As The Water Levels Of Regulation Rise, So Must Your Strategy; Plan Your Course To Avoid...

Expert Q&A

Since passage of the Sarbanes-Oxley Act (SOX), the move to regulate the accounting profession has been more akin to an onslaught. While it's undeniable that the increasingly complicated regulatory and standards-setting atmosphere is a challenge for public accounting firms, this

Q: Doesn't increased regulation and standards-setting stymie opportunity for accounting firms?

A: I believe the smart money is on leveraging regulation to direct and enhance a firm's growth efforts. Mature markets typically experience three types of stimuli: regulatory, competitive or technological changes. All three are clearly in play for accounting firms in today's marketplace, with the regulatory impetus at the top of the list. We could very well witness the possibility of having "differential standards" for private and public companies. I see no end in sight for this trend in standard setting. There are compelling reasons for practitioners not only to have a better understanding of this altered regulatory and standards-setting terrain from a service delivery standpoint, but also to understand what it might mean in terms of growth strategies. Effectively managing the strategic direction of their service offerings demands that accounting firms significantly increase their understanding of the unfolding landscape.

Q: How many sets of standards can the profession stand?

A: A chief concern that accounting firms may face in the future is which standards and how many sets of them they can provide trained professionals to support while still delivering cost-effective service to their clients. Although definitive positions have not yet been uttered, the big firms certainly might have a vested interest in serving a client base which requires fewer versus more sets of standards. The mere cost of training separate teams on separate sets of standards could be cost prohibitive. So if we continue down the "multiplestandards'' road, we may see firms deciding to eliminate clients that don't fit the standards-set that the firm supports - which could mean lots of opportunity for other firms to acquire new clients. How this will ultimately shake out is undetermined. But it's apparent that this highly regulated, multi-provider environment is continuing to create solid opportunity for firms able to embrace it. Firms that found opportunity in 404 work, employee benefits plan auditing, SAS 70 and other new specialties know the wisdom of planning for and adapting to such changes.

Q: How can our firm create a strategy that capitalizes on an increasingly regulated environment?

A: The watchword for the future of accounting firms is "specialize." Niches and specialties will be even more relevant in the future. Consider that we may see standards-based niches in our firm of the future - along with industry and service line niches. As standards-setting decisions unfold, the future belongs to firms that embrace opportunities to specialize. Says Chuck Landes, VP - Professional Standards and Services at the AICPA, "With new standards such as the eight recently issued Risk Assessment Standards, CPAs will be even more compelled to understand the client's industry in order to be adequately informed on the financial statement as well as business risks. CPAs can't reasonably be all things to all people. The business risks are just too high." As you nurture your service lines, you must also constantly monitor the rulemaking environment.

Q: What role will line partners play in executing strategies that help us capitalize on increased regulation and standards-setting?

A: Task your service line leaders with more than just focusing on quality and efficiency of service delivery. They should be researching and reporting back to your partner group on the shifting regulatory and standards-setting terrain and the potential implications for your firm. Based on changes you or others observe, determine the strategy your firm should use to acquire desired segments and clients. This means taking service-line ownership to a whole new level - moving beyond the typical concentration on the "delivery" side of the business into strategic thinking about new directions, new markets, new clients, new niches and new services. The job descriptions of today's practitioners should include taking responsibility for the strategic direction and overall growth of the service line. It's all about asking questions like: "What will we offer?" "Who will we offer it to?" and "How will we go about finding prospective clients for these offerings?" These are traditional product management duties - a discipline not yet well understood by most CPAs.

Q: When should our firm start preparing for regulatory changes that lurk down the road?

A: Marketplace dynamics will take their shape ... and they will take their time. Don't wait until the chips have fallen to plan your strategy. Monitor the decisions that come from rule-making bodies, be nimble, and be prepared to respond flexibly as standards change. Savvy firms and practitioners need to look beyond the current uncertainty and use rules-driven marketing to create a brighter future.