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Blake Oliver, CPA: [00:00:22] Welcome to the webinar. We'll get started shortly. Before we begin, here's how to earn CPE credit. Unlike traditional CPE webinars, there are no polling questions or attendance checks during the presentation. Instead, you will demonstrate your knowledge by taking a brief multiple choice quiz in the earmark app, search for the free earmark app from the App Store or Google Play Store, or scan the QR code on the screen. Open the app and create an account. Be sure to use a valid email address, because we'll email you your CPE certificates from the home screen. Scroll down to find the course. You can also tap the magnifying glass icon to search for the course. Tap on the course artwork, then the enroll button. On the course tab. You'll find the recording and quiz questions. If you don't see the quiz yet, don't worry, we'll email you when the quiz is available. Complete the quiz to earn your CPE certificate. If you have questions or need help, email us anytime at support at earmark Cpcomm. Now on to the webinar. Hello everyone, and welcome back to the show. I'm Blake Oliver, CPA, and I'm joined today by Steven Sacks, and David Bergstein. We're going to be talking about the identity crisis in the CPA profession. Steven Sachs serves professional service firms, not for profit membership associations and educational institutes through research and issues management, organizational strategy and governance. He's the author of the book The New Fundamentals Practical Guidance for Today's Accounting Firms, published in 2020. Welcome to the show, Steven.
Steven Sacks, CPA, CGMA, ABC: [00:02:00] Thank you. Good to be here, Blake.
Blake Oliver, CPA: [00:02:02] David Bergstein is a seasoned innovator in the accounting software industry. He's a digital evangelist and a catalyst for change. David extends his reach as a blogger, podcaster, author, teacher and international speaker, making his mark on various platforms to share his insights and expertise on the future of accounting. David, welcome.
David Bergstein, CPA, CITP, CGMA: [00:02:20] Thank you.
Blake Oliver, CPA: [00:02:22] I understand you've got one tax return left to do.
David Bergstein, CPA, CITP, CGMA: [00:02:25] My son's tax return. It's always family that puts you into the bad position.
Blake Oliver, CPA: [00:02:30] He won't get you the docs you need. I love it. You must have some leverage on him. You know.
David Bergstein, CPA, CITP, CGMA: [00:02:36] Maybe he's an independent casting director in California, and he's got adopted. A West Coast attitude to his East coast father.
Blake Oliver, CPA: [00:02:47] Ah, well, maybe I should take offense to that, given I'm from California, but we'll let that one slide. I'm going to take our first question and, uh, bat that over to Steve here. Steve. Uh, we're talking about the identity crisis in the profession. This came up as, uh, a conversation between you and me and David informally. And we decided, let's do an episode about it. Right. So I want to ask you, you know, what do you think are the most significant challenges facing the CPA? We are all aware of the decline in enrollment in accounting programs and the decline in the number of CPAs, the struggle of firms to find and hire certified public accountants, the talent shortage, uh, is that in your mind, the biggest one or or is there something else going on here?
Steven Sacks, CPA, CGMA, ABC: [00:03:36] We'll look at it as sort of like a three legged stool. You have, as you mentioned, a drying pipeline. Then, of course, is, uh, the second thing that's been a major issue, and that is that extra the fifth year of university, in order to be able to sit for, uh, licensure for the CPA exam. And lastly, it's going to be what we hear constantly. It's this, uh, two pronged thing lousy pay and burnout. So many, uh, hours of overtime. And was we see it, you know, they walk around like zombies. You don't talk to me after January 15th, you know, it's. They walk around and then. Fuck April 16th and they're fine. And then it's like, it's crazy. It does something to your head, and then you have to gear up again for the September and October filing. So essentially the pipeline, the fifth year and the combination of pay and and uh, uh, too many hours.
Blake Oliver, CPA: [00:04:38] David, do you agree? Do you disagree? What do you think are the biggest challenges we've got?
David Bergstein, CPA, CITP, CGMA: [00:04:43] Boredom. I think most people perceive accounting as a boring area to go into. You know, you really I agree with everything that Steve said, but I think people don't perceive accounting as an exciting career, and that's basically due to older accountants. Not me, of course, who keep saying, hey, it's boring, it's long hours, and people complain about the fact, but it isn't, you know, a necessary evil. We deal with compliance work. There's always going to be a tax season. You can't change it. That's what makes work life balance difficult during tax season. But again, if you're efficient, things can change. I look at compensation, the boredom, uh, the cost of education. Uh, I really don't believe you need the fifth year of education when you start to look at it. I think there was a Journal of Accountancy study that said there was no perceived difference. Uh, in the accountant who came out with 150 hours versus 130.
Blake Oliver, CPA: [00:05:43] Yes. I mean, there have been a number of surveys that I've seen from state societies. Minnesota did one, um, a few others have done them, and they all kind of agree that it's like 80 to 90% of the profession says there's no difference. If I get a candidate with four years versus five years, I can't tell the difference. So.
Steven Sacks, CPA, CGMA, ABC: [00:06:03] Well, it goes back to something you had said at a previous, uh, podcast. Blake, uh, when you and David Leary were talking and you said. I don't think anybody, uh, third party outside wherever should tell me who I should hire. And I think that's really the crux of it. Because if you speak to managing partners, say, your senior partners, and they take a look and they've been at their firm for many years, and they have that cross over the four year and the fifth year people, it gets to a point where it's it's a distinction without a difference. And and that's what we have to ask ourselves as a profession, what is the end game here? Who's the beneficiary of this? And is it the only way to go? And you talk about Minnesota. Uh, Colorado is another area. Uh, I think Arizona was um. Yep.
Blake Oliver, CPA: [00:07:00] Arizona did one.
Steven Sacks, CPA, CGMA, ABC: [00:07:01] Yeah. They're they're they're they're taking, uh, a wide angle view of this whole thing. And they're saying, you know, maybe there's some thought that why don't you make, uh, undergraduate 90 credits with an extra 30 credits specialty? So you actually 120 credits, you now have both a bachelor's and a master's. But what that means is now going further back or re-engineering this whole thing is that, uh, you have to take a look at the curriculum and saying, well, who's going to lose out on this if we want to stay competitive and have the best and the brightest come out of, you know, uh, diploma mill and that is, well, we're going to have to cut the liberal arts. We're going to have to cut this. Oh, then the professors, then you have issues up the wazoo. But until you take a look at the education and even drawing it back to to high school. The whole allure of accounting, the whole idea of what its role is going forward is going to be up for much debate.
