The accounting profession is more complex than ever before. Small and medium-sized accounting firms face increasing competition, shifting client expectations and rapid technological innovation. While many firms seek to adapt through trial and error, our recent study provides evidence-based insights into what truly drives perceptions of success in this challenging landscape.

Through a survey of 192 firms collected by the Center for Accounting Transformation, we found that the most significant factor consistently associated with success is technological leadership. Firms that consistently stay ahead of their peers with advanced technologies outperform their peers. Beyond technology, other contributors to success include exceeding client expectations and fostering a culture of continuous learning and improvement. 

For practitioners, these findings offer actionable guidance. Success in today’s accounting world is not about doing everything, but about prioritizing the right strategies. Below, we outline the suggestions that can help small and medium-sized firms thrive based on our empirical results.

Key factors driving firm success

Leadership in technology adoption: The clear standout factor in our research is technological leadership. Firms that position themselves ahead of their peers in adopting advanced tools—such as AI, automation and cloud platforms—are consistently perceived as more successful.

• Why it matters: Technology enhances efficiency, allowing firms to automate parts of routine tasks like tax preparation and reviewing workpapers. It also enables firms to remain resilient during periods of rapid change, adapt to shifting client needs, and compete effectively with larger firms. By leveraging technology, firms can streamline operations, reduce costs, and free up resources to focus on higher-value services.
• Survey insight: Respondents noted that tools like AI not only streamline operations but also solve staffing challenges. For instance, respondents to our study noted, “AI allows me to produce more today by myself than when I had a staff of 20.” Additionally, remote work technologies were highlighted as game-changers: “The ability to work anywhere with our paperless environment is a tremendous advantage.”

Exceeding client expectations: Technology is not the only factor that incrementally enhances perceptions of success; firms must also focus on delivering exceptional client experiences. Firms that go beyond meeting expectations to actively contribute to client success see stronger client loyalty and reputational benefits.

• Why it matters: Clients increasingly demand tailored, strategic solutions, not just compliance work. Exceeding expectations strengthens trust and fosters long-term relationships.
• How to implement: Use client feedback to identify service gaps and opportunities for improvement. Train staff to adopt a client service approach, focusing on clients’ broader business goals.

A culture of continuous learning and improvement: Organizational culture is another important driver of success. Firms that emphasize learning, innovation, and improvement outperform those focused solely on team dynamics or routine processes.

• Why it matters: A forward-thinking culture helps firms adapt to industry changes, attract top talent, and retain staff in a competitive labor market.
• How to implement: Implement professional development programs that prioritize tech skills and leadership training. Regularly evaluate firm processes and encourage team input for improvements.

Surprising findings, what didn’t matter as much: Our empirical research also debunks some common assumptions. For example:

• Service specialization: While many practitioners emphasize the need for industry or service specialization, our findings show these factors have limited incremental impact on success.
• Advisory work vs. compliance work: Contrary to popular belief, the balance between advisory and compliance work does not significantly drive success. Instead, success stems from how services are delivered, not the type of services offered.

Practical steps for practitioners

To capitalize on these findings, firms should focus on:

• Investing strategically in technology
  • Assess your firm’s current tech stack and tech abilities and compare it to industry leaders.
  • Prioritize investing in the technology skills of your people and in investments in AI, automation and cloud-based solutions that directly enhance client service and operational efficiency.
• Reframing client relationships
  • Position your firm as a strategic partner, not just a service provider.
  • Create metrics to measure and track client satisfaction and loyalty.
• Fostering a culture of innovation
  • Encourage staff to explore new technologies and processes.
  • Recognize and reward innovative ideas that enhance client or firm outcomes.

Looking to the future

The accounting profession is evolving at a breakneck pace, with new technologies like generative AI, predictive analytics and remote work technology reshaping the landscape. For small and medium-sized firms, success depends on being proactive: adopting transformative technologies, exceeding client expectations, and fostering a forward-thinking culture. By prioritizing these strategies, your firm can navigate the challenges ahead and emerge as a leader in the industry.

For more detailed insights or guidance on implementing these strategies, feel free to reach out to the authors.

The accounting profession is facing a perfect storm of staffing challenges. There aren’t enough accountants to handle the rising workloads, the workforce is getting older, and the number of new CPAs coming in has been slowing to a trickle over the past ten years. Companies are desperate for ways to keep their quality of service high, even though they have smaller teams. Artificial intelligence (AI) is one possible answer. 

