Perspectives of the Accountancy Profession over the Next Decade – A Scenario Analysis

Klaus Backhaus, University of Münster, Institute of Business-to-Business Marketing; Hans-Jürgen Kirsch, University of Münster, Institute of Accounting and Auditing; and Christina Rossinelli, University of Münster, Institute of Business-to-Business Marketing | February 24, 2015 |

Accountants are faced with many challenges that will affect the profession, such as changes in national regulatory frameworks or the influence of IT on auditing. It is crucial that accountants prepare for these developments, which could dramatically alter the entire profession.

To address these developments adequately, the Institut der Wirtschaftsprüfer in Deutschland e.V. (IDW, or the Institute of Public Auditors in Germany) initiated a research project. In the project, we ran a complex scenario analysis to identify those factors that have a key influence on the developments.

Scenario analysis has, in comparison to forecast techniques, the advantage that it is not concerned with predicting one probable future but considers multiple different possible futures by integrating quantitative as well as qualitative factors that cannot be forecast by numbers (e.g., IT innovations, regulations) and also takes into account unexpected events. Thus, scenario analysis can be characterized as a structured process for the systematic development and description of complex future situations.

Our methodological scenario approach involved three steps. First, to identify the influencing factors, we held a series of workshops with national and international experts (accountants, auditors, IT experts, clients, politicians, journalists, etc.). We evaluated the strength of the input impact of one factor on another for the whole set of influencing factors, with extensive by the expert panel. Based on this broad data base, we analyzed in-depth the interaction effects between the factors to determine the most relevant factors (the key factors).

As the second step, future projections were developed for each of the key factors. Finally, all projections were combined into possible scenarios. This resulted in a large number of scenarios. To reduce this number, a selection process was necessary. We applied two methods of multivariate analysis, namely Multi-Dimensional Scaling and clustering algorithms. The final result was eight consistent scenarios.

The outcome of our research indicates several possible future worlds based on alternative development paths of the key factors. We demonstrate that the diverse scenarios generate various opportunities and risks for different stakeholders. On this basis, it is possible to develop strategic options for the different players in the accountancy profession that either 1) are applicable in any situation (robust strategies) or 2) are customized to individual scenarios (focused strategies).

Our project has involved representatives from the entire accountancy profession as well as other stakeholders. It took approximately 24 months to complete the complex scenario process and almost one year to translate the scenario results into strategic options. These strategic options refer to the most challenging areas for the future, such as the balance between audit and consulting, IT, or the qualifications of personnel.

We feel very honored that the results of our research project were awarded the Academic Prize during the World Congress of Accountants in Rome, which was held in November 2014 under the theme “Vision 2020: Learning from the Past, Building the Future”.

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