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The British Accounting Review 35 (2003) 69103

www.elsevier.com/locate/jnlabr/ybare

Accounting practice in the new millennium: is


accounting education ready to meet the challenge?q
Bryan Howieson*
School of Accounting and Information Systems, University of South Australia, GPO Box 2471,
Adelaide, Australia
Received 1 May 2002; revised 24 January 2003; accepted 24 January 2003

Abstract
As the new century and millennium get underway it is appropriate to reflect upon, and plan for,
expected changes in accounting practice and the implications of these changes for accounting
education. This paper covers three broad topics. These are:
the future of business and accounting practicea brief review of the predictions about how we will
do business in the new century seems a necessary precursor to a discussion of changes in education;
in the light of expected changes in business, what skills will be required by the accountants of the
future?; and
what are the implications for accounting education?
Expected trends in business practice and the necessary skill set of accountants are reviewed in the
light of recent literature from the United Kingdom, United States and Australia. These trends suggest
that so-called compliance work will form a diminished portion of accounting firms revenues as
technology means that even small businesses become more empowered with respect to their recordkeeping needs. On the other hand, the main growth areas of accounting practice appear to lie in the
fields of business advisory services. As such, future accountants will take on the role of knowledge
workers. Although a command of technology will be an important component of an accountants skill
set, of more significance will be skills in analysis, innovative problem solving, communication and
client relations.

q
Earlier versions of this paper were presented to the 1999 Australasian Conference of PKF Partners (1999) and
to staff at the Universities of Western Australia, Southern Queensland, South Australia, and Aveiro (Portugal) as
well as the 2001 Annual Conference of the British Accounting Association. Bryan Howieson thanks the
participants at these forums for their helpful feedback and suggestions. He also gratefully acknowledge the
insightful comments of two anonymous referees.
* Tel.: 61-8-8302-0781; fax: 61-8-8302-0992.
E-mail address: bryan.howieson@unisa.edu.au (B. Howieson).

0890-8389/03/$ - see front matter q 2003 Elsevier Science Ltd. All rights reserved.
doi:10.1016/S0890-8389(03)00004-0

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B. Howieson / The British Accounting Review 35 (2003) 69103

Accounting educators need to anticipate the expected shift in accountants skills and develop
courses and teaching methods that are far more interdisciplinary and analytical in their orientation.
This paper explores some ways in which this might be achieved and some of the challenges to effecting
change in accounting education that will have to be overcome.
q 2003 Elsevier Science Ltd. All rights reserved.
Keywords: Accounting practice; Accounting education; Knowledge

1. Introduction
The arrival of a new century and millennium is a time for taking stock and reflection.
In the field of accounting education, this desire for introspection is given greater urgency
by the significant changes that technology is already imposing on business practices and
the need to reconsider the role of accounting practitioners as business changes. This paper
seeks to help generate debate between accounting educators as to what might be the
implications of these expected changes for universities and other educational institutions.
As such, the paper covers three broad topics:
the future of business and accounting practicea review of the predictions about how
we will do business in the new century seems a necessary precursor to a discussion of
changes in education;
in the light of expected changes in business, what skills will be required by the
accountant of the 21st century?; and
what are the implications for accounting education?
Before beginning these topics, it should be noted that most serious forecasters of the
future for business have limited their outlook to the next 20 years or so and this paper does
the same. Further, although the primary focus of this paper is a consideration of how the
education of future accountants might respond to the expected restructuring of the
accounting profession, it is not predicated on a view that universities are simply training
grounds for professionals. The exact opposite position is adopted here. Elliott and
Jacobson (2002), for instance, describe how life-skills necessary for success and existence
change over time as environmental and economic conditions change. Universities are
ideally placed, if they are so inclined, to offer the sorts of generic, life-long learning skills
that will be essential for success in a world of rapid change. The sorts of educational
approaches explored later in this paper are designed to leverage the strengths of a
traditional university education and simply contextualise these strengths in the type of
environment future accountants are likely to encounter.

2. The future of business and accounting practice


Although the futurist pundits may differ on some of their specific predictions about how
business will be transformed over the next 20 years, there has been general agreement that

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71

the way we do business is likely to be subject to widespread and significant change. Of


course, change is not a new phenomenon for accountants. Parker (2001), for instance,
describes the restructuring in the accounting profession that has occurred over the last 100
years, while Elliott and Jacobson (2002) broadly review historical trends that describe the
emergence of the knowledge professional. However, at the start of this century many
commentators (as described below) expected that the changes would not only be major in a
structural sense, but also that change would occur at a quicker rate than before. Not
surprisingly, the major drivers of these forces of change are the expected growth and
flexibility of communications and business technology and a belief that this will result in a
more globalised business environment.1 Of course, more recent events such as the
September 11 terrorist attack and the major corporate accounting scandals in the US and
elsewhere suggest that such growth will be subject to constraints and setbacks.
Nevertheless, we might ask what are the implications for accountants of these changes?
A number of relevant surveys and interviews of accounting practitioners and eminent
business people have been conducted in recent years. These include, but are not limited to:
the Institute of Chartered Accountants in England and Wales (ICAEW) (1996) (the
report of the 2005 Working Party);
the Institute of Chartered Accountants in Australia (ICAA) (1998a) (a survey of 18
selected Australian business people representing a wide cross-section of expertise);
ICAA (1998b) (a series of interviews with 28 of Australias chief executive officers and
chief financial officers);
the Institute of Management Accountants (IMA) (1999) (a survey of the changes in the
work and organisational role of American management accountants);
Albrecht and Sack (2000) (a wide ranging review of educators, professionals and others
on the state of accounting education in the US); and
ICAA (2001) (a survey of 46 selected Australian business people representing a wide
cross-section of expertise).
Although the findings of this material are bullish in sentiment, they do provide a
useful starting point for our predictions of the future. Each of the documents may
use somewhat different terms but there is considerable commonality between them in
what they identify as the major forces of change. These can be summarised as (ICAA,
1998a, p. 2):
an escalation in the pace and extent of change itself-there will be a need for
employers and employees to be able to anticipate and manage change;
demographic changes, population movement and growthaging populations in
industrialised countries and increasing participation by women in the workforce will
change workers expectations about how work is performed. In the non-industrialised
1
In their review of accounting education on behalf of the American Accounting Association and other
interested parties, Albrecht and Sack, (2000, p. 6) also include a third source of change, namely the concentration
of power in certain market investors, primarily large mutual and pension funds. Their argument is that the rise of
powerful investors means that business is now more accountable than ever before. A similar theme is explored
later in this paper.

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B. Howieson / The British Accounting Review 35 (2003) 69103

world, it is expected that the issue of the control of the size of the population will need
to be addressed;
developments in technology, particularly communications and ITexpected changes
will allow business and consumers real time access to more and new types of
information. New technologies should improve the ability of small and medium sized
businesses to access global markets;
with the changes in technology, all businesses may face increasing competition due to
the globalisation of businessin its interviews with Chief Financial Officers, the ICAA
(1998b, p. 4) notes, Factories and production centres can now be located in the most
advantageous countries. Shared service centres are moving jobs away from some
countries into others. With the ability to communicate instantly, to fly to almost
anywhere in the world within 24 hours and to be able to transport goods quickly and
economically, the actual location of the facilities is almost irrelevant in many cases.
These forces mean that strategic alliances with other organisations may become
increasingly prevalent;
the focus on knowledge capital and the growing importance of intellectual property
rapid change and increased competition will mean that innovation in products and
services is likely to confer competitive advantage. The greater access to information
(and the resulting information overload) will increase the demand for effective
methods of sorting and screening information (ICAA, 1998a, p. 21). The growing
importance of knowledge capital is likely to continue the trend away from a focus on
profit towards the maximisation of shareholder value (with more attention being
paid to non-financial measures of performance) (ICAA, 1998b, p. 5). Globalisation is
not limited to the effects of technology. For instance, the announcements by the
European Union and Australia to adopt International Financial Reporting Standards by
1 January 2005 and New Zealands similar adoption by 2007 signal the start of the
removal of one of the frictions to the global flow of finance;
changing expectations of stakeholderschanges in technology and demography are
likely to result in a more informed set of stakeholders who will demand more
accountability from business, both financially and non-financially. The growing
movement towards triple bottom line reporting is one example (see, for instance,
Elkington, 1999). The fallout from Enron and other corporate scandals has also raised
stakeholders expectations about auditor independence which will have implications
for how public accounting firms provide both audit and non-audit services; and
the increasing importance of human resources managementall of the factors listed
above are likely to mean a more mobile and independent workforce. Issues like loyalty
and career development will increasingly be in the hands of the top so-called gold
collar knowledge workers rather than employers.

