Accounting errors surged to a nine-year high last year, putting scrutiny on the inner workings of the industry and its regulation. High-profile errors have created conversation around the controls and governance needed to support accounting teams as they do their work, but it’s critical for there to be a balance between control and flexibility, said Chris Miller, SVP of product strategy at accounting software provider Netgain Solutions.

“You want to have good controls, but you don't want to have too many controls, or else you grind everything down to a halt, and then you create just as much of a problem,” he said in an interview.

The right scrutiny

The number of U.S. companies forced to withdraw finance statements hit a near-decade high in 2024, with 140 public companies issuing restatements in the first 10 months of the year, the Financial Times reported in December. In a high-profile example of mishaps in the accounting space, retailer Macy’s announced it was postponing the release of its Q3 2024 results after it was revealed an ex-accountant had deliberately hidden more than $154 million in expenses, CFO Dive previously reported.

The flawed bookkeeping of the former Macy’s accountant speaks to growing pressures in the accounting industry, including an ongoing shortage of skilled talent, potential issues with organizational structure and oversight, and pressures for accounting teams to hit critical profitability or growth targets. Often, there’s a perception that the accounting team is responsible not just for monitoring company results, but that they’re “somehow responsible for the results themselves,” Miller said. 

That could contribute to “bad incentives” to overworked accounting teams, he said, if they start to feel pressure to meet profitability or other financial goals.

Such pressures can also lead to less rigid controls, allowing critical checks to slip through the cracks. For example, in the case of the $154 million error at Macy’s, “no one ever questioned the underlying assumptions of the accrual to make sure that it was correct,” Miller said “And that happens all the time without good controls put in place that force you to look at those assumptions and challenge your judgments.”

Miller previously served as director of IT strategy at Englewood, California-based Netgain before departing for Oracle’s Netsuite, where he logged an eight-year term in roles including global finance architect, strategic initiatives, according to his LinkedIn profile. A certified public accountant, Miller’s past experiences also include a term at Workday. He rejoined Netgtain as an SVP in April 2022.

While the prevalence of accounting errors has called into question current governance, a broad tightening of controls could further bog down accounting teams, creating more pressure and contributing to the bleed of skilled talent.

“What we need is really the right scrutiny,” Miller said. That includes “maybe even pulling back some of the wasted oversight and kind of redesigning the flow or the process of how these things actually got done,” he said.

Filtering the noise

To support today’s accounting teams, finance leaders and regulators also need to turn their attention to the ongoing talent pipeline problem. While it’s difficult to draw a direct correlation between a lack of skilled accountant to specific incidents of accounting errors, “there certainly is the second order effects that are coming from that, from there not being people in the pipeline,” Miller said.

New technologies such as artificial intelligence can help support overwhelmed accounting teams, but to address the wider shortage of accountants, the first step is to “lower the barriers of entry so that we can appeal to a wider range of people,” Miller said.

Approval for alternative pathways to CPA licensure has been gaining ground in recent months among accounting professionals, regulators and companies as the talent shortage continues. The governor of Ohio recently signed a bill into law enabling such alternative routes for would-be accountants in the state, a move that follows endorsement for a 120-hour licensure path — as opposed to the 150-hour path — by Big Four accounting firms, CFO Dive previously reported.

When seeking to find and retain talent, it’s also important to understand that the role of the accounting team is changing, Miller said, with professionals becoming more responsible not just for recording or aggregating financial information, but in driving key business insights and strategy.  

Accountants also have more access than ever to a growing volume of data — something that has to be evaluated closely in tandem with their changing roles, he said. It’s crucial for finance leaders to understand “more data doesn’t make better decisions,” Miller said. “The right data does, at the right time, in the right context.”

“Nowadays we're just awash in data, and there's tons of noise, but very little ‘what do we [home] in on and [what] do we really need?’” he said. Focusing in on the wrong data can have lasting consequences for business leaders as well, he said.

“I think it can lead to this false sense of security … because you're breaking everything down to the ninth degree, you're creating this false precision” if you zero in on metrics that don’t actually speak to the true health of the business, he said.