12 July 2024
Ethnic diversity in accounting: Serious issue persists

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Ethnic Diversity Accounting: A Critical Issue in Accounting Firms

In recent years, the lack of diversity in workplaces, particularly in terms of ethnic and gender diversity, has become a growing concern. This issue is particularly prevalent in the accounting profession, where ethnic minorities and women have been underrepresented, especially at the senior levels. Despite efforts by accounting firms to improve diversity through recruiting and retention initiatives, ethnic diversity at the top ranks remains a serious issue. This commentary delves into the challenges and implications of ethnic diversity accounting in accounting firms.

The Current State of Ethnic Diversity in Accounting Firms

The Big Four accounting firms—Deloitte, Ernst & Young, PricewaterhouseCoopers, and Klynveld Peat Marwick Goerdeler—have implemented measures to enhance diversity, such as appointing chief diversity officers and setting diversity targets. However, a 2019 survey revealed that only nine percent of accounting firm partners identify as non-white. Additionally, ethnic minorities are significantly underrepresented, with only 8.9 percent of accountants and auditors identifying as Hispanic or Latino, 8.5 percent as Black or African American, and 12 percent as Asian.

In the United Kingdom, the disparity is also evident, with only 0.4 percent of equity partners in the Big Four firms being Black, compared to the population representation of 3.3 percent. While data on ethnic diversity in Canadian accounting firms is still emerging, research suggests a similar trend of underrepresentation. This lack of ethnic diversity at senior levels poses challenges for the profession’s inclusivity and talent retention.

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Published on: August 29, 2021 Description: Online seminar by Professor. Bin Srinidhi "Board Ethnic Diversity and Earnings Quality" Friday 27 August 2021 at 5pm Cairo time.
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Insights from Research on Ethnic Minority Accountants

Recognizing the underrepresentation of ethnic minority accountants at the partner level, recent research aimed to shed light on the experiences of ethnic minority auditors who reached top positions in U.S. firms. The study defined ethnic minorities as Asian, Black non-Latino, Hispanic Latino, and white non-Latino, based on the U.S. Census’ classification.

The findings revealed that ethnic minority auditors faced obstacles in attaining partnership, with those who did often relegated to less prestigious offices within non-Big Four firms. Despite outperforming their white counterparts, ethnic minority partners were more likely to be in smaller offices, handling lower-fee engagements. Additionally, they faced higher scrutiny and were more likely to be replaced after audit errors, compared to white partners.

Implications and Recommendations for Enhancing Ethnic Diversity

The underrepresentation of ethnic minorities at senior levels in accounting firms not only hampers diversity but also leads to talent drain, with up to 55 percent of underrepresented accountants leaving their employers. To address these challenges, proactive steps are needed to promote ethnic diversity and inclusivity in accounting leadership.

Efforts should focus on recruiting, nurturing, and promoting talented individuals from underrepresented backgrounds, offering equal opportunities for career advancement and creating inclusive work environments. Fast-tracking promising audit managers to partnership roles and ensuring equitable treatment in promotion decisions are essential steps in fostering diversity at the top levels of accounting firms.

Closing the gaps in promotion and treatment of ethnic audit partners not only enhances the quality of audits but also mitigates talent drain within the profession. By fostering a more ethnically diverse accounting leadership, firms can attract and retain skilled professionals from diverse backgrounds, positioning the profession to tackle future challenges effectively.

Addressing ethnic diversity accounting in accounting firms is crucial for creating a more inclusive and sustainable profession. By recognizing the disparities, implementing proactive diversity initiatives, and promoting equitable opportunities for all professionals, accounting firms can foster a diverse and talented workforce that reflects the broader society they serve.

Links to additional Resources:

1. https://www.diversityinc.com 2. https://www.shrm.org 3. https://www.eeoc.gov

Related Wikipedia Articles

Topics: Ethnic diversity in the United States, Diversity and inclusion in the workplace, Accounting profession

Ethnic groups in the United Kingdom
The United Kingdom is an ethnically diverse society. The largest ethnic group in the United Kingdom is White British, followed by Asian British. Ethnicity in the United Kingdom is formally recorded at the national level through a census. The 2011 United Kingdom census recorded a reduced share of White British...
Read more: Ethnic groups in the United Kingdom

Diversity, equity, and inclusion
Diversity, equity, and inclusion (usually abbreviated DEI) are organizational frameworks which seek to promote "the fair treatment and full participation of all people", particularly groups "who have historically been underrepresented or subject to discrimination" on the basis of identity or disability. These three notions (diversity, equity, and inclusion) together represent...
Read more: Diversity, equity, and inclusion

Accounting
Accounting, also known as accountancy, is the processing of information about economic entities, such as businesses and corporations. Accounting measures the results of an organization's economic activities and conveys this information to a variety of stakeholders, including investors, creditors, management, and regulators. Practitioners of accounting are known as accountants. The...
Read more: Accounting

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