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Election 2024 and the ‘unpredictable landscape’ of accounting

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Forecasting the future for accountants has rarely been more difficult, according to American Institute of CPAs president and CEO Barry Melancon.

“The profession today is in a very unpredictable landscape. Young people have never known anything but this environment,” he told attendees of the AICPA Executive Roundtable, a gathering of technology executives held in New York City last week. “For most people alive today, they’ve never experienced a world with as much unpredictability and uncertainty as today.”

The upcoming presidential elections are a perfect illustration, with a huge range of possible outcomes on the tax issues that are of key concern to accountants.

“If you assume a Republican Senate and a Democratic house and just say either a Democratic or a Republican White House, what happens from a tax perspective is totally different from what happens if you have a clean sweep of either party,” he said.

Barry Melancon speaking at the AICPA Executive Roundtable

Barry Melancon speaking at the AICPA Executive Roundtable

What’s more, the likelihood of closely divided government — with the most common current predictions calling for the Republicans to have narrow control of the Senate and the Democrats to have narrow control of the House — makes resolving the large number of what Melancon called “dicey tax issues” even more difficult.

“This is a danger point for our country,” he said. “We live in a world where the difference in who controls the House or the Senate will be a very narrow margin. … That makes managing government very difficult. Our government is based on compromise, and there isn’t a lot of room for compromise now in Washington.”

Because of that division, Melancon and the AICPA tax team don’t think there’s a very high prospect of major tax legislation; instead, there will be more restrained activity based on the priorities of the party with more power.

He noted, for instance, that a clean sweep by the Democrats would lead to a focus on the state and local tax deduction, and that corporate taxes would go up. It would also likely lead to stricter regulators. “There’s certainly a lot of concern in the profession about the regulatory environment with the Public Company Accounting Oversight Board,” which has been extraordinarily active over the past two years.

On the other hand, if the Republicans were to make a clean sweep, Melancon suggested that they might look at the SALT deduction (though to a lesser extent than the Democrats), but that their main priority would be extending the expiring provisions of the Tax Cuts and Jobs Act, and particularly the R&E credit.

Outside of tax, Melanon did see one area where divided government might not matter as much: artificial intelligence.

“AI legislation is probably one of the most bipartisan issues in D.C.,” he said. “It’s likely we’ll see something in that space. What it is will depend on who’s in office.”

Despite the bipartisan interest, however, he is skeptical about the effectiveness of governments in regulating AI, given the international scope of the technology and the speed with which bad actors can advance it.

A changing profession

Changes to tax laws are only one small portion of the disruption that accountants face, according to Melancon.

“There is a lot of true innovation and transformation of what accounting’s all about,” he said. “The profession’s footprint has changed from accounting, audit and tax to a much broader notion of a business information set, and of who the stakeholders are. That group is much broader today — it’s investors and entrepreneurs, to be sure, but also employees and regulators and society at large.”

“What an accounting firm is is changing, as is what is the finance function in corporate accounting,” he added.

The ever-quicker pace of technological transformation — with AI in particular — is having a major impact.
“Technology and AI will affect jobs; I’ll be honest about that,” he said. “It’s going to move people around. It’s going to affect entry-level positions and how we get people into higher positions quicker.”

Also having a major impact is the pipeline crisis, with not enough young people choosing to work in accounting.

“Where is the next generation of professionals going to come from?” he asked. “Some of the capacity will come from technology, but the biggest number of young people is in the continent of Africa as a whole, and in Saudi Arabia — it’s a smaller center, but it’s the youngest population center of any part of the world.”

Hard demographic trends like those, and the constant evolution of technology, require flexibility and proactivity on the part of the profession.

“You have to look at efficiency, automation and growth, because that’s what you can manage and change,” Melancon advised. “You can’t change the other factors.”

Even with all those pressures on it, however, the profession has plenty going for it.

“The past four years have been the best run for accounting firms in a long while, no question,” Melancon said. “If I randomly brought in 10 CEOs or managing partners, nine out of 10 would say that their most profitable year was either 2022 or 2023. And for the others, it’s still some of their best years ever.”

Much of that is due to the circumstances of the pandemic and the economic changes surrounding it, but credit must also go to the values of the profession.

“The value of lifelong learning and competency and integrity and leadership skills and all those things – they remain valuable,” he explained. “This is what the profession is all about.”
“In upturns, the trusted advisor is critical; in downturns the trusted advisor is critical,” he concluded. “The reason why we’re trusted and why the profession is successful is because we help people get through the challenges that they face.”

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Accounting

IAASB tweaks standards on working with outside experts

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The International Auditing and Assurance Standards Board is proposing to tailor some of its standards to align with recent additions to the International Ethics Standards Board for Accountants’ International Code of Ethics for Professional Accountants when it comes to using the work of an external expert.

The proposed narrow-scope amendments involve minor changes to several IAASB standards:

  • ISA 620, Using the Work of an Auditor’s Expert;
  • ISRE 2400 (Revised), Engagements to Review Historical Financial Statements;
  • ISAE 3000 (Revised), Assurance Engagements Other than Audits or Reviews of Historical Financial Information;
  • ISRS 4400 (Revised), Agreed-upon Procedures Engagements.

The IAASB is asking for comments via a digital response template that can be found on the IAASB website by July 24, 2025.

In December 2023, the IESBA approved an exposure draft for proposed revisions to the IESBA’s Code of Ethics related to using the work of an external expert. The proposals included three new sections to the Code of Ethics, including provisions for professional accountants in public practice; professional accountants in business and sustainability assurance practitioners. The IESBA approved the provisions on using the work of an external expert at its December 2024 meeting, establishing an ethical framework to guide accountants and sustainability assurance practitioners in evaluating whether an external expert has the necessary competence, capabilities and objectivity to use their work, as well as provisions on applying the Ethics Code’s conceptual framework when using the work of an outside expert.  