Speaker4: [00:08:05] Mhm.
David Bergstein, CPA, CITP, CGMA: [00:08:06] Part of what you just said, the allure of accounting, I think part of the problem of attracting people to accounting is they don't know what accounting is, you know. So really what is the definition of accounting. And that's somewhat changing at this particular point in time. You know if you go to pure definition it is boring. Accounting is a process of recording, sorting and summarizing economic data to permit informed judgment. Well, all of that process can be automated now. And you have to know the process to be able to help people. But accounting is more than what we just said. Accounting is that in part help people make decisions. It's really about the advisory service and using your accounting knowledge and using your creative mind to help your clients, whether it be personal clients or business clients, achieve what their dreams are with an accounting background accounting and finance, accounting, computers, accounting and data analytics, you're developing skills that you can utilize to help a lot of people. At the same time, help yourself make money. And people just think accounting, debit, credit. That's not accounting. That's not even bookkeeping anymore, but.
Blake Oliver, CPA: [00:09:14] That is a lot of what the curriculum is. Uh, when you go to school for accounting, you start with the debits and the credits, and there's a lot of nitty gritty accounting standards applying these accounting standards. Beginner. Intermediate. Advanced cost accounting. We didn't get into any of that that you're talking about, David. In my accounting courses there were no electives that even involved that.
David Bergstein, CPA, CITP, CGMA: [00:09:41] I teach my first year accounting. So I do the debits and credits, but I'm immediately after the third week showing how it's all automated. And I bring up these screens. Since I'm a quick users in the past, you could bring up zero whatever. I'm bringing up a dashboard and showing how it's all about consulting, and you just mentioned a point. Maybe Steve will get on it, because I think the future of accounting is going to be divided. You said accounting standards, more and more of the accounting firms are dividing in half or accepting private equity, and auditing goes to one side. And everything else that's exciting and interesting goes to the other side. And that's up to some questions about where do you audit this are and are they independent. But that's a whole different part of this crisis.
Steven Sacks, CPA, CGMA, ABC: [00:10:30] But to go back to the whole point of the allure. As Blake says, debits and credits and down to a layer of or a level of granularity. I mean, that's what it is. So it's it's myopic. It's focused as the do the debits equal the credits. They're not teaching you to say, uh, you know, here how would you grow your, your business. And they may wait till that fifth year to do that. But, um, someone who we both know and I think Blake, she may be doing a future webcast for you, Sharon Lasser, she's the director of accreditation at the University of Denver. And she's she's the.
Blake Oliver, CPA: [00:11:12] Head of the accounting program there.
Steven Sacks, CPA, CGMA, ABC: [00:11:13] Yes. And she and I years ago used to work together at the AICPA. She was in, uh, in the education part in consulting, crossed over a couple of years. And she has been, uh, saying this very strongly for a long time, 150 credit hour. You know, it's not necessary, however, if I give her credit, because when you take a look at the fifth year at the University of Denver, they have some, some meat on the bones saying, yeah, that's what you should be teaching instead of like, you know, I speak to a lot of young people down here in West Palm Beach, and I, I've taught in the past and lectured, and I have to tell you, asking them about that fifth year, what did you get out of your fifth year? Yeah, it's much the same thing. Or I took this or I took lacrosse and whatever. Really, really $75,000 of additional debt to take lacrosse must have been expensive uniforms.
Blake Oliver, CPA: [00:12:05] So I'm with you guys on the 150 hour rule. I've been a passionate advocate of repealing that or creating an alternative pathway that allows for four years and two years of work experience. Um, but I also think now that I've gained more experience on this issue, and I've talked to a lot of folks that, you know, perhaps that is not where we could have the biggest impact and that this focus on the beginning of the pipeline. While it is important to focus on that, it's not going to solve our problem because that's not where we have the biggest leak. The biggest leak in the pipeline is with mid-career accounting professionals. When you look at the data, you see that people are going into public accounting, and instead of leaving public accounting to go into industry, they are just leaving accounting entirely. They are having such a bad experience in these big public accounting firms. They're getting burned out and they're quitting. And you look at the salaries and the hours that are asked of these folks, and it just doesn't make sense. One of our live stream viewers here, boring accountant, said having a salary of $70,000, working 50 to 60 hours a week per year is an effective hourly rate of $21.54. Getting five years of education to get paid a little more than fast food in California. Why? And so the more I talk with. Yeah go ahead.
Speaker4: [00:13:32] David. Absolutely.
David Bergstein, CPA, CITP, CGMA: [00:13:33] I agree with what the person is saying. And that's why I think we're starting to see some changes in the profession and where actually firms are moving away from calling themselves CPA firms and calling themselves advisory services and treating the employees differently, giving them a higher base salary, more incentives, more like the fintech companies where they're getting stock options and the opportunity to participate at a higher rate. And that's what's got to continue. You know, and I think the other part of it is I'm a solo practitioner again, I'm out of I'm out of it at this point because I'm not old. But when you get past the top 500 firms, the firms are less than 20 people. And I think you're going to find better education, better salaries that a lot of these firms, the progressive, not the traditional bookkeeping and compliance.
Blake Oliver, CPA: [00:14:23] The challenge with that is those firms are not first of all, they pay lower salaries actually, than the bigger firms, as we can see in the data. And they're not set up to take fresh graduates and train them. It's the big firms that do that. And that's also where there's a gap. Why is it necessary for me after I get an accounting degree, to go apprentice, essentially at a big accounting firm to actually learn how to do the work? I was shocked that I came out of my accounting education as a career changer, having no idea how to even start doing a tax return. It wasn't even part of the curriculum. Not in the slightest. We didn't ever look at a tax form. We just learned the theory. And same thing with journal entries. I learned how to do t-accounts and journal entries, but I never touched QuickBooks or NetSuite or Intacct or any of the modern accounting systems that people are using these days.
