Mirroring the Big Four Will Give Midsize Firms a Competitive Edge

More financial restatements from clients, high audit deficiencies revealed by board inspections, and talent pipeline challenges all plague the accounting industry as we enter 2025. These challenges place the heaviest burden on mid-tier firms, governments, and financial reporting departments within companies.

Governments that can’t fully staff their accounting departments create a potential business boom, Plante Moran has said, because they often turn to mid-tier and local firms to fill the void. To take advantage of the opportunity, these firms need flexibility in their audit teams to shift staff duties.

That flexibility doesn’t exist, and is unlikely to this year. Mid-tier firms should work to get ahead of the problem—they can start by competing with the Big Four in salaries, technology, and fees.

Public filings of companies have cited lack of accounting talent at their companies as the reason for misstatements, filing delays, and internal control weaknesses. This gap in preparers makes it more likely that material errors or frauds will slide into financial statements, and that auditors will be unable to finish the audits or detect these misstatements if they accept the audit engagements. Everyone is worse off, and shareholders and stakeholders will suffer.

The narrowing talent pipeline is poised to hit mid-tier firms especially hard. Big Four firms have cited pipeline challenges as a threat to growth. But their actions—from laying off core accounting staff to continuing to expand offshore operations—suggest this isn’t an industry-wide concern.

The Big Four have resources and capabilities to find nontraditional talent pathways offshore or through widespread AI adoption. But for their smaller peers, it’s a threat that seems likely to worsen.

As the hirers of the largest incoming classes from colleges and universities each year, the Big Four historically have served as a training ground and staffing resource for the rest of the industry. It’s common for staff to work for a few years at their first firm and then leave for a mid-tier firm in search of a better work-life balance, or be poached by a former client for work in their financial reporting or internal audit department.

The rest of the industry depends in part on voluntary turnover at the largest firms to fill their vacancies. As the Big Four continue to hire fewer, lay off more, and move more core positions overseas, mid-tier firms and employers are left competing for a shrinking pool of candidates.

There aren’t enough staff exiting the Big Four, nor are there enough entry-level staff available from colleges and universities that don’t initially sign with the Big Four to allow the rest of the industry to meet their staffing needs.

The biggest firms also continue to invest heavily in artificial intelligence infrastructure—they have the resources. While AI adoption is still in its infancy in accounting, its largest benefit is replacing much of the time-consuming and more mundane tasks done by early career staff. Tasks that once took staff hours to complete can now be accomplished in minutes.

As AI improves, those wielding it will become more skilled in applying it to audits and that will continue putting downward pressure on Big Four hiring. This will further reduce the pool of talent available to mid-tier firms and others and increase the challenges for those without the financial resources of the Big Four.

But mid-tier firms can fight these challenges. First, they can start by competing directly with the Big Four for talent at the collegiate level. This includes paying a salary premium, a higher signing bonus, and other incentive factors that tie incoming staff to the firm like tuition assistance and leading work-life balance.

Second, they need to begin to model the Big Four playbook: Invest in AI capabilities and train existing staff on those capabilities to lessen the burden on existing staff. Finally, they need to raise their fees to reflect the economic environment and give them enough capital to encourage accountants to leave the Big Four and join them or switch career paths if they are elsewhere.

Mid-tier firms may say they can’t afford to do these things. If the pipeline challenges persist, they may soon realize they can’t afford not to.

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, assistant professor of accounting at Hofstra University, and vice president of content development at KnowFully Learning Group.

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