Audit Errors or Fresh Perspectives, What Does Gen Z Bring

The audit world is in flux as Gen Z strides into the workforce, bringing a taste for flexibility, tech-savviness, and work-life balance. While that’s great for innovation, it’s ruffling a lot of feathers in an industry built on structure and tradition. Add remote work into the mix, and you’ve got a recipe for growing pains. A survey of 160 accounting execs spilled the tea: some think better work-life balance boosts audit quality, while others blame remote work for holding back training and upping errors. With senior staff stepping down a level to fill gaps, audits are losing that crucial second pair of eyes. Even billion-dollar giants like EY, Deloitte, PwC, and KPMG are sweating it. With 1.5 million staff, they’re not immune to Gen Z turnover, linked to a rise in audit deficiencies. The challenge? Balancing fresh energy with the industry’s demand for rigor and trustworthiness. 

When Old School Meets New School

Gen Z brings an entirely different outlook to the accounting table. For many, a job is just that—a job, not a lifelong career. Their expectations for flexibility, meaningful work, and a healthy work-life balance are shaping the way firms recruit and retain talent. However, this mindset has clashed with the traditional apprenticeship model that has long defined the audit profession. According to the American Institute of Certified Public Accountants (AICPA), the number of accounting graduates dropped by 18% in the past decade, with only 30,000 candidates sitting for the CPA exam in 2022 compared to nearly 50,000 in 2010. Retaining talent is proving just as tricky, with many younger employees willing to leave for industries that offer better pay, growth opportunities, and perks.

The result? Audit firms are scrambling to fill roles, and some are finding themselves short-staffed at critical moments. The PCAOB has pointed out that firms with higher turnover rates among younger staff also report more deficiencies in their audits. These errors aren’t just embarrassing; they could lead to serious financial and reputational damage for clients and firms alike.

Remote Work or Accuracy Nightmare?

As if generational challenges weren’t enough, remote work policies introduced during the pandemic are adding another layer of complexity. While remote and hybrid work has become standard in many industries, the transition has been bumpy for accounting and auditing firms. The PCAOB reported a significant increase in errors post-pandemic, with deficiency rates climbing from 20% in 2020 to uncomfortably high levels by 2022. Although these rates have stabilized, they remain far from acceptable.

The primary culprit? A loss of in-person interaction. Traditionally, junior auditors learned by shadowing senior staff, absorbing not just technical skills but also the nuances of professional judgment. Remote work has made this hands-on learning harder to replicate. Managers and partners often find themselves stepping down to complete tasks typically assigned to juniors, leaving less time for oversight and quality control. A PCAOB study revealed that 64% of surveyed executives believe improving work-life balance positively impacts audit quality. However, a vocal minority, about 36%—argue that remote work policies delay the professional development of younger employees and create a disconnect between staff and firm culture.

What’s Behind the Numbers?

Audit errors have become a growing concern. Inconsistent training, high turnover, and remote work are creating a perfect storm for mistakes. Firms like BDO and EY, which have reported some of the highest deficiency rates in recent years, have attempted to centralize and standardize procedures to minimize variability. However, critics argue this approach risks reducing audits to a box-ticking exercise, stripping auditors of their ability to make critical professional judgments.

Offshoring routine tasks to countries like India has also come under scrutiny. While cost-effective, this strategy often leaves new recruits without the foundational experience they need to develop a deep understanding of accounting principles. In the absence of robust apprenticeship models, these gaps in training can lead to costly errors that damage both client trust and firm reputation.

A Tech-Driven Paradigm Shift

Some firms are turning to technology as a potential solution. AI tools and real-time data analytics are being introduced to flag anomalies and streamline the audit process. These innovations could allow auditors to focus on higher-value tasks, like investigating red flags and resolving complex accounting issues. However, even the most advanced tools can’t replace the intuition and critical thinking developed through years of hands-on experience.

Finding Balance

The industry faces a delicate balancing act. On one hand, it must adapt to the expectations of Gen Z by offering flexibility, meaningful work, and competitive benefits. On the other, it must maintain the rigor and precision that auditing demands, especially as errors and deficiencies continue to draw regulatory attention. The boards' push for new disclosure rules, requiring firms to provide detailed metrics on training, experience, and workload, underscores the importance of addressing these challenges. But not everyone is on board. Some firms argue these metrics could be misunderstood by investors and add unnecessary pressure to an already strained system.

Ultimately, the future of the accounting and auditing industry will depend on whether firms can harmonize the fresh energy and ideas of Gen Z with the industry’s high standards for accuracy and integrity. It’s not an easy task, but as the saying goes, “No pressure, no diamonds.” The accounting world will need plenty to shine in this new era. Subscribe to MYCPE ONE Insights for the latest in finance, accounting, and corporate news delivered straight to your inbox.