Steven Sacks, CPA, CGMA, ABC: [00:15:15] You know something? Um, that's interesting because, Blake, you are much, much younger than David, a little younger than me. And I have to tell you that. The accounts. Uh. 14 column paper, all of that. It was it was an immersive education as opposed to learning something, QuickBooks and the screen. If you don't have like five screens and you flick around, oh, I missed it. What? Who needs that? But once you get that immersive type of learning. Okay, I got it. Back to your point. Now what do I do? How do I apply that? David feels that the value is of being a CPA is to create value for the client. I say, okay, that's I agree with that. I agree with that value added services. But nobody is going to come out of college now. Kill themselves to pass the CPA, and all of a sudden they're going to do all this exotic work, uh, uncover fraud, do all, do these interesting SoC studies. No, no, they're going to be. Saddled to a big client and counting cash or whatever it is. It's not exotic. And I have to say, and David, you heard me say this before when when Enron hit and Worldcom and Global Crossing and Tyco. Et cetera. Et cetera. And then you had, you know, those who were certified fraud examiners, all these people doing this stuff to uncover fraud. So then there was a blip upward of of people who enrolled in accounting because they say, wow, I could be Sherlock Holmes, a financial Sherlock Holmes right out of college. No, no, the answer is no. Do you know where how an audit works? Do you know the difference between a balance sheet and income statement? Yeah, you may know from school, but now we're talking the real world.
Speaker4: [00:17:10] Yeah.
Blake Oliver, CPA: [00:17:11] Yeah, that makes a lot of sense. Like you can get there, you can get to those really cool jobs in accounting, those fun jobs. But the amount of time it takes you to get to that point, we're losing people before they get there, David. And that goes to your point about boredom, that the jobs available right out of school are a grind. And as one of our live stream viewers pointed out. These firms often have a what younger generations would call a toxic work culture. What I have started calling a toxic work culture based on the stories that I've heard.
David Bergstein, CPA, CITP, CGMA: [00:17:47] Again, I understand what the statistics say, but I come from the opposite side of the fence. I dealt with smaller firms first, and when I graduated college, I and again, this is way, way back when. This is back when, uh, accountants were these things.
Blake Oliver, CPA: [00:18:05] You're wearing a green visor. You have to send me one of those.
Speaker4: [00:18:10] I need one.
David Bergstein, CPA, CITP, CGMA: [00:18:10] I stole this from somebody else. Yeah.
Steven Sacks, CPA, CGMA, ABC: [00:18:12] There. There goes, uh, all the money that has been spent in the past. When I start image enhancement campaigns.
David Bergstein, CPA, CITP, CGMA: [00:18:18] They brought me up real quick and taking over a client, you know, and learning different things and giving me the ability to make decisions. And again, that's all part of choice going forward. But I'm looking at it if I was. 45 years younger. I would go out and get ten clients. Ten clients is all you need to start to build up. If you want a decent practice and right mesh it between compliance and advisory services. But that's something we know today. But we didn't know.
Speaker4: [00:18:50] Then to.
Blake Oliver, CPA: [00:18:51] Get the skills that you need to serve those ten clients and have that great lifestyle type of practice, you have to go apprentice yourself at a firm that's going to require you to work over 40 hours a week, which when you go into accounting, like I went into accounting because it would give me the opportunity to work less than 40 hours a week so I could pursue my side, my my passion, which was side.
Speaker4: [00:19:14] Hustle on.
Blake Oliver, CPA: [00:19:15] The side. Right?
Speaker4: [00:19:16] I.
Blake Oliver, CPA: [00:19:17] I started cello, yeah, cello. I played the cello. I graduated with a cello performance degree from a great university, but I couldn't make the living I wanted. Doing that. So I said counting. Great. I can I can have my own practice. It can be flexible. And it was only after I got like deeper into the accounting profession, became a CPA and started talking to people who worked at big firms, that I found out that accounting is the opposite of flexible for these younger folks. So that's the weird dichotomy we have here in accounting, is that it can provide you a fantastic, flexible, remote work environment where I can sit here at home and Scottsdale, Arizona, and I could have ten clients and make good money and, you know, live a good life and work probably 20 or 30 hours a week.
Speaker4: [00:20:03] But, you know, but.
David Bergstein, CPA, CITP, CGMA: [00:20:05] That goes to my other point, which is where I think the action appears to be. I'm seeing the younger generation not become CPAs and become advisors or accountants. Non CPAs have tremendous practice out there. I've cut I cross both lines across the CPA world and the QuickBooks and Xero world, and they have some of them have very, very lucrative practice. They're in their 40s, 30s and 40s. For the most part. They didn't pursue an accounting career. They very rarely they took very few accounting courses. And now they're quarterbacking firms and hiring some CPAs, but mainly accountants and non accountants. And they're doing managerial reports and, uh, partial CFO services with data analytics background. So the question, you know, there's a identity crisis. Should I become a CPA and be an auditor? Because that's the thing. The only thing a CPA can do that nobody else can or should I pursue some other field and have work life balance? And yet I can perform different types of accounting services.
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Steven Sacks, CPA, CGMA, ABC: [00:21:14] Exactly. I'm glad you brought that up, that when you when you swept it back into the whole thesis of an identity crisis, because here it is, you can be an advisor, you go through a four year accounting degree, and maybe in the future it'll be beefed up even more. Uh, uh, the emphasis on the first couple of years maybe make it more intense or what I said before the 120 credit hour, both the bachelors and the masters. But really get them, um, prepared and and to look, be able to look at a business holistically, not having to be saddled with coming out immediately and sitting for the CPA exam where there's an uncertainty about whether you actually need it in the first place. And then, of course, the what's been the, the, the, uh, emergence and the tidal wave of CAS, you know, client accounting services. That's why we've always done.
Blake Oliver, CPA: [00:22:16] But you look at the numbers and client accounting services still is about 10% of firm revenues and two thirds of accounting grads go into audit. So. The pipeline problem, in my view, is that we're sending these young grads into audit. Audit has become more and more commoditized. There's a lot of pressure on the hours. Still, that hasn't changed. That's the same as it always was. But salaries have stagnated. So over time, over the last 20 years, what's happened is that salaries have risen in related business majors. The hours have gotten better in other majors.
Speaker4: [00:22:54] Because they.
Blake Oliver, CPA: [00:22:56] Write. Because in other areas of business, executives embrace using technology to reduce workloads. But in audit, which bills hourly, there's no incentive to become more efficient. If you become more efficient, you bill fewer hours. And that's that's my theory as to why, you know, audit has lagged in terms of automation. So, you know, that's that's really the crux of this is that we we have a pipeline from education into firms. And the work is still boring. It hasn't been, you know, automated. It hasn't we haven't embraced all the tools that are available to us in these large firms. They talk about investing billions. But what do we ever get out of that? They've been talking about that for decades and it never really changes.
