EY and PwC’s New Leaders Must Help Restore Trust, Build Pipeline

The new leaders of EY Global and PwC US—Janet Truncale and Paul Griggs, respectively—hail from the financial services auditing side of the business at a time when consulting services make up an increasing share of the total revenue, despite intense competition and cost-cutting by clients. Meanwhile, the audit side is under increased regulatory pressure because of perceived lapses in audit quality at accounting firms of all sizes.

Truncale and Griggs would have their work cut out for them if these two challenges were the only tests they faced. But these issues are matched, and possibly exasperated, by a litany of broader industry challenges: a still-decreasing pipeline of future accountants, potential shakeups to the partnership model, artificial intelligence, and defending the relevance of the auditing industry.

Each of the last six years has seen fewer college accounting graduates and even fewer newly licensed CPAs. Instead of increasing salaries to attract more candidates, the industry has responded with salaries that are negative in inflation-adjusted terms and uncompetitive relative to other fields such as data analysis, banking, and tech.

Coupled with multiple rounds of layoffs by the largest firms and recent declines in job postings, the profession no longer appears inviting to potential hires. The new leaders will be forced to address the pay situation head on and make the profession appealing to the next generation of accountants and consultants.

Addressing salaries and the work environment could be seen as steps to improve audit quality while improving the pipeline. Staffing and pipeline related issues could have a direct impact on audit quality and lead to even further regulatory pressure.

Related to the pipeline concerns, the partnership model that accounting firms operate under largely delays meaningful compensation until staff reach the partnership level. As few staff make it to the partner level, this payoff isn’t a realistic option for many who will turn over before becoming partners. Employees want to be compensated earlier for the skills, work hours, and education demanded by the firms.

In response, BDO, the sixth-largest US accounting firm, has created an employee stock ownership plan, giving their employees an ownership stake in the firm early in their careers through retirement. The leaders who already have achieved partner status will need to decide if the current model is working for their firms or if the partnership model, like the combination of accounting and consulting under one roof, should be on the chopping block too.

Outside of firm structure and salaries, the new leaders will face the challenge of leading the integration of AI across service lines at their firms. AI presents opportunities to operate more efficiently and meet client demands faster and with fewer staff.

This will likely only increase competition from other consulting and accounting firms and new entrants that aren’t yet foreseeable. Griggs was a champion for PwC’s technology upskilling before becoming senior partner, an experience that should serve him well as the firm looks to incorporate large language models and other AI at the firm.

A senior leader of a large accounting firm once told me that they didn’t view the biggest threat to their business as another accounting or consulting firm—they worried about a large tech firm with advanced technology and troves of data, such as Alphabet Inc. or Microsoft Corp., entering the space.

Accounting firms will need to respond to advancements in technology and data rapidly and incorporate the latest tools in near real-time. Those that navigate technology adoption and implementation quickly and effectively will continue to thrive and grow revenue. Those that are slow to adopt or have missteps along the way will fall further behind and create a space for new competition to emerge.

Perhaps the greatest challenge is defending the relevance of the auditing industry. Trust in many institutions is at an all-time low, and accounting hasn’t been spared from this erosion of trust. High-profile frauds at FTX Trading Ltd., Theranos Inc., and Wirecard AG, alongside bankruptcies at Silicon Valley Bank and Signature Bank last year, among others, have led to critiques that overall audit quality has declined.

In fact, the Second US Circuit Court of Appeals in August 2023 ruled that audit opinions themselves are immaterial, meaning a reasonable investor wouldn’t rely on them when reviewing a company’s 10-K. Ironically, the auditor’s report that addresses the lack of material misrepresentation has been ruled itself immaterial.

As two veteran auditors, Truncale and Griggs know the criticisms but also understand the value that auditing brings to capital markets. They will need to be a strong voice for the industry and demonstrate that audits still matter, that the auditor’s primary job is to protect investors, and that investors can still trust the profession to deliver a meaningful report, despite recent public failings. They must take the role as champions of the profession and auditor independence.

If the firms lose the trust of the investing public, nothing else matters. Truncale and Griggs have the unenviable task of reassuring investors, the public, and the courts that they can trust the firms they run. That they can trust the audit reports the firms provide. And that the need for independent auditing is just as important now as it was in 2001 after the Enron Corp. scandal.

With the elevation of Truncale and Griggs, EY and PwC stuck to their traditional accounting roots. Their challenges involve the accounting profession, and they’ll likely shape what the industry looks like for years to follow. They’ll need to decide what, if any, steps they must take to address the challenges at hand.

This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law and Bloomberg Tax, or its owners.

Author Information

Jack Castonguay is a CPA and an assistant professor of accounting at Hofstra University and vice president of content development at KnowFully Learning Group.

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