What’s in store for Accounting’s evolving landscape in 2024?

Firstly, the profound influence of Private Equity (PE) activity reverberates throughout the accountancy domain, carving out the middle market with “buy and build” strategies, transforming traditional practices and ushering in new challenges and opportunities. Regional dynamics complicate this narrative, as varying economic climates and regulatory landscapes present unique hurdles for firms across different jurisdictions. From regulatory strains to burgeoning client expectations, navigating these regional intricacies demands keen foresight and adaptability.

Moreover, technological advancements continue to redefine the contours of the accountancy profession, heralding a new era of automation, data analytics, and AI-driven solutions. As the industry grapples with the implications of continued digitisation, the quest for innovation and efficiency becomes more urgent. It is against this backdrop that IAB’s World Survey 2024 aims to delve deeper into these trends to provide valuable insights into the shifting paradigms of the accountancy industry’s landscape.

In terms of auditing, dynamic strategic responses to conflicts of interest, quality assurance, and emerging trends like ESG reporting and sustainability assurance are pivotal. Diverse perspectives from industry leaders illuminate strategies, challenges, and opportunities shaping the future of audit and advisory services.

Francesca Largerberg, Global CEO of Baker Tilly advocates a multi-disciplinary approach while addressing these challenges, emphasising the efficacy of their conflict check system and their commitment to talent retention and attraction. Baker Tilly professes a focus on balancing societal perceptions with professional contributions, underscoring a proactive stance towards changing industry dynamics. Lagerberg says “we believe in the multi-disciplinary model, but we also work closely with local regulators to make sure we’re agile if there are specific needs in a particular jurisdiction.”

BDO's Global CEO, Pat Kramer, underscores the need for structured audit practices and quality management frameworks such as ISQM 1, highlighting investments in global training for consistent quality across engagements. In a similar vein, UHY International’s CEO, Rhys Madoc, emphasises continuous review and engagement within the network for robust risk assessment and management, particularly in conflict checking. Kamel Abouchacra, CEO of Crowe Global, believes that their commitment to quality across all practice areas and a proactive stance towards addressing conflicts of interest and commitment to ethical behaviour resonates with industry expectations. He says “audit is an established, specialist, regulated discipline subject to largely common global standards. We are experiencing growth as new assurance services emerge, such as sustainability reporting.”

The mantra of having a multidisciplinary approach in ensuring client relevance and quality while addressing market needs is oft repeated but as Jenny Reed of Kreston Global points out “The importance of performing conflict checks within a network has never been higher, to ensure that network firms adhere to the requirements of the IESBA Code of Ethics as well as any additional local requirements in individual jurisdictions. These necessitate firms to maintain accurate client records and give timely responses to independence inquiries. Some of our firms have chosen or are choosing to create specialist audit teams, especially those firms that audit listed entities and other PIEs.”

PrimeGlobal's CEO Steve Heathcote points to persistent demand for audit services and the challenges in talent retention and recruitment to support those activities. PrimeGlobal’s emphasis on career development, mentorship, and technology adoption underscores the importance of innovation and human capital in audit efficiency and quality. However, as Herve Helias, Chairman of Mazars Group, states “there aren’t enough players in the market to support organisations, especially as more obligations are placed upon them. There's a lack of choice in the market and we’re building an organisation capable of filling that void, helping clients avoid the risk of becoming ‘audit orphans’. As auditors and advisors, we are an essential element in the chain of trust in our economies, helping to secure the health of financial markets to the benefit of society.”

Amidst these perspectives, a common theme emerges: the importance of adaptability, innovation, and maintaining high ethical standards. Collaboration, talent investment, and technological advancement are highlighted as key enablers of success in the evolving landscape of audit and advisory services. The consensus being that, as the profession navigates challenges and opportunities, proactive responses will be vital for sustainable growth and relevance.

