Niches of the Number Crunchers

Accounting is numbers, and numbers aren’t supposed to change. But the accounting profession – despite its image as a bastion of prudent calculation – has entered a period of disruption. An article in the June issue of the Journal of Accountancy cited new technologies, such as artificial intelligence and specialized software, as the main cause. “CPA firms have been organized to provide opportunities for recent college graduates to develop their skills and advance; for seniors, managers, and supervisors to hone their leadership abilities; and for the brightest and most highly motivated people to advance to the coveted role of partner. But the emergence of new technology and new ways of doing business has the potential to upend — or at least alter — the way accounting firms are managed,” stated the article, titled “Accounting Firms: The Next Generation.” Besides the disruption in accounting, CPAs also face disruption in the industries they serve. David Free, a partner at Miller and Co. in Woodland Hills who specializes in the entertainment sector, noted the changes in his client base. “In the last 24 hours, I dealt with the proper accounting treatment of deals with Google and Netflix – much different than traditional network or studio deals,” he told the Business Journal in an interview on page 10. This year’s report focuses on specializations in the accounting industry, featuring interviews with accounts who practice in entertainment, real estate, forensics and mergers and acquisitions. All the firms appear on the Business Journal’s list of Accounting Firms, which starts on page 13. Lewis Sharpstone, chairman of the California Association of CPAs and an assurance partner at BDO USA in downtown Los Angeles, said accounting practices in his specialty of nonprofits is in the midst of change. “A lot of nonprofits are experiencing disruption and need strategic planning on how to stay relevant and find funding in this environment,” he said. Sharpstone thinks of accounting specialties in three dimensions. First, there are functions categories, with tax and audit the largest. This category also includes mergers and acquisitions, forensics and compliance. Next are accountants who specialize by type of client – for example, public companies, nonprofits, municipal governments and pension plans. And third are the industry specializations, such as real estate, entertainment, restaurants and cannabis. In the Los Angeles market, entertainment accounting has a large presence. Sharpstone said firms often specialize within entertainment to serve movie makers, music studios, independent filmmakers or other players. Real estate is “pretty big” in L.A. as well, and forensics is “a booming area with more and more people are going into it,” he said. Sometimes specializations overlap. “Entertainment spans nonprofits as well with arts-related organizations such as museums or public TV stations,” Sharpstone said. One catalyst for change in the industry is the new tax code. Although it was introduced last year, the rules continue to evolve for accountant. “Last year when it came in, people had to try to understand it. This year, it’s real with numbers on forms,” Sharpstone explained. “In early 2018, it was a voyage of discovery. Now it’s now a question of how to communicate it to clients.”