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An important report last month on the workplace culture of the largest US audit firms had an undercurrent of intergenerational tension.
Based on interviews with executives and partners at Deloitte, EY, PwC, KPMG, Grant Thornton and BDO, it highlighted allegations that firms risked losing the old “apprenticeship model” where entry-level workers learned from their elders.
The new model of remote and hybrid work has created training challenges that have yet to be fully overcome, according to several senior figures, whose interviews were reported anonymously. Respondents at one firm even complained that managers and partners had to go down a level audit The tasks were traditionally performed by more junior staff, which meant that some tasks were not getting a second pair of eyes to check their accuracy.
Intergenerational tension is hardly unique to accounting firms as Gen Z – the age group born between 1997 and 2012 – makes its presence felt in the workplace, but it has a particular significance in audit firms due to their central role in the financial system. Last month’s report was produced by the Public Company Accounting Oversight Board, which is trying to puzzle out why its auditors saw an increase in flawed audit work after the pandemic. The deficit rate stabilized last year and began to decline, but the PCAOB said it remains unacceptably high, given the risk auditors may face. Failed to find fault Fraud even in public companies.
“An audit firm’s culture contributes to the audit firm’s ability to deliver a quality audit,” the PCAOB wrote, explaining its focus on the issue. “Audit firm leaders, the tone they set and the culture they foster, are responsible for ensuring that their professionals maintain independence, integrity and professional skepticism.”
The report noted, hardly exclusively, that “the younger generation has a different view of career than their older counterparts, many see their work more as a job than a career, and are therefore more likely to leave their profession if presented with more. Attractive opportunities .”
Interestingly, it also noted that the audit firms with the highest attrition rates in recent years had the highest percentage of senior managers and partners who were recruited from other firms rather than starting their careers in-house. This suggests that organizations that retain employees over the long term have an advantage in building a strong culture and keeping standards high.
Which is not easy in a profession Struggling to attract talent First, there is competition for well-paying jobs in finance and technology. Firms are trying to break the reputation of accounting for brutal times, especially during the annual busy season after the end of the financial year. But not everyone in positions of authority is on board with organizations’ focus on work-life balance initiatives. More than a third of partners interviewed by the PCAOB said such efforts reduced productivity and delayed the professional development of young recruits.
For firms like BDO and EY that are in the bottom half of the PCAOB Quality league table Focused on centralizing and standardizing the audit process, with peak deficit rates in 2022 and 2023. But centralization and standardization are hardly the stuff of anyone’s career dreams, let alone Gen Z. This risks stripping auditors of their ability to make professional judgments and can reduce their work to box-checking. There are already strong disincentives for people to pursue auditing of public companies, and the PCAOB’s report acknowledges that including scrutiny from its own auditors, makes the job more stressful with high downside risks to careers if employees slip up.
Another trend in many firms is to outsource more routine work Offshore Center in India and elsewhere, but it presents more confusion. This risks stripping new hires of the basics of business methods and accounting principles, exactly the kind of apprenticeship that some of their elders are already lamenting is being lost.
The most forward-thinking organizations are reimagining the audit from the ground up. This includes ingesting and verifying financial data in real time and layering in new AI tools to highlight anomalies. Such steps will allow employees to monitor problems raised by “red flags” and deal with interesting accounting problems that require the most complex judgments. It’s a generational change that can’t come soon enough.
