewer CPAs available to tackle the workload, the remaining professionals may be overworked and stressed, leading to burnout and a further exacerbation of the shortage. The shortage may also lead to increased competition for top talent, which could result in higher salaries and increased benefits for accounting professionals. However, this could also lead to a further decrease in diversity, equity and inclusion.
The shortage of accountants and auditors is having a clear impact on the quality of audits. Public companies are facing difficulties in finding qualified professionals to conduct their audits, and when they do, they often have to push them to work harder. This leads to important checks being skipped and errors or discrepancies going unnoticed. As a result, companies risk facing penalties from the SEC for late filings, as well as fines and negative market reactions if errors are present in their financial statements. Even small errors can lead to a significant decline in stock prices.
Moreover, the shortage of CPAs can also result in higher prices for accounting services as the demand for these services will be more than the supply, which will negatively impact small and medium-sized businesses.
It is important to note that the solutions to this problem cannot be found overnight and will require a comprehensive and long-term approach. The accounting profession should focus on increasing the number of new graduates entering the field, making the profession more diverse, equitable and inclusive, and ensuring that the work environment is such that it retains its professionals.
How Can We Support CPAs in the Shortage?
There are several ways to support CPAs during the current shortage:
- Encourage more students to pursue accounting: By encouraging more students to pursue accounting degrees and take the CPA exam, the pipeline of new professionals can be replenished.
- Increase the diversity and equity of the profession: by encouraging and supporting individuals from underrepresented communities to join the accounting profession, we can help increase the diversity of the profession, and also help to retain professionals from these groups.
- Increase the flexibility of the profession: By promoting flexible work arrangements, such as telecommuting or part-time work, we can help to retain professionals who may be struggling to balance the demands of the profession with personal responsibilities.
- Provide support for professional development: By providing financial assistance, training and mentorship opportunities, we can help professionals to continue to develop their skills and stay up-to-date with the latest industry trends.
- Improve the work environment: By addressing the issues of high stress, long hours, and high risk of errors that are causing many professionals to leave the profession, we can help to make the profession more appealing to both new and existing professionals.
- Recognize the importance of the profession: By highlighting the importance of the profession and the vital role that accountants play in ensuring the stability and integrity of the financial system, we can help to increase public respect for the profession and help to attract new professionals.
- Create incentives: Governments and other organizations can create incentives for companies to hire and retain more CPAs.
- Support aging professionals: Provide support for aging professionals to continue working in the profession, such as through phased retirement programs or alternative career paths.
- Professional development: Encourage professional development opportunities for accountants to keep their skills current and enhance their knowledge in the field.
- Encourage mentorship: Encourage mentorship programs between experienced accountants and new graduates to ensure that the new generation is well-trained and prepared for the challenges of the profession.
Learn More About Milikowsky Tax Law
CPAs make up the lion’s share of our referral partnerships. Because we do not do our clients’ taxes, we are a great partner for CPA firms whose clients are facing complex tax audit situations.
Learn more about us, here.