Demand for advisory services in the accounting industry is on a robust ascent, driven by the imperative need for specialised expertise and strategic counsel in navigating the intricate labyrinth of today's business landscape. The global phenomenon of digitalisation, as observed by Dr Christian Gorny, ELT Global CEO, “transcends geographical boundaries, permeating industries worldwide.” While developed economies grapple with increasing indirect taxes and regulatory complexities, emerging regions like India grow as outsourcing hubs for advisory services, reflecting a global shift towards innovative expertise and technological adoption. There appears, though, an underlying trend towards focussing on risk management advisory, not surprising, considering the levels of political and military turmoil in many areas of the globe.

Lagerberg spies this burgeoning demand, eyeing an opportunity for Baker Tilly to expand its advisory services ambitiously to encompass corporate finance, forensic services, legal, digital transformation, and ESG consultancy. This expansion is a direct response to the rapid technological advancements and escalating regulatory complexities that beset businesses currently, especially those operating internationally. Kramer echoes this sentiment, witnessing substantial growth particularly in digital and cyber advisory services. His sentiment is that with AI poised for significant growth, “the market anticipates continued momentum in this domain.” Rhys Madoc observes a notable uptick in ESG and corporate responsibility services, as clients “adopt a proactive stance to address environmental and social issues amid mounting public pressure.”

On this theme, Herve Helias adds, “We’ve doubled down on our sustainability services to support our clients with their transformation and to provide assurance on non-financial information, which is increasingly expected by stakeholders. This is in line with our purpose to help build the foundations of a fairer, more prosperous world.” Moore Global CEO, Anton Colella, states “From donor agencies to the private sector, we find risk is front of mind of the CEO. A continued awareness and focus on ESG is helping drive demand across all our key territories. Europe is leading the way here. Elsewhere, we have seen an uptick in demand for our global corporate finance services, and of course cyber security, as firms of all sizes grapple with ongoing threats.”

The trajectory, therefore, of the accounting industry indicates a profound shift towards specialised advisory services, driven by these concerns but aided by evolving technological solutions and stakeholder expectations. As businesses navigate the complexities of today's environment, the role of advisory services assumes even higher significance in guiding strategic decision-making and fostering sustainable growth. This is true globally, but the imperatives are varied according to the region under consideration. These distinct regional trends are shaping demand.

Tim Wilson, CEO at Nexia International, explains that, for his organisation the regional picture remains unchanged from previous years. He expounds, “Advisory demand is higher across North America and Europe than Latin America, Africa and Asia. Saying that, India continues to shape its reputation on building the outsourcing hub for such services. However, it would be unfair not to state that the regions rather lagging have started to catch up, with amazing pockets of expertise building up for certain services in unexpected locations, for example RPA services in Africa and Latin America.” Heathcote also adds that, “In North America there is an increasing move away from audit to advisory.  This reflects increased concerns about the profitability of audit, lack of staff, and the burden of regulation. It is noticeable that there is a shift to increasing tax services and reducing audit.  There is also a significant market for Client Advisory Services and continued demand for RPA.  This is across industries, but ESG reporting services are beginning to emerge in response to potential new SEC reporting requirements and the new California law.”

New CSRD legislation in Europe is driving increasing demand from clients looking for advisory support to improve their environmental impact reporting with many firms applying to become B Corp certified.

Additionally, advisory in Asia Pacific, has seen increased demand for Initial Public Offering (IPOs) and establishing new businesses.

Clearly, throughout the accountancy industry, the traditional roles of compliance and auditing are undergoing a significant expansion and change, driven by a growing demand for specialised advisory and tailored consultancy services to meet evolving client needs.

As stated by Suan Wee Tan of IECNet, “The mantra of one of the world’s largest global banks, “Think global, act local”, would definitely place one’s firm at an advantageous position in this environment. All member firms will need to be at the top of their game, be aware of recent government legislation and also have processes in place to facilitate inbound clients.”

Regulatory complexities and geopolitical uncertainties have driven a heightened focus on compliance and risk mitigation within the advisory realm. As noted by Lagerberg, these factors have led to shifts in deal-making dynamics, with clients prioritising bolt-on acquisitions to enhance existing businesses amidst geopolitical uncertainties. This interrelation between geopolitical and regulatory trends is a recurring theme, but there remains optimism for growth and expansion within key markets.