All of these factors are interrelated and, to a large extent, all are driven by current and
expected advancements in communication and data management technology. However,
more recent events would suggest that these forces of change are likely to be more muted
in the short to medium term than first anticipated in the various surveys. For instance,
globalisation of business has generated resistance from some groups for reasons such as its
impact on low-qualified workers in developed countries, the impact on national trade

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unions, perceived threats to national sovereignty, and environmental sustainability


(Siebert and Klodt, 2001). Further, the events of September 11, 2001 have highlighted
a new level of political risks that restrain the practicality of some aspects of globalised
business such as relocating activities to other countries (ICAA, 2001).2 More recently, the
events surrounding the accounting improprieties of Enron,3 WorldCom, Tyco International, and others are currently requiring all accounting firms to reassess the manner and
mechanisms by which they can react to the sources of change noted above. The new
Sarbanes-Oxley Act in the US that restricts the ability of accounting firms to offer nonaudit services to audit clients is a clear demonstration of how regulation modifies the
relative level of influence of the different drivers of change.
Nevertheless, the underlying tenor of the evolution of the business environment
described in the reports above suggests a number of structural changes that will make
some aspects of business easier and cheaper. Many commentators expect these forces to
redefine the relationship between clients and professional experts because more powerful
technology will empower clients to take a bigger role in managing their own affairs. As a
result, although many of the sort of services that accountants have traditionally provided
will still be demanded (for example, records still need to be kept and audited), more
businesses will be able to perform many of these procedural tasks themselves or outsource
them to a growing number of competitors to accountants. We have already witnessed
the start of this trend where compliance services such as audit and tax have begun to be a
diminishing part of an accounting firms revenue base relative to so-called management
services work.4 The way in which this trend unfolds in the future has now become more
problematic in the light of the restrictions placed on non-audit services by the SarbanesOxley Act. However, it is clear that clients will continue to demand the non-audit services
and accountants will need to explore new ways in which they can meet these demands
(see, for example, Currie, 2002; Ham, 2002).
All of the above factors suggest that the major products of the early 21st century
may not be physical goods or even many existing services but rather knowledge and
the ability to manage knowledge. These days people talk, not of an information age
but rather of moving into a so-called knowledge age. Knowledge as a commodity
will significantly alter the way clients operate and in turn change the type of product
professionals have to offer and how they offer it. It will also create new ethical
challenges because, as the adage goes, knowledge is power. Many commentators see
the knowledge age as a catalyst for an explosion in business growth but it also has
the potential to, inter alia, stifle competition as businesses and professionals act to
protect their valuable intellectual capital.
2

At the time of writing, there was also the possibility of a war in Iraq.
An excellent review of the accounting practices adopted by Enron, for instance, can be found in Benston and
Hartgraves (2002).
4
In the context of the US, Albrecht and Sack (2000, p. 12) cite evidence about these relative changes in
accounting services. They note: In 1993, the Big 5 firms accounting and auditing services averaged 51%
of total fees; tax services were 22%; and consulting and other services accounting for 27%. By 1999,
accounting and auditing had slipped to 33% of total fees, tax was 18% and consulting and other services
had grown to an average of 49% of firms fees.
3

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Building on the forces for change identified previously, we can consider what might be
some of the structural and operational changes for accountants and their clients.
2.1. Clients
The various reports described earlier suggest that advancements in communications and
e-commerce mean that all businesses could potentially face a global marketplace, a number
of commentators have called this virtual business. This potentially presents more business
opportunities for firms but it also increases the competition that any particular firm must
face (not to mention the complexities of doing business in a larger market). To compete in
such a market, firms will need to be constantly innovative in the products and services they
provide. In the report Vision 2010: Designing Tomorrows Organization5 it is predicted that
the change to a virtual business environment will mean that companies must concentrate
on their core competencies (Epstein, 1998, p. 9) and jettison all non-core activities such
that the company of the future will be a lean organization drawing on a network of external
relationships (Epstein, 1998, p. 8). If firms must focus on their core competitive
advantage, then it is predicted that there will be a major growth in outsourcing and joint
ventures, particularly internationally. Indeed, it has been reported (Epstein, 1998, p. 9) that
in 1995, the Institute for the Future in Menlo Park, California, found that the number of
international joint ventures had grown 25% a year since 1990. Australian chief financial
officers have stated that Strategic alliances are becoming more common as specialist
businesses seek to gain synergies with other businesses (ICAA, 1998b, p. 5).
For small to medium businesses, Gottliebsen (1998) predicts that the rapid changes in
the business environment will create a short-term crisis that many firms will not survive.
However, he predicts that those that do emerge will have completely transformed their
systems and will be much more professionally managed. They will no longer need
accountants to process their cheque butts and make adjustments in June to save them tax
(Gottliebsen, 1998, p. 17). Others believe that there should be a trend for more and more
small businesses. This is because it is becoming increasingly easier and cheaper to start a
business, especially online (Thompson, 1998, p. 20).
Recent experience suggests that this initial enthusiasm for virtual business is perhaps
premature. On the one hand, internet-business (I-business) remains unproven, a segment
epitomized by the still-as-yet-unprofitable Amazon.com and Ebay. Few retail pure
I-business ventures show profits at this time, less than 1% as reported by the US
Department of Commerce (Nemzow, 2000). One of the reasons for the lack of success
in the I-business sector may be that comparative price information is so easily obtainable
in this market that retailers are forced to be price takers by the resulting high levels of
competition. On the other hand, the success story in electronic-business (E-business)
would seem to be businesses use of electronic data interchange (EDI). It has been reported
that business-to-business communications and transaction processing represents more
than 99.9% of all E-business transactions. In contrast, greater than 90% of E-business is
EDI, which is unlikely to vanish (Nemzow (2000)). The growth in EDI is at least
5

Prepared jointly by the Economist Intelligence Unit and Andersen Consulting (as it was then called. See
footnote 6).

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consistent with the view that firms are streamlining their business processes and
information systems which can lead to more relevant and timely information for
managerial decision-making, inventory control, faster transaction processing, and other
value adding activities.
Overall, there seems to be general agreement that technological improvements in data
management will mean that the average business person will become more sophisticated
and educated and thus more self-reliant than at present. One American social
anthropologist, Jennifer James, has stated The more society pushes complexity, the
more homo sapiens will push back and take back autonomy (quoted in Keeva, 1998,
p. 82). She notes that professions like lawyers and doctors in the US have felt the effects of
a self-help craze where, for instance, medical self-care has reached the point that it is
possible to buy a home-model heart defibrillator (Keeva, 1998, p. 82). Just as consumers
are now more willing to question a doctors diagnosis and demand a second opinion,
business people are being equipped with technology that allows them to keep their own
accounts and monitor their own affairs. As Albrecht and Sack (2000, p. 6) have noted, the
forces of change have eliminated the old model that assumed information is expensive.
Today anyone, armed with the right software, can be an accountant and produce financial
information. The problem for the businessperson then becomes what to do with all the
information and how to avoid information overload. The opportunity for the accounting
professional is to add value to the client/employer by analysing and interpreting that
information and providing recommendations for appropriate courses of action.
2.2. Accounting practitioners
What do all these changes to the business environment mean for accounting
practitioners?
Accountants must be proactive. It has been noted that there are no monopolies on
business advice (Keeva, 1998) and accountants must compete with other existing and
emerging advisory professionals. With more self-reliant clients who are focussed on their
core business activities, accounting practices will have to become more multi-disciplinary.
(This is discussed further below.) In the context of small accounting firms, Gottliebsen,
(1998, p. 17) warns that they will need to invest in the latest technology and have a better
knowledge base. If they fail to do so, they too will disappear along with the clients that did
not adapt.
There is much, however, about these expected changes in the business environment that
is very positive for accounting practitioners. If knowledge is the commodity of the future,
then accountants are ideally placed to seize the opportunity to be the main player in this
commodity. After all, accounting has always been an information system designed to
collate, analyse and disseminate knowledge in a way that is useful to various decision
makers. Knowledge management is the raison detre of accounting. The trick for
accounting practitioners will be, in the language of Barry Jones (1999), how to turn this
comparative advantage into a competitive advantage. In a world of intense competition
accountants will need to effectively position themselves as the gurus of knowledge
management by thinking globally and in a way that provides clients with value added
services. To demonstrate the latter, accountants must reinvent themselves to clients as

