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The myth of meritocracy in accounting

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9 months ago

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The notion of “meritocracy,” where the most talented rise to the top through skill, discipline and determination, fits neatly with the American dream. It reassures us that success is earned and that anyone, regardless of background, race, religion or creed, can reach the heights of leadership if they simply work hard enough.

But scratch beneath the surface, and the concept of meritocracy reveals a more complicated, and sometimes downright troubling, story. In public accounting, a profession that prides itself on objectivity and fairness, meritocracy is sometimes used not to ensure equity but to defend an uneven playing field. When some call for “merit-based hiring,” they are really signaling a desire to preserve the status quo, one that continues to advantage white, male, upper-middle-class applicants at both the entry level and in the race for firm leadership.

I’m not saying we shouldn’t aim for meritocracy. But to reach it, we need to first dismantle systemic barriers, rather than clinging to them. To see why, it helps to trace both the history of the idea and its modern misuses.

From dystopian fiction to everyday excuse

The word “meritocracy” was first popularized by British sociologist Michael Young in his 1958 satirical book “The Rise of the Meritocracy.” Rather than celebrating the concept, Young used dystopian fiction to issue a warning. He imagined a society where access to education, jobs, and leadership was determined almost entirely by intelligence tests and academic credentials. Those who scored well rose to the top and insisted they had earned their place through hard work and talent alone, while those who did not were dismissed as inherently less capable. The result was not a fairer society, but one where inequality deepened and the ruling class justified its dominance as deserved, making the system even harder to challenge.

Ironically, what Young meant as a warning was quickly reframed as a virtue, particularly in the United States during and after the civil rights era. As formal barriers to discrimination began to fall in the 1960s and 1970s, business and political leaders seized on meritocracy as a way to signal fairness while protecting the status quo. The idea sounded neutral: Hire the most qualified person, regardless of race or gender. But in practice, merit was defined by benchmarks that overwhelmingly reflected the backgrounds of white men already in power: elite schools, exclusive professional networks, uninterrupted career paths, and cultural markers of “fit.”

In public accounting, this dynamic was especially clear. Most firms presented themselves as objective and even-handed, yet their recruiting pipelines, internship programs, and promotion criteria consistently favored those who looked and lived most like the existing partnership ranks. Neutrality became a convenient shield, allowing firms to reproduce old patterns under a new label. And for many of those invoking meritocracy today, the unspoken intent remains the same: to restore or preserve a system where opportunity flows most easily to those already holding advantage.

What a real meritocracy would require

If taken seriously, meritocracy is demanding. It requires not only a fair assessment of ability but also equal opportunity to demonstrate it. In hiring and promotion, that would mean:

  • Removing barriers to entry. Every qualified applicant, regardless of socioeconomic background, should be allowed to compete. That requires addressing disparities in education, professional exposure, and financial resources.
  • Defining qualifications transparently. Job criteria should be clear, measurable, and genuinely tied to success in the role, not coded expectations like “polish,” “fit,” or “executive presence.”
  • Applying standards universally. The same yardstick must apply to everyone, and not be relaxed for those with connections or inflated for those who are considered “different.”
  • Continual auditing. Firms need to examine outcomes regularly to ensure that bias is not creeping into the system under the guise of objectivity.

In short, a true meritocracy is not passive, and certainly not easy, as some claim. It requires intentional, ongoing effort to level the field and embrace true equity.

What calls for meritocracy really mean

In today’s debates, meritocracy is often used less as a principle and more as a weapon. The loudest calls for merit-based hiring typically emerge in response to diversity and inclusion initiatives. The claim is that efforts to recruit or promote more women, people of color, or individuals from disadvantaged backgrounds amount to “lowering the bar.”

But this framing is deeply misleading and, frankly, offensive. It assumes that the current system is neutral and fair, when in fact it is already skewed. People from underrepresented groups often have to work harder and longer to get to the same place as those with inherited advantages. They face greater scrutiny, receive less benefit of the doubt, and are more likely to be judged by their mistakes than by their potential.

Consider a few examples. A white male graduate from a flagship state university may be seen as a “solid fit,” while a woman of color with the same degree is viewed as untested. A man who leaves work early for a child’s school event is praised as a dedicated father, while a woman doing the same is questioned for her commitment. Candidates with family connections often secure internships or referrals without criticism, yet targeted recruitment of underrepresented groups is dismissed as favoritism.

The narrative of lowering the bar persists because those in power do the storytelling. The gatekeepers define what counts as merit, who deserves advancement, and whose success seems suspicious. Calls for meritocracy, in practice, become a way of preserving the status quo and keeping the pathways to success familiar and predictable.

How public accounting perpetuates advantage

Public accounting illustrates how a system that claims to, and in many cases legitimately tries to, be objective can still reproduce inequity.

