The corporate accounting scandals WorldCom and Enron resulted in billions of dollars lost among investors. They also served to affix a black eye to the accounting profession.

Along came the Sarbanes-Oxley Act of 2002, a wide-sweeping framework for public accounting that was implemented beginning in 2004. For the first time, publicly traded companies in the United States were required to follow stricter guidelines, including the annual assessment of their internal auditing practices, a report from external auditors on management control and financial statements.

It has all added up to more work for the accounting industry, which helped spawn a wave of successful mid-tier firms. But is the new landscape comprised of the traditional “Big Four”—KPMG, Deloitte & Touche, Ernst & Young and PricewaterhouseCoopers—and the boost to mid-tier firms sustainable? Is there enough talent to go around? What are accounting firms big and small doing to retain and attract top employees?

Sara Lankford recently left the regional, Jackson, Missippi-based Horne CPA Group in order to form Carter Lankford CPAs, a smaller accounting company that caters mostly to the medical industry in Nashville. She says the Big Four powerhouses have been forced to take on fewer clients in order to dedicate more time to meeting Sarbanes’ lengthy requirements. This shift, she says, has opened up the market for firms like Horne that can take on mid-sized clients dropped by the larger firms. “There’s a trickle down effect,” she says. The fear, however, is that “SOX [Sarbanes-Oxley] work will dry up as it becomes standard and more streamlined, so you may not have all that work you have now.”

Jack E. Kiger, an accounting professor at the University of Tennessee, Knoxville, agrees. “I think the demand for accountants will level off as companies and audit firms have experience with SOX,” Kiger says, “though ultimately, SOX will require more accountants than the pre-SOX environment.” Thus, he says mid-tier firms have a growing place in the accounting profession. “Many of them are emerging to provide services to Big Four clients that because of SOX the client’s auditor cannot perform—including consulting such as tax advice, internal audit outsourcing, etc.” Lankford also says mid-tier firms will have a stable place in the market because of the additional roles Sarbanes has opened up for accountants. “Companies are looking at separating their services,” she says, “which provides more opportunity in the market. The focus on internal controls is not going to go away.” She notes that several regional companies, such as Crowe Chizek and Co., Rodefer Moss and Co., and Dixon Hughes are already capitalizing on this trend by expanding into Tennessee.

With the rise of mid-tier firms comes more intense competition for top students. Luckily for these companies, student interest in accounting is currently strong. According to Kiger, Tennessee’s program is graduating around 20% more accounting students per year than prior to the Enron-Worldcom scandals. He says the Enron debacle has actually attracted more students to the industry: “I have talked with students who say that because of the audit failures that have received so much publicity, they understand that the role of accountants in corporations and CPA firms is very important. In other words, as an accountant, they will be in a position to make a difference.” Lankford has noticed a trend towards the field spurred by the nature of investigative accounting after Enron. “There’s a new word in accounting: professional skepticism,” she says, explaining that students are now being taught to question managers more than ever before. “There’s much interest in public accounting for those who want to go into a more investigative, forensic accounting,” she adds. In spite of the new graduates, accounting firms still struggle to fill their employee needs. “Very rarely will you find an accounting company filled to capacity,” Lankford says.

James Jones, the office managing partner for KPMG Nashville, says KPMG has faced tougher competition for employees since Sarbanes-Oxley. As a result, he says, “We have about 25% more professionals consistently engaged in recruiting activities and building relationships with candidates.” According to Jones, KPMG is increasing efforts at schools with which it already has a recruiting relationship, and is discussing adding more schools to the docket. It has also created new leadership programs to attract top students throughout the Southeast. Kiger says that although all CPA firms maintain high standards, he has noticed that “both Big Four and mid-tier firms appear to apply lower grade point standards than they did prior to the Sarbanes-Oxley Act.” He also says there is a stronger market than there was prior to Sarbanes for students who have not completed a Master of Accountancy program. Companies are simply eager to recruit employees who are eligible or close to being eligible, to sit for the CPA exam.

However, Jones notes that KPMG’s biggest hurdle is not necessarily recruitment—competition has always existed for top students—but instead is retention. “The number of experienced candidates in the marketplace has virtually disappeared at a time when demand is particularly strong,” he says.

“Firms and industries of all sizes are utilizing the financial and control expertise of accountants as never before,” Jones says. “They also are finding the training accountants receive very useful in nontraditional areas.” Tennessee has experienced a significant increase in recruitment interest from corporations seeking graduates for internal auditing and other areas of corporate accounting, Kiger adds.

Sara Lankford believes that it is now up to executives in the industry to create better methods for retaining employees. She feels that young adults in the field burn out quickly because of the long hours and extensive travel required by many firms, especially when other industries offer similar positions with less work and no tax season. “If we lose them, we lose them from the industry,” she says of her employees. Lankford notes that many firms are already examining new initiatives to keep staff around, such as increased benefits, day care programs and flex hours.

For example, KPMG’s Jones says that the company has addressed this issue through a new program, the Employer of Choice initiative. “As an Employer of Choice, we offer a full plate of traditional benefits as well as some very progressive ones such as volunteer paid time off, flexible work arrangements, emergency day care, and others,” he says.

Jones also worries that as accounting programs gain in popularity, schools will struggle with keeping enough faculty on staff. “In all likelihood,” he says, “there will be enough students. The question is: Will there be faculty to teach the students and space to hold class?” He says colleges are turning away qualified accounting students each year due to a lack of resources and support from their schools and business programs.

“There is a significant population of accounting faculty who will be retiring in the next few years, and not enough PhDs entering programs to fill the open spots,” Jones says. U.T.’s Kiger says that although many instructors at the university are indeed approaching retirement, it has become more common for teachers to remain on staff until the age of 70, rather than 62 or 65. “As a result,” he says, “the problem is not as severe as it could be.”

He also says it is necessary for schools to limit the number of students coming into the program in order to see a higher success rate. “Currently, more than half of the undergraduate accounting students’ academic achievements and interpersonal skills are so limited that they are not hired into premier entry level accounting positions,” Kiger says. He says that by upping admissions standards, most universities could accommodate students who could be placed in good jobs. “That would mean that companies that do not pay market might have more difficulty finding accountants,” therefore sustaining tough competition among CPA firms for those top students. As turbulent as things have been in the wake of Sarbanes-Oxley, few think the industry has reached calmer waters just yet. In the age of post-SOX accounting, “We’re going to see many more changes,” Lankford says.