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being in the ideas and advocacy business rather than in the compliance business (Jones,
1999). One possible direction in which accounting services might further develop is that of
analysing risk. Albrecht and Sack (2000, p. 9) have noted that the increasing complexity
and uncertainty of the business world has given rise to new types of professional services
focusing on understanding risk. Although many people expect the demand for audit
services to decrease because an audit is a commodity that adds little future value, this
increase in risk may create an even higher demand for audit-type services in the future.
More generally, knowledge management is described by Parker (2001, p. 437) as a
continuous process of creating, capturing, storing, sharing and redistributing knowledge
that can enhance organizational performance. The key concept here is not merely the
structuring of a data system, but rather a question of how can information be used within
an organisation to add value to its activities by identifying strengths and weaknesses and
improving business processes. The IMA (1999, pp. 4 5, 7) views knowledge management
as a transformation of management accountants from scorekeepers to business partners
with the result that these accountants spend the bulk of their time as internal consultants
or business analysts performing tasks such as strategic planning, internal consulting,
process improvement, and performance evaluation. In a similar vein, the ICAA (2001,
p.11) has operationalised knowledge management in terms of activity based management methods such as strategic cost management (including activity based costing and
value chain analysis), analysis of those product/service attributes most valued by
customers, customer profitability analysis, and the evaluation of the profitability of alternative sales and delivery channels. Accountants have a competitive advantage in knowledge management relative to many other professionals because they tend to understand
the interrelationships between different segments of a business (ICAA, 2001, p. 8).
Another opportunity for accountants comes from the expected outsourcing of
organisations non-core activities. In commenting upon the Vision 2010 report, Andersen
Consulting6 partner Wayne Furphy noted (quoted in Ryan, 1998, p. 28):
Theres a fair investment in the skilling up of people. Any service, which is not
customer-related, could be outsourced. This includes financial management, human
resources, IT management, legal services, procurement and back office processing.
The processing of information typically takes 75% of employee effort and this
aspect is suited to outsourcing to obtain available efficiencies. The remaining 25%
consists of effectiveness and interpretation, which typically is insourced. Management focuses substantially on the interpretation of information for executive
decision making.
Accountants have an opportunity to significantly capture this growing outsourcing
market but to do so they will need to reconsider their structure and the services they
provide. To speak of the accounting firm of the future is probably a misnomer because
the expectation is that clients will want all their needs both locally and internationally to be
met by one set of professionals, the so-called one-stop professional shop! This one-stop
shop will have to be multi-disciplinary if it is to meet the complete needs of a business. As
6

Andersen Consulting changed its name to Accenture in 2000.

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mentioned previously, that means that accountants must re-model themselves beyond their
traditional boundaries and create alliances with a wide variety of professionals such as
lawyers, architects, actuaries and engineers.7 This re-modelling will bring problems too of
course. For example, as discussed shortly, there are ethical considerations associated with
the ethical principle of independence when accountants become primarily business
advisers.8 For the larger accounting firms that are already global or enjoy international
associations this process of transformation will be aided by economies of scale. Again,
these accounting firms enjoy a competitive advantage that may make them the dominant
partner in such one-stop shops. As the futurist John Naisbitt has said at a conference of
American lawyers (quoted in Keeva, 1998, p. 81), Theres a good reason for mergers with
accounting firms. Theyre everywhere, and law firms will increasingly need people in key
cities. Smaller and local accounting firms may only achieve survival and growth if they
are prepared to lose some autonomy and become franchisees in a professional shop
network. This is already underway in the US, for instance, where companies such as
American Express, Merrill Lynch and Oppenheimer are purchasing individual accounting
(and other professional) practices across the country and creating a professional services
franchise network (Melancon, 1998). The Chairman of the Australian Society of Certified
Practising Accountants9 (ASCPA) National Public Practice Committee, Mr Rob
McAdam, has been reported to have recommended that small accounting practices
should consider the following responses to this sort of consolidation and the other changes
discussed previously (see Armstrong, 1999, p. 41):

enhancing and diversifying the skills set of practitioners


increasing the strength of internal and external networks
increasing the use of technology
ensuring that there is a structured marketing and promotions program for
practitioners
reinforce the CPA brand. Presumably a similar claim can be made for other
professional designations.
These general expectations that accounting firms will become one-stop shops have
recently suffered a hiccup due to the fallout in the US from the accounting and auditing
improprieties exposed in corporations such as Enron and others. Not only was one of
7
Clegg (1999a) notes that these multi-disciplinary dimensions to accounting practices are underway already.
With respect to the Big Five accounting firms he states that Many of the recent appointments are not even
qualified accountants. They are lawyers and IT wizards, management gurus and change consultants, merger
experts and human resource planners.
8
These ethical issues are starting to emerge. For instance, Durie (1999) reported that a proposal by KPMG in
the US to float its consulting division in association with the network equipment company Cisco Systems was put
on hold by the Securities and Exchange Commission (SEC). The SEC was concerned that such alliances create
the potential for significant conflicts of interest between the audit and consultancy divisions. This proposed
merger has since provoked a sometimes bitter debate between the SEC and large accounting firms over
independence issues. These sorts of conflicts have now been superseded in the US by the requirements of section
201 of the Sarbanes-Oxley Act which forbids a registered public accounting firm from providing any non-audit
services contemporaneously with audit services to the same client.
9
The ASCPA has since changed its name to CPA Australia.

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B. Howieson / The British Accounting Review 35 (2003) 69103

the Big Five accounting firms, Arthur Andersen, erased world-wide in a matter of weeks
but the ability of the remaining Big Four firms to simultaneously offer audit and nonaudit services to the same client has been severely curtailed by section 201 of the
Sarbanes-Oxley Act. As noted earlier, subject to some very limited exceptions, a registered
public accounting firm cannot contemporaneously provide audit services and:
1. bookkeeping or other services related to the accounting records or financial statements
of the audit client;
2. financial information systems design and implementation;
3. appraisal or valuation services, fairness opinions, or contribution-in-kind reports;
4. actuarial services;
5. internal audit outsourcing services;
6. management functions or human resources;
7. broker or dealer, investment adviser, or investment banking services;
8. legal services and expert services unrelated to the audit; and
9. any other service that the [Public Company Accounting Oversight] Board determines,
by regulation, is impermissible.
The impact of this prohibition is far more wide-ranging than might at first be
appreciated. Although it is a piece of US Federal legislation, there are widespread
concerns that its provisions might be more widely imposed in the US by being replicated
by various State legislators (see Partners Report, 2002; Sachdev, 2002). More
importantly, there are worldwide repercussions because section 106 of the Act requires
foreign public accounting firms who audit a US corporation to register with the Public
Company Accounting Oversight Board and so be subject to the provisions of the
Sarbanes-Oxley Act and the regulations of the Board!
At the time of writing the ramifications of this legislation for the structure and conduct
of accounting practices have yet to unfold. At one extreme, accounting firms were being
starkly exhorted to choose between the audit and the consulting work (Partners Report,
2002). The president of the American Institute of Certified Practicing Accountants
(AICPA) was reported to have predicted that as many as two-thirds of the approximately
800 [US] firms that audit public companies will forgo that business in the next two years
(Sachdev, 2002) due to concerns about the increased regulatory environment. In reality,
although Sarbanes-Oxley may have speeded up the process, the separation between audit
and consulting divisions was already underway in some accounting firms (see endnote 8
and Ham, 2002). Auditor independence is clearly important to all stakeholders (including
accountants) but in the medium to long-term the demands for accountants consulting and
knowledge-based services are unlikely to diminish. There are a number of reasons for this
expectation. One of the strongest is simply that the general forces for change discussed
earlier have not gone away as a result of Enron. Clients continue to need the sorts of skills
that accountants have and that strong demand may well mean some compromise between
independence and consulting services will emerge (see, for instance, Currie, 2002; Ham,
2002; Marcus, 2002). It seems likely that in the short-run firms will now have difficulty
using audit services as a vehicle for selling non-audit services but this could even be at the
expense of additional costs to clients. Marcus (2002) has argued that there are efficiencies

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79

that can be achieved from the conduct of both audit and non-audit services because the
knowledge obtained and the improvements made to a clients systems from one of these
types of services can assist in the conduct of the other service thus reducing overall costs.
Another reason to expect that audit firms will be reluctant to withdraw entirely from nonaudit services is because the latter are lucrative (Ham, 2002)!
Although there are clearly incentives for firms offering audit services to have some
involvement in non-audit services, the mechanism by which this might be achieved, if at
all, remains to be seen. It may be that accounting firms separate their audit and consulting
divisions and, perhaps, treat their old consulting division as a preferred supplier (Ham,
2002, p. 57) or non-audit services may become the primary focus of regional and specialist
boutique accounting firms (Kelcher, 2002) with whom audit based firms may form
alliances or partnerships. Nevertheless, the key point remains that although the mechanism
by which accountants deliver non-audit services may change, these services will remain an
important, if not growing, component of the work of many accountants.
There are many other matters relating to the future of the accounting profession that
could be mentioned if space allowed. For example, as business becomes virtual and
borderless, what does the future hold for our professional accounting associations and their
accreditation requirements for both local and overseas accountants (see, for instance,
Wells, 1994)10 Although many national accounting associations have been exploring ways
of implementing cross-accreditation, these proposed changes have met with some
resistance. For instance, the AICPA had proposed a change in its bylaws that would have
allowed the granting of an interdisciplinary global credential by an affiliated entity to
qualified persons who seek to obtain it. The global credential was to be offered by a new
organisation entitled the International Institute of Strategic Business Professionals. In a
vote by approximately 134,000 of the AICPAs members in December 2001 the proposal
was defeated when 62.7% of the voters opposed it (AICPA, 2002). One of the main
reasons for the opposition was a concern by AICPA members that the global credential
would have empowered the AICPAs competitors rather themselves.
Enough has been discussed here to allow a consideration of what skills will be required
by an accountant to survive and prosper in the first 20 years of the new millennium.