Speaker4: [00:23:39] So well you know I think well let me jump.
Blake Oliver, CPA: [00:23:42] And but and well and let me just if I could finish my point. It's not that there aren't all these other opportunities for accountants, it's just that we've tied the CPA to audit. And audit has become more and more marginalized. Uh, and you see it with the fees stagnating, right? Even. We CPA trendlines likes to report that oh audit fees went up. But you look at it compared to inflation it's really not you know it's just stagnated right. So it's not a growth opportunity for the profession. But yet that's what we've tied the CPA to.
Speaker4: [00:24:14] If I understood you correctly.
David Bergstein, CPA, CITP, CGMA: [00:24:17] That's why firms are splitting in half. That's why we're seeing p money or hey let's split it off. But that creates another problem which we're not even talking about today, which becomes the ethics problem of the past, where you got the consulting side on one side and the audit side on the other, but the consultants go back and forth as auditors.
Blake Oliver, CPA: [00:24:38] Yeah, we just saw a big firm get in trouble for that. Um, I forget who it was. One of the big four got slammed with a fine because they decided they were going to dump the audit in favor of consulting, and they talked to the client about this. But then they, they, you know, they they didn't dump the audit fast enough. So they had a conflict of interest for like a year and a half that they shouldn't have had. And, you know, I.
Speaker4: [00:25:01] Mean, you know, some.
Steven Sacks, CPA, CGMA, ABC: [00:25:02] I want to jump on something, uh, that you said a minute ago. Um. Because the audit has been marginalized and commoditized, that the firms are not going to automate it quickly because of its automated, then it's more efficient and less hours, and then they lose a billable hours. That to me is sort of nefarious behavior. Okay, let's put that to the side. The other side is to your point again Blake, big firms, you know, uh, what are they going to they're going to spend and the questioning on what they're spending technology bring in private equity that says we're going to pour in a ton of money on technology. We're going to streamline this because many of them may have even come from, you know, McKinsey, you know. Right. Chop chop chop chop. You know. So they're going to. You're going to automate and they're going to see. And then now hold on Steven.
Blake Oliver, CPA: [00:26:05] David brought up a good point, which is that these private equity firms are not going to automate at all. They're splitting the firms in two. Yes. And this is obviously for legal reasons. Right. The CPA still have to own a majority of the attest entity. And so private equity takes an ownership stake, a majority ownership stake in the non attest entity. They split out the consulting. But that's where the private equity is focused on growth right. They care about the entity that they control and that they can guide. So I don't know if any of that is investment is going to go to the attest firm. It's just going to sit there as sort of like this appendage.
Steven Sacks, CPA, CGMA, ABC: [00:26:44] That's interesting because because if you think about it, there's a revenue stream in the attest side year in and year out, attest and tax. But there's no revenue side. A revenue flow normally on the consulting side many times depending upon there are a number of exceptions, many times as a one off. So how are you going to develop it in private equity is going to say how are you going to build this. Oh you industry specialization. What's your five year projection. They're going to start throwing this. In fact David and I had this discussion. Think about it. If I was private equity and I want to invest in David's firm and uh, I want him to give me a dashboard, his firm's analytics. Give me the big picture first, and then I'm going to take my guys private equity and I'm going to do data analytics on his firm. And I tell you something, I would bet you that the PE people are going to say shoemaker's shoes. What are what is his analytics? What is it? We're missing the big picture. You haven't thrown in this consideration. If in terms of you're going to specialize or what are you going to do about compensation, how what are you going to do about like retaining the talent, those people who've gone from equity now into an income situation. So a lot of things that I guess is it roils the waters, but it makes it uncertain for CPA firms. What will their model be in the future? Cut it in half. You got the commodity. Who's going to do it? Will government take over or you're just going to have those people are going to go through the diploma mill and going to be an audit auditor for the whole time. Well, that.
David Bergstein, CPA, CITP, CGMA: [00:28:28] Leads to my question of what Blake should do. Over the next five years. Blake should develop a new certification called something like Certified Business Advisor, and it will be for people who are accountants who don't do audits and get recognition. And I'm really I'm saying that seriously because.
Speaker4: [00:28:47] But here's the thing, David, CPA.
David Bergstein, CPA, CITP, CGMA: [00:28:49] Is for doing audits. If you're not doing audits, how do you get the business we all become, well, I'll shut up.
Speaker4: [00:28:57] No, no.
Blake Oliver, CPA: [00:28:57] No, that's a good point. But if so, this is the weird situation that we have in the profession where the brand CPA in the mind of the public has actually something to do with audits, but mostly not when you ask a typical business person would do CPAs do what's the first word they say?
Speaker4: [00:29:19] Probably accountants.
Blake Oliver, CPA: [00:29:20] Tax. And more and more they say outsourced accounting. They do my books, they do my books, they do my tax. Because most business owners in this country do not need an audit and will never need an audit. Now, what does the license actually give us a franchise on or a monopoly over? The only thing is the audit. So we have this. We have this situation where what the license is is not what the brand is. And so I think. It shouldn't be the auditors who get to keep the CPA. It should be the CPAs who are not doing audit because that's most of us. Most of us only do audit for a few years, and then we go and we do other stuff. We work in industry, we advise clients, we do taxes. We are business engineers. We keep it all running behind the scenes. So like, why have we tied the CPA to audit in this way? Our entire educational system pushes people into it, but it's not what they're ultimately going to end up doing. And the excuse that I hear, which, you know, may be legitimate, is that, oh, you learn so much by doing audits that then you can go out and you can advise you get a broad range of experience. But I find that when I talk to people, some of them do and a lot of them don't, they don't get a lot of great experience. It really depends on the firm and the partner you're with and all that. So you get.
David Bergstein, CPA, CITP, CGMA: [00:30:42] A lot of great experience with PACs, just the opposite way around and knowing how to maintain the business.