Looking ahead to 2024, Anton Colella identifies corporate finance services in the US and Europe as areas poised for significant development, driven by the need to fuel economic growth.  Steve Heathcote suggests that going forward, “collaboration between firms can create a differentiator.” He explains that, for example, “PrimeGlobal firms work together to support clients across borders especially in dealing with ESG opportunities. A member in Singapore has developed TCFD (Task Force on Climate Related Financial Disclosures) consultancy services and is able to partner with others to support demand globally.”

The demand for tax services in the global market has been steadily growing, driven by various factors ranging from regulatory complexities to the evolving geopolitical landscape. Multinational clients, in particular, are increasingly sensitive to transfer pricing matters and dealing with these requires substantial expertise due to the complex and varied rules imposed by different jurisdictions. As Chris Borneman, CEO, MGI Worldwide, puts it, “International Tax appears to be the service most in demand. Globalisation and the reopening of the global economy post-COVID, have resulted in a lot of inbound and outbound investment requiring international tax advice and compliance.”

Liza Robbins, CEO,Kreston Global concurs, stating, “Clients of global groups are operating in multiple jurisdictions so require the relevant tax advice, whether that is establishment advice (employee tax), or import‐expert advice (indirect tax) or transfer pricing. As soon as an organisation operates in another country a tax‐issue is triggered that needs to be addressed.” The COVID-19 pandemic's fallout aside, there are factors such as inflationary pressures, geopolitical tensions, global mobility and compliance contributing to the worldwide evolution and importance of the tax function in strategic decision-making within organisations.

Kamel notes that, additionally, “this demand is also being fuelled by the expansion and consolidation of companies and accelerated global operations facilitated by technology.” The broad consensus is that this demand remains robust irrespective of whether firms are part of a network or association but there are indications of an accelerating global trend towards outsourcing tax-related tasks. As Dr Gorny states, “this trend includes, in particular, the outsourcing of day-to-day matters such as tax compliance, employer obligations in terms of payroll tax and social security, year-end accounting etc.”

Implementing tax technology solutions across multinational organisations presents numerous challenges that require careful consideration and strategic planning, the complexity of multiple tax regimes being a significant hurdle. Multinational clients need to navigate diverse sets of rules and regulations across different jurisdictions, requiring a deep understanding of financial reporting and tax compliance. There is still, however, room for growth and innovation. For example, as Tim Wilson explains, “additional opportunities have arisen from customs, duties and export control advisory which is a newly created service line due to important supply chain and customs optimisation opportunities, related but not limited to Brexit impacts. Overall activity is largely driven by increasing compliance requirements from tax authorities, for example in relation to ATAD, BEPS and BEPS 2.0, as well as the international mobility of clients’ businesses and high net worth individuals, fuelled by Covid impacts.”

BDO’s Pat Kramer echoes the sentiment of rapidly changing tax regulations across global borders posing a key challenge by stating that, “these frequent shifts in regulatory landscapes also present obstacles to successfully implementing tax technology solutions.” Equally, for Steve Heathcote the relevance of software in specific jurisdictions is a concern. He adds, “partnerships with software providers like Xero aim to address these challenges by expanding offerings to support integration with other tax platforms and developing versions tailored to different languages and regions. AI is also playing a crucial role in expanding the range of compatible tax software by enabling flexible data capture from various sources.”

The investment in technology also plays a pivotal role in enhancing efficiency, collaboration, and compliance in the realm of tax advisory. However, as Robbins astutely points out, “Network firms are independently run entities and will have different priories and objectives, so a one‐size fits all platform might not deliver. A single platform might have support across global time zones, languages and accessibility, but some countries do not have robust internet - so cloud options are a risk.”

Lagerberg elucidates that for Baker Tilly International, “the challenge is to find the balance between complexity, governance and cost. There is also a human intellectual property (IP) issue, as in, does the multinational client have the necessary human IP, technically, intuitively and with a mindset of understanding financial reporting?” Baker Tilly is developing tax platforms which aim to streamline processes, enhance client collaboration, and leverage data analytics, laying the foundation for efficient tax management across borders. Similarly, at Crowe, Kamel Abouchacra says that they are investing heavily in digital tax transformation, including automation of tax processes and adoption of software platforms like Generative AI applications and Alteryx. These initiatives are geared towards reducing compliance costs and ensuring compliance with regulations such as BEPS Pillar 2.