3. What skills will be required by the accountant of the 21st century?


In a world of rapid change where business is conducted globally and via e-commerce
the skills of the future accountant are likely to be demanding. For instance, the one-stop
shop concept is not just about delivering a range of services. An Australian senior
managing accounting partner, Chris Knoblanche, was reported as saying, Its not so much
a one-stop shop [clients] want: its a depth of competencies in all the services, and
10

One example of the possible direction of professional associations was the announcement that the Canadian
Institute of Chartered Accountants proposed to recognise specialist CA designations from association with the
designations of The Canadian Institute of Chartered Business Valuators and The Information Systems Audit and
Control Association (see Canadian Institute of Chartered Accountants, (1999a and 1999b)).

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B. Howieson / The British Accounting Review 35 (2003) 69103

the ability to bring all those together in a team to do the major transactions and projects
(quoted in van Leeuwen (1999)).
Instead of blue collar and white collar workers there is now talk of the emergence of
so-called gold collar workers who will be the elite top advisors to business (ICAA,
1998a, p. 33). The broad skills, the demand for which is already emerging, of the future
accounting practitioner have been aptly summarised by Andrew Mcelhone of Drake
Executives (see Lamba, 1999):
Employers demand skills within specific industries Banks which would normally
take anyone with a commerce degree are now asking for commerce graduates who
specialised in banking. The same goes for insurance companies, superannuation,
whatever.
He says that while specialised industrial knowledge is being asked for, the role of
accountants within those companies requires a far wider range of skills.
Employers also want accountants to have business nous. They have to produce,
interpret, and advise on those numbers, not just crunch them in a backroom while
someone else makes the decisions.
Mcelhones remarks attempt to reconcile an apparent contradiction between the
need for professionals to be generalists and specialists at the same time.
Accountants may, for instance, need to have specialist knowledge in a specific
industry but they will also have to possess a range of generalist (generic) skills
which enable them to apply their specialist knowledge within the big picture context
of a clients/employers organisation and strategy. These dual roles are reflected in a
number of reports by accounting professional bodies around the world, who have also
sought to identify the skills needed by practitioners in the early decades of the next
millennium. The Report of the ICAEWs 2005 Working Party has considered the
implications of change for the accountant in different areas of public practice. These
are summarised in Table 1. Table 2 reports the ICAEWs projections by employment
sector (also see Table 3).11
At the individual and generalised level, the ICAEW and Australian chief financial
officers have summarised the future skills set of accountants as in Table 4.
To many, these competencies are at odds with more traditional concepts of accounting
which portray accountants as skilled technicians, who possess specialisations in the rules
and procedures of financial reporting, auditing, or tax. They are also at odds with a system
of training accountants (both within universities and the professional entrance exams) that
has emphasised the gaining of technical competence as the primary goal of an education
and apprenticeship. In addition, the reported shredding of Enron audit work papers by
Arthur Andersen staff and the increased public awareness of the need for auditor
independence mean that accountants need increased sensitivity to the ethical implications
of their decisions and (in)actions.
11
A similar survey has been conducted in Australia. The 1998 ICAA survey of Australian business people
which was mentioned earlier summarised the competencies of the future gold collar worker into four broad
areas as shown in Table 3 (ICAA, 1998a).

Table 1
Activities and skills necessary for success in various areas of public practice. Source: ICAEW (1996)
Financial reporting

As firms:
Add value to the
audit by reducing
the perceived risk
to the users of
financial statements

Exploit technology to
provide/interpret
relevant timely
financial information

Tax advice and


planning

Corporate finance

Expected to be an
unattractive area of
work for accountants
because of changes in
technology and
competition from
non-accountants.
Develop and diversify Champion the conver- Likely to be
the range of
gence of management a platform from
assurance services
and financial accounwhich other types of
ting, and non-financial advisory services
performance measures, could be sold
to increase users
information value
Have the ability to
Understand the
No special skills
deploy teams with
changing needs of new mentioned
the right mix of
and existing users
specialist skills

Unlike tax compliance,


seen as a growth area

An excellent
The entrepreneTo keep them
understanding of a wide urial spirit required selves fully up
range of businesses
to run a business
to date with
the latest
management
techniques and
thinking
A wide range of
Managerial skills
A detailed
contacts in industry,
knowledge of
commerce, the professwhat makes
ions and government
organisations
succeed

Be able to handle
IT applications in
order to access
information quickly

Access to sources
of capital

As individuals:

Be seen to maintain
the highest standards
of practice

Negotiating skills

Analytical skills to
give simple/relevant
information tailored to
precise needs of users

Tax compliance

Combine enhanced
specialist expertise with
broader interdisciplinary
business and team skills

Insolvency
and corporate
recovery

The skills
and expertise
necessary to
value businesses
and individual
assets
A broad range
of business
skills, such
as marketing

Management
consultancy

Strong analytical and


problemsolving skills

Excellent
communication
and change
management
skills
(continued on next page)

B. Howieson / The British Accounting Review 35 (2003) 69103

Auditinga

81

82

Table 1 (continued)
Financial reporting

Develop specialist
expertise and/or
industry-specific
knowledge built on
sound general
business training
Have an excellent
understanding of IT
and the systems
approach to auditing

Keep pace with


international
reporting changes

Tax compliance

Tax advice and


planning

Corporate finance

Insolvency
and corporate
recovery

Management
consultancy

Market themselves very


strongly against high
quality competition from
within and outside the
accounting profession

A good knowledge
of company law and
other relevant legislation and regulations

Project manage
ment skills

Skills in interpretation of
financial information

The marketing
skills to reposition themselves
as consultants who can
add value

Expertise in
financial modelling
a

With respect to auditing, the ICAEW also had some recommendations for the profession which were: (i) emphasise and build on the intrinsic value of the audit to
capital markets; (ii) maintain a strong reputation for professional ethics, and promote these as unique selling propositions for auditing and related work; (iii) develop
training programmes in the skills necessary to allow members to diversify away from standard audit products.

B. Howieson / The British Accounting Review 35 (2003) 69103

Auditinga

Table 2
Strategies and skills necessary for accountants to succeed in different employment sectors. Source: ICAEW (1996)
Medium sized firms

The big firms

Corporate sector

Public sector

The technical, financial,


marketing and business
skills to add significant value to their
clients affairs
The broader business and
personal skills to be an
effective adviser and
establish long-term
relationships

Making better use of


international networks to
share investments, risks
and expert knowledge

Exploit the opportunities


in value added areas such
as tax-planning, corporate
finance and business advice

An ability to contribute
to the strategic direction
of the business

Similar skills to those


needed by accountants
in the corporate sector

Forming co-operative
alliances or mergers
with other accountants,
lawyers and
professional firms

Further development of
consultancy divisions and
challenging the strategic advice
consultancies

Broad management skills


including change manage
ment, people management
and marketing

Long-term
continuity of staffing

Focussing on niche sectors


and services, and turning away
business that does not
fit the strategy

Diversification of standard
audit

Strong IT skills

The imagination and


adaptability to contribute in sectors that have
not previously made
substantial use of the
traditional skills of
professional accountants
An awareness of the key
issues in the delivery of
public services, such
as the public service
ethic, openness,
accountability and the
importance of wider
social dimensions

The ability and integrity


to sell on the basis of a
strong reputation

Developing innovative
marketing programmes to
support their strategies
and to differentiate
themselves

Joint ventures with


other professionals

Non-financial performance
measurement and
management skills

B. Howieson / The British Accounting Review 35 (2003) 69103

Small firms

(continued on next page)

83

84

Table 2 (continued)
Medium sized firms

The big firms

Corporate sector

Good local knowledge


and close involvement in the
local business structure

Matching the office network


to the strategy, perhaps by
closing offices to cut costs
or by opening more
high street offices
to attract smaller
clients
Exploiting big firm conflicts
of interest in insolvency, litigation
and similar work

Firms may organise themselves


in functional silos
rather than on a
regional or local basis

The flexibility to take


on new roles outside
the traditional accounting
sphere and to acquire
new specialist skills:
e.g., in tax planning
and internal audit

Strong working relationships


with other service providers
in order to offer a full
range of services
The marketing tools (including
database software) to
target clients with appropriate
services
A commercial approach to
the types of fees and service
levels expected by clients

Practice management skills

Streamlining personnel policies:


e.g., placing greater reliance
on low cost para-professionals

Develop more efficient


staff recruitment and retention
policies designed to develop
better trained and more
flexible workers
Making better use of recruits
by offering broader training and
more varied career options
and mobility
Recruiting staff with MBAs,
industry-specific knowledge
and post-qualification
experience in other
disciplines

Public sector

B. Howieson / The British Accounting Review 35 (2003) 69103

Small firms

B. Howieson / The British Accounting Review 35 (2003) 69103

85

Table 3
Competencies of Gold Collar Workers. Source: ICAA (1998a)
Knowledge

Skills

Attitudes and value

Intellectual
framework

Formally qualified in a
particular discipline: a
prerequisite only

Core basic
technical skills

Well-connected

A general specialist:
breadth of knowledge
and experience

Demonstrated high
level business
management skills

Portable, adaptive
skills: likely to
change career
several times/wants
to upgrade skills
Embrace change

Understanding of
business dynamics

Good communication
skills: also relates well
to people

Technology wise (not IT


technically-expert)

