Accountants are certified financial professionals who maintain and/or inspect financial records for a wide variety of customers (e.g., governments, corporations, small businesses, individuals) and from a diversity of potential settings (e.g., corporate accounting department, freelancing, private practice, large accounting firm). Although accountants as a whole have enjoyed strong demand for their services in recent years, the coronavirus pandemic has temporarily undercut growth in revenue and profitability for many of these professionals and their firms.
- Broadly speaking, an accountant is a professional who maintains and/or inspects financial records, which can be private or public and related to a variety of potential stakeholders, such as governments, corporations and individuals.
- In this capacity, accountants "use numbers and financial statements to paint a picture of the health of a company, organization, or individual."
- As such, these individuals generally have highly developed skill sets in "math, accounting, law, and finance" as well as a propensity for "organization and detail-oriented work."
- However, the specific role of an individual accountant may vary significantly based on educational background and certification.
- Although most professionals in this industry possess a bachelor's degree or higher, many also acquire one or more certifications, most commonly:
- Certified Internal Auditor (CIA)
- Certified Management Accountant (CMA)
- Certified Public Accountant (CPA).
- The CPA designation is particularly desirable among accountants as it is considered the "gold standard in the accounting profession."
- Accountants are also required to obtain state-specific certifications, as well as pass the Uniform Certified Public Accountant Examination.
- Ultimately, these exams and certifications reflect the high ethical standards and a general expectation for integrity among accounting industry professionals, given that they frequently work with sizable amounts of money and may have "real influence over their clients," including a company's employees, board members, investors and even the wider public.
- Moreover, accountants may be held liable for losses to creditors and investors in the case of a "misstatement, negligence, or fraud."
- The accounting industry has well-established roots in the United States, marked by the creation of its first professional association (the American Association of Public Accountants) in 1887 as well as the award of the CPA designation as early as 1896.
- Today, accounting continues to be a "steadily growing" industry in the country, thanks in large part to increases in the number of new businesses in America and the country's general trend towards economic expansion.
- Most recently, the accounting services industry has enjoyed a compound annual growth rate (CAGR) of 0.9% between 2015 and 2020, and reached an annual industry revenue of approximately $110 billion, as highlighted within the following chart.
- Meanwhile, the accounting industry currently supports 92,037 accounting businesses (in addition to internal corporate accounting operations) and employs approximately 2 million Americans.
- Accountants in the US are employed in a wide array of settings, ranging from accounting-specific businesses (e.g., freelancing, private practices, large accounting firms) to internal accounting departments (e.g., within small businesses, international conglomerates, non-profits, government agencies).
- These various arrangements can cater to clientele on a local, regional, national, international and/or virtual basis.
- Amid this diversity, large, international accounting firms hold a disproportionately sizable market share in the US accounting services industry.
- In particular, a substantial portion of annual revenue (as depicted below) is earned by those firms known as the Big 4: Deloitte Touche Tohmatsu Limited, PricewaterhouseCoopers (PwC), Ernst & Young (E&Y) and Klynveld Peat Marwick Goerdeler (KPMG).
- Moreover, these largest industry players are increasingly acquiring smaller private practices to "boost market share" as well as "heighten their service offerings to include ancillary consulting services" amid increasing industry competition.
Types of Services
- Accountants perform a wide variety of services depending on where they are employed and their specific area of expertise.
- At the largest accounting firms in the country, services are fairly evenly divided between accounting and advisory (A&A), tax and consulting offerings, as highlighted within the below graphic.
- These core accounting functions further delineate into the following product and service areas:
- "Financial auditing
- Financial statement review
- Other financial assurance services
- General accounting
- Tax planning and consulting
- Individual tax preparation
- Corporate tax preparation "
- Other (e.g., designing accounting systems).
- Notably, tax preparation is associated with substantial seasonality in work/revenue, particularly for small accounting practices that specialize in this area.
- Alternatively, accounting services can be segmented based on the type of accounting (e.g., forensic accounting, fiduciary accounting, national income accounting).
- Alongside the diversity in accounting services and industry business models, accountants may also hold a wide variety of titles.
- Entry-level positions in the field may be more prevalent at major accounting firms or within the accounting departments of large organizations, and can include:
- "Staff accountant
- Junior accountant
- Accounts payable / accounts receivable clerk
- Financial analyst
- Audit associate."
- Mid-level positions typically become available to industry professionals after two to eight years of experience, and may reflect service specialization:
- Meanwhile, very few accountants reach the "ultimate destination" of the most senior accounting roles, such as becoming a partner in a public accounting firm or the chief financial officer at an organization.
- However, other more accessible, senior-level accounting roles (which generally require at least nine years of prior industry practice) include:
- As highlighted previously, US accountants tend to be highly educated, given that a bachelor's degree or higher in accounting or a related field is generally required for any position.
- Consistent with this level of educational attainment, American accountants have a reasonably high median salary of $70,500.
- However, the accounting industry is known for a substantial gender pay gap, wherein male accountants earn an average of $97,939 annually compared with $66,432 for females.
- Despite this fact, women comprise the majority of the accounting services industry professionals, at 60.9% of all US accountants.
- With that said, the industry is less diverse in terms of race/ethnicity, given that over two-thirds of American accountants are white and relatively few are racial/ethnic minorities, as detailed further below.
Key Pain Points
- Meanwhile, perhaps the biggest pain point among US accounts at the moment is the impact of the coronavirus outbreak on industry revenue and profitability.
- Despite the strong, recent, positive trend in accounting services revenue growth, COVID-19 is expected to result in a 5.3% contraction in industry revenue in 2020 alone due to "shifting demand" and the "subsequent recession."
- Moreover, the pandemic is undermining industry profitability, given that accounting offices are limited in their reopening but are generally retaining staff on payrolls.
- Meanwhile, this challenge comes amid a larger reshaping of the country's accounting industry and declining demand for traditional accounting business models, as individual consumers shift "away from in-person services to web-based services."