PwC sees priorities shifting among CFOs and CEOs
CFOs have been adjusting to higher interest rates and inflation over the past year, but finding the right people is still a priority at many companies.
“There’s more optimism from CFOs, in terms of how they’re going to manage through change, and there’s more change all the time,” said Kathryn Kaminsky, vice chair and Trust Solutions co-leader at PwC US. “Some of that is coming from the fact that they’ve been in a ‘change environment’ for so long. I’m not sure anyone really knows what normal is anymore.”
Finding the right talent is a key priority for CFOs, she noted, but it’s difficult to locate people who have probably not done this type of forecasting before in a difficult environment where they have to consider the implications of rising inflation and interest rates and discount rates for goodwill, she noted.
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She has been leading a number of CFO roundtables and found that growth is a priority for CFOs. “How do they manage their business for both the short term and the long term, and not being too short term focused, but actually thinking through the long term to see how they can reinvent,” said Kaminsky.
CEOs share similar concerns. Kaminsky pointed to a recent CEO survey from PwC that found nearly 40% of CEOs don’t believe their companies will be economically viable a decade from now if they continue on their current path.
“They believe that if they don’t do something, they worry about the longevity of their companies, which really shows that you need to reinvent your company, and the best person to help you strategically is the CFO,” said Kaminsky.
CEOs and CFOs are hearing concerns from investors and financial analysts. “When you listen to earnings calls, there are a lot of questions about historical financials, but also about forward looking,” said Kaminsky. “When things keep changing, it’s hard to do forward-looking information.”
She also hears concerns about recruitment of accountants, and PwC has been looking for accountants from different kinds of backgrounds. “I have a history degree and I became a CA and a CPA,” she said. “I have a 17 year old who’s a junior, and every time he talks about a school, I ask, ‘Does it have a good accounting program?’ Fundamentally, there is absolutely no better job. I just feel very passionately there’s no better place to start your career with a professional designation, where you learn how to manage teams, work with clients, lead teams, and technically learn some really interesting things. I’m very pro audit. I always have been.”
PwC has begun trying new ways to attract more young people to the profession, including pilot programs where employees can join the firm while working to get the 150 hours needed for a CPA license. “We just have to be open minded about how we bring in talent and think of talent differently,” said Kaminsky. “We have a really big responsibility to train the talent that we get with the CPAs, but at the same time, we have to make sure that we’re thinking about how we get talent through the system.”
CFOs are more focused now on areas like environmental, social and governance reporting as investors focus more on ESG funds amid concerns about the acceleration of climate change, but the trend has provoked a backlash in some quarters as some states like Florida and Texas move to discourage investments in such funds.
“Climate is important, and I think you’re seeing that in the climate transition and what it means and how CEOs and CFOs think about risk,” said Kaminsky. “Climate risk is important all the time, so you’re seeing a lot more discussion about climate and climate transition, and the impacts that climate might have on your business.”
ESG has been one of the priorities for PwC’s other vice chair and U.S. Trust Solutions co-leader, Wes Bricker, with whom Kaminsky works closely. PwC has been investing more heavily in technology to assess climate risks, as well as in other areas such as tax and auditing software.
“What we deliver hasn’t changed, but how we get to the answers and how we do our work has changed, and using tools is really important to us,” said Kaminsky. “It’s really important for Wes and I as co-leaders to make sure that we are challenging ourselves and investing in the technology in both tax and audit about data extraction and what you can do with the information, and also making sure that we’re getting the best out of our people where they do their own technology. Think about how they can create bots. We’re very invested in technology for the audit of the future, as well as how you do proficient tax work using technology.”
So far, this tax season seems to be going well at the firm. “They have different peaks and valleys,” said Kaminsky. “There’s the audit support that happens for tax, but the K-2s and K-3s came out this year. I’ve got to give a huge amount of credit to my partners in the tax space, who have really worked hard with their teams through the changes that came quickly.”
On the audit side, PwC recently released a midyear update to its annual Audit Quality Report showing improvements in inspections by the Public Company Accounting Oversight Board in recent years. Only two of the 56 audits reviewed by the PCAOB in 2021 had deficiencies significant enough to be included in Part 1.A of the PCAOB inspection report. That was one more deficient audit than the PCAOB inspectors found in 2020, when one of the 52 audits reviewed was included in Part I.A, but a big improvement over 2019, when 18 of the 60 audits reviewed had significant enough deficiencies to be included in Part 1.A of the report.
“The one thing Wes and I are always focused on is audit quality,” said Kaminsky. “You can see in our audit quality report, our PCAOB results were good. Yes, there was one more, and we always aim for perfection. But it is something that Wes and I spend probably a huge amount of time talking to our teams about and that’s who we are.”
The PCAOB has a mostly new set of board members since last year and has promised a tougher approach under its new chair Erica Williams. The Securities and Exchange Commission has also begun searching for a successor to the longest-serving PCAOB board member, Duane DesParte, whose term ends in October.
“They are a regulator, and we stay true to who we are, and they stay true to who they are,” said Kaminsky. “They regulate us, and we work with anyone in that seat.”
