Changing Paradigms in the CA Profession

Last weekend I attended the World Congress of Accountants (WCOA 2022) at the Jio World Convention Centre in Mumbai. The grandeur and sheer scale of the event were awe-inspiring. The number of participating delegates, the addresses and deliberations on and off stage, and the humility induced by the work happening in the country made me realise the shift in the CA industry at large.

During my last term at IIMA, my Syndi and I researched why there are no multi-national CA firms from India. Our research gave us insights into the working and growth of CA firms. The CA profession has historically been driven by skilled professionals serving clients. A CA firm is known through its partners – their skill, ethics and integrity. Growing the firm means partnering with like-minded people having complementary skills, aligned ambition and equal regard for ethics and integrity; this makes finding and retaining partners difficult. Hence, CA firms have not grown beyond a point. However, my recent experience in the CA profession and my interactions at the WCOA made me realise the changing paradigm of the profession.

CAs have traditionally moved towards practice for lack of comparable opportunities. Owning a practice offered freedom and better financial prospects in the long run. Today, opportunities for freshly qualified CAs have increased exponentially. With multi-national CA firms offering outsourced services from India, more CAs are employed in accounting BPOs than ever before. Employment has become not only comparative but a better alternative to owning a practice. The offered compensation and glamour of high-rise offices are keeping the brightest CAs away from practice. CAs who do end up in practice or get employed with a mid-sized CA practice are those who are not accepted by the industry owing to the higher number of attempts taken to clear the CA exam. Industry standards of compensation are a major hurdle to growth in CA practice.

On one hand, CAs are not entering into practice and on the other hand, increasing digitisation is making CAs and their professional judgement redundant. The quality of work is no more a function of skill or integrity. The judgement of professionals is commoditised through software and tools. ERP-like solutions help ensure service quality and adherence to laws. The increasing oversight of regulatory authorities on auditors is forcing CAs to adopt these tools to justify their professional judgement. Digitisation of CA practice is no more an option.

This is where I feel the CA profession is in a phase of consolidation. It has never been as expensive and capital-intensive to start a CA practice as it is today. For a CA practice to grow, it must invest in software, tools, and digitisation. With increasing oversight and the introduction of new laws and accounting regimes, there is a constant need to invest in learning and upskilling. Lastly, the high standards of compensation set by the industry are making the hiring of skilled resources prohibitive. Slowly, the larger organisations which can invest in these tools and resources would acquire smaller practices for better utilisation of their investment and smaller practitioners would have to allow such acquisitions if they want to stay relevant in the profession.

Such industry consolidation was apparent throughout the WCOA 2022 where larger firms were offering smaller firms to be part of their ‘professional network’ which would allow them access to tools and resources in return for consolidating their professional practice! Joining a network may become the price a firm must pay to stay relevant unless it can invest and develop differentiated service offerings of its own. CA firms will have to take a hard look at their short-term and long-term strategies.

There is no doubt that at the end of this consolidation phase, the Indian CA profession may see some of its first Indian multinational accounting firms.

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