Accounting’s Talent Shortage By the Numbers

About three-quarters of the CPAs who work now are either at or close to retirement age and will be leaving the workforce in the next ten years. This “silver tsunami” means that many experienced professionals will soon leave the field.

Also, fewer people are taking the CPA exam, which means there are fewer new graduates entering the profession. Because of things like the 150-hour CPA requirement, lower starting salaries, and not understanding the profession well, fewer students are choosing accounting.

In addition to retirements, a lot of accountants in the middle of their careers have left the profession in the last few years. Over 300,000 U.S. accountants and auditors left their jobs between 2019 and 2022, a 17% decline in the workforce. This is a lot higher than the average quit rate in the economy, which shows that people in the field are facing burnout and dissatisfaction. 

Ironically, there continues to be strong demand for accounting services. Companies need to find ways to do more with less because there is more work and fewer people. This is where technology, particularly AI, comes into play.

What Accounting Firms Can Automate Today

Recent advances in AI offer a timely opportunity to boost efficiency and alleviate overburdened staff. Modern AI tools can handle many routine, time-consuming accounting tasks, allowing human professionals to focus on higher-value work. 

Here are some examples of how automation powered by AI can be used across different accounting tasks:

Bookkeeping and data entry: AI-powered software can classify revenue and expenses and reconcile accounts, automating bookkeeping and data entry. Algorithms scanning invoices or receipts can automatically extract all relevant fields, saving time and reducing data entry errors. AI matching ledger transactions to bank statement lines accelerates bank reconciliations from hours to minutes by detecting exceptions for human inspection.

Document review and audits: AI systems can quickly read and extract data from documents for audits and document review. AI lets audit teams evaluate entire contracts, agreements, and financial records for issues. Deloitte used cognitive artificial intelligence to examine all contracts and detect auditor-relevant phrases and irregularities. 

Tax preparation and research: AI is simplifying tax preparation and research, from data collection to filing. Tax prep and research machine learning models can automatically extract and prepare W-2s, 1099s, and other tax documents for returns. This makes hand-entering taxes much easier. AI can optimize a client’s tax situation by finding qualified credits or deductions by verifying transactions against tax legislation. 

Analytics and forecasting: AI can find trends and generate concepts that humans cannot. Accounting and advising firms use AI-driven analytics for risk assessment, fraud detection, and predictive forecasting. An AI model can analyze client financial data and identify unusual transactions or trends, alerting accountants to potential issues. 

What AI Does Not Replace: The Human Judgment Factor

Despite AI’s amazing potential, there are crucial areas of accounting that technology should not (and cannot) replace. Accounting is, at its core, a profession of judgment, ethics, and trust – all elements that require a human touch. 

Professional judgment and expertise: AI doesn’t have the background, skepticism, or experience that accountants do. Experienced accountants can comprehend unclear legislation, apply accounting standards to new scenarios, and make difficult transaction decisions. AI can propose or offer facts, but ultimate judgments like audit opinions or tax positions require human skill and accountability. 

Ethics and skepticism: Accountants must follow strong ethical guidelines and take care. AI lacks ethics and skepticism. Fraud detection requires questioning and verifying facts with a healthy doubt, not merely noticing irregularities. A human auditor must determine if an unusual pattern is fraudulent or not. Human monitoring is needed to check AI outputs since algorithms can make mistakes or “hallucinate”. 

Client relationships and communication: Accounting often involves talking to and working directly with clients. In uncertain times, clients rely on their trusted advisors to look at the numbers, explain options, and put their minds at ease. AI cannot replace the trust and understanding CPAs build with clients. When a business has to make a tough financial decision, they want a human advisor who can listen to its concerns and tailor advice to the specific situation.

Strategic thinking and creativity: AI can evaluate data effectively but not innovate or think strategically. Accounting firms must develop strategies, solve difficult financial problems, and solve client problems creatively. AI might show that a client’s costs are going up, but accountants need to be creative and think outside the box to find the best pathway forward. AI works with people to quickly analyze data and give them information that helps them make those decisions. Then, people use their judgment and creativity to choose the best course of action.

So how does my firm get started?

In general, AI should handle tasks, not responsibilities. By automating routine tasks, AI lets accountants use their most valuable human skills, such as judgment, ethical reasoning, communication, and strategic insight.

