Accounting
Time for accounting firms to double down on DEI
In the face of recent backlash and a broad corporate pullback on diversity, equity and inclusion, experts say the accounting profession largely remains on track with its efforts.
But while the profession remains strong in DEI, experts point to a loud minority amplifying an unpopular sentiment that, as a result, may see some firms quietly retreating out of fear of legal or political backlash.
Experts agree that now is not the time to become complacent. They remind accountants that DEI is ultimately a boon to firms in terms of the bottom line and talent development — making it an invaluable lever to pull amid an ongoing talent shortage.
Breaking down DEI
The politicization of DEI has made it easy to lose sight of what the term actually means and what its implementation looks like in a firm.
Diversity encompasses more than just race, ethnicity and gender. It also refers to age, marital status, parental status, neurodiversity, socioeconomic status, veteran status, nationality, immigration status, physical ability or disability, religion and more.
“I don’t know how we let someone take the word ‘diversity’ and make it all things bad,” said Kimberly Ellison-Taylor, former chair of the American Institute of CPAs’ National Commission on Diversity and Inclusion. “To the extent that people don’t really understand what diversity means, that’s when you see them using it, not knowing that it includes the veterans programs, it includes the programs for young people, it includes programs for women, it includes mental health programs.”
Equity is the “assistive things that people need in order to be the best version of themselves,” Ellison-Taylor explained.
Equity is often conflated and confused with equality, but the difference is significant: Equality entails providing everyone with the same treatment across the board, while equity entails providing varying kinds of help according to each individual’s needs.
“Originally, we used to talk about equality, and equality was, ‘We’re all equal. There’s a level playing field.’ Part of what DEI looks at and says is that not all people have the same opportunity as others do, and some people need a boost to enable them to have that opportunity,” said Donny Shimamoto, founder of CPA firm IntrapriseTechKnowlogies. “That’s why they show that picture of the sliding boxes. The shorter person needs a bigger box to have the equal view over the fence. If you gave everyone the same box, which is equal, the short person still can’t see over the fence.”
Lastly, inclusion is making sure everyone feels like they have a place in the profession.
“If we’re doing it well, everyone would know where they fit, and they would not begrudge the assistance that other people are getting in order to be their full, productive selves,” Ellison-Taylor said.
Temperature check
In 2020, George Floyd was murdered by Minneapolis police, inciting a summer of racial unrest across the country. In corporate America, Floyd’s death prompted a wave of renewed commitments to DEI initiatives and programs, such as implementing diverse recruitment practices, increasing pay equity, establishing employee resource groups, and hosting trainings on topics such as unconscious bias and microaggressions. But now major companies like Ford, Microsoft, Tractor Supply, John Deere and Harley-Davidson are making headlines for reversing their DEI commitments.
It’s the result of recent political and cultural rollback: The
The general consensus among accounting leaders is that most firms are still moving forward, despite the politicization and broader corporate backlash, while a small group have pulled back. Where experts disagree is the degree to which firms are pulling back and just how many are doing so.
“The accounting profession remains strong in our stance on the importance of DEI. The future of the profession demands it,” said Anoop Mehta, past chair of the AICPA and current chair of the AICPA NCDI, noting that it is a loud minority that opposes DEI. “Now certainly is not the time for employers to overreact to whatever is going on or what you’re seeing in the media. … This is now the time to double down.”
Bonnie Buol Ruszczyk, president and manager of the Accounting MOVE Project said, “It depends on the firm that you’re looking at.”
“This is a really loud minority,” she said. “They’re the squeaky wheel, but most people do feel that this is important. They may be on different spots on the spectrum as to how important it is or what elements of it are important, but this is not a 50-50 kind of thing by any means.”
Sandra Wiley, president of Boomer Consulting, said that many firms are frightened to associate with the politics and fear the legal risks their DEI initiatives may pose.
“Firms are almost scared to talk about it anymore because they’re afraid that what people are trying to say is that the firm will be more Republican or Democrat, which is stupid,” Wiley said. “It’s not about politics. It’s about the human aspects of what is right and what is not right.”
Firm leaders “don’t want to admit that there’s a systemic problem going on,” Wiley said, and that refusal results in top leadership being majority male and white.
Wiley said some firms are pulling back for financial reasons — they look at DEI positions in their firm and ask if they’re really boosting profitability, which means DEI leaders “have got to start looking at their metrics deeper so that they can protect their positions.”
