[Why&Next] 'The Accountant's Crown' Partner Promotion Falls to Lowest Level Since New External Audit Act Introduction

New Partner Count Falls Below 100 for the First Time in 5 Years
Promotion Bottleneck Due to External Demand Drop and Reduced Resignations
Concerns Over 'Surplus Workforce'... New Hiring Expected to Shrink

The number of new partners at the Big 4 accounting firms has fallen to its lowest level since the introduction of the "New External Audit Act (Shin Oegam Act)." For the first time in five years, the total has dropped below 100. This appears to reflect an internal personnel bottleneck as the boom period for accounting firms comes to an end.

According to the accounting industry on the 2nd, the Big 4's regular personnel appointments for this year were completed on the 1st with EY Han Young Accounting Firm being the last. EY Han Young appointed 27 new partners, down 6 from last year's 33. Samil PwC (27) and Samjung KPMG (28) also decreased by 7 and 5 respectively compared to the previous year. Deloitte Anjin was the only firm to promote and appoint more new partners than last year, increasing by 1 from 16 to 17.

The total number of new partners at the Big 4 is 99. This is 17 fewer than last year (116), a decrease of about 15%. This is the lowest level since 2019 (98), the year following the introduction of the Shin Oegam Act. The numbers peaked at 103 in 2020, 104 in 2021, and 146 in 2022, then dropped to 116 last year. Compared to the 2022 peak, this is a 32% decrease, showing a clear downward trend for two consecutive years.

Decline in External Demand → Decrease in Resignations → Promotion Bottleneck

Partners at accounting firms, equivalent to 'executive level' in general companies, are known as the "flower of accountants." Unlike typical companies, partners become co-owners of the firm upon promotion, sharing equity. This is why they are called partners. They are directly involved in management and receive dividends, acting as owners of the company. The appointment of representatives also reflects the will of the partners. Additionally, partners enjoy perks such as company cars and chauffeurs, and there are 132 partners across the Big 4 firms earning over 500 million KRW annually (as of last year). Being a partner is a coveted position for anyone intending to continue their career at an accounting firm.

The reason the "promotion gate" is narrowing is interpreted as a direct hit from the downturn in the industry. Since the introduction of the Shin Oegam Act in November 2018, the accounting industry experienced a boom with increased workloads, but recently, with the deterioration of the mergers and acquisitions (M&A) market and reduced client demand, performance shows signs of decline. An industry insider said, "As the good times ended, demand from venture capital (VC), private equity funds (PEF), and startups decreased, so fewer accountants are leaving to move elsewhere," adding, "The atmosphere is that staying inside is better than going outside." For example, Samil's resignation rate for the 2023 fiscal year was only 8.8%. Other firms also show a stark contrast to the past when resignation rates were close to 20%. Thanks to this, a personnel bottleneck has created an environment where partner promotions are more difficult than before.

Another Concern: Utilizing 'Surplus Personnel'

The performance of accounting firms is closely linked to the macroeconomy. The audit market, which once caused a shortage of accountants, has stabilized, while the deal market has been in a slump for two years. In the first half of this year, there were only two transactions worth trillions of won: PEF operator MBK Partners' acquisition of Gio Young and Hankook Tire's acquisition of Hanon Systems. Accounting firms that massively increased personnel during the boom now face new challenges in utilizing their workforce amid reduced workloads. Since they cannot afford to let expensive hires sit idle, they sometimes assign work or provide artificial intelligence (AI) training instead.

The decrease in resignation rates is also expected to affect new hiring. With a record 1,250 new certified public accountants expected this year through the CPA exam, the Big 4 firms are considering freezing or reducing hiring compared to last year. The total hiring scale is expected to drop significantly from last year's 875 to the 700 range. If actual hiring falls to the 600 range, it will be the lowest in 10 years since 2014 (670 hires).