Certain groups encourage member firms to collaborate with other industries to drive technology standardisation and address common challenges faced by clients and network firms alike. For example, PrimeGlobal's partnership with Xero seeks to leverage technology for enhanced tax advisory services by firms sharing ideas and providing benchmarking information, ultimately enhancing their ability to deliver tailored and insightful tax advice to clients. Investments in such solutions are essential for firms to meet the complex demands of multinational tax compliance. By leveraging innovative tools and platforms, firms are aiming to streamline processes and enhance collaboration.

Diversity, Equity, and Inclusion (DEI) initiatives are increasingly becoming a focal point for accounting firms worldwide, reflecting a commitment to fostering diverse and inclusive workplaces. While approaches may vary across different firms and jurisdictions, the overarching goal remains consistent: to create environments where all individuals feel valued and supported, regardless of their background or identity. The importance of promoting accountancy as an exciting and diverse career for everyone, with many larger member firms implementing bespoke programmes to achieve this goal, is critical to the success of the industry.

IECNet focus on the importance of attracting talent based on meritocracy while acknowledging the ongoing consideration of DEI principles in recruitment efforts. ETL prefer to highlight the firm's business culture which is “centred around teamwork, mutual trust, and equality.” Whether they explicitly set DEI targets in recruitment and retention strategies, most firms want to prioritise building a positive and inclusive work atmosphere for all employees. Jenny Reed explains Kreston’s approach, “Bonuses are often linked to minimum retention periods, especially post qualification. Flexible working is a feature that many firms have retained post pandemic, which can be a major draw for many people. Increasingly firms are talking to older children whilst they are still at school about a career in accountancy and not waiting until they go to university, especially in those jurisdictions where an accounting degree is essential. For example, in the UK, school‐leaver apprenticeships from the age of 18 are increasingly popular.”

Borneman highlights progress in another important area, gender diversity within its leadership committees. He says “The Executive Committee is now 66% female, up from 0 and the International Committee is 25% female, also up from 0. We have also introduced a Shadow International Committee, made up of younger members aspiring to be partners, which is 50% female.” In an industry which, not so long ago, was male-dominated, these are progressive numbers.

Whilst evidence of gender equality, at all levels of organisations, is growing and is welcomed by every stakeholder in the industry, the proliferation of technology in recruitment and retention is set to become a further important differentiator. How firms adopt technology, to what extent and for what purpose is significant. Nexia, for example, have established initiatives like the Aspiring Women Leaders Programme but Anton Colella feels that “AI will inevitably reshape resourcing strategies but may not necessarily impact the overall headcount. Instead, it will propel practitioners to focus more on strategic decision making. AI and automation technologies are poised to break free from the confines of 'shadow IT' and burdensome, expensive implementations. As organisations evolve and adopt robust technology governance, the profession will witness a more integrated approaches to deploying these capabilities. Firms of all sizes with very little advanced technology knowledge can now take advantage of improved and automated technologies.”

Steve Heathcote has another view on this, as he observes that, “skills shortages are driving more efficiencies through automation and AI. Our firms are seeing roles change significantly. Routine tasks are being automated and moved to the cloud. This is impacting all roles across the firm, not just professional staff.  In support functions such as IT or payroll, firms are investing more in development of staff to improve retention and develop higher level analytics and insight skills. Professional staff now need to develop higher level skills such as communication, empathy, innovation, and business acumen. Several of our firms have completed a press review of their entire systems to identify opportunities to use AI to create efficiency. Larger investment is therefore likely to happen over 2024/25.”

In this rapidly evolving landscape, it might be easy to overlook that there is still an overwhelming demand for personnel with a diverse set of skills and competencies. As technology continues to advance and client needs evolve, this need becomes more pronounced. Stephen Hamlet, CEO of Russell Bedford International, puts it rather eloquently when he says, “I would say that the term “traditional accountant” will soon become redundant. We need to make our profession more attractive and this comes down to perception. Personnel at an accountancy practice are so much more than what used to be deemed as an ‘accountant’. Today, it is very much about people relations, business development skills, business advisory knowledge and a rounded understanding of the latest technologies and how these can help assist in client work, along with technical experts and industry specialists.” 