“The pushback on it is a little bit dumbfounding to me,” Buol Ruszczyk added. “There are those that have been in positions of power that see this as somebody trying to take their power away.”
But she clarified that implementing DEI does not mean leadership giving up their piece of the pie: “What it does is it creates a larger environment.”
“Pulling back is only going to position your firm as being run by people that don’t care about this kind of stuff,” she said. “They don’t care about their employees. They don’t care about reaching people outside of the majority of firm employees.”
The upsides of DEI
Leaders say DEI is an obvious solution to the profession’s pipeline problem. With fewer students studying accounting, fewer earning their CPA and even fewer staying in the profession until they make partner, firms need to improve both recruiting and retention.
“When people say they can’t find talent, I’m like, ‘Where are you looking? Who are you bringing? Who are you asking?'” Ellison-Taylor said. “To some degree, it takes diverse talent to help locate diverse talent.”
Trevor Williams, audit partner and director of DEI at GRF CPAs in Bethesda, Maryland, said firm leadership is mistaken “if you don’t think your employees want to see the staff be diverse.”
“In order for DEI to be successful, there has to be a tone at the top, not just one person in leadership,” Williams added. “In order for staff to really have buy-in, they need to see that their leaders are actually bought into the various initiatives or the culture of the firm.”
“Organizations and firms do their due diligence and go through the interviewing processes, so please believe that these candidates are doing the same,” Williams said. “It’s very easy to go on your firm’s website and do a dropdown and see what leadership looks like, and if the leadership doesn’t look like that particular ethnic group, they’re not going to be that eager to join the firm.”
The importance of diverse leadership cannot be overstated. Women, for instance, have consistently comprised just over half of all firm employees but often drop from the partner pipeline at the senior management level. This year, women comprised 35% of partners and principals, and 35% of management committees, according to the
DEI is important to retaining young talent, too. For the next generation of accountants, seeing a diverse workforce when they walk through the doors is an important factor in convincing them to stay.
“Gen Z, the 20-year-olds that are popping up in the workplace today, they simply do not understand why there is even a problem,” Wiley said. “And what they really don’t understand is when they walk into the workforce, and it is completely different from what they have felt and seen and experienced in their life outside of the firm. So they go to college, or they go to school, or they go to networking events with their friends and they see a ton of diversity, and then they walk into a firm and it looks whitewashed, and they don’t get it.”
“I don’t understand why firms aren’t looking through that lens and seeing what the young people are seeing today. And so unless we change that, we are not going to retain,” Wiley continued. “They are going to leave in mass numbers, which is what’s happening right now.”
Research shows that DEI impacts the bottom line. Companies in the the top quartile for gender diversity on executive teams are 25% more likely to have above-average profitability than companies in the bottom quartile, and companies in the top quartile for ethnic and cultural diversity outperformed by 35% in profitability, according to a
To break it down, retaining a diverse workforce can increase innovation and collaboration.
“It’s really important, I believe, to have different perspectives at the table in the conversations,” said Lexy Kessler, vice chair of the AICPA and mid-Atlantic managing partner of Top 100 Firm Aprio. “If everybody has the same opinion, you’re not going to get the right answer. If you have people with different opinions and different backgrounds coming into conversation, then you get to the right answer.”
Kessler pointed to the cost of employee turnover. The cost of replacing an individual employee ranges from one-half to two times the employees’ annual salary, according to
Client engagement is also a factor. “From a public accounting perspective, and I would think from a business and industry perspective as well, your investors, your clients, the business community, are diverse,” said Kessler. “If they see somebody that looks like you, there’s a connection.”
What’s in a name?
Some firms are dropping the name “DEI” in favor of using less politicized language such as culture, inclusion, wellbeing and belonging. They’re also emphasizing the human aspect of these efforts with terms like “people-centered” and “human-centered” leadership.
“By and large, many of the firms, I think, are standing on their values, standing on what means the most to their firm, and they’re sticking to it,” Ellison-Taylor said. “They may be calling it something different, but they are still doing the work, and I think that’s the most important part.”
“This is not a political issue,” Buol Ruszczyk said. “This is about people and about creating systems and situations where people are treated fairly.”
“You have to make it happen,” warned Mehta. “You can’t wait and hope for the best. You have to put processes in place, and you have to be intentional about it.”
The Financial Accounting Standards Board met this week to discuss its projects on accounting for transfers of cryptocurrency assets and enhancing the disclosures around certain digital assets, such as stablecoins.
