June 20, 2024

How Can Accounting Teams Navigate Regulatory Challenges and Inflation?

Clearview Group

7

Minutes to read

Understand the causes and effects of “regu-flation” on accounting teams and explore practical strategies to overcome these obstacles and maintain financial stability.

When the challenges of evolving regulations seem daunting, those who are truly committed always seem to find a solution. History is full of stories of great accomplishments happening during times of great challenge – even in the accounting industry.

Accounting and financial reporting have evolved significantly since the early- to mid-1900s, entering a modern era marked by a continuous shift toward standardized methods. The increasing need for accurate long-term financial projections prompted a demand for accounting practices that reflect current financial standing and forecast future conditions.

In response to this necessity for transparent reporting, the U.S. accounting industry adopted generally accepted accounting principles (GAAP). These guidelines, regulations, and protocols dictate how the country's public and private corporations prepare their financial statements.

Several other pivotal economic challenges influenced the trajectory of accounting practices. The stock market crash of 1929 led to the implementation of stringent accounting standards and the establishment of the U.S. Securities and Exchange Commission (SEC).

Notorious cases, like the trial of Al Capone in the 1930s and the investigation of Enron in 2001, played a crucial role in shaping the accounting profession's ethical standards and oversight.

And still, there are current challenges – challenges and regulations from which accounting teams are not exempt.

But what happens when these challenging regulations cause further turmoil, creating inflation among accounting teams and the economy as a whole?

When regulation causes inflation, the result has been coined “regu-flation.”

Though every industry faces these forces, let’s explore the impact of these challenges on accounting teams.

Regulations and Challenges

Between regulators like the PCAOB, AICPA, and all 50 states, accountant teams are increasingly regulated through their profession and its governing bodies.

PCAOB

The PCAOB notes a growing number of public company audits are deficient based on the most recent inspection data. While the profession continues to seek improvement, the PCAOB is admittedly activist in going after what it considers low-performing auditors.

Even more recently, the PCAOB voted 5-0 on a rule significantly reducing the time allowed to compile final audit documentation. The new timeline allows auditors just 14 days to gather their comprehensive audit materials, a sharp contrast from the original 45-day period allotted.

AICPA

The AICPA peer review process has advanced since the time when every firm received a “pass” rating. This process aims to promote and enhance quality in the accounting and auditing services provided by firms (and individuals) subject to the standards in service of the public interest.

Yet, with the enhanced oversight program, more accounting teams and firms are found to have deficiencies or “fail” their reviews.  Even the peer reviewers are being reviewed, a sort of “watching the detectives” idea.

In addition to this meticulous review system, the AICPA requires firms to adopt new Quality Management Standards, effective December 15, 2025. The standards are intended to enhance ongoing quality control and continuous improvement.

Generally Accepted Accounting Principles

As GAAP continues to undergo significant transformations in areas like revenue recognition, leases, and credit losses, accounting teams face the challenge of adapting to these changes. Implementing these major revisions requires a substantial investment of time, effort, and resources, as well as careful consideration, thorough analysis, and potentially heated discussions among stakeholders.

More recently, all companies must adopt a new standard regarding Current Expected Credit Losses (CECL).  While originally intended for banks and financial institutions in the wake of recent credit crises, this standard now requires all entities to assess credit risk in broader terms.  

While larger companies may have the resources to handle CECL internally, many smaller and mid-sized organizations find themselves struggling with this, causing additional costs both internally (staff doing this in addition to daily duties) and externally (hiring a specialist).

Accounting Talent Shortage

Perhaps the biggest challenge today is the accounting talent shortage. This multifaceted issue is influenced by various factors, such as decreased interest in the profession, the 150-hour requirement, and the accounting culture.

Accounting teams are having trouble filling positions, especially those requiring a high level of expertise and experience. The shortage means that teams are short-staffed and often forced to do more with less, which can lead to overworked employees and decreased employee satisfaction. The ripple effect includes a potential decline in output quality, increased errors, and a strain on working relationships.

Yet, accounting teams are not the only ones affected by these challenges and regulations. The result affects clients, employees, business owners, and anyone who uses financial statements.

Inflation Result

Simple math indicates that more work plus fewer professionals equals higher costs. Accounting professionals with experience navigating the regulatory landscape are in high demand.

While public accounting firms have this challenge, it’s even more significant for corporate accounting teams.

In addition to the salaries and benefits costs of today’s professionals, the cost of doing business keeps increasing. Transportation, office space, and the average “overhead” costs of today’s world continue to squeeze both consumers and companies.

As a result, companies and accounting teams need to offer creative compensation packages to attract and retain talent.

Strategies to Combat Regu-Flation

Though accounting teams and the resulting clients, employees, and business owners are all experiencing inflation, there seems to be hope in several strategies for a solution to regu-flation.

Offshoring Talent and Interim Staffing

Many accounting teams, primarily the larger ones, are offshoring work to countries with lower labor costs. Other teams are utilizing interim staffing as an employment arrangement to fill short-, mid-, or even long-term needs for specialized skills.

By offshoring talent and using interim staffing, teams can supplement work during the accounting talent shortage.

However, these initiatives require focused quality control from leadership. Teams must balance the trade-off between lower labor costs and higher compliance costs.

Offering Work Flexibility

Accounting professionals and teams – like everyone in a post-COVID world – are opting for work flexibility. This allows them to choose where, when, and how their work is performed, which ultimately can be a strong differentiator when attracting and retaining talented professionals.

Offering work flexibility also allows accounting teams to minimize their overhead expenses, as many employees will choose to work from home.

Continuous Training

Ongoing training and continuous education are crucial for keeping abreast of the ever-evolving accounting standards and challenges. Accounting professionals require formal education to grasp the underlying concepts, while on-the-job training enables them to apply these principles in real-world scenarios.

Utilizing continuous training can help accounting teams attract top talent. By providing this opportunity, accounting teams can also mitigate the expense of hiring a specialist whenever a new or updated standard is introduced. Instead, they can invest in training their current employees – a strategy that benefits both the individual and the accounting team.

“There is no ‘silver bullet’ when it comes to combatting the combination of regulation and inflation.”

“There is no ‘silver bullet’ when it comes to combatting the combination of regulation and inflation,” said Mike Buher, Director of Clearview Group’s Audit and Assurance practice. “Accounting teams, along with their CPA firm, must utilize any and all strategies. This includes working closely together so that success is not only defined as producing a final product, but the relationship being mutually beneficial and long-term.”

Despite the challenges and regulations they face each day, accounting teams are still attracting problem solvers. Motivated professionals who see the challenges clearly can and will pursue solutions that succeed despite the headwinds of regulation and inflation.

At Clearview Group, we encourage team members at every level to be themselves, to solve problems, and to think strategically – with technical excellence as the cover charge. We know that uninspired, exhausted people tend to produce mediocre work and struggle to combat evolving regulations and challenges.  

Healthy, fulfilled, respected individuals are more focused, produce higher-quality work, and are far more dedicated to combating regulations and challenges.

When your accounting team needs help solving complex problems that come with regu-flation, our experts provide clear solutions. Contact us today.

Mike Buher
Director
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