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Accounting

Tariffs will hit low-income Americans harder than richest, report says

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President Donald Trump’s tariffs would effectively cause a tax increase for low-income families that is more than three times higher than what wealthier Americans would pay, according to an analysis from the Institute on Taxation and Economic Policy.

The report from the progressive think tank outlined the outcomes for Americans of all backgrounds if the tariffs currently in effect remain in place next year. Those making $28,600 or less would have to spend 6.2% more of their income due to higher prices, while the richest Americans with income of at least $914,900 are expected to spend 1.7% more. Middle-income families making between $55,100 and $94,100 would pay 5% more of their earnings. 

Trump has imposed the steepest U.S. duties in more than a century, including a 145% tariff on many products from China, a 25% rate on most imports from Canada and Mexico, duties on some sectors such as steel and aluminum and a baseline 10% tariff on the rest of the country’s trading partners. He suspended higher, customized tariffs on most countries for 90 days.

Economists have warned that costs from tariff increases would ultimately be passed on to U.S. consumers. And while prices will rise for everyone, lower-income families are expected to lose a larger portion of their budgets because they tend to spend more of their earnings on goods, including food and other necessities, compared to wealthier individuals.

Food prices could rise by 2.6% in the short run due to tariffs, according to an estimate from the Yale Budget Lab. Among all goods impacted, consumers are expected to face the steepest price hikes for clothing at 64%, the report showed. 

The Yale Budget Lab projected that the tariffs would result in a loss of $4,700 a year on average for American households.

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Accounting

At Schellman, AI reshapes a firm’s staffing needs

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Artificial intelligence is just getting started in the accounting world, but it is already helping firms like technology specialist Schellman do more things with fewer people, allowing the firm to scale back hiring and reduce headcount in certain areas through natural attrition. 

Schellman CEO Avani Desai said there have definitely been some shifts in headcount at the Top 100 Firm, though she stressed it was nothing dramatic, as it mostly reflects natural attrition combined with being more selective with hiring. She said the firm has already made an internal decision to not reduce headcount in force, as that just indicates they didn’t hire properly the first time. 

“It hasn’t been about reducing roles but evolving how we do work, so there wasn’t one specific date where we ‘started’ the reduction. It’s been more case by case. We’ve held back on refilling certain roles when we saw opportunities to streamline, especially with the use of new technologies like AI,” she said. 

One area where the firm has found such opportunities has been in the testing of certain cybersecurity controls, particularly within the SOC framework. The firm examined all the controls it tests on the service side and asked which ones require human judgment or deep expertise. The answer was a lot of them. But for the ones that don’t, AI algorithms have been able to significantly lighten the load. 

“[If] we don’t refill a role, it’s because the need actually has changed, or the process has improved so significantly [that] the workload is lighter or shared across the smarter system. So that’s what’s happening,” said Desai. 

Outside of client services like SOC control testing and reporting, the firm has found efficiencies in administrative functions as well as certain internal operational processes. On the latter point, Desai noted that Schellman’s engineers, including the chief information officer, have been using AI to help develop code, which means they’re not relying as much on outside expertise on the internal service delivery side of things. There are still people in the development process, but their roles are changing: They’re writing less code, and doing more reviewing of code before it gets pushed into production, saving time and creating efficiencies. 

“The best way for me to say this is, to us, this has been intentional. We paused hiring in a few areas where we saw overlaps, where technology was really working,” said Desai.

However, even in an age awash with AI, Schellman acknowledges there are certain jobs that need a human, at least for now. For example, the firm does assessments for the FedRAMP program, which is needed for cloud service providers to contract with certain government agencies. These assessments, even in the most stable of times, can be long and complex engagements, to say nothing of the less predictable nature of the current government. As such, it does not make as much sense to reduce human staff in this area. 

“The way it is right now for us to do FedRAMP engagements, it’s a very manual process. There’s a lot of back and forth between us and a third party, the government, and we don’t see a lot of overall application or technology help… We’re in the federal space and you can imagine, [with] what’s going on right now, there’s a big changing market condition for clients and their pricing pressure,” said Desai. 

As Schellman reduces staff levels in some places, it is increasing them in others. Desai said the firm is actively hiring in certain areas. In particular, it’s adding staff in technical cybersecurity (e.g., penetration testers), the aforementioned FedRAMP engagements, AI assessment (in line with recently becoming an ISO 42001 certification body) and in some client-facing roles like marketing and sales. 

“So, to me, this isn’t about doing more with less … It’s about doing more of the right things with the right people,” said Desai. 

While these moves have resulted in savings, she said that was never really the point, so whatever the firm has saved from staffing efficiencies it has reinvested in its tech stack to build its service line further. When asked for an example, she said the firm would like to focus more on penetration testing by building a SaaS tool for it. While Schellman has a proof of concept developed, she noted it would take a lot of money and time to deploy a full solution — both of which the firm now has more of because of its efficiency moves. 

“What is the ‘why’ behind these decisions? The ‘why’ for us isn’t what I think you traditionally see, which is ‘We need to get profitability high. We need to have less people do more things.’ That’s not what it is like,” said Desai. “I want to be able to focus on quality. And the only way I think I can focus on quality is if my people are not focusing on things that don’t matter … I feel like I’m in a much better place because the smart people that I’ve hired are working on the riskiest and most complicated things.”

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