In 2024 and the years ahead, tax and accounting firms will face increasing challenges. New environmental, social, and governance (EGS) policies call for greater innovation than ever, and as a result, firms are trying new tactics like automating workflows and focusing more on compliance. In this changing landscape, it’s important for auditors to be able to identify and assess risk. 

Here are five recent changes firms should be aware of, along with ways to respond.

1.ESG: the new focus

ESG brings up a number of challenges for tax and accounting firms. As investors and stakeholders start focusing more on ESG in their decisions, firms should deliver reports on ESG if they want to remain relevant. These reports can affect everything from grants and supplier selection to funding and valuations.

But here’s the catch: ESG reporting can be challenging, especially since there’s no prior standard to work from, and comparing to other reports isn’t always effective. In order to audit ESG disclosures, firms will need to either upskill their team or bring on new team members who understand ESG. 

2.Talent: acquisition and retention

Recruiting and retaining talent in this industry has always been tough. Now, as auditors become more in-demand and competition between firms increases, it’s harder than ever. The last few years have seen more tax professionals leaving the industry than entering it. 

As a result of this and a changing industry, the talent pool is smaller and auditors are asked to take on a larger scope of work: involving everything from reports and disclosures to data and technology. This means recruiters have to look for candidates with a more comprehensive skill set.

While new technology can be difficult to navigate and costly to set up, it can help firms offer more beneficial, competitive services to their clients—and make things easier on team members, who can use technology to pull up data and automate time-consuming processes.

In particular, AI and cloud-based audit tools can help firms more easily identify risk, delivering meaningful insights with less time and effort. It’s a valuable way to increase productivity, make your firm more efficient, and save your team a lot of work—which can contribute to your retention strategy.

3.AI and tech: unexplored possibilities

As technology changes rapidly, firms may struggle to keep up with the latest tax software and auditing tools. But it’s a challenge that must be undertaken. Cloud-based technology can help improve communication and streamline workflow, and new AI tools can help you make better use of data and analytics. 

If your firm is struggling, you may want to ask junior team members to help senior staff understand and use the new technology. Not only will this help give everyone a better handle on the new tech, it encourages greater camaraderie between younger and older team members, and makes junior employees feel valued.

As you search for the best software to use for your firm, choose one that can quickly synthesize data and analytics using AI, and that won’t just bring you accurate information, but will offer insights and risk identification as well. 

Using the latest technology can allow you to meet the increasing demands for ESG, risk management, and regulatory compliance. Firms may even be able to automate some aspects of digital reporting and business insight delivery. In addition, new technology can help empower decision-making and speed up audits by allowing you to more quickly and fully consider the risks involved.

4.M&A: new challenges

In 2022, more than 20,000 mergers and acquisitions occurred in the U.S. As M&A activity increases, auditors may find it more difficult to manage all the complexities of these transactions while also ensuring accurate and reliable financial reporting. 

In addition to growing in number, mergers and acquisitions are also becoming more complicated. With this in mind, auditors will need a firm grasp on the tools and technology being used in these processes, as well as specialized knowledge about compliance as it relates to M&A. Once again, AI and other new technology can help with risk identification and analytical decision-making by allowing you to look at work by auditors who’ve faced similar risks.

In light of these changes, firms should look more closely at their internal operations with an eye toward quality and efficacy. This may allow you to create new unique selling points for your firm that can help you compete with other firms. As part of this effort, take time to reconsider your financial reporting methods.

5.Compliance: rapid changes

As regulations continue to change and regulatory scrutiny intensifies, auditors and tax professionals must stay on top of all the latest requirements and upskill accordingly. Expertise in changing tax and compliance laws will always be something clients are willing to pay for.

Because compliance laws are so specific to each industry, firms may want to outsource or work with consultants, especially in industries with recent compliance changes. In addition to adding expertise and knowledge to your firm, this also alleviates the pressure on your in-house team. Another option is to hire a consultant to work in-house on anything and everything compliance-related.

Then again, some firms have started using AI and predictive analytics to navigate compliance. Software with built-in AI may be able to help you stay on top of compliance laws so you can flag risks, prevent violations, and avoid legal consequences.

As auditors and tax professionals seek to develop their own compliance-related skills, they should focus on data analytics, tools, and technology. Firms can help their team by offering training and practice in these areas, and by encouraging continuous learning—which also helps with talent retention.

Embracing change

Things are always changing, but lately it seems like things are changing faster than ever, especially in the technology sector. Financial professionals are feeling the effects of that. But rather than playing catch-up, your firm can change with the times: positioning itself as an up-to-date, technologically-savvy service provider for modern clients.