Ability to work in
global markets

Team working-skills:
able to manage
a multi-disciplinary
team
A strategist

Leadership skills:
motivate and
ideas people

If the futurists are correct, then there will need to be a major change in the way both
practitioners and educators view the objectives of university accounting studies and
continuing professional development.12
As an aside, the rise of gold collar workers will present very challenging issues for the
human resource management of the one-stop professional shops. The gold collar worker
will be a more independent and empowered entity than at present. For instance, the 1998
ICAA survey notes that (ICAA, 1998a, p. 33):
The marketable gold collar worker will increasingly be unprepared to work excessive
hours per week, looking for flexible working arrangements that meet lifestyle
requirements and career objectives. Employment contracts will be tailored to fit with
lifestyle expectations. Short-term contracts, out-sourcing arrangements, and other
flexible employment practices will enable the worker to move in and out of the paid
workforce, and to change work practices from say, consulting to permanent
employment and back to consulting, as needs change.13
The need for flexibility in work practices will also become more important as more
women enter what has been a male dominated profession. The membership statistics of
12
Some of these changes are already beginning, for example, the introduction in 2000 of the ICAAs CA
Program which seeks to emphasise analytical skills and strategic thinking. The details of this program are
described later in the paper.
13
For instance, a recent survey by Morgan and Banks of 1000 Australian employees indicated that 57%
would much prefer home-based work, with interest highest among middle to lower-income earners in the
accounting and finance, engineering and IT industries (reported in Field (1999)). 60.2% of men but only
55.3% of women were interested in telecommuting. Clegg (1999b) mentions that at least one large
accounting firm, Deloitte Touche Tohmatsu, has started to address this issue by instituting a system called
Signals which aims to provide employees with a balance between work and personal life.

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B. Howieson / The British Accounting Review 35 (2003) 69103

Table 4
General Summary of Skills for Future Individual Accountants. Sources: ICAEW, 1996; ICAA, 1998b)
ICAEW (1996)

ICAA (1998b)

See the qualification as the starting


pointnot the end pointfor their
professional education and development
Market themselves effectively

Strategic skills including a thorough


understanding of the employers business

Develop strong communication and IT skills

Use every opportunity to broaden and


extend their business skills

Accounting and finance skills including


measurement and reporting skills,
management skills, environmental
skills, costing and cost management skills,
valuation skills (particularly intangible assets),
financial market skills, risk management,
and compliance with tax legislation
People skills including general
management skills (particularly for
co-ordinating teams), communication and
presentation skills, project management
skills, change management skills,
negotiation skills, outsource provider/supplier
management skills, international social and
cultural skills
Information technology skills including
systems usage (e.g. sophisticated modelling
software), systems delivery (e.g. ensuring
appropriate information flows)

Shift their emphasis from the tasks


accountants have traditionally done, to
those the market is now willing to
pay for, such as business analysis,
strategic planning, decision support,
information management
Combine technical skills and strategic vision
to contribute effectively to the new
range of performance measures stakeholders will
demand in the 21st century
Add value by managing and improving
their clients, customers and employers performance
Recognise the need to start taking
action now to shape their skills
for the future

professional accounting associations indicate that women represent over 50% of members,
at least at the graduate entry level (for example, see CPA Australia, 2001; ICAA, 2002c;
Wooten, 2001). However, although there are signs that women are making some headway in
advancing their careers in accounting,14 a considerable divide still exists between men and
14

For example, US surveys suggest that the proportion of women partners in Big 5 accounting firms has grown
from 4.9 to 11.9% between 1992 and 2000 (Strafford Publications, Inc., 2000).

B. Howieson / The British Accounting Review 35 (2003) 69103

87

women in senior managerial and partner positions. For instance, Baldiga and Doucet (2001)
report that US evidence indicates that only 15% of women CPAs hold positions of partner,
principal, director or senior manager while 41% of male CPAs hold these positions. An
Australian survey found that 34% of male CPAs were senior managers or partners and 11%
were chief executive officers but women CPAs represented only 9 and 1%, respectively, of
these categories (CPA Australia, 2001). Wooten (2001) argues that there are at least five
institutional pressures that are likely to continue to promote the interests of women CPAs:
external pressure for firms to manage workforce diversityfor example, social
responsibility obligations and a need for firms to achieve an economic advantage.
Failing to retain women employees means a loss of valuable expertise and experience.
Staff turnover is also costly;
pressures from constituentsfor example, professional accounting associations have
begun to promote the interests of their women members and are proactive in exploring
means of improving womens career prospects such as mentoring programs. Wooten
also reports some anecdotal evidence that suggests that some clients of accounting firms
are expecting to see more women in the firms customer service teams;
consistency of institutional pressures within organizational goals and characteristics
for example, large public accounting firms adopt socially responsible policies in the
expectation that this will add to the perceived prestige and reputation of the firm;
institutional pressures imposed by legal authoritiesfor instance, equal opportunity and
sexual harassment legislation; and
environmental uncertaintyduring times when skilled professionals are scarce,
accounting firms can help manage their labour shortages by making their workplace
practices more attractive to skilled women accountants.
The need to ensure more flexible workplace practices is not limited to attracting more
women accountants. As with the ICAA, 1998a survey, the Vision 2010 report predicts that
gold collar workers will be highly mobile and if employers are to retain them, then there
will be a need to supply constant training and opportunities for career enhancement that
the worker, rather than the employer, can control (Epstein, 1998). Epstein (1998, p. 9)
concludes:
That suggests a dual reality for employers: That they must value their workers
knowledge and skills, while at the same time acknowledging that todays employee
may work for someone else tomorrow. Japanese business culture, for example, tends to
value personal relationshipsand thereby the tacit knowledge in individualseven
more than Western culture does. As enterprises work more through alliances than
through their own internal organization, the ability to manage networks of people may
be as key to future success as the core competencies of the partners involved.
Breaking old hierarchies and rigid work practices could be a considerable challenge to
many accounting firms. For instance, in February 1999, Business Review Weekly ran an
article entitled Small CPA Firms in Danger in which the buyout of small firms by bigger
organisations was noted. The article suggested that there was a brain-drain from smaller

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B. Howieson / The British Accounting Review 35 (2003) 69103

accounting firms due to poor handling of staff. One consultant, Allison Ashby, was
reported as making the following comments (Thomas, 1999, p. 64):
They (accounting staff) want out, into the corporate sector, where they perceive the
hours to be lower and pay higher. Rightly or wrongly they also perceive the work
variety in companies to be better. Those hours in the big firm arose through staff
shortages, job deadlines and partners lack of awareness of what their staffs were going
through. Partners are often not good at saying thank you; its more a case of saying
youre late to someone who comes in at 10 a.m. after a long nights work.
In a similar vein, The Australian newspaper reported the comments of two academics
that there was a brain-drain from higher studies in accounting because students were put
off a career in accounting because of the perceptions of a low pay rate (relative to finance
careers), the difficulty of the professional entrance requirements and the rigidity of the
career structure in accounting public practice (Pryor, 1999). Middle tier and small firms, in
particular, will have to make serious attempts to address these perceptions if they are to be
able to attract a suitably high level of raw material for future gold collar accountants.

4. What are the implications for accounting education?


Given the forces for change and the accompanying skills set reviewed so far, what are
some of the issues accounting educators must address if they are to supply the sort of future
graduates that the profession requires? The release of a major review of accounting
education in the US (Albrecht and Sack, 2000) provides one source of valuable evidence
and insights into this issue.
In Chapter 5 of their monograph it is suggested that there are six broad problems with
the current state of accounting education:
1. Course content and curriculamany stakeholders view accounting curricula as too
narrow and often outdated or irrelevant. [Curricula] are driven by the interests of faculty
and not by the demands of the market (Albrecht and Sack, 2000, p. 43).
2. Pedagogythe teaching of accounting is dominated by a rule based approach which
promotes memorisation rather than creativity.
3. Skill developmentthe focus of teaching is upon content rather than the development
of generic skills.
4. Technologythe emphasis remains on technology as a bookkeeping system rather than
on how technology can be leveraged to make business decisions (p. 43).
5. Faculty development and reward systemsaccounting teachers are largely divorced
from teachers of other business disciplines and business practitioners.
6. Strategic directionmost accounting schools have failed to strategically plan for
the changes to their environment and as such have lost ground to other disciplines
and other education providers.
These problems are explored below.