Processing Content
During Wednesday’s meeting, FASB’s board made certain tentative decisions, according to a
At a future meeting, the board plans to consider clarifying the derecognition guidance for crypto transfer arrangements to assess whether the control of a crypto asset has been transferred.
FASB also began deliberations on the
The board decided to provide illustrative examples in Topic 230, Statement of Cash Flows, to clarify whether certain digital assets such as stablecoins can meet the definition of cash equivalents. It also decided to include the following concepts in the illustrative examples:
- Interpretive explanations that link to the current cash equivalents definition;
- The amount and composition of reserve assets; and,
- The nature of qualifying on-demand, contractual cash redemption rights directly with the issuer.
FASB plans to clarify that an entity should consider compliance with relevant laws and regulations when it’s creating a policy concerning which assets that satisfy the Master Glossary definition of the term “cash equivalents“ will be treated as cash equivalents.
“I agree with the staff suggestion to look at examples,” said FASB vice chair Hillary Salo. “From my perspective, I think that is going to help level the playing field. People have been making reasonable judgments. I agree with that. And I think that this is really going to help show those goalposts or guardrails of what types of stablecoins would be in the scope of cash equivalents, and which ones would not be in the scope of cash equivalents. I certainly appreciate that approach, and I think it has the least potential impact of unintended consequences, because I do agree with my fellow board members that we shouldn’t be changing the definition of cash equivalents, and it’s a high bar to get into the cash equivalent definition.”
“I’m definitely supportive of not changing the definition of cash equivalents,” said FASB chair Richard Jones. “I believe that’s settled GAAP in a way, and we’re not really seeing a call to change it for broader issues. I am supportive of the example-based approach. The challenge with examples, though, is everybody’s going to want their exact pattern, but that’s not what we’re doing.”
The examples will explain the rationale for how digital assets such as stablecoins do or do not qualify as cash equivalents and give a roadmap for other types of digital assets with varying fact patterns to be able to apply.
“We really don’t want to be as a board facing a situation where something was a cash equivalent and then no longer is at a later date,” said Jones. “That’s not good for anyone, so keeping it as a high bar with certain rigid criteria, I think, is fine.”
Stablecoins are supposed to be pegged to fiat currencies such as U.S. dollars and thus provide more stability to investors. “In my view, while a stablecoin may meet the accounting definition established for cash equivalents, not every one of those stablecoins in the cash equivalent classification represents the same level of risk,” said FASB member Joyce Joseph.
She noted that the capital markets recognize the distinctions and have established a Stablecoin Stability Assessment Framework to evaluate a stablecoin’s ability to maintain its peg to a fiat currency. Such assessments look at the legal and regulatory framework associated with the stablecoin, and provide investors with information that could enable them to do forward-looking assessments about the stability of the stablecoin.
“However, for an investor to consider and utilize such information for a company analysis the financial statement disclosures would need to include information about the stablecoin itself,” Joseph added. “In outreach, the staff learned that investors supported classifying certain stablecoins as cash equivalents when transparent information is available about the entities at which the reserve assets are held. Therefore, in my view, taking all of this into consideration a relevant and informative company disclosure would include providing investors with the name of the stablecoin and the amount of the stablecoin that is classified as a cash equivalent, so investors can independently assess the liquidity risks more meaningfully and more comprehensively by utilizing broader information that is available in the capital markets and its emerging information.”
Such information could include the issuer, reserves, governance and management, she noted, so investors would get a more holistic look at the risks that holding the stablecoin would entail for a given company.
The board decided to require all entities to disclose the significant classes and related amounts of cash equivalents on an annual basis for each period that a statement of financial position is presented.
Entities should apply the amendments related to the classification of certain digital assets as cash equivalents on a modified prospective basis as of the beginning of the annual reporting period in the year of adoption.
FASB decided that entities should apply the amendments related to the disclosure of the significant classes and amounts of cash equivalents on a prospective basis as of the date of the most recent statement of financial position presented in the period of adoption.
The board will allow early adoption in both interim and annual reporting periods in which financial statements have not been issued or made available for issuance.
FASB also decided to permit entities to adopt the amendments to be illustrated in the examples related to the classification of certain digital assets as cash equivalents without the need to perform a preferability assessment as described in Topic 250, Accounting Changes and Error Corrections.
