Connect with us

Accounting

How will firms respond when AI agents reshape your firm’s business model?

Published

on

Agentic AI holds much promise for the accounting profession. AI agents, defined as “software that is capable of at least some degree of autonomy to make decisions and interact with tools outside itself in order to achieve some sort of goal—whether booking a flight, sending a bill, or buying a gift—without constant human guidance” (by Chris Gaetano here) are particularly poised to revolutionize accounting firms’ business models.

Generative AI is already ushering in this change, and AI agents will take it to another level, fundamentally reshaping how firms win. Here are three ways AI agents will force a business model reckoning in accounting.

1. Death of the billable hour accelerates

The billable hour has been under scrutiny for years, but agentic AI will accelerate its demise at an unprecedented rate. Why? Because AI agents can scale 100 times faster than humans at a fraction of the labor costs, resulting in parallelized work for greater speed and efficiency. In this agentic AI world, the traditional time-and-materials billing model becomes increasingly nonsensical.

Imagine an army of AI agents that can:

  • Generate many tax returns with reasonable “judgment” for initial reviews in the background, reducing the need for manual first-pass preparation;
  • Reconcile financial statements instantly, identifying anomalies and inconsistencies with greater accuracy than a human who is manually doing this work;
  • Draft audit reports overnight, improving speed and consistency without requiring overtime or additional staffing.

I cannot stress this enough: the firms that successfully transition to value-based pricing will be the winners in this new agentic AI economy. I hear of firms instituting technology fees or passing on specific software costs as a response to time saved in achieving an outcome. This is not enough if we want our profession to thrive.

True transformation requires a shift in how we define, price, and deliver value; it’s time to rip off the band-aid and do the hard work. 

2. Current outsourcing models become obsolete

Outsourcing has been a great capacity expansion and cost-optimization solution for firms looking to grow and serve their clients well. Many times, outsourced roles focus on less complex and more deterministic work like reconciliations and tax prep and are managed by more senior accountants in the home office.

These are precisely the types of tasks AI agents will take over. As the agentic AI technology improves, firms will increasingly appreciate that AI agents don’t get sick, work 24/7 without burnout, can be quickly “onboarded” upon a firm-wide trained repository of data, and don’t leave for another job with higher pay. It is inevitable that agentic AI will eventually replace human-based outsourcing models as we know it, forcing firms to reallocate budgets and rethink staffing.

Outsourcing firms will not disappear overnight and there is still a great ROI to be gained from further investment today. However, over time, the nature of outsourcing will evolve dramatically. My many talented friends in the accounting outsourcing business are already aware of this shift and are actively working to redefine the value that outsourcing entities of the future can bring for firms.

3. Cost structures and workforce metrics transform

Nvidia CEO Jensen Huang said something clever at the CES show in January: “The IT department of every company is going to be the HR department of AI agents in the future.” He is pointing out the inevitable shift of firms who will soon be “hiring” AI agents alongside human employees.

Today, we judge the efficacy of engagements based on KPIs such as realization, utilization and bill rates. But in a world where AI agents execute on increasing portions of work alongside humans, how we measure profitability, cost structures and engagement performance will change.

Key shifts include:

  • Human staff impact will be quantified differently, explicitly including their ability to manage AI agents for compensation considerations.
  • Performance metrics will evolve—how do we measure AI agent vs. human staff performance, productivity and their direct contributions to success?
  • IT budgets will increase as firms invest in AI agents to increase their “labor capacity.”

This transformation will require new benchmarking, financial models and internal engagement cost allocation between IT and HR.

How to prepare for the agentic AI world

The firms that win in this era of agentic AI will be those that take a proactive approach to business model evolution and rethink their approaches to value creation, talent management and financial modeling.

1. Transition to value-based pricing

The firms that wait too long to make this transition will struggle to justify their fees in an environment where AI agents dramatically reduce the time and cost required to deliver services. Key steps to take include:

  • Identify high-value services that can be decoupled from time and materials billing.
  • Educate clients on why they are paying for outcomes, not effort.
  • Experiment with fixed-fee engagements where possible, ensuring pricing resilience in an AI-driven world.
  • Incentivize teams based on client outcomes rather than hours logged.

2. Evolve your workforce strategy

The workforce of the future is hybrid—humans and AI agents working side by side. Firms that fail to adapt to this reality will overpay for human labor where AI could be leveraged or will fall behind competitors who optimize AI-human collaboration. Key steps to take include:

  • Collaborate with outsourcing partners that are actively evolving their business models and technology capabilities alongside agentic AI developments.
  • Create training programs in preparation for the agentic AI future.

3. Adjust cost structures and performance metrics

Firms that don’t rethink their profitability, cost allocation and engagement performance tracking will be flying blind in an agentic AI world. Key steps to take include:

  • Redefine staff performance impact—factor in how well human staff work with technology and AI in performance and compensation models.
  • Treat AI investments as labor-expanding strategies, not just tech expenses.
  • Update engagement profitability models to incorporate AI-driven workstreams alongside human contributions.

AI agents are no longer a far-off concept. While they are not quite ready for prime time for a mainstream CPA audience, they are here and slowly but surely changing the accounting profession. Firms that embrace these changes with strategic intent will thrive in the agentic AI economy.

Continue Reading

Accounting

IAASB tweaks standards on working with outside experts

Published

on

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.  

Continue Reading

Accounting

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

Published

on

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.

Continue Reading

Accounting

At Schellman, AI reshapes a firm’s staffing needs

Published

on

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.”

Continue Reading

Trending