Steven Sacks, CPA, CGMA, ABC: [00:30:49] Except that from the tax it goes to the financial statements and the financial statements came from the audit. And then, you know, you do it backwards. Reverse engineer. You know, I think that if you're working for a small CPA firm, not a sole proprietor, but if you're working where and this is the issue that I think young people face with larger firms, you have to have a culture where the partners will allow first year people come out, listen to a pre engagement, uh, client meeting. You don't have to ask any questions. You don't have to answer any questions. But then you'll get to know, like here's some of the client's concerns. This is how we handle it. How often does that happen? Do you think a big four firm is going to come and say, hey, you know, you know, here, Fred, come on out and sit down. We're going to talk to the, uh, the CEO of this, you know, fortune 500 company. No, no, they're not going to do that. And back in my day, it was. When they needed an auditor. It's sort of like, I need somebody with a pulse, you know, to do the work. And that's why. So not only was the work commoditized, but the individuals who were doing it, they themselves were views viewed as commodities.
Blake Oliver, CPA: [00:32:03] I want to welcome a few more of our live stream viewers who have joined us. Jody, Peter is here. Great conversation, she says. Thanks for joining us, Jody. Great to have you on the stream with us. And Prince Gupta said, should the regulators not push for clients to pay higher fees, which can then be used to pay better salaries and invest in tech? And this is an interesting idea, because when you look at the hours that auditors are working. It's not out of the realm of possibility to bring those hours down to 40 on average around the year. Right now, they're somewhere between 43 and 50, if you on average throughout the year, if you if you look at the latest data from Big Four transparency, which is a site that crowdsources thousands and thousands of data points from actual accountants working right now, and some of these firms are better than others. Some are down near 40. They're still above though, on average, and some are like up at 50 or more. Uh, CBI's there. People are working 50 on average, which means during busy season it's got to be 60 or 70, which is just untenable these days. Right? Nobody wants to do that anymore. Very few accountants want to do that anymore.
Speaker4: [00:33:19] I have a question. Go ahead. David, you.
David Bergstein, CPA, CITP, CGMA: [00:33:22] Just mentioned Cbiz. Now Steve doesn't do audits. That's my half moon McCain. Right? The other half of the firm, they were one of the first to go the opposite way.
Blake Oliver, CPA: [00:33:34] Yeah. And Cbiz, uh, is publicly traded, right? Right. So they are one of the few professional services firms that have adopted this, you know, private equity public model. And they actually have the worst hours of any firm, according to Big Four transparency, which doesn't bode well.
Speaker4: [00:33:52] For the.
Blake Oliver, CPA: [00:33:53] Private equity investment that's happening.
Steven Sacks, CPA, CGMA, ABC: [00:33:55] Exactly, exactly. Because think about this. If you're an investor and it comes out, you take a first run at this statistics and it's like 49.4 hours. You got to ask yourself, how does this compare? How does this investment compare with the analytics we obtained from other potential acquisitions that we bugged off on, or others that we did do? And, you know, and you have to ask you a question if it's if it's like that, did we make a mistake, you know, why is it slogging? Why is it so, you know.
Blake Oliver, CPA: [00:34:29] So, uh, there's one thing I wanted to get back to with this comment about regulators saying, hey, you can't work your auditors so much. I think actually that could be the solution is if all the firms were required to put a cap on the hours that their people are working their staff. Senior accountants are working about 50 hours a week. It goes up the farther you go up in the firm. So seniors are working about 50 on average throughout the year, which means during busy season they're working 60 or 70. And this is one of the big reasons we hear from exit interviews why people are quitting. They don't want to work those busy season hours, especially since there's multiple busy seasons now.
Speaker4: [00:35:12] Um, let me let me inject you.
David Bergstein, CPA, CITP, CGMA: [00:35:13] First of all, I apologize if I'm associating the wrong accounting firm with CBI's because you're saying CBI's is doing the hours, but they're not doing audits. Correct?
Blake Oliver, CPA: [00:35:24] I don't know about KPIs. Like, I don't know what they do. I just know they are providing professional services. They employ CPAs, they do this.
Speaker4: [00:35:35] I don't think.
David Bergstein, CPA, CITP, CGMA: [00:35:35] The audits are firm. But you know, if you're going to have regulators govern it, why? And this is part of the thought, why not make, uh, the audit part, just like the IRS tax part, an audit, be a government agency because it's independent and not controlled by making a profit? Because if you're in business and you're servicing people, you want to make a profit.
Speaker4: [00:35:56] Yeah, well.
Blake Oliver, CPA: [00:35:56] This goes to the whole, you know, conflict of interest of getting paid by your client. But rather than stir up a giant debate about expanding the size of the government, you know. Exactly. Hundreds of thousands of employees. I'm just saying, like, what if. And maybe this could even be a voluntary thing, like, let's say all the CPA firms in the country got together and said, hey, guess what, guys? We have a problem with overwork in our profession. So we are going to stop exempting our salaried professionals from overtime. So we are all going to agree to pay overtime, which then incentivizes firms not to work staff more than 40 hours, because now there's a financial penalty for doing so. And it makes the staff feel better because just like when they were interns, if they work overtime, they get paid for it. Why do we pay interns overtime? But once you become a staff accountant, you don't get overtime. I feel like if a firm is selling my time, they should be paying me for my time. Exactly. And so, like, I don't even understand why this exemption applies to accountants when when our time is billable and we are and the firm is essentially selling our time, why are we able to be hired as exempt professionals? The only thing it incentivizes is the firm to work us as many hours as possible to milk us for everything that we've got. And what does that do? It burns us out. Apologies for the mixed metaphors.
Steven Sacks, CPA, CGMA, ABC: [00:37:19] Well, except the fact that you don't want to the scales to be tipped in the other direction and have featherbedding, you know, you know, to jam, you know, two hours of work into eight hours. You want to make sure, because here you're going through such a long period of time. Where they're underpaid and overworked, and it's about time we stand up for our rights, etc., etc.. So yeah, I think that makes perfect sense that you pay them for the time that they work. Um. So that means I'm sorry. Go ahead.
Blake Oliver, CPA: [00:37:50] Well, so, like, we could do this ourselves. We don't need the regulators to do it. Like the AICPA and Nasba could get together and say, we're going to have all the firms sign a pledge to pay overtime, and we're going to shame the firms that don't. And we can improve the work life balance in the profession that way. But I don't think that's going to happen because who controls the AICPA?
Speaker4: [00:38:18] It's the big answer.
