Economic Challenges Create Accounting Opportunities
By Cathy Lockman
What can today’s accounting students expect as they enter the profession? Despite the high rate of unemployment and the current economic complexities, and in some cases because of those complexities, today’s graduates can expect some unique opportunities, says Sven Erik Holmes, who serves as Vice Chair—Legal, Risk, and Regulatory, at KPMG LLP.
“On a micro level, we’re optimistic about the opportunities at KPMG, even though the current levels of debt and unemployment in our country as well as the stalled global economic environment create some pessimism at the macro level,” he told an audience of accounting students and faculty at the Department of Accountancy’s recent Lyceum event.
How does this uncertain economic environment translate into optimism for the profession? Holmes explains that the challenges create a need for the particular skill set and expertise that accountants and auditors provide. For instance, a complex environment leads to more scrutiny from regulators, which means opportunities for the profession. “The enforcement role of government drives compliance systems, and accountants will have an important role to play in the development of those systems,” says Holmes.
Accountants are likely to play an expanded role in other areas as well, including the development of risk management structures and systems for operation and oversight as well as business planning and tax planning. “In addition, companies have plans that continue to call for a growing global presence, even if they are only local today. Such growth and the uniformity of quality of reporting that it will require across countries will create lots of opportunity,” he says.
Holmes’ predictions for the future of the profession are based on knowledge acquired throughout a distinguished career that includes key positions in law, government, and academia. Prior to joining KPMG in 2005, he served as a U.S. District Judge for the Northern District of Oklahoma for 10 years and, before that, he was a partner with the Washington, D.C. law firm of Williams & Connolly LLP. He has also served as an adjunct professor of constitutional law, the general counsel for the Senate Select Committee on Intelligence, and a member of the Select Committee on Secret Military Assistance to Iran and the Nicaraguan Opposition, that is, the Iran-Contra investigation.
His experience has earned him respect across professions for his professional judgment and integrity, qualities that he encouraged the audience of students to cultivate for themselves and to explore in the firms they consider for employment.
Holmes told of an ethical test that KPMG faced not long after he joined the organization in light of accusations of irregularities regarding tax shelters. “We made a public declaration that there had been wrongdoing and took responsibility for it without making excuses,” he says. “We also made a commitment to our clients and to the whole community that it wouldn’t happen again. This declaration had a high potential for downside, but it ended up impacting our organization positively. Our clients’ respect for the firm rose because of our forthcomingness, and, just as importantly, our employees felt the same because the forthcomingness reflected their values. It was something that they wanted to hear from their firm; that the acts of a few people didn’t reflect on the actions of everyone in the KPMG family. It was important to us that our people’s pride in our organization not be adversely impacted.”
As we move beyond the financial crisis and its fallout, Holmes says there are important questions to be answered in U.S. accounting firms regarding skepticism, communication, the role of the outside auditor, and the content of the audit report. “There is no question that there are no more important considerations than skepticism, independence, and objectivity and what the profession can do to ensure them,” stresses Holmes.
In Europe, the focus is on the number of firms and their scope of services. Questions include: should the Big 4 go to the Big 8, should there be mandatory joint audits to build up the capacity of small firms, will firms become audit only or decide to give up clients to meet new regulatory proposals?
“At KPMG, we believe that you have to be multidisciplinary to do the best job,” says Holmes. “If regulations require one or the other, we would rather give up clients than become audit only because we believe it enhances the quality of the audit to have all three functions.” He also says that it’s important from a recruiting perspective. “We won’t be able to attract the kind of talent we need if we go to an audit-only model.”
Recruiting is an important focus at KPMG. “There is an ongoing challenge to recruit and retain the very best people,” says Holmes. “There is an enormous amount of competition in the marketplace, and our goal is to have the kind of offerings, opportunities, and programs so that we can compete as the very best and be viewed as top of class.”
Building an Ethical Environment
How should a company prepare itself to deal with all of these challenges? According to Holmes, the most important step is to establish a common set of values that guides your firm and to ensure that those values are communicated and instilled in your workforce. “We want people who share the values of KPMG,” says Holmes. “We stress that everyone has a personal responsibility for the ethical environment, that everyone should respect their peers, themselves, and the corporation as part of that undertaking. There is no better way to instill respect than to ensure you have a strong ethical environment.”
As a result, KPMG put training in place for third- and fourth-year associates. They also evaluated where in the employment timeline they spoke to their employees about ethics. “We examined where our touchpoints are with our people and how we use those touchpoints as an opportunity to convey what we stand for as a company and what our expectations are,” says Holmes. Making sure the importance of a strong ethical environment is emphasized during interviews, orientation, and even technical training builds the organization’s commitment to that culture.
Holmes suggests that the responsibility for assuring the right fit of an employee in a corporate culture rests with both the firm and the employee—even the potential employee.
“As you make your decisions about your first professional choice,” he told the students, “determine whether the organization reflects your personal values. Ask yourself: ‘When the organization is tested will it act in a way that I would be proud of?’” Holmes suggested that students “feel free to reverse the inquiry during an interview,” asking recruiters directly about how the organization ensures that it encourages an ethical culture because they have a legitimate interest in knowing that information.
“In the long term your happiness will depend on the fact that you believe you are part of something that reflects your values and that you are proud to be a part of,” he told the students.