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Pathways to Growth: Complexity, speed, constant pivots

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With sand tumbling through the neck of the hourglass that is 2024, I’ll use this space to share my thoughts about forces at play and areas to conquer in our CPA profession. I focus on three distinct themes: complexity, speed, and the imperative to pivot.

1. Complex environment

I was conservative in my choice of the adjective “complex” to describe the current scene. To be perfectly honest, we more accurately find ourselves in a tsunami. As I close my eyes and envision the past several months, I see a giant wall of water washing up over a managing partner clinging mightily to the leg of a sofa being swept into the deluge.

Complexity, and its evil twin uncertainty, are new to us. For a long time, there was predictability in our labor force, in our business model, revenues, profitability, services, clients and even competitors. We didn’t have to break a sweat to manage this. But things have changed, as we find ourselves wondering if it’s time to don the Gore-Tex and batten down the hatches.

Maybe you’ve experienced something like what happened at a firm I know: Kimberly, a team member who masterfully managed the intake of tax returns for years, left to find herself. Mark, her replacement, has barely found his way to

the bathroom after six weeks on the job. Multiply that by the 10 others that the firm lost in 2024, and the impact becomes seismic.

2. Speed of change

Our profession has remained comfortably in the right lane for more than 100 years, driving forward in a paced and predictable manner. As stewards of the public trust, it’s what the market required of us. Now several factors are propelling us into the fast lane — factors like the infusion of capital into our markets, the role of corporate players. and unrelenting changes in technology. From succession planning to financing the firm of the future, the breakneck pace shows no signs of slowing.

The need for speed runs counter to the nature of accounting firms and a partnership model that fosters slow decision-making, where everybody gets a vote on everything. This is at odds with the sheer number, scope and pace of decision-making required in today’s firms. Without a dynamic, corporate-style organizational structure, firms will be unable to move into, let alone remain in the left lane without getting rear-ended by faster, more agile organizations — the ones with the people, succession, financing, and deal-closing strategies all figured out. The ones capturing the markets with an evolving menu of shiny new services — the markets you are used to owning.

3. Strategic pivots

When I left IBM — then considered the most admired corporation in the world — it looked very much like public accounting looks today. We were big, we were solid, and we had little in the way of competition. Most important, we had tremendous predictability and a solid business model. I went from Big Blue to a tech startup where I lasted only 90 days. In explaining why he was firing me, the CEO said, “We are not IBM, and we do not operate like they do. We are not slow and predictable, with our i’s dotted and t’s crossed, and we do not own the marketplace!”

My brief tenure with that startup taught me a lot. In my next chapter, I would have to make my way to a new planet, one where oxygen was unpredictability and strategic and tactical pivots were standard operating procedure. I came to understand that moving forward would require me, and those I later counseled, to become more entrepreneurial, more agile, and more creative. For more than a decade, public accounting fought this imperative. We remained firmly inside the box. We resisted approaches like offshoring and making strategic use of non-CPAs. We stubbornly rebuffed advances in tech. Luckily, that tide is slowly turning. But now we have our backs against the wall.

Prepare to soar

Many firms are acknowledging these realities, and some are taking appropriate action. But still others are thinking, “We’re good. Business is up and so are profits. I don’t see anyone moving my cheese.” If you haven’t yet witnessed these challenges, you soon will. It will be evident when you’re up against stiff competition from alternative firms with better value propositions, pricing, client experience, and service delivery.

Successfully addressing these demands requires creative approaches (like inviting outsider “friends of the firm” into your strategic planning process), as well as consultative input from sources familiar with operating in the left-hand lane. Having come from the technology world, I can tell you that this is their daily fare. Consider importing people from unpredictable early-stage environments, as well as from companies sustaining annual growth rates of 30% or more. They are comfortable discovering and executing strategy amid uncertainty. But they aren’t the traditional hires in CPA firms.

As you plan for 2025 and beyond, consider stepping back, thinking bigger, and evaluating the complexity, the critical need for speed, and your readiness to pivot. Attack your strategic plan in a more open, creative way than in the past.

I cannot predict that you’ll become an instant frontrunner, forever dominating the fast lane, but I bet with confidence that you’ll bring tangible benefits to your firm and those you serve. Wishing you a coming year of confident decision-making and continued prosperity!

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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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