B. Howieson / The British Accounting Review 35 (2003) 69103

89

4.1. Pedagogy and content


In too many respects, accounting education is being delivered the same way today as it
was 20 or 30 years ago. In one simple sentence, Albrecht and Sack (2000, p. 2) succinctly
summarise the predominant state of accounting education and what is wrong with it.
Despite actual and predicted changes in business practice, accounting is still largely taught
within the long established format of lectures, tutorials and workshops and from the
perspective as if it consists of nothing more than a series of discrete independent topics
relating to technical matters, usually entirely divorced from other related disciplines.
For example, intermediate accounting courses are usually a litany of technical
bookkeeping subjects such as lease accounting, consolidations, and tax-effect accounting
with limited attempts to inter-relate the various topics to each other or to place them in a
realistic and interesting business context. As such, students leave these courses with little,
if any, sense of an inquiring mind and do not have an appreciation that the financial
reporting choices they make may have an impact on other parties both within and external
to the organisation. The approach is even worse in the context of so-called accounting
theory courses where we would expect to see an attempt to place the theory in an
institutional and practical context and to explore the relationship between accounting
practices and user needs. But typically each topic is presented as an independent subject
such as the conceptual framework or agency theory with little effort to relate the
abstract concepts to real world phenomena. In addition, most of these courses on
accounting theory and concepts are actually taught towards the end of an undergraduate
degree. It seems strange to wait until the end of their degree to ask students to reflect on,
for instance, the nature of an asset when they have had to work with that concept right
from the start of their studies. Consequently, it is not surprising that many accounting
students find accounting theory irrelevant and uninterestingthe exact opposite of what
their reaction should be!
The traditional approach described above can be contrasted with the needs of the
knowledge worker or new information professional as described by two American
practitioners (Elliott and Jacobson, 2002, p. 75):
The required competencies will be broader, covering not only all types of information
that might be relevant to a business problem, but also all types of decisions.
The challenge of the new information professional will be to formulate the strategy to
align or mesh the right information with particular and generic problems requiring
decisions.
They argue that academics have a role to play in the evolution of the accounting
profession by defining a body of knowledge more suited to the realities of the
marketplace, to the needs of the decision makers, and to the future prospects of both
(Elliott and Jacobson, 2002, p. 79). Students of accounting need to be prepared so that they
can identify and create decision-useful information, arrange its availability when needed
for decisions, and design feedback loops to ensure the continued readiness and
effectiveness of systems (Elliott and Jacobson, 2002, p. 79). An overemphasis on
accounting rules and techniques will clearly not meet these aims.

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Albrecht and Sack (2000) document a declining interest by US students in accounting


studies. These students are now choosing to major in other business areas such as finance,
strategy, information technology and e-commerce. The two researchers even found that
many accounting teachers and practitioners would not choose to undertake the accounting
courses they took as students if the approach and content of teaching was to remain the
same! As such, they argue, accounting is in danger of becoming a second class citizen
relative to other business majors because these alternative fields of study appear to reflect
changing business practices.
On the other hand, as Mathews (2001, pp. 118, 120) notes Albrecht and Sacks gloomy
picture needs to be balanced by the understanding that they did not survey the members,
academics, and graduates of other professions who may be experiencing similar
disillusionment. Nevertheless, even Mathews (2001, p. 120, emphasis added) acknowledges that:
The absence of courses in accounting theory, and the exclusion of non-financial data
from the programme lead to the results of narrow thinking discussed in the [Albrecht
and Sack] report. These issues are common to many [non-US] systems of accounting
education.
These problems of course content and declining student interest are only exacerbated
by university administrations that, particularly for the long established institutions, have
been driven more by research interests and, perhaps, scholarly prejudices rather than by
teaching quality.
Practitioners too have traditionally encouraged an entrenched technical approach to
accounting education. For instance, some sectors of the profession have persistently
complained that universities produce graduates, who cannot instantly be turned to
profitable activities. The professional accounting bodies have also, until recently,
promoted the command of technical accounting, tax and auditing rules as the primary
benchmark to satisfy their entrance examinations. It seems that if accountants are ever to
become gold collar workers, then both universities (including university administrators)
and the practitioners must change their perspective away from the short-term and technical
and more towards the long-term and adaptability. In the new millennium, the practicality of
an accountant is not to be judged by competence in procedures alone, but also by capacities
in problem solving and client advice. It is time to acknowledge that the objective should be
to prepare students to become professional accountants, not be professional accountants at
the time of entry to the profession (Williams, 1994, p. 208, emphasis in original).
Our discussion of the gold collar worker indicated that we must move away from an
approach that seeks to pass on to our students a thorough knowledge of all the technical
rules of accounting or tax, etc. With the rate of change in business and business regulation
it is simply becoming physically impossible to be an encyclopaedia of rules. Bandy (1994,
p. 427) notes:
At one time it was possible to read everything published in accounting. R.M. Mautz
reports that, in 1948, A.C. Littleton stated that he read everything that was published in
accounting Who would do that now? Or would want to?

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91

He goes on to argue that (Bandy, 1994, p. 428):


Law schools do not attempt to teach law students every law. Rather law schools attempt
to provide students with skills needed to conduct legal research. Moot court serves to
provide students with simulated courtroom experiences before they serve real life clients.
Williams (1994, p. 208) summarises the change that must take place in accounting
instruction when he states:
They should be taught to identify and solve unstructured problems, learn by doing,
work in groups, and learn to use technology effectively, such as databases for
researching issues.
Students learning should focus on skills as well as knowledge. Especially important,
students should develop good communication and interpersonal skills. In addition, their
ethical and professional values should be enhanced.15 But of greatest importance, the
curriculum should focus on the process of learning, not just teaching answers. If
students can learn how to find answers, then they are well prepared for a lifetime career.
To achieve these outcomes, various innovative strategies must be devised, tested and
incorporated into the teaching methods and curriculum of accounting courses. Some
suggestions include:
a revision of course curricula and degree structure that seeks to develop an integrated
set of courses, which place the content firmly within a realistic context and avoid the
trap of treating each topic as though it is unrelated to any other topic;
the use of team teaching of courses needs to be developed much further (particularly
across various business disciplines). This has the advantage of exposing students to
different mind sets and of setting the course material in a wider business context. This
would help students appreciate the interrelationships between all aspects of a firm. It is
necessary for students to understand the role of accountants as consultants who need
skills in the use of IT and strategy;
a continued use of case studies to help stimulate student interest and link course
material to accounting practice. However, the content of cases should be extended to
incorporate so-called scenario planning in which students must think strategically
within a particular business context rather than simply technically. As such, it is time to
recognise that managerial accounting may be the more dominant major in an
accounting degree rather than financial accounting;
class activities need to be set in more of a systems contextnot only a technical
command of IT systems but how such systems can be designed and used for analysis
and decision making. In the words of Albrecht and Sack (2000, p. 57), Our students
must understand how technology has and will continue to change the way we provide
and use information to make decisions;
15

An understanding of ethics has assumed a much higher profile in the light of the scandals associated with
Enron and other corporations.

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B. Howieson / The British Accounting Review 35 (2003) 69103

related to these prior two suggestions, it may be time for university accounting and
finance departments to reassess the place of work-based learning in their programmes.
Eraut (1990, p. 25), amongst others, has noted the common separation between
training and the workplace and the importance of trying to integrate these two
contexts:
knowledge is transformed by the process of being used. Hence knowledge used only
in the training context will not be the same as apparently similar knowledge used on the
job; and knowledge used in one job context will not be quite the same as apparently
similar knowledge used in a different context.
Various methods of getting students to involve themselves in real work-place
scenarios are available (see, for instance, Crebert, 1995; Martin, 1996; Trigwell and Reid,
1998). However, given that most mainstream accounting and finance courses may have
many hundreds of students in them, work-based learning opportunities will be admittedly
difficult to implement. One successful role model is the initiative between the University
of Newcastle upon Tyne, PricewaterhouseCoopers (PwC), and the ICAEW to offer a
business programme that includes a significant component based on a placement with
PwC. This placement not only gives students a valuable opportunity to explore how their
university studies are transformed by practical experience but it also allows them to fasttrack their Chartered Accountant qualification;16
there is a need for more interactive group work within tutorials rather than simply
presentations by individual students;
much greater use of the world wide web as a reference source;
the training of students in the practical skills of ethics - namely personal and
professional values clarification, ethical decision making, and ethical policy setting.
Past experience suggests that implementing these sorts of pedagogical changes is more
easily said than done (see, for example, Mathews, 2001). The types of resistance that might
be encountered and the barriers to change are explored in the next section of this paper but
one example of the types of changes that might and can be made can be found in Australia.
This example is the ICAAs new CA programme which is the recent replacement to its
Professional Year programme (PY) for entrance to the ICAA. The objectives and
proposed learning techniques dovetail very well with the observations made here in that
the ICAA is clearly seeking to develop the types of skills it identified earlier in its various
surveys. The PY concentrated on in-depth technical modules in subjects such as Financial
Accounting, Auditing, and Taxation. The new CA programme, however, consists of five
modules, the first of which, CA Foundations, is a module devoted to broad business
knowledge, skills and values providing an important base for the collaborative and
interactive learning that is central to the programme (ICAA, 2002a). The objectives of CA
Foundations are to develop chartered accountants who are (ICAA, 2002b, pp. 27 3):
16

Information on the program can be found at http://www.ncl.ac.uk/flyingstart/about.htm

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informed about the latest international, disciplinary and business knowledge


innovative problem solvers
forward-thinking change managers
technology-literate
collaborative team workers
capable communicators of shared understandings
service-oriented
ethical
professional and
reflective about their own knowledge, skills and values.