David Bergstein, CPA, CITP, CGMA: [00:38:19] That question.
Speaker4: [00:38:20] The big firm, right? Right.
David Bergstein, CPA, CITP, CGMA: [00:38:23] And by the way, I googled, uh, CBS. Cbs provides internal audits and assessments and reviews that helps your organization. So it's not doing third party audits or the attest function. Mihf McCain is an independent firm that provides audit, review and attest and works closely with CBS in business consulting. Two separate.
Blake Oliver, CPA: [00:38:44] So, David, you didn't want to talk about that. You don't want to answer my question about like the AICPA could, you know, do this if they wanted to? Why not?
David Bergstein, CPA, CITP, CGMA: [00:38:52] Probably making too much money through cbis. Uh, I mean, uh, through CPA's, uh, I mean through CBS.com. Uh, they can decide what they want to do because there there really are a body. Right. Then you have the other.
Speaker4: [00:39:07] But this is what's killing our profession.
Blake Oliver, CPA: [00:39:09] It's the overwork is what's killing our profession. And we could actually stop it. We could choose as a profession not to do it. But the problem is it's going to come out of the partner's pockets, right? Because if you reduce the hours. Well, but it doesn't have to. That's the crazy thing is, is.
Speaker4: [00:39:22] If we reduce.
David Bergstein, CPA, CITP, CGMA: [00:39:22] Hours and charge more for.
Speaker4: [00:39:25] More.
David Bergstein, CPA, CITP, CGMA: [00:39:25] Approach to, you know, value billing, value pricing.
Blake Oliver, CPA: [00:39:28] But well this is the problem is the audit is commoditized.
Speaker4: [00:39:32] So provide a.
David Bergstein, CPA, CITP, CGMA: [00:39:34] Value to the people that need it for their.
Speaker4: [00:39:36] Right. It does.
David Bergstein, CPA, CITP, CGMA: [00:39:37] For the.
Speaker4: [00:39:37] Banks.
Blake Oliver, CPA: [00:39:38] Yeah.
Steven Sacks, CPA, CGMA, ABC: [00:39:38] But hold it, hold it hold it a second. Excuse me. If you have a 1231 year end and by regulation, uh, you have to deliver that report to the client by 331 of the subsequent year. They're now beginning, you know, their second quarter, and you're giving them a snapshot of what happened last year, upon which they now need to make perhaps midstream adjustments, whatever it gets to June, I don't know. But there's the value is the audit is just taking an amorphous blob of information and putting it into the form of financial statement in accordance with GAAP or gas. It's the value is what you do with it. And the fact is that when you have this dichotomy between private equity coming in and you have a test and you have a consulting, so how does a firm how does a client benefit from that consulting side? If the person didn't really understand the the books and such, I would think that two different.
Speaker4: [00:40:48] Things on.
David Bergstein, CPA, CITP, CGMA: [00:40:48] Here, there's the consulting side to help make the business. I'll use the word liquid, solvent and profitable. There's the audit side, which in a world capital economy, people look at companies to decide whether to invest in them through independent verification of those financial statements could be three months after the fact. They're looking at trends. But again, Blake said something very interesting before. Most companies don't need an audit to get money, you know, and you know, how many businesses are large, how many businesses can find alternative means. But if you're on the world capital market and you you have to produce statements that people all over the world can look at. So you want to make sure that they're in accordance with generally accepted auditing standards, generally accepted accounting principles. So you have to have the audit for those companies. The question is which companies? Would you gentlemen agree with that?
Speaker4: [00:41:45] Well.
Blake Oliver, CPA: [00:41:46] My issue with audit at the moment is that. I as the purchaser of the audit, the audit committee can go out and shop around and find any auditor to give me an opinion. And so if I don't really want an auditor who's going to take a deeper look, I look for somebody who's going to go easy on me. Imagine if every restaurant could hire their own health inspector. Imagine the situation we'd be in. And that's how I feel like audits are. And we saw that with Truth Social. Right? Trump's social media company, their auditor for the Spac, had a 100% PCAOB inspection rate failure. They failed like nearly 100% of their audits from the pcaob's point of view in the last three years. And guess what? Nobody cared who the auditor was. So the Spac just went out and got somebody who would do the job and obviously doesn't do a very good job. And it didn't matter, didn't make a difference. So this this situation we have. Is that I as the consumer, the the buyer can go out and just find anybody to sign off. And David Leary and I were joking on our show that I, as Blake Oliver, could just set up a CPA firm and start doing low quality audits for low prices. And I'd probably never suffer any serious consequences because the Pcob find this firm at most $25,000 over the last five years.
David Bergstein, CPA, CITP, CGMA: [00:43:16] But because of ethical considerations, you wouldn't be doing that.
Blake Oliver, CPA: [00:43:20] Well, but ethics training is irrelevant if the system incentivizes unethical behavior, right? People will just disregard ethics for money. We know this. This is how business works, right? So you set up a system where it's really easy to cheat, make a lot of money. I mean, this firm that we're talking about, they did like 200 audits in the last 2 or 3 years, and they have 100% pcob failure rate. And so this firm is making millions and millions and millions of dollars, at least 2 million, probably far more than that. Right? They outsource the work to the Philippines. And they they do low quality work.
Speaker4: [00:44:01] Now is it the response doesn't matter.
David Bergstein, CPA, CITP, CGMA: [00:44:03] Aicpa to come in here and take away all the nasba to take away their licenses?
Blake Oliver, CPA: [00:44:07] Well, it's our it's our responsibility to set up a system where we don't have bad actors doing a bunch of shoddy work and given the CPA a bad name and essentially commoditizing the profession, because let's say you're a firm that does do good work and it's more expensive for you to do that good work. Well, you're at a competitive disadvantage, right? Because the firm doing the bare bones, probably less than they should, obviously less than they should if the PCAOB has given them part one A deficiencies all over the place, or they can come in and undercut you and they can continue to do that shoddy work because there's nobody really.
Speaker4: [00:44:43] Penalizing, putting.
Blake Oliver, CPA: [00:44:45] Yeah, the penalties are just a cost of doing business. And these folks are all over the place. I'm discovering we talked about the audit of Tingo in Nigeria. You know, the US entity. Their audit was done by a solo CPA and in Colorado, in Denver, Colorado. And that guy got a.
Speaker4: [00:45:03] One year on site.