  • Hiring: Most firms concentrate recruiting at a narrow band of universities, often large state schools or private institutions with predominantly white, middle-class student bodies. This means that students at historically black colleges and universities, community colleges, or regional schools are often overlooked. The internship-to-job funnel compounds this problem: Many students can’t afford relocation or unpaid opportunities, leaving them shut out before the competition begins. Even seemingly objective measures like GPA cutoffs or CPA exam readiness reflect unequal access to resources such as tutoring, exam prep, or the ability to test immediately after graduation.
  • Promotion: Historically, advancement within firms has been shaped by subjective evaluations of “leadership potential,” which studies show consistently underrate women and people of color. Mentorship and sponsorship networks where partners choose protégés who remind them of themselves can further tilt the playing field. And expectations of round-the-clock availability penalize those with caregiving responsibilities, most often women, even when their performance matches or exceeds their peers.

What is the result? Firms claim hiring and promotion decisions are purely merit-based, yet the numbers tell a different story. Teams may begin with some diversity, but at each rung of the ladder, diversity thins out until the partnership table looks much the same as it always has — overwhelmingly white and male. Leaders continue to insist the system reflects merit, often without realizing that their choices may be shaped by long-standing, unconscious assumptions about who is best suited for leadership. 

Moving toward a genuine meritocracy

Bias persists less because leaders openly discriminate and more because inherited systems reward familiarity. Managers gravitate toward candidates who look or act like them. Longstanding recruiting practices at elite schools were designed in a different era and still filter out diverse talent. Even definitions of “professionalism” often mirror white, middle-class norms of dress, speech and demeanor. (Just ask any woman with curly hair.) 

This creates a cycle where privilege is recast as merit. The son of an accounting partner who attends a top school looks very qualified, not because he inherently is, but because the system was designed to highlight people like him.

Breaking this cycle requires more than talk. If the profession truly values meritocracy, it must redefine what counts as merit and ensure opportunity is equally accessible. That means expanding recruiting beyond a narrow band of schools, offering paid internships and relocation support, using structured interviews and blind resume reviews, and auditing hiring and promotion processes with real accountability. Most importantly, it means recognizing that equity is not the opposite of merit; it is its fulfillment.

These steps aren’t simple. They disrupt traditions and challenge comfort zones. In fact, I would bet that simply reading this article has made some of you uncomfortable. But without real change, meritocracy in accounting will remain a myth that justifies inequality rather than dismantling it.

Whose merit counts most?

Merit should mean recognizing talent and effort wherever they appear. Yet in public accounting, as in many professions, the term too often masks advantage and reinforces inequities. The loudest calls for a return to “merit-based hiring” rarely come from those left out of the system, but from those who have long benefited from its hidden preferences.

A genuine meritocracy wouldn’t see diversity as a threat; it would see it as proof that opportunity is working as it should. Potential exists in every community, and fair evaluation means removing barriers. Until firms confront this reality, meritocracy will remain less a principle to strive for and more a myth used to excuse cronyism.

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Accounting

Are you ready for it? 4 steps to successfully integrate AI into your operations

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1 month ago

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May 7, 2026

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Over the last few years, AI has gone from being a novelty to a mission-critical business strategy for many accountants. Innovative, forward-thinking firms are using these tools to streamline manual tasks, ensure compliance and provide the best possible service to their clients. According to the 2025 Intuit QuickBooks Accountant Technology Survey, 81% of accountants report AI boosts productivity, and 86% agree it reduces mental load. 

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However, AI adoption is at varying levels across the industry. While nearly every firm has begun experimenting with basic AI tools, many remain in a sandbox phase, hesitant to move toward full-scale integration due to perceived complexity or costs.No matter where you may fall on the integration spectrum, the fact remains: AI is rapidly reshaping the accounting industry. If you’ve delayed AI adoption in your business, you’ll want to create a focused plan to catch up. 

Time is of the essence, but don’t sacrifice strategy for speed

Firms that are ready to take the leap from casual use to deep integration may find themselves in need of accelerated adoption, but speed should not come at the cost of strategy. Identify tangible, practical ways that easy-to-use tools can impact your business through automation. Having a strong strategic focus allows firms to implement workflow changes to streamline manual tasks, ensure compliance and provide excellent service to your clients.

To begin your AI journey, here is a four-step plan that firms can use to transition from experimentation to execution, in a safe, practical manner:

Step 1: Kick off your first AI project

As is the case with many things, getting started is often the most challenging step. While enthusiasm is high, uncertainty with implementation risks can cause hesitation. The key is to lower risk by embracing AI and implementing an intentional, phased approach. Begin by weaving AI tools into high-impact, low-risk tasks, such as summarizing meeting notes, drafting client or firm-wide memos, or translating complex concepts into easy-to-understand ideas. Monitor results carefully and, if these initial attempts need adjustment, be prepared to pivot to the next use case until you can clearly demonstrate that AI systems are delivering a measurable impact on your operations. From there, you can learn from early experiences, adapt strategy, and scale appropriately to complete more complex projects. 

Step 2: Dig into your AI toolkit

The marketplace is crowded with AI-powered tools that promise to do everything from enhancing your workflows to improving the customer experience. It can be hard to know which ones are worth investing your time and money. Find a trusted source like a respected peer, or leverage your professional network to help discuss the tools that may be the best fit for achieving your business goals. You can also look within the tools you’re already using to see if they offer AI-powered features, which can help ease into the transition. Additionally, look for free high-quality education to upskill your team. For example, Anthropic offers a Claude AI University that provides excellent foundational resources for moving beyond basic prompts.