The candidates seek to obtain these objectives via a varied mix of teamwork and
individual exercises, self-study materials, on-line learning methods, and weekly workshops. Only 16% of the module is directed towards developing and assessing knowledge,
while 69% of the content is directed towards skill development. The remaining 15% of the
content is oriented to developing professional values (ICAA, 2002b, p. 1). The other
modules in the CA programme include three technical modules and a final CA
Integrative module. Even the technical modules emphasise problem solving skills and
strategic planning.
One side issue, perhaps, is what is the role of a professional designation for the gold
collar worker of the future? Future workers may be more attracted to MBAs, which seem
well placed to provide the generalist type of instruction that would satisfy the desired skill
set for the future business environment. Indeed, professional accounting associations
everywhere will have to think seriously about how they position and market themselves to
an increasingly generalist class of experts. This is not to say, however, that a professional
designation is not valuable. CPA Australia, for instance, has recently launched its own
MBA programme as a means of meeting the expected skill needs of its members, while at
the same time signalling to the community that the MBAs of its members are associated
with an organisation with professional and ethical standards.
4.2. Barriers to change in accounting education
It must be acknowledged that there are a number of committed academics who are
seeking new and innovative means of training students for the future. In more recent years,
many university departments have established teaching and learning committees to help
foster innovation in instruction. Nevertheless, there remain significant barriers to those
who wish to reform the teaching of accounting. These barriers include:
lack of financial and physical resources. Most university accounting departments have
insufficient resources available to them to allow for effective innovation in teaching.
For instance, student/staff ratios are usually too high and the number of teaching venues
is too small to allow for small group teaching that could effectively support innovative
teaching methods;
despite the rhetoric, there is still a widespread perception that universities do not reward
teaching quality when it comes to promotion. Certainly, for the long established

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institutions, research still seems to be the higher, rather than equal, priority (not that
research should be abandoned or avoided);
in Australia, at least, university accounting programs are locked into a three year
model. Attempts to expand to a fourth undergraduate year and thus provide more room
for broadening student education have been unsuccessful. By contrast, in the US many
states now have five-year accounting programs;
a general lack of awareness on the part of accounting academics (and
administrators) of the changes the business environment and a need to re-skill
accounting educators in innovative teaching methods and content.
A major impediment to change is the readiness of some academics and students to
explore whether change might be necessary and whether they should be a part of it. For
instance, attempts to introduce a more integrative critical approach to the teaching of
accounting at Waikato University in New Zealand were strongly resisted by some
academics and students because such an approach did not accord with their understanding
of what accounting was all about (see Gallhofer et al., 1998). Widespread stereotypes of
accountants as bookkeepers are hard to dispel and should be attacked as early as
possible in students accounting studies. The professional accounting bodies may be able
to help reduce the impact of these stereotypes by way of educational visits to secondary
schools.
In a series of case studies on re-engineering change in UK universities, Allen and
Fifield (1999) indicated that university departments and academics can be particularly
resistant to widespread change in the workplace because of cultural, political, and
managerial structural factors, which stem from the ancient values of these institutions. In
particular they noted that one major factor that drives resistance to change is a culture of
individualism that exists at both the levels of departments and individual academics.
Central to this culture is the notion of academic freedom in which departments are
typically decentralised and autonomous and individual academics believe that they have
the right to choose whatever pedagogical approach best suits the subject matter at hand.
Any attempt to introduce pedagogical change is usually resisted on the basis that it
represents an attack on academic freedom. In addition Allen and Fifield argue that a sense
of inertia exists in many universities where staff believe that long established academic
programmes have worked and can therefore see no reason to change them. In a similar
vein, most academics will have invested considerable intellectual capital and energy into
their existing courses and may be reluctant to embrace change if they see it as having to
start from scratch all over again. The link between research and teaching can exacerbate
this resistance to change because academics have often developed their own specialist
research commitment for which they may be widely acknowledged and recognised. These
research specialisations in turn drive their teaching interests. Asking academics to make
major changes in their teaching may thus be seen as threatening a change to their
underlying knowledge/research base and interests.
One trend over the years that is saddening, is the extent to which the academic and
practitioner communities usually do not work together. There was a time when the
practitioners played an active role in university teaching but this is no longer the case
(compare, for example, Wildman, 1926). A shift in the research interests of academics may

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be one reason for this but it is also probable that teaching links are also not rewarded within
accounting firms. However, practitioners have so much to offer. Their wealth of experience
makes them a vital but largely untapped source of case study material and even if only as
guest lecturers, they can use their experiences to illustrate the study topics and capture
students interests. There are also benefits to the practitioners in that it raises their profile
with students and assists them to identify quality candidates for potential recruitment.
4.3. Competitors to individual local universities
An internationally mobile workforce with advanced communications technology poses
interesting challenges to the role of individual universities who have traditionally served
their local communities. There are at least two issues here.
First, for some time now some universities have offered distance-learning programs but
the great majority of these have been limited to national boundaries. Future professionals
(particularly at the postgraduate level) may wish greater flexibility in the location from
which they do their studies and in their choice of educational institutions. Institutions will
need to explore much closer working relationships/partnerships with other institutions in
their region (e.g., South East Asia) and globally. Such developments are currently being
explored in the UK and elsewhere. Lymer (1999) reports:
Some of the UKs top Universities are joining forces with similar bodies in China,
Australia and Canada. The new group will be called the Vice-Chancellors and
Presidents Forum.
Part of the plans appear to be the idea of global degrees where, for example, a student
could take different years at different Universities in different countries but gain a
complete degree from one of them. This credit type system has been tried,
unsuccessfully, in the past in the UK, however, previously it was sunk by the very
Universities who now are supporting this concept.
Although the move to e-learning has been rapidly embraced by some institutions, it has
not been without its problems. Goodridge (2002), for instance, noted the financial
difficulties faced by the on-line Cardean University (a partnership between UNext.com
and the universities of Carnegie Mellon, Columbia, and the London School of Economics)
that forced it to conduct substantial restructuring. She notes that, in general, the rush to online learning lacks maturity at present and she states (Goodridge, 2002):
Some of the stumbling blocks that trip up users of e-learning technologies are
integration and interoperability problems among elements of e-learning systems;
product limitations; inadequate support services; and vendors financial woes.
The Cardean experiment seems to have worked best for narrowly defined business or
technical courses (Smith, 2002a). Nevertheless, more cautious entrants into the e-learning
environment, such as the Alliance for Lifelong Learning (operated by the universities of
Oxford, Stanford and Yale), have been enjoying modest success (Smith, 2002b). Some
form of e-learning seems to be here to stay but its successful growth will depend, in part,

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on e-learning providers having a much clearer and more precise understanding of


the training and educational needs of the end user of their product. Careful and seamless
integration of the various components of the e-learning system will also be required.
The second issue is that universities are likely to face competition from new players in
the education market. These may even be large multi-national companies who believe that
the career aspirations of their workforce might best be satisfied by superior in-house
training. Professional associations are now starting to offer their own post-graduate
qualifications. In Australia, for example, the ICAA has recently gained approval to award
a Graduate Diploma to all ICAA candidates who complete the CA program. The ICAA
believes that the graduate diploma provides a stronger base for developing strategic
partnerships for the provision of masters degrees for members (Charter, 2001, p. 74). As
previously noted, CPA Australia offers an MBA program in conjunction with three
Australian higher education institutions. Textbook publishers are also potential
competitors. For instance, the publisher, Harcourt Inc., is reported (Mendels, 1999) to
be considering a Harcourt University Project which would be an institution that only
offers courses over the internet. Mendels (1999) indicates that this movement is young but
there is considerable interest among various organisations to enter this market.
Of course, online teaching poses challenging pedagogical problems and its merits must
be more carefully assessed against the more traditional face-to-face methods of
instruction. Although many universities are racing to use on-line technologies and webbased courses as a perceived means of conferring competitive advantage upon themselves,
many critics warn that more caution needs to be exercised. For example, in a radio
program, the Australian Broadcasting Corporation (ABC) reports the following comments
from Canadian policy analyst Marita Moll (ABC, 2002):
learning and education is a people experience. You cant take the people out of
it, you cant take the social experience out of it, you cant take the teachers out of
it. And thats what a lot of this technology does, it removes us from the people
from whom we have gained much of our education.
In the same program, American academic Langdon Winner argues (ABC, 2002):
In a normal face-to-face classroom for example, if you follow what actually goes
on, there is a continuing negotiation between students and teachers. In the online
world I think that kind of negotiation is less likely, particularly in these heavily
commoditised courses where what students are getting basically is the educational
equivalent of a Big Mac.
The importance of the social interaction that occurs in more conventional teaching
methods cannot be understated. Although not inherently opposed to the use of technology
in teaching, the educationalist Parker Palmer (1998, p. 21) insightfully notes that the
imprint of good teachers remains long after the facts they gave us have faded. Advocates
of web-based learning might be tempted to argue that social interaction can still be
achieved by means of electronic chat-rooms but as Palmer, (1998, pp. 75 76) argues:

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a teaching and learning space must be more than a forum for individual
expression. It must also be a place in which the groups voice is gathered and
amplified, so that the group can affirm, question, challenge, and correct the voice
of the individual. The teachers task is to listen for what the group voice is saying
and to play that voice back from time to time so the group can hear and even
change its own collective mind.
Chat-rooms do not offer the spontaneity and interaction needed to support this
important social aspect of the educational process.

