SIN WINS in a recession and, so it seems, do accountants. While firms are far from recession-proof, the profession as a whole has held up remarkably well over the last five years. Membership of the main institutes has grown steadily, fee incomes for the major firms have recovered since 2010, while student numbers – on a worldwide basis at least – have boomed since 2009.
According to the FRC’s latest annual key facts and trends in the profession report, accountancy remains an attractive career prospect and is in rude health overall. Paul George, executive director of the FRC’s conduct committee, says the data reflects a positive message about the health of the profession.
“We have gone through a pretty bad recession. But member numbers continue to grow and student numbers have recovered and started to pick up,” he says. Indeed, his sentiments are echoed by representatives of ICAEW and ACCA.
Over the last five years, total membership of the seven UK and Irish accountancy bodies – ACCA, CIMA, CIPFA, ICAEW, CAI, ICAS and AIA – increased by 2.7% to 327,000 with worldwide membership rising by 3.5%. Student numbers, which George says is a “better barometer” for gauging the attractiveness of the profession, increased by 3.4% globally over the same period to 530,000, including a 4.5% increase over the last 12 months.
In the UK, student numbers rebounded 1.6% in the last year having remained largely static from 2009 to 2013. George says the rally is indicative of increasing confidence from the major firms that are ramping up their hiring plans, but also illustrates how the institutes are looking abroad for growth.
“The strategy of a number of bodies is to focus on their international operations as they see domestic growth opportunities as less obvious,” he says.
Route to the top
The profession has remained attractive, explains Sharon Gunn, ICAEW executive director, commercial, because of the broad career options it gives candidates. “With a chartered accountancy qualification behind you, you can go into so many different areas,” she says.
“We still see our members at the top of FTSE 100 companies, whether board, CEO or chairman roles. It is seen as a route to the top and you can work in any industry.”
Accountancy’s attraction as a career path can also be attributed to the way finance – whether in practice or business – has evolved. Changes in corporate reporting and technological advances that support data-driven insights from the finance team have all played their part.
“It’s a more strategic role and offers a mixed career,” says Ewan Willars, director of policy at ACCA, which with 137,000 members is the largest of the institutes on a global basis. The institute also has the largest population of members that are younger than 45. According to Willars, the younger generation have particularly engaged with integrated reporting and non-financial reporting along with the impression they will not end up “stuck in the back room”.
Non-audit client work
At the same time, fees are on the up. Since 2009, the Big Four reported a decline in fees in only one year (2009/10), with the percentage of total fee income increasing by 3.9% this year. There has also been an average increase of 2.6% for the largest registered firms outside of the Big Four in 2012/13.
Audit fee income for the Big Four firms continues to grow, albeit at a slower rate of 2.8%, though this has declined for firms outside the Big Four in each of the last four years. However, it is fees from non-audit work to non-audit clients which has provided firms with the largest growth in income for 2012-2013.
PwC, KPMG, EY and Deloitte saw 5.8% growth in this area, compared to a total increase in fees of 7.7% in 2011-2012. Fees from non-audit clients climbed by 5.7% for mid-sized firms, offsetting a reduction in audit fee revenue of 1.7% and a 0.5% decline in non-audit work conducted for audit clients.
Changes to audit regulation from the FRC and Competition Commission have served to shake up the market, but it is reform from the EU which is compounding firms’ decision to increasingly focus on their already burgeoning areas of consulting-type work. Under rules set to be transposed from the EU into UK law, FTSE 350 companies must cap the amount of non-audit work their auditors can undertake, while some non-audit services are banned altogether.
The growth of non-audit fees from non-audit clients will continue, with some firms experiencing double-digit growth in that segment compared to modest growth in audit work.
“There could become a point where firms will consider whether the profile of their service lines meets their business model,” says George at the FRC. However, it is unlikely that one of the Big Four would ditch audit in favour of pursuing non-audit work alone. “Audit is such an important pillar in their brands,” he adds.
Further down the market, expected changes to audit thresholds are causing concern. Willars at ACCA says it is a “little bit of a worry” that BIS will implements rules that would exempt 99% of UK companies from the need to have a statutory audit.
“There is a squeeze because of raising the threshold,” he says. “There will be a streamline version of audit coming through that takes up some of the slack.”
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The select committee heard that GT had not met up with the BHS pension scheme advisers or trustees, but had done so with Deloitte, Arcadia’s pension advisers