Step 3: Review an AI security checklist

An important element in AI implementation is security. With AI tools needing access to firm and client data to function, it leads to questions of how the data will be protected.  This makes the right AI and cybersecurity strategy critical. Firms must proactively ensure that client data remains protected from today’s increasingly sophisticated threats by embracing an established cybersecurity framework such as SOC 2 or ISO 27001. IRS Publication 4557 (Safeguarding Taxpayer Data) can be a helpful guide for navigating these compliance standards. Regardless of the security framework you select, utilize accompanying compliance checklists and ensure they are strictly followed by your firm to protect both your practice and your clients as AI tools are woven into everyday workflows. 

Step 4: Openly discuss AI usage with your clients

Once you’ve established the best way to use AI tools that meet your firm’s needs, you’ll want to communicate all of the advantages afforded by these tools to your clients. Make sure you highlight the benefits and simultaneously ensure you are addressing any potential concerns. It’s also important to get explicit consent from all clients if you’re sharing their information with the third-party tools you may use. While this might seem like an extra step, it will go a long way toward fostering a greater level of transparency and deepen trust between you and your clients. 

Don’t get left behind

Adopting AI does not have to be intimidating, expensive or overly complex. Think of it as a strategic business move that will not only keep you competitive, but will potentially free you up to focus on keeping clients happy and growing your practice. By strategically focusing on these best practices, identifying AI use cases in a phased approach, evaluating the right tools for your business, ensuring client information is secure and clearly communicating your AI strategy, you’ll be AI-ready in no time.

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FASB plans changes in crypto accounting

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2 months ago

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April 18, 2026

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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.

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During Wednesday’s meeting, FASB’s board made certain tentative decisions, according to a summary posted to FASB’s website. FASB began deliberating the Accounting for transfers of crypto assets project and decided to expand the scope of its guidance in  Subtopic 350-60, Intangibles—Goodwill and Other—Crypto Assets, to address crypto assets that provide the holder with a right to receive another crypto asset. FASB decided to clarify the existing disclosure guidance by providing an example of a tabular disclosure illustrating that wrapped tokens, if they’re significant, would be disclosed separately from other significant crypto asset holdings.

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 Cash equivalents—disclosure enhancement and classification of certain digital assets project and made a number of decisions.

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:

  1. Interpretive explanations that link to the current cash equivalents definition;
  2. The amount and composition of reserve assets; and,
  3. 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.

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Lawmakers propose tax and IRS bills as filing season ends

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2 months ago

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April 17, 2026

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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.

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Senators Bill Cassidy, R-Louisiana, and Mark Warner, D-Virginia, teamed up on introducing a bipartisan bill, the Improving IRS Customer Service Act, which would expand information on refunds available to taxpayers online and help taxpayers with payment plans if they need it.

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 Senate Finance Committee hearing about tax season when questioning IRS CEO Frank Bisignano. During the hearing, Cassidy secured a commitment from Bisignano that the IRS would work with Congress to implement these reforms if the legislation were signed into law.

“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 introduced the Improving IRS Customer Service Act in 2024. Last year, Warner wrote to National Taxpayer Advocate Erin Collins at the IRS regarding the underperforming Taxpayer Advocate Service office in Richmond, Virginia, and advocated against any harmful personnel decisions that would negatively impact taxpayers.

“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 introduced two other pieces of legislation aimed at cracking down on the use of grantor retained annuity trusts and private placement life insurance contracts to avoid or minimize taxes.

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 Democrats as well as President Trump have pledged for years to curtail. The tax break mainly benefits hedge fund managers, private equity firm partners and venture capitalists, who have lobbied heavily to defeat attempts to end the lucrative tax break. The tax break was scaled back somewhat under the Tax Cuts and Jobs Act of 2017.

Carried interest is a form of compensation received by a fund manager in exchange for investment management services, according to a summary of the bill. A carried interest entitles a fund manager to future profits of a partnership, also known as a “profits interest.” Under current law, a fund manager is generally not taxed when a profits interest is issued and only pays tax when income is realized by the partnership, often in connection with  the sale of an investment that happens years down the road. Not only does this allow a fund manager to defer paying tax, but the eventual income from the partnership almost always takes the form of capital gain income, taxed at a preferential rate of 23.8% compared to the top rate of 40.8% for wage-like income.  

Under the bill, the Ending the Carried Interest Loophole Act, fund managers would be required to recognize deemed compensation income each year and to pay annual tax on that amount, preventing them from deferring payment of taxes on wage-like income. A fund manager’s compensation income would be taxed similar to wages on an employee’s W-2, subject to ordinary income rates and self-employment taxes.   

“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 scaled back under the Trump administration to only require beneficial ownership information reporting by foreign companies to FinCEN, the Treasury Department’s Financial Crimes Enforcement Network. 

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.”

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