5. Where to from here?


This paper has sought to describe and explore some of the implications for practice and
education of the expected changes to flow from the most recent developments in the
evolution of accounting. As a minimum, this paper is an invitation for accounting schools
and individual scholars to reflect for themselves upon the current state of their educational
offerings and what, if any, changes should they effect to their own pedagogical
methodologies, content, and methods.
5.1. Some key questions
Responding to change poses many difficult questions for higher education institutions,
departments, and individual academics. At one level Albrecht and Sack, 2000 are at pains
to stress the need for university accounting educators to respond to the challenges raised
by a changing environment by thinking strategically. They strongly believe that increased
competition among different providers of business and accounting education means that
each accounting school must now strive to ensure that its offerings are sufficiently distinct
from that of its competitors to create a unique niche to attract students. For instance, they
note (p. 56) that if we effectively teach [analytical and generic] skills, we will add value
that cannot be duplicated through distance learning and other lower-cost delivery
methods. In Chapter 6 of their review, Albrecht and Sack argue that an accounting
schools strategic planning process should consist of four sequential sets of questions (see
Albrecht and Sack, 2000, p. 64):
1. What is our environment and what are our resources? Who are our students and
employers? Some educational institutions may need to recognise that the demand for
their students may extend beyond primarily serving public accounting firms.
2. What kinds of programs should we have? Should we form strategic alliances with
other programs or disciplines? Some accounting schools may decide that they wish
only to be service providers to other business disciplines.
3. What should our course content look like? Which courses should we offer? How
should we structure our curriculum?
4. What kinds of delivery methods should we use? How do we develop our faculty? How
do we measure performance?

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In addition to these questions, many others could no doubt be generated. Resource


issues will not be limited to simply asking what is available, but rather will focus on how
resources can be increased. In Australia at least, universities have faced significant
declines in government funding which somehow have to be supplemented from other
sources. This can lead to overloading of staff and other resources as universities seek, for
instance, to increase the numbers of overseas fee paying students. Extra students also
reduce the time academics have for other important duties such as research and so
managing workloads will become an even more important challenge for academics.
Related resourcing issues include maintaining availability of suitable physical and
technological facilities (e.g., rooms and computing facilities), how to manage class sizes
and student/staff ratios to ensure students receive an appropriate level of individual
attention, and how to package and present new forms of teaching materials? If the
accounting profession is broadening its scope as claimed and thus attracting a wider range
of people, another question, which must be addressed, is how are universities to encourage
new people (particularly young people) into an academic career and to higher university
studies (rather than, for instance, the offerings of competitors to universities)? Mention was
made previously in this paper that the culture and attitudes of academics could be a major
source of resistance to change. Institutions, heads of departments/schools, and especially
individual academics will have to face up to the difficult question of what incentives can be
offered or found if staff are to respond to changes in the accounting environment?
It will not surprise the reader to note that there are no easy answers to these questions.
As noted by Mathews (2001) many prior attempts to change accounting education have
not been successful. Nevertheless, some observations are given below on possible
approaches to implementing a review of what academics offer and how it is offered.
5.2. Modus operandi?
In a previous section of this paper some cultural, political and managerial factors were
identified as attributes of universities and academics that result in resistance to change.
These factors are steeped in tradition and long held values and so are very difficult to
change quickly. In their case studies of UK higher education institutions, Allen and Fifield
(1999) found that changes in the work practices of universities would be more likely to
succeed if the cultural aspects of the workplace were acknowledged and accommodated in
any proposed changes. For example, they argued that although continued and visible
senior management support was crucial for successfully implementing change, it was also
vital that the development and implementation of new proposals was conducted via a
participative process in which all those who would be affected felt that they had input to
the process. If this were not the case, the proposed changes would be viewed as an attack
on academic freedom and vigorously resisted. Further, it was important to couch proposed
changes in terms which were consistent with the existing cultural paradigm or values that
staff identified with. As a consequence, they argue that successful change in universities is
likely to be more incremental rather than radical. Nevertheless, this is preferable to no
change at all.
One strategy for implementing change in a way which is accepted by academic staff
is the implementation of a program of regular reviews of the curriculum. Depending upon

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how this is implemented it might offer the opportunity for those who wish to
explore alternative pedagogies to do so while allowing those who are more cautious to
observe the success or otherwise of these efforts. If universities and departments make
available appropriate training and technologies to help academics respond to
environmental change, those who are successful in using the new methods may attract
other staff to join them. Regular reviews of the curriculum also offer the possibility of
being more inclusive because all interested academic staff could participate as well as
other stakeholders such as employers and students.
Associations of accounting academics have a role to play in developing strategies for
accounting education and lobbying interested stakeholders for change and resources. For
instance, the American Accounting Association has developed projects such as the
benchmarking of different accounting schools, electronic publishing, and programs in
teaching faculty development (see Albrecht and Sack, 2000, p. 12) and similar activities
could be undertaken by other associations such as the Accounting and Finance Association
of Australia and New Zealand and the British Accounting Association. These associations
could also seek to join forces with the practitioner equivalents to, not only lobby for
resources, but also educate students against the stereotypes of accounting careers. As noted
earlier, it may well be necessary to change perceptions of accounting practice at the
matriculation/high school level by communicating with students and their career guidance
officers.
There can be no pretence that solutions will be straight-forward or obvious but we
should resist the temptation to give up simply because reform is all too hard. Complaints
of too much teaching, not enough resources, and unsympathetic university
administrations which wont listen are all common experiences which make it easy for
academics seeking change to sink into despair. However, constantly using these excuses
as arguments against reform merely reinforces them and creates a mental state of
pessimism and paralysis. Much inspiration can be gained from the writing of Parker
Palmer (1998, Chapter VII) who seeks to call on teachers to adopt a movement mentality
to challenge the restrictions currently facing them. Palmer argues that a study of all the
great movements for social reform (such as the civil rights and womens movements)
faced forces that similarly seemed insurmountable. In the traditions of these social
movements, academics must learn to institute reform by fighting on grounds other than
that chosen by university administrations and government policy. There are at least two
lessons here:
first, that the challenges currently being faced and a general despondency among
academics are clearly signals that something new has to be done, that things have to
change. As such, this should be seen as an opportunity to be creative in generating
alternatives to the present situation; and
second, it is important to find sources of countervailing power (Palmer, 1998, p. 165))
which give leverage to proposed reforms. In the case of accounting, such
countervailing sources of power could include the accounting profession/firms, other
employer groups, the media, and opposition political parties. For instance, many larger
professional firms and businesses have developed their own highly advanced teaching
methods and technologies. It may be possible for individual accounting departments or

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even individual academics to enter into strategic partnerships with these organisations
to gain access to new resources that might otherwise not be available through the
university system.
Palmer sees four stages to the development and implementation of a movement
mentality but a detailed description is beyond the scope of this paper.17 Further,
implementing reforms requires energy and drive that may well require the services of
individuals with strong personalities and organisational skills. Nevertheless, Palmers
characterisation of the reform process does offer the hope that change is possible.

6. Conclusions
This review of the predicted future for accounting practitioners and their skills needs
presents significant challenges to accounting educators and to employers. It seems likely
that the traditional approaches will be inadequate and that new philosophies, materials and
technologies will be needed. The end objectives of innovations in accounting education
will be to develop students skills in abstraction, systems thinking, experimentation, and
the capacity for communication and collaboration. There are some notable efforts now
emerging both within universities and from the professional accounting bodies that are
consistent with these life-long learning goals. However, serious barriers to innovation
remain and both universities and the profession should be encouraged, as a part of their
own strategic planning, to explore ways in which they can contribute to the learning skills
of future knowledge workers.
The objective of equipping students for life-long learning cannot stop at university.
The predictions for rapid change in knowledge and technology and the desire by gold
collar workers for training which furthers their careers, suggests that continuing
professional development is another area which will become a much more significant
activity than it is now. Universities may be able to position themselves as quality suppliers
of professional training but they will face potential competition from employers and
professional associations.
It is appropriate to summarise and conclude this paper with the closing remarks of
Albrecht and Sack (2000, p. 66) which signal both warnings and promise for the future of
accounting education:
Corporate and public accounting firms are working hard to transform themselves into
finance professionals and professional services firms. It is now accounting educations
turn to transform itself. Failure to do so could be fatal. Seizing the moment to make
17
The four stages are described in more detail in Palmer (1998, Chapter VII) but are summarized on page 166
(emphasis in original) as: Stage 1. Isolated individuals make an inward decision to live divided no more,
finding a center for their lives outside of institutions. Stage 2. These individuals begin to discover one another and
form communities of congruence that offer mutual support and opportunities to develop a shared vision. Stage 3.
These communities start going public, learning to convert their private concerns into the public issues they are
and receiving vital critiques in the process. Stage 4. A system of alternative awards emerges to sustain the
movements vision and to put pressure for change on the standard institutional reward system.

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needed changes could increase our relevance and open new opportunities for
accounting education.

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