The reputation of CPAs, perhaps exaggerated, is that they are precise, introverted, and conservative. Whether they are employed by a public auditing firm or by an organization, a CPA’s traditional responsibilities have been financial stewardship and assurance of financial accounting compliance with regulatory and tax agencies and typically report past historical data.
Generally, CPAs have not had a reputation for deep involvement with operations and sales management nor being a strategic advisor to their executive team, although articles by the media, consulting firms, and IT analysts have been claiming this is a trend and direction for them.
Are the claims becoming reality?
Maybe there is now a glimmer of change. Perhaps CPAs are increasing in numbers with their transition to expanding from being primarily financial accountants to managerial accountants. I have some evidence for this.
Here are some impressions I have from presenting at AICPA financial planning and analytics (FP&A) conferences in the US. (As many are aware the AICPA and CIMA created an alliance, the CGMA. I have authored two CGMA books). A first sign of change of this transition from “bean counter to bean grower” is that the number of conference attendees at AICPA FP&A conferences is increasing.
However, a much better indicator is the common FP&A themes by the presenters, including myself. At a summary level these themes are:
The CFO and controller roles are becoming more strategic advisor roles.
Less emphasis on the annual budget and spending control and more emphasis on analysis, forecasting, and planning.
Enterprise risk management (ERM) are being integrated with enterprise and corporate performance management (EPM/CPM) methods.
Which “dark side” do I mean?
When I asked the question in this blog’s title if CPAs are now joining the “dark side” (as with Darth Vader from Star Wars), what I am referring to is the managerial accounting side of accounting’s taxonomy neighbored with financial and tax accounting.
To clarify, financial accounting is intended for external reporting to satisfy regulatory compliance, bankers, and the investment community. In contrast, managerial accounting is for internal reporting to support better analysis and decisions. (Tax accounting is in my mind a digital game somewhat disconnected from economic reality.)
The AICPA has been the USA’s primary professional institute for financial accounting. Similarly, is the Association of Chartered Certified Accountants (ACCA) in the UK. However, in the past few years both of these professional societies have established partner alliances with premier managerial accounting institutes. The ACCA with the USA’s Institute for Managerial Accounting (IMA), and, as earlier mentioned, the AICPA with the Chartered Institute of Management Accountants (CIMA) headquartered in London. Similar partnering has occurred with Canada’s accounting institutes.
My interpretation is that these new joint alliances reflect a shift in emphasis of CPAs from “valuation” (i.e., external financial accounting) to the more critical need for “creating financial value” (i.e., internal managerial accounting).
CPAs joining the dark side?
To sum up, yes, it is good news that CPAs are increasingly acquiring FP&A and managerial accounting skills and competencies. It is their “Force.” But to clarify the Star Wars “dark side” analogy represented by managerial accounting. It is actually the “bright side.” Why? Good managerial accounting, such as activity-based costing (ABC) practices, brings visibility and transparency to product, service, channel, and customer costs and profit margin layers that are typically hidden with GAAP reporting. With managerial accounting internal managers and employee teams gain more insights and foresight to support better decision making.
It has been a longtime coming for CPAs to display high interest in managerial accounting. Hopefully CPAs will now be like moths-to-the-flame pursuing analysis. CPAs are seeing the light and are expanding their FP&A and managerial accounting skills and competencies. It is a win-win for both them and the line function managers they support.
