Aon | Professional Services Practice
Resilience Confronting Complexity: Observations on the Risk Environment Facing Accounting Firms
Release Date: June 20242024 Accountants’ Liability Risk: Global Trends and Issues provides insights into current global trends and risk issues facing the accounting industry and is produced by the Risk Management Information team of the Professional Services Practice at Aon.
Key Takeaways
- Risks facing professional service firms continue to evolve and develop in complexity.
- Identifying and understanding these challenges is key to developing a robust risk management strategy.
- Aon closely monitors the changing professional risk landscape, bringing attention to current and emerging risks.
Overview
The risk landscape features many interconnected economic, geopolitical, environmental and social threats, creating uncertainty and demanding resiliency and adaptability. Major events include increased international and civil conflict, adding to a fractured world and heightening risks faced by accounting firms. Rapid technological advancements, notably in generative artificial intelligence (AI), continue to disrupt the firms’ operating and business models, with questions arising around the economic and social impacts.
Against this challenging background, accounting firms are also operating in a rapidly evolving and complex environment characterized by expanding client demands, more rigorous regulatory oversight, a high degree of public scrutiny, new workforce challenges and a host of traditional risks. In response, firms are adapting and transforming.
Current observations of note in the risk environment include:
Regulatory Activity – Regulators expanded enforcement and oversight in 2023 with increased scrutiny of ethical lapses. Suspensions against audit firms and individuals were noted in several jurisdictions. Cross-border enforcement remained strong.
Cybersecurity – Cyber attacks and data breaches remain a top concern as biometric data risks drew increased attention and ransomware risk proliferated in 2023. An agreement to ease the transatlantic (EU to U.S.) flow of data was well received.
Reputational Concerns – Professional service firm reputation is impacted in several ways, including large litigation against firms, scrutiny from governments and regulators, and the sometimes retrospective criticism of “risky clients,” such as those around crypto and opioids. Leaks of information, whether the result of cyber events or human error, were drivers of reputational incidents in 2023.
Litigation Developments – High profile litigation involving the accounting profession attracted attention in the U.S. and Ex-U.S. The banking and crypto sectors gave rise to notable lawsuits. Many major cases were fueled by litigation funders, as some linked litigation funding with the social inflation of damage awards. A growing number of lawsuits involved data privacy matters, including the Illinois Biometric Information Privacy Act (BIPA), and ESG.
Human Capital – The global challenge of securing the right talent for current growth opportunities continues for the firms, although tightened budgets resulted in layoffs in some business lines. The talent shortages have been addressed by the firms with adaptations to the rapidly changing market. 2023 included a revisiting of hybrid working among the firms and financial institutions, with louder calls for a return to the office persisting in 2024.
Geopolitical Developments – A variety of geopolitical challenges in various jurisdictions, including armed conflicts and threats to already slowed supply chains, have complicated the risk landscape for the firms, which have proved adaptable and resilient. Demand for geopolitical risk consulting grew in 2023.
Disruptive Technologies – Rapidly-evolving generative AI tools presented risks and opportunities. Firms have been making significant investments in AI, emphasizing greater AI and tech-literacy for new recruits and existing staff, and partnering with big tech companies to leverage large language models, as firms enhance automation and augment their capabilities in audit and other areas. The firms have also displayed interest in other novel technology such as quantum computing.
Aon will provide ongoing analysis of the wide range of factors that shape the risk landscape for accounting firms.
Contact
The Professional Services Practice at Aon values your feedback. To discuss any of the topics raised in this article, please contact Audrey Jenner , Daniel Hacikyaner or Rona E. Davis.
Audrey Jenner
Vice President and Director
Montreal
Vice President and Director
Montreal
Rona E. Davis
Senior Vice President and Executive Director
Montreal
About Aon
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