The bottom line is that AI can be a powerful ally in solving the accounting labor shortage, but success requires choosing the right tools and using them wisely. Start by addressing your firm’s pain points with proven AI solutions – whether that’s automating a tedious workflow or augmenting your team’s analysis – and ensure you maintain robust human oversight. With a thoughtful strategy, accounting firm leaders can harness AI to not only fill the labor gap but also to transform their firms for the better: boosting efficiency, enhancing services, and making the profession more attractive for the next generation of talent.

The Securities and Exchange Commission is already making plans in the event that the massive tax bill now moving through Congress ends up shifting the Public Company Accounting Oversight Board’s duties to the SEC.

In late May, the House passed far-reaching tax and spending legislation that included a provision transferring the PCAOB’s responsibilities to the SEC. The so-called One Big Beautiful Bill is now in the hands of the Senate, where much of it is likely to pass. However, it’s unclear whether there will be changes in the PCAOB provision, which has not been attracting as much attention as the tax and Medicaid provisions. Nevertheless, the SEC is preparing in case it inherits the PCAOB’s work.

“I guess as an initial matter, certainly, we are aware of the proposed legislation that is both in the House and the Senate as part of the budget reconciliation bill,” said SEC acting chief accountant Ryan Wolfe during Financial Executives International’s SEC and Financial Reporting Conference at the University of Southern California’s Leventhal School of Accounting. “I think from the staff perspective, where we’re assisting the Commission, it’s important that we are thinking about these issues, are monitoring and are prepared as the potential for these bills to move forward would result in the Commission having new statutory responsibilities. Specifically with respect to standard-setting and inspections, the enforcement authorities would also transfer, but we already have shared jurisdiction with respect to those activities.” 

He noted that the SEC has been hearing a great deal of feedback about it across the spectrum. 

“I would observe that one thing that I hear, I don’t want to say universally, but quite consistently, is the importance or the overall ecosystem of the three major programs that the PCAOB engages in, being standard-setting for auditors, inspections of auditors to evaluate the compliance with those standards, and similarly, the enforcement function,” said Wolfe. “And so I think that these are incredibly important objectives that will continue regardless, which is just to say, without providing any significant details, that we’re aware of it and we are working on those issues.”

On the other hand, the SEC’s Office of Chief Accountant is prepared in case the provision gets dropped from the final bill.

“But in the event that that would not go forward, the OCA’s assistance with the Commission and the oversight of the PCAOB will continue regardless,” said Wolfe. 

He also pointed to the importance of continuing standards such as the PCAOB’s recent quality control standard, QC 1000, which takes effect at the end of the year. “QC 1000 is a big project,” he said. “I know that firms are working really hard. The PCAOB is committed to engaging with those firms to work through implementation issues. I would ask any auditors watching to continue that effort and raise those issues. We as OCA staff are also willing to engage on those issues and hear what’s working and what maybe can be addressed throughout the process.”

Panel moderator Mark Kronforst, a partner at Ernst & Young, pointed out that SEC chair Paul Atkins said during a recent congressional hearing that despite a recent 15% reduction in staff at the SEC, there would still be room in the budget for the PCAOB under the legislation.

Another SEC official also acknowledged the recent reduction in the staff during a later panel discussion.

“Certainly, there has been a reduction in the federal workforce and the Commission, the SEC, has been no exception to that,” said Gaurav Hiranandani, acting deputy chief accountants at the SEC. “Many of the talented staff at the Commission have decided to retire or have sought opportunities outside of the commission. Within OCA, we have also seen some talent depart, some longstanding staff.” He noted that some of the speakers at last year’s conference are among those who left.

Financial Accounting Standards Board chair Richard Jones also spoke at the conference and discussed the progress that FASB has been making on its standard-setting. 

“A couple years ago, we comprehensively reset our agenda,” he said. “We did robust stakeholder output to really ask an open-ended question of what should be the FASB’s priority, and what you’ve seen over the last couple of years is us executing on that revised agenda. If you pull up our technical agenda today, you’ll see there are 12 projects on our technical agenda. Of those 12 projects, five of those have been voted out by our board to proceed to final standards. Five of those are in redeliberations, meaning that we’ve already issued an exposure draft, we’ve gotten great input from our stakeholders, and our board will be redeliberating to decide what direction to go forward on those standards. We voted to move forward with an exposure draft on another standard, so that’s 11 of the 12. If you follow those through, and you follow a plan of execution on those standards, it’s very reasonable that we could complete substantially all the projects on our agenda at or about the end of this year.”