The ‘mixed bag’ of economic sentiment; recent IRS news; a PCAOB update

Hosted by Neil Amato

More than half of companies hope to add employees in the next year, but many of the CPA decision-makers at those organizations remain pessimistic about the U.S. economy. Those are a few of the key takeaways from the quarterly Business and Industry Economic Outlook Survey, which was released Thursday.

Inflation is a top concern chosen by many of the respondents. Ken Witt, CPA, CGMA, associate technical director for Management Accounting Research and Development at the Association of International Certified Professional Accountants, explains some of the pain points and potential bright spots from the quarterly data.

Also, gain insights into key provisions of the Inflation Reduction Act, get caught up on IRS and PCAOB news, and learn the questions cyber insurance carriers might ask organizations.

Links mentioned in this episode:

What you'll learn from this episode:

  • An overview of third-quarter results of the Economic Outlook Survey.
  • Why Witt calls the results "a mixed bag."
  • What finance executives project related to profits in the coming 12 months.
  • An explanation of the hiring outlook for the next year.
  • A roundup of recent Journal of Accountancy coverage of multiple news topics.

Play the episode below or read the edited transcript:

— To comment on this episode or to suggest an idea for another episode, contact Neil Amato at


Neil Amato: Welcome to the Journal of Accountancy podcast. This is your host, Neil Amato. It is September 1st, Thursday, and we have news on several fronts, including the Economic Outlook Survey release — the quarterly survey is out. We have an expert to talk about that survey, and we'll discuss other topics. All of that is coming up after this word from our sponsor.

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Amato: Ken Witt is a CPA who holds the CGMA designation and he is associate technical director for Management Accounting Research and Development at the Association of International Certified Professional Accountants. He's also overseen the Business and Industry Economic Outlook Survey for more than a decade. Ken, first, welcome to the podcast, I guess welcome back.

Ken Witt: Thanks, Neil. Always good to be with you.

Amato: What would you say is an overview of the key news in the survey for this quarter.

Witt: Well, this year or this quarter, I mean, we have a mixed bag, which is what you're seeing in the news media as well. We've got our members telling us their optimism about the U.S. economy has been dropping since the third quarter of 2021, when it was at 51%. This quarter, we're seeing it come in at 18%, which is the same as it was in the second quarter.

Fortunately, organizational optimism is always higher than our optimism about the economy itself. But that also dropped six points from 47% optimistic to 41% of our respondents optimistic about the prospects for their own organizations.

But we're seeing that tapering off of revenue and profits. Both of those projections have been easing, but we still have almost half, 49% of our respondents, with plans to expand their businesses. But on the flip side of that, we also have 25% that have plans to contract, including 4% with plans to contract significantly.

At the big-picture level, one of the concerns that people cited often was the global economy. We've only got 9% of our respondents optimistic about the global economy, and they cited major concerns. Obviously, the war in Ukraine is a big concern to everybody along with slowing growth in China.

Amato: On the key challenges front, it's probably no surprise to anyone what's at the top of the list. But what else can you tell me about those challenges, starting off with inflation?

Witt: Inflation, inflation, inflation. We can throw interest rates into the mix, too, because that's one of the things that was most often cited and related to the interest rates. Our respondents expressed concern about the impact of Fed tightening on capital investments. We're seeing that in our numbers, too, the survey respondents. While IT investment is still relatively strong at, I think, 3.4%, we are seeing the projections for other capital spending and training and development spending tapering off a little bit. That's some of the impacts and the projections for spending going forward.

Amato: Let's talk hiring. A quick rundown of the numbers is 5% of companies say they have too many employees, 38% said they have the right amount, and the rest either intend to hire or are needing people but are hesitant to hire. What do you think that says that more than half of organizations need workers?

Witt: Well, I think that's what we're seeing in the media as well. Fifty-three percent have too few employees, and 34% of those have plans to hire. In spite of the fact that we're seeing a pretty high level of concern about the economy overall and plans for easing off on capital and IT spending and training and development spending.

We only have 19% of those 53% with too few employees who are hesitant to hire. In the top 10 challenges, availability of skilled personnel still ranks third on that list. Inflation is first, and availability of skilled personnel continues to be a challenge, and it has been for a couple of years now.

On the flip side of that, in terms of our challenges, we're seeing the one thing that broke into the list was stagnant and declining markets has not been in the top 10 for some time, but that's making an appearance at the bottom of the list. We'll have to just keep our eye on how these things evolve, whether companies can get the employees and whether they'll have the business projections to support the ongoing hiring of workers.

Amato: Two years ago, revenue and profit projections were pretty low. They were negative for the coming 12 months. Then last year, they bumped up, though they were actually headed down exactly a year ago, but they were at least in positive territory. Now, specifically with profit, it's pretty much at a projection of zero. How often have you seen this kind of volatility where it went negative, became positive, and now it's dropping back down again? I think five consecutive quarters profit projections have dropped.

Witt: I'm not sure that we have seen that combination, which I think reflects what I said to open the podcast, was that we've got a real mixed bag with the economy and with our survey. We still had some strength in the economy, and revenues are easing. It's inflation that's just squeezing profits down to nothing. Let's hope we don't see that turn into negative numbers going forward. We'll have to wait and see as we move forward into the fourth quarter.

Amato: In the show notes for this episode, we will have a hyperlink to our article. We'll also have the full survey results linked so you can get all the background on this. Ken, thank you very much for being on. Anything you'd like to add in closing?

Witt: No, I think we'll have to wait and see what the fourth quarter brings. That's always an important quarter as we turn the corner into 2023.

Amato: Ken, thank you very much.

Witt: Thank you, Neil.

Amato: In addition to the Economic Outlook Survey release, we have a lot of news to discuss. The JofA is covering that news and here are a few of the topics for which there will be links in the episode show notes. The JofA's Paul Bonner has coverage of an AICPA letter disputing "misleading" claims on new IRS funding. The letter also calls for IRS service improvements. Alistair Nevius has taken an in-depth look at tax provisions of the Inflation Reduction Act. That's a topic recently covered on this podcast, but there's still plenty to explore and learn about in those provisions.

The JofA's Bryan Strickland has written about a PCAOB statement of protocol that allows the PCAOB, or Public Company Accounting Oversight Board, to inspect Chinese companies the same way it does companies in other countries. Kevin Brewer has written about the questions cybersecurity insurance carriers might ask and why those specifics are important. He has a Q&A with a longtime cybersecurity consultant.

All of that coverage and updates on other topics are available at We appreciate you listening and remind you if you haven't already to follow the show wherever you listen and to rate, review, and share the Journal of Accountancy podcast.