For global accounting networks, strategic expansions, mergers and acquisitions play a significant role in shaping reach and influence. Recent developments underscore this trend, with notable expansions and strategic partnerships across different regions.

Baker Tilly's expansion efforts in 2023 were marked by significant milestones. In India, the network welcomed ASA as a full member, enhancing its presence in the country following the departure of its previous member firm. In Italy, strategic acquisitions in Milan and Rome bolstered Baker Tilly's position in key financial centres. Similarly, a merger with BDO in Bulgaria contributed to substantial growth, while MHA in the UK pursued an aggressive growth strategy, expanding into Scotland and Wales. The network's legal offerings also saw notable advancements, with new legal teams established in Poland and Uruguay. However, alongside expansions, Baker Tilly also navigated departures, including the resignation of Baker Newman Noyes in the US and Baker Tilly Ireland's transition to Azets in Ireland.

PrimeGlobal claim a total membership of 311 firms at their year-end. Heathcote says, “We recruited 20 new firms over the year. Our firms’ revenue rose to $4.3 billion – a record level.  Our location coverage increased by 16% to 1,095 locations around the world. We saw a significant 25% increase in professional staff across all regions bringing the total to 27,608. We have recruited firms with more advisory services to help our firms adapt and be ready to deliver future services." Patterns of growth and challenges were observed across other accounting networks. UHY reported the loss of a firm in Denmark but identified a new firm for the country. ETL Global invested in majority shares of 43 firms across ten countries, emphasising its “long-term strategic partnership approach.” IECNet gained three new members in the Middle East, Latin America, and the Asia Pacific region, despite ongoing economic challenges in some countries due to the COVID-19 pandemic.

Stephen Hamlet, though, offers a note of caution. He says, “The amount of M&A and PE activity is a concern to us. We will sometimes lose a firm when that firm gets much bigger and becomes even more attractive to larger national practices and, additionally, if a firm has not focused on its succession plan and partners are approaching retirement age. With respect to PE activity, we have had to accept that this is now very much part of our profession. Thus far, however, this has not led to us losing any firms. The situation of a PE vehicle having a number of firms, which might not all be in the same global network or association, is starting to become a norm.” The implication appears to be that compatibility and a shared corporate culture may be critical in a successful merger or acquisition.

Clearly, the influence of private equity (PE) investments and the trend of consolidation have emerged as significant factors shaping the trajectory of accounting firms. Across different networks, the impact of PE investments and the implications for long-term sustainability and growth strategies are subjects of careful consideration. However, the reception of PE involvement varies amongst networks and member firms. While some see PE as a positive growth accelerator, others view it as a short to mid-term financing option, rather than a long-term strategy. Concerns about maintaining focus on client service delivery amidst PE involvement are also evident, underscoring the importance of aligning investment with the firm’s strategic goals. In other words, having an endgame in which an exit strategy is clearly defined and the necessary thought has gone into setting up regulatory oversight, is critical.

So, overall, is PE a good or a bad thing for the accountancy industry? There is no right answer. The consensus is that there can be downsides related to PE if firms become too focused on narrow growth targets potentially at the expense of a focus on the broader aims of the profession. However, the upside can be more investment which helps firms deliver increased impact for their people and clients. With PE injection, the global accounting landscape will, no doubt, continue to evolve through strategic expansions, mergers, and acquisitions, driven by the pursuit of greater reach, influence, and specialisation.

Through 2024, for most networks and associations, considerations related to navigating the choppy seas of consolidation and competitive pressures will remain a growing priority. The exit of smaller firms and the encroaching influence of consolidation underscore the need for strategic positioning and proactive engagement in the evolving marketplace. As accounting networks and firms navigate the complexities of the sector, a steadfast focus on culture, communication, multi stakeholder collaboration and differentiation emerge as foundational pillars for sustaining competitive advantage and fostering long-term success.