The board directed the staff to draft a proposed accounting standards update to be voted on by written ballot. The proposed update will have a 90-day comment period.
Senators introduced several pieces of tax-related legislation this week, including measures aimed at improving customer service at the Internal Revenue Service, cracking down on tax evasion and curbing the carried interest tax break, in addition to efforts in the House to repeal the Corporate Transparency Act.
Processing Content
Senators Bill Cassidy, R-Louisiana, and Mark Warner, D-Virginia, teamed up on introducing a bipartisan bill, the
The bill would establish a dashboard to inform taxpayers of backlogs and wait times; expand electronic access to information and refunds; expand callback technology and online accounts; and inform individuals facing economic hardship about collection alternatives.
“Taxpayers deserve a simple, stress-free experience when dealing with the IRS,” Cassidy said in a statement Wednesday. “This bill makes the process quicker and easier for taxpayers to get the information they need.”
He also mentioned the bill during a
“I’m happy to meet with the team … and do all I can to make it as good as you want it to be,” said Bisignano.
“My bill would equip the IRS with the legislative mandate to create an online dashboard so that taxpayers can monitor average call wait time and budget time accordingly,” said Cassidy. He noted that the bill would allow a callback for taxpayers that might need to wait longer than five minutes to speak to a representative, and establish a program to identify and support taxpayers struggling to make ends meet by providing information about alternative payment methods, such as installments, partial payments and offers in compromise.
“I know people are kind of desperate and don’t know where to turn for cash, so I think this could really ease anxiety,” he added. “This legislation is bipartisan and is likely to pass this Congress.”
Cassidy and Warner
“Taxpayers shouldn’t have to jump through hoops to get basic answers from the IRS — and in the last year, those challenges have only gotten worse,” Warner said in a statement. “I am glad to reintroduce this bipartisan legislation on Tax Day to ease some of this frustration by increasing clear communication and making IRS resources more readily available.”
Stop CHEATERS Act
Also on Tax Day, a group of Senate Democrats and an independent who usually caucuses with Democrats teamed up to introduce the Stop Corporations and High Earners from Avoiding Taxes and Enforce the Rules Strictly (Stop CHEATERS) Act.
Senate Finance Committee ranking member Ron Wyden, D-Oregon, joined with Senators Angus King, I-Maine, Elizabeth Warren, D-Massachusetts, Tim Kaine, D-Virginia, and Sheldon Whitehouse, D-Rhode Island. The bill would provide additional funding for the IRS to strengthen and expand tax collection services and systems and crack down on tax cheating by the wealthy.
“Wealthy tax cheats and scofflaw corporations are stealing billions and billions from the American people by refusing to pay what they legally owe, and far too many of them are getting a free pass because Republicans gutted the enforcement capacity of the IRS,” Wyden said in a statement. “A rich tax cheat who shelters mountains of cash among a web of shell companies and passthroughs is likelier to be struck by lightning than face an IRS audit, and Republicans want to keep it that way. This bill is about making sure the IRS has the resources it needs to go after wealthy tax cheats while improving customer service for the vast majority of American taxpayers who follow the law every year.”
Earlier this week. Wyden also
The Stop CHEATERS Act would provide the IRS with additional funding for tax enforcement focused upon high-income tax evasion, technology operations support, systems modernization, and taxpayer services like free tax-payer assistance.
“As Congress seeks ways to fund much-needed policy priorities and address our growing national debt, there is one common sense solution that should have unanimous bipartisan support: let’s enforce the tax laws already on the books,” said King in a statement. “Our legislation will make sure the IRS has the resources it needs to confront the gap between taxes owed and taxes paid – while ensuring that our tax enforcement professionals are focused on the high-income earners who account for the most tax evasion. This is a serious problem with an easy solution; let’s pass this legislation and make sure every American pays what they owe in taxes.”
Carried interest
Wyden, King and Whitehouse also teamed up on another bill Thursday to close the carried interest tax break for hedge fund managers that
Carried interest is a form of compensation received by a fund manager in exchange for investment management services, according to a
Under the bill, the
“Our tax code is rigged to favor ultra-wealthy investors who know how to game the system to dodge paying a fair share, and there is no better example of how it works in practice than the carried interest loophole,” Wyden said in a statement. “For several decades now we’ve had a tax system that rewards the accumulation of wealth by the rich while punishing middle-class wage earners, and the effect of that system has been the strangulation of prosperity and opportunity for everybody but the ultra-wealthy. There are a lot of problems to fix to restore fairness and common sense to our tax code, and closing the carried interest loophole is a great place to start.”