Steven Sacks, CPA, CGMA, ABC: [00:45:07] I, I kind of doubt that he. One of the things you learn as an intern and then the first year account is to tour the client's operations. He toured the the client's operations like. I can't even come up with something. But this is this is the situation here. And by the way, you know, it's it's whatever his name and associates, he's really a solo practitioner. So Blake, to your answer, you know, the upside is what happens with opinion shopping. It's a win win. It's a it's a it's a it's a win for the person who invested in Truth Social. It's a win for the benefactor who shall go nameless with truth social. So and you know this is there's a win win for everybody here. No, it's a lose lose.
Blake Oliver, CPA: [00:45:55] It's a lose lose in the sense that, well, the person who loses is the the public loses, because what happens is the quality. Of audits declines because to compete exactly. To compete with folks who are doing low quality work, you have to lower your bid, which means that you've got fewer hours to spend on the audit, which means you cut corners. And so we've got a culture of corner cutting in the audit profession, which to me, as somebody who likes to do high quality work, if I were coming out of school and going into an audit firm, and I saw just how much the corners are being cut and how little judgment is being used and how much is just being shoved under the carpet right there. There's I'm not I'm not saying there aren't high quality audits and good auditors out there, but I think as a whole, our profession has some serious issues with quality and the system that we have created, the regulatory system we have created led to that. And this is why people are getting burned out too, is because they feel like what they do doesn't matter.
Speaker4: [00:46:58] But here's.
Steven Sacks, CPA, CGMA, ABC: [00:46:58] The thing. I didn't mean to say it was a win win. It was a win win for the nefarious actors. Right? That's that was a win win. It's yes, the end user loses. So then oh opinion shopping then it piles on as this whole snowballing effect. And then you see how shoddy. And then it's going to reach a tipping point. And what is that tipping point when it's like big name companies and that, that, you know, have to file for bankruptcy or these accounting firms. What's the tipping point and will the tipping point be more regulation? Will the tipping point mean that government then takes over the the test function? What does that mean?
David Bergstein, CPA, CITP, CGMA: [00:47:42] Well, the tipping points coming you both you both saying it. Because if you're going to be a smart business person and Blake is saying it, don't do audits, do everything else but audits because there's more profitability to be made in everything but audit.
Speaker4: [00:47:59] Well, and that's why that's why we have audits.
David Bergstein, CPA, CITP, CGMA: [00:48:01] And that's why firms are splitting up now, which goes back to the question of do you need us CPA and what should the CPA license be? And I want a CPA license to be a quality person who is an accountant because they're a trusted advisor, but not necessarily do the audit side.
Speaker4: [00:48:18] And that's why you see that's.
Blake Oliver, CPA: [00:48:20] Why you see the certified management accountant. Growing that is growing and the CPA is shrinking. So this is this is the there's a there's a playbook for this. What the CMAs have done. We could simply adopt that strategy with the CPA to defend our turf.
Speaker4: [00:48:41] As business advisors.
David Bergstein, CPA, CITP, CGMA: [00:48:43] In California have two tier licenses way back when where I would.
Speaker4: [00:48:46] Not and.
Blake Oliver, CPA: [00:48:47] And I would not be a CPA if they didn't. So I didn't have to do a test in order to become a CPA, which I think is great because most CPAs don't end up doing a test these days.
David Bergstein, CPA, CITP, CGMA: [00:48:58] So two audits in my career, uh, working for another, I've done one by another firm and one by myself, and never did another one again. And that was a small audit, but it was just too much work and too much risk and too much liability. So it's California. Take away that separate CPA.
Blake Oliver, CPA: [00:49:17] No, no, I mean, I got it not that long ago. I don't think they've changed it now.
David Bergstein, CPA, CITP, CGMA: [00:49:21] It's just the one at this point.
Blake Oliver, CPA: [00:49:23] Well, it's just I'm. I'm a CPA. I just can't if I'm in California, I can't sign an attest report. But I can call myself a certified public accountant. And there are other states that have done this too I understand.
Speaker4: [00:49:35] Mhm.
Steven Sacks, CPA, CGMA, ABC: [00:49:35] Interesting.
David Bergstein, CPA, CITP, CGMA: [00:49:36] You're still the difference between an accountant and a CPA is very simple. You're licensed by the state right.
Blake Oliver, CPA: [00:49:42] Yeah. They're still licensed. You're still licensed by the state. It's just.
Speaker4: [00:49:45] Until you do.
Blake Oliver, CPA: [00:49:46] Until you do the attest hours. You can't sign an attest report, but you can still be a CPA.
Speaker4: [00:49:52] And you.
David Bergstein, CPA, CITP, CGMA: [00:49:52] Still have to take CPA. Right.
Blake Oliver, CPA: [00:49:54] I still take CPA. Uh, which is another thing we haven't talked about yet. It's on our agenda. We could jump into that as the the relevance, the quality of CPA. We are turning this recording right now into a CPA course on the earmark app next week. Um. So let's let's tackle both of those in the time we have left. We've got about ten minutes. And if anyone's listening live and has questions, feel free to send those into the chat. I'd love to get to those. Let's let's sort of wrap this up, right. Um, let's talk about what are the strategies and recommendations you have to address these challenges. How do we. How do we fix this identity crisis in the CPA profession? And if you have any comments on CPE, now's the time as well. So, Steven, I went to you first at the beginning of this. So I'm going to go to David to start this off.
David Bergstein, CPA, CITP, CGMA: [00:50:48] Well, first of all, I think there should be. A different licensure for a CPA that doesn't do the attest function. Uh, and that means it doesn't have to be a state issued license. It could be a certification that the person is a CPA, which means they met all the qualifications and have all the knowledge to help people, uh, with their accounting, business, taxes, etc.. Same exam other than for the audit part of it, so to speak. Uh, but continuing education has to be more focused. There's so many CPA courses out there that you don't learn anything. You, uh, all you do is you press the button and say, I'm here. Uh, I'm attending. Uh, I like the fact that there's questions, but I want it to be meaningful to help me in what I. I take a lot of tech courses because I want to keep current with technology. So I want to know about artificial intelligence. I wanted to I want I wanted to be a Novell certified person when that came out way back when. So I took courses to help my skills. I'm not an expert in a lot of this, but I take the courses so that I can identify situations and it helps me. In the past, it helped me run my practice because I look at me a solo practitioner, as a quarterback, I don't know everything, but if I can recognize a problem, I can go get help. So I want to take courses that are relevant to help me with my clients that are meaningful.
