Sometimes people ask “why do you write about things happening in Australia on an American website?” Tempted as we are to quip back “because just how much American accounting news do you think there is?” the more accurate answer is because of things like this. We aren’t so different really if you ignore their culinary quirks and backwards seasons.
The Australians are having the same staffing problems we are and the chair of the Australian Securities and Investments Commission said in the most libertarian way possible it’s because of all the regulation. While that may be a factor, and certainly one contributing to why audit partner is not the attractive career path it once was, one senator called bullshit on his claim.
AFR:
Auditing firms are struggling to attract people into the profession because the role is demanding and the work unpleasant, the head of the corporate regulator says.
ASIC chairman Joe Longo told a parliamentary inquiry into the regulator on Friday that the auditing profession also had “long-term staffing challenges”, partly because being an auditor was a “high-risk” occupation because of heavy regulation of the sector.
However, Labor committee chairman Deborah O’Neill said the key reason firms had a staffing problem was the low pay of junior auditors compared with the oversized pay packets of partners at the large auditing firms.
AFR goes on to share the actual quotes:
“The audit professionals globally and nationally, [it’s] a challenge for them to attract people into that profession,” he told the joint committee. “It’s a very demanding role. It’s heavily regulated. It’s high risk. So I think that’s an issue that I know that big firms are thinking about; how they’re going to address moving people around the network, giving them exposure, making it a more attractive role.”
Senator O’Neill responded: “Or they could pay their junior staff a bit better, Mr Longo.”
Let’s find out what Aussie grads make in audit these days:
Graduate salaries at the Big 4 can vary depending on the service line you work in and the job you’re doing. In a broad sense, you could expect to be earning anywhere between $45,000 and $75,000, but this can even be different from city to city.
If you’re working in specialised departments like economics, digital services, financial advisory and consulting you’ll often have a starting salary between $60,000 and $70,000, and this is the higher end of the pay scale for graduates at the Big 4. At the lower end, graduates working in audit and assurance departments have reported salaries between $45,000 and $60,000. Most of these packages include superannuation.
$45,000 AUD = $28,560 USD.
On the topic of regulators and auditor pay, Financial Reporting Council chair Jan du Plessis responded directly to a similar complaint from UK Big 4 firms last summer with his own burn. FT:
Senior partners at the Big Four — Deloitte, EY, KPMG and PwC — have claimed that criticism from politicians and regulators, including high-profile fines for poor work, is making it more difficult to recruit and retain auditors.
But Sir Jan du Plessis, chair of the Financial Reporting Council, hit back, denying that the watchdog’s tough approach had made the profession unappealing.
Asked whether increasing pay was a solution to attracting people to work as auditors, du Plessis told the Financial Times: “Blunt answer: yes . . . There has been a significant increase in profitability at all the audit firms. They have the resources available to increase the pay levels of more junior people that they want to attract into their firms and it’s up to them whether they want to do so.”
Audit may be thankless work but the firms might be surprised what people are willing to endure if paid well enough to do it.
Unpleasant work or low pay? What’s behind the auditor shortage [Australian Financial Review]
So says a teacher, because she has an understanding of the pressures facing auditors.
I work for a regional firm. We pay a lot more than that for brand new staff. We pay more per hour than big 4. The local University pushes all the grads to go big 4 anyway like they’re some kind of failure if they don’t. We already have to pay extra to overcome an inefficient system that requires an extra year of school. We aren’t setting record profits this year. Every time we decide to hire a brand new staff, that is a huge investment – the cost between when the new staff is hired and when they start earning their pay in the form of productivity. Many of them leave after 1 year and we never recoup that investment. It bothers me when people roll that out as some type of cure-all solution.
I resigned from audit work last year. The number of senseless required auditing standards, in addition to non useful reporting requirements makes audit work very inefficient and not worth any salary amount.
100% agree and happy at least someone in Australia gets it! In the US I’ve seen so many articles harping on getting rid of the 150 hour requirement, which, fine, okay, but the fact is people will go where the incentives are so I’m not sure that’s really addressing the root problem of the squeeze not being worth the juice. If people want to work 100 hours a week in investment banking because they’ll make $200K+ or in commodities trading, they’ll jump through the hoops to do it.
The problem for public accounting is it doesn’t know what it wants the value proposition to be for anyone joining. In public accounting you get to work a ton of hours for constantly urgent deadlines for unappreciative bosses for compensation nearing Seattle hourly minimum wage when you adjust for the hours you work. Keep in mind this is for a career where you already went through several years of university level education and had to pass a very selective professional exam process. And each year the partners find more ways to trim little fringe benefits you might have had or rearrange vacation time to be even more of a pain to take all while patting themselves on the back and giving themselves awards for such great work life balance.
I sure can’t understand why people aren’t chomping at the bit to join the accounting career path!
As a whole, I think the overall career problem is very structural and based on bad incentives: the people controlling the credentials are public accounting partners, and to work basically anywhere outside public you need to have ideally worked in public for several years. So basically even if you don’t want to be the 1% of people working in public accounting that become partners, you will need to pass through, and that’s not a life for everyone and leaves a bad taste in a lot of people’s mouths. The business model of public demands a constant churn of talent, which for strictly demographic reasons alone I think is not sustainable, so now they want to lower the barrier to keep people coming in rather than up the rewards because that’s what benefits them. Something has to give.