Repealing Corporate Transparency Act
The House Financial Services Committee is also planning to markup a bill next Tuesday that would fully repeal the Corporate Transparency Act, which has already been significantly
If enacted, the repeal would eliminate beneficial ownership reporting requirements, removing a transparency measure designed to help law enforcement and national security officials identify who is behind U.S. companies.
“This repeal would turn the United States back into one of the easiest places in the world to set up anonymous shell companies, something Congress worked for years to fix,” said Erica Hanichak, deputy director of the FACT Coalition, in a statement. “These entities are routinely used to facilitate corruption, financial crime, and abuse. Rolling back the CTA doesn’t just weaken transparency, it signals to bad actors around the world that the U.S. is once again open for illicit business.”
The Internal Revenue Service rarely penalizes taxpayers who have high balances in foreign bank accounts and fail to file the proper forms, according to a new report.
Processing Content
The
Taxpayers with specified foreign financial assets that meet a certain dollar threshold are also required to report the information to the IRS by filing Form 8938. Failure to file the form can result in penalties of up to $60,000. However, TIGTA’s previous reports have demonstrated that the IRS rarely enforces these penalties.
The IRS created an Offshore Private Banking Campaign initiative to address tax noncompliance related to taxpayers’ failure to file Form 8938 and information reporting associated with offshore banking accounts, but it’s had limited success.
Even though the initiative identified hundreds of individual taxpayers with significant foreign bank account deposits who failed to file Forms 8938, the campaign only resulted in relatively few taxpayer examinations and a small number of nonfiling penalties. The campaign identified 405 taxpayers with significant foreign account balances who appeared to be noncompliant with their FATCA reporting requirements.
The IRS used two ways to address the 405 noncompliant taxpayers: referral for examinations and the issuance of letters to them.
- 164 taxpayers (who had an average unreported foreign account balance of $1.3 billion) were referred for possible examination, but only 12 of the 164 were examined, with five having $39.7 million in additional tax and $80,000 in penalties assessed.
- 241 noncompliant taxpayers (who had an average unreported account balance of $377 million) received a combination of 225 educational letters (requiring no response from the taxpayers) and 16 soft letters (requiring taxpayers to respond). None of the 241 taxpayers were assessed the initial $10,000 FATCA nonfiling penalty.
“While taxpayers can hold offshore banking accounts for a number of legitimate reasons, some taxpayers have also used them to hide income and evade taxes,” said the report.
Significant assets and income are factors considered by the IRS when assessing whether taxpayers intentionally evaded their tax responsibilities, the report noted. Given the large size of the average unreported foreign account balances, these taxpayers probably have higher levels of sophistication and an awareness of their obligation to comply with the law.
TIGTA believes the IRS needs to establish specific performance measures to determine the effectiveness of the FATCA program. “If the IRS does not plan to enforce the FATCA provisions even where obvious noncompliance is identified, it should at least quantify the enforcement impact of its efforts,” said the report. “This will ensure that IRS decision makers have the information they need to determine if the FATCA program is worth the investment and improves taxpayer compliance.
TIGTA made three recommendations in the report, including revising Campaign 896 processes to include assessing FATCA failure to file penalties; assessing the viability of using Form 1099 data to identify Form 8938 nonfilers; and implementing additional performance measures to give decision makers comprehensive information about the effectiveness of the FATCA program. The IRS disagreed with two of TIGTA’s recommendations and partially agreed with the remaining recommendation. IRS officials didn’t agree to assess penalties in Campaign 896 or with implementing performance measures to assess the effectiveness of the FATCA program.
“From our perspective, TIGTA’s conclusions regarding IRS Campaign 896 are based, in part, on a misguided premise and overgeneralizations, including the treatment of ‘potential noncompliance’ as tantamount to ‘egregious noncompliance’ that warrants a monetary penalty without contemplating the variety of justifications that may exempt a taxpayer from having to file Form 8938,” wrote Mabeline Baldwin, acting commissioner of the IRS’s Large Business and International Division, in response to the report.
What that means for consumer loans
Checks and Balance newsletter: Of God and MAGA
Why software stocks, 2026’s market dogs, have joined the rally
Armanino adds Strategic Accounting Outsourced Solutions
New 2023 K-1 instructions stir the CAMT pot for partnerships and corporations