Blake Oliver, CPA: [00:52:12] So you're saying create a CPA designation specifically for non attest? I mean I have that that's what I that's what California did. Do you think California should do. Do you think every state should do what California did?
David Bergstein, CPA, CITP, CGMA: [00:52:26] I think it would be helpful. But again, you still have a you still. The difference is and maybe I don't think that's right per se, because you don't need a state certification. The CMA is not a issued by a state authority. Is that correct? It's just.
Speaker4: [00:52:43] It's just issued by the.
Blake Oliver, CPA: [00:52:44] Institute of Management.
Speaker4: [00:52:45] Accountants. Yeah. Right. So but the CPA is a CPA.
David Bergstein, CPA, CITP, CGMA: [00:52:49] You.
Speaker4: [00:52:49] Know. Yeah.
David Bergstein, CPA, CITP, CGMA: [00:52:50] Issue a CPA license. People qualified to be CPAs.
Blake Oliver, CPA: [00:52:55] All right, Steven, what are your recommendations for how we solve this identity crisis?
Steven Sacks, CPA, CGMA, ABC: [00:53:04] Well, again, um, we've we've covered it in bits and pieces. Uh, I again, I go back to, if you really want to, uh, increase the pool of CPAs, define what the CPA is, what it means, define. And again this touches a little bit on licensure. What is the definition of the practice of public accounting. What is public accounting. What are accounting services? I mean there's a lot of things that are really not clear. And it goes back to the comment you made on an earlier, uh, webcast. It was vague and overbroad. You were talking about, uh, CAS okay. So the same thing applies to, to to see, you know, to the CPA. What does that mean? And then when it's defined, then you can say, what do you need to become that, whatever that is. And then I'm hearing you say, well, you get rid of the, the test part of the exam. Uh.
Speaker4: [00:54:05] Well, I'm not saying that.
Steven Sacks, CPA, CGMA, ABC: [00:54:07] That would be hard to extract that out. What what do you mean by that?
Blake Oliver, CPA: [00:54:10] Well, I don't think we should get rid of the test part of the exam. I still had to take that. I just didn't have to do audit hours in order to be a CPA.
Steven Sacks, CPA, CGMA, ABC: [00:54:16] Oh, gotcha. Okay, so you still have that, but you know that it's not going to reflect what you want to do in the future because you're not going to be doing audit. If you're able to give a roadmap in the undergraduate and make it where they they have that accounting as a basis, and then they can use that along with data analytics or something, they can jump right into a profession to a Big Four or what have you after their fourth year and earn good money because, well, they have that accounting as a core. They have data analytics or AI expertise. That's that's something that's that's going to help this. The CPA, if you could answer polling questions and you get it, what does that mean? States will say, you know, you must have 24 credits of of A and eight, but you don't do it. So part of the the process is to have Nasbe and AICPA get together and say, how do we identify and create. It's a framework for true meaningful CPA or true meaningful CPE for the breadth and depth of services that are being provided by a group under this rubric of CPA. And finally, culture and the timing and the UN and the, um, they're not paying properly. Well, you know, the fact is, yes, 40 hours after that, do, um, you know, do overtime or take a look at what your competitors are doing and think of it as more of a, of investment in the future because you want to retain your, your, your talent. And if you don't pay them, even though different, um, different surveys have said, well, pay is not really the number one. Okay. But you know what? Pay and praise pay and growth pay is always the common thread.
David Bergstein, CPA, CITP, CGMA: [00:56:07] Yeah. One last comment. You know, I think CP is continuing education is necessary in every career. It's just that it's got to be meaningful to help you continue to learn. I think that's an important process. You don't want to become static. That's just my thought.
Blake Oliver, CPA: [00:56:22] And I agree with you 100% on that. David and Steven, uh, and that's our mission at earmark is to make CPE high quality and easier to obtain and less expensive so that all CPAs can get high quality CPE. So thank you for joining me for this recording, for this podcast episode, for this webinar, because we are going to turn it into a free CPE course on the earmark app. We've got one final comment from a listener. Prince said the industry is not so ready to accept non CPAs into non-audit jobs such as accounting, controlling treasury or advisory. Most of the jobs I see require prior experience with an audit firm for at least a couple of years, and this is true. I have heard this from other of my listeners, and it forces them to go work for a firm doing audit because of the requirement that you have like two years of audit experience. Prince continues. Do you think the market should also be ready to accept that CMAs or other accounting experts can take up other jobs? Steven.
Steven Sacks, CPA, CGMA, ABC: [00:57:27] I think the the CMA really rips apart the financial statements and takes a more granular look at what's what. Do you want to be a true business advisor? You know, if it's you could take a look at cost. Cost is everything in the business. And if you're able to look at it, I tell you something, just having that knowledge alone is is enough to help a company and to get paid and to have, um, work life balance. So that would be my theory.
Blake Oliver, CPA: [00:58:01] David, I'll let you have the last word.
David Bergstein, CPA, CITP, CGMA: [00:58:04] I think a CMA is qualified to get those jobs and. See ads for. They don't care if you have four years of college, two year college, no college. If you are a certified ProAdvisor and they're using QuickBooks, they want to hire you if you have the skills. So I think CMA skills are comes down to Prince selling himself on the show. Everything comes down to selling yourself and your ability to do it. And I still like all the certifications.
Blake Oliver, CPA: [00:58:33] Thanks everyone for joining us. Thank you Steven and David. Don't go anywhere. I'm going to play a quick video telling everyone how to earn CPE. And I'll see you guys on the other side. Today's webinar has ended. We hope you enjoyed it! To earn CPE for watching, download the free earmark app. Scan the QR code on the screen to visit the download page. Open the app and create your account. Use a valid email address where you will receive CPE certificates, then register for the course. You can search for it by tapping on the magnifying glass icon on the home screen, and then entering the name of this webinar. If you're attending the live stream of this webinar, keep an eye out for an email letting you know when the quiz is available. In the next few days. Pass the quiz to earn your CPE credits, then tap the button to email yourself a CPE certificate. Stay tuned for more webinars from earmark. We appreciate you joining us today, and we look forward to seeing you again soon.