November 2000

I attended the annual NASBA conference September 17–20 in Boston and met many of the hard-working, public-interested individuals that serve on state boards of public accountancy and work for various organizations that support or monitor the activities of those boards. A large proportion of those at the conference were CPAs or CAs and expressed intelligently their concern for the continued development and success of the accounting profession.

Their jobs are not easy in today’s environment. The resources of state boards of accountancy are spread too thinly over too many tasks for them to effectively regulate a dynamic profession. The long-term dynamics in three areas will require state boards to evolve significantly:

  • Structural asymmetries between the authority to regulate licensure and the authority to set the standards to which licensees are held will frustrate regulatory efforts.
  • Environmental developments regarding global markets, technological expansion, and electronic commerce will cloud issues of jurisdiction and create a demand for credentials beyond the scope currently provided by state legislation, or even the Uniform Accountancy Act (UAA).
  • Long-term cultural and ideological dynamics will undermine the ability of the accounting profession to attract qualified entrants. It is not just a matter of starting salaries: The talent pool is very small and will remain so in the near future unless entrance becomes more accessible and attractive to a broader range of people.

    Nonetheless, state boards can have an extremely profound impact by using their resources to spearhead recruitment efforts. Their leadership focus on the “three Es”—education, examination, and experience—could make a significant difference. I will return to the three Es, but first, more on the three long-term challenges facing state boards.

    Structural asymmetries. State boards regulate CPA licensure; however, they do not regulate what CPAs do. An array of private sector standard setters and federal and state agencies create accounting and auditing standards. Moreover, these standards are rapidly harmonizing with those of other (usually) national accounting standard setters that regulate both standards and practitioners. Increasingly, this has led in the United States to fine distinctions between the regulated and unregulated work performed by licensed CPAs. As this trend continues, so will the demand for further professional credentialing outside the present regulatory structure.

    Environmental developments. When New York passed the first CPA licensure law in 1896, few nations were organized as democracies. A century later, most nations at least aspire to the principles of American democracy: government for the people, protection of property rights, and the rule of law. The U.S. government, which has evolved to become an enabler of personal freedom and economic success, has been on a significant deregulatory path for the past quarter-century. Coupling current developments in global communications, markets, and business with domestic deregulation has created a force pushing the profession to seek private-sector, contractual means to assure the quality of services rather than governmental, regulatory means.

    Cultural dynamics. CPAs are aging. The accounting professorate is aging. The profession’s principal regulated products are aging. In spite of high demand for CPA candidates, accounting academic programs attract fewer, less-qualified students. Young people, especially from the professional and managerial middle class, see brighter financial and personal futures in careers that do not have the perceived steep cost and limited options required for CPA entrance: education, examination, and experience.

    Leadership and Change in the Three Es

    Because state boards control licensure they are in a unique position to help expand the pool of potential entrants to the profession.

    Step 1 would be to actively encourage innovation in accounty education delivery and content, as opposed to allowing it only after exhaustive justification. Virtually every college accounting curriculum is designed to fulfill the specific requirements of the state board and would change with those requirements. State boards should broaden the educational background that qualifies people to sit for the CPA exam and provide incentives for colleges to design programs that attract diverse age and racial cohorts.

    Step 2 would be to completely rethink the experience requirement. Linking the CPA license solely to experience in CPA firms discourages those potential entrants that perceive their chances of such employment as small, namely, older students and minorities. Can the profession at large provide education, review, and developmental activities to qualify CPAs for more complicated levels of attest work? I believe we can, but it will require change.

    Step 3 would be to focus the content of the CPA exam on knowledge related to attest functions and to enhance the stature of the exam in qualifying for attest practice.

    CPAs have a long history of placing the public interest over personal agendas. Independent, objective CPAs are vital participants in the economic well-being of their communities. The future supply of CPAs is a concern for us all, and one that state boards of accountancy are in a unique position to ensure.

    What’s in a name? Thanks to those who have sent suggestions for naming this column. There are some good ones to consider! There is still time to enter; please send your suggestion to The entrant with the winning name will join me for lunch and have the chance to set me straight on the Journal.

    Robert H. Colson, PhD, CPA

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