State of the profession: The decade in accounting

Mark Lloydbottom looks back at the last decade in the accountancy profession and casts a weather eye on the road ahead.

The last decade started with the threat of the much-hyped millennium bug and ended with a global economy in a deep malaise. Even with the ground-breaking economic surgery of quantitative easing, we still do not know what course or timeline the recovery will take.

There were of course those who diagnosed the seemingly inevitable correction, but few perceived the full impact the failure of Bear Stearns, Lehman Brothers and the subsequent faltering of sub prime loans would have on the global economy.

We witnessed the burst of the dotcom bubble in March 2001 and internet entrepreneurs joined the rest of the commercial world in having to accommodate the demands of shareholder value. But not even that collapse could prepare us for the events of 9/11.

Things got worse for the accounting profession with the Enron scandal. Not only had their special purpose vehicle manipulations misrepresented the company's financial status on a grand scale, the company had also been deeply involved in power outages in California as they sought to manipulate energy prices. One side effect of the Enron fraud was the demise of the company's auditor, Andersen, as a result of a conviction (subsequently overturned) for shredding Enron documents at their Houston office.

We saw out 2005 with the profession endeavouring to embrace value added services. Unfortunately progress was hampered by a lack of clients or inadequate skills to deliver the new services that institutes thought clients would be demanding.

The first decade of the new millennium has been marked by accelerating change on all fronts. Post-Enron, regulations have advanced and intensified. And the internet has changed the way we do business. We can now access endless data within a second, and online commerce has provided an opportunity but also a threat, particularly to those who trade from the high street.

Back in the office, deadlines and penalties for non compliance have become the norm and many now envisage their offices consuming less paper (well, computers have been largely responsible for ever-increasing volumes of paper consumption in the first place after all).

I suspect this year will have some surprises ahead – not least the prospect of a second, double-dip phase of the recession when we feel the aftershocks from the year's Budget cutbacks. Even this government in its dying days recognises that tax has to be increased and public expenditure cut. How can a country like ours end up paying more in benefits than it receives in income tax, capital gains tax and corporation tax?

As I explained in my economic forecast for 2010, efforts to tackle the UK’s systemic debt could ripple through every business and household as well as the wider economy. The challenge facing practitioners is to assess how those impacts will affect their clients and firms.