CPA Journal Education Forum Anticipates Future
By Robert H. Colson
Interest in Education Remains Strong
The CPA Journal recently organized a forum to address the state of the educational requirements for aspiring accountants. In 1988, the AICPA Council adopted the 150-hour requirement for membership, which has been effective since July 1, 2000. Forty-six states now require 150 hours of college education to sit for the CPA exam. Nonetheless, a chorus lamenting the educational background of new hires can still be heard in almost every practice sector. The forum brought two eminent educators and two respected firm partners together in a panel to provoke thought about the future of accounting education. Paul R. Brown, accounting chair at NYU, and Brent Inman, partner at PricewaterhouseCoopers, made the case for a well-constructed 120-hour program followed by formally organized professional development. G. Peter Wilson, president of the American Accounting Association, and Victor S. Rich, partner at McGladrey, argued for graduate education to maintain professional status for CPAs. The synopsis of their presentations and reactions from forum participants that follow identify some of the important issues facing accounting education.
Higher education has always concerned the leaders of the CPA profession. In New York, where the first CPA licensure law was enacted in 1896, Charles Waldo Haskins and other leaders of the budding accounting profession successfully lobbied to be regulated by the Regents of the State University of New York, the regulator of the learned professions (those requiring a college degree), rather than by the Department of State, which regulates the trades.
Haskins himself left his firm in 1901 to become the first dean of the business school at New York University. In the Midwest, William A. Paton, an accountant, organized the first MBA program at a public university, the University of Michigan, in a futile attempt to create a movement for accountancy professional schools. Most states, however, adopted bachelor’s degree requirements for CPA licensure after World War II, and during its great growth during the 1950s business boom, the profession’s leaders again proposed professional schools.
A 1958 AICPA study commission recommended expansion to a graduate or professional format, which in 1968 was picked up again in another study commission’s recommendations. The AICPA board of directors adopted the goal of an expanded educational requirement in 1978, and 10 years later the membership voted to change the bylaws to require a bachelor’s degree and 150 hours of higher education for AICPA membership, effective July 1, 2000. As the states have adopted this 150-hour requirement for licensure, each has specified the program content slightly differently, although the effort for national uniformity has been notable.
In spite of the apparent resolution of the educational problem through the 150-hour requirement, education was the single issue that most CPA practitioners wanted to discuss with me before the collapse of Enron and the ensuing problems for the accounting establishment. It was not just that firms could not find an adequate number of qualified applicants for their open positions; the issues were subtler, reflecting the increasing specialization and fragmentation of CPA practice. Whereas once CPAs all worked in accounting and auditing or tax preparation, CPA firms large and small now specialize in financial planning, tax planning, business development, financial management, information systems, risk management, forensic and fraud auditing, and many other areas.
The common theme, however, rang through clearly: Not only were small firms with bookkeeping and tax preparation practices having a problem finding appropriate accounting graduates, but so were the largest firms. When I was an accounting educator, I often heard complaints from the large firms that we trained students narrowly for the small firms, while the small firms complained that graduates knew nothing about running a set of books because they learned only about abstract FASB statements useful to the big firms.
The memory of one small practitioner’s complaint remains vivid. He understood that the large state university had to teach “all that FASB nonsense,” but why couldn’t my small college program “teach something practical?” He found it hard to accept my explanation that my accounting program was the same as that at the large university because we both comply with the same set of state regulations.
The motivation for this forum was to start a discussion that could lead to an expanded conception of, and a more liberal approach to, the content of CPA education.
Updating the Educational Model
By Paul R. Brown
(Editor’s Note: Interested readers can view an expanded version of Brown’s remarks at www.stern.nyu.edu/acc/.)
The traditional accounting educational model has become narrow and outdated. Today’s business world values students with a broad business education and professional business skills rather than students with a circumscribed education focused on achieving professional certification. The Accounting Education Change Commission (AECC) outlined the objectives of education:
Accounting programs should prepare students to become professional accountants, not to be professional accountants at the time of entry into the profession. At the time of entry, graduates cannot be expected to have the range of knowledge and skills of experienced professional accountants. To attain and maintain the status of a professional accountant requires continual learning. Therefore, pre-entry education should lay the base on which lifelong learning can be built. In other words, graduates should be taught how to learn. The base on which lifelong learning is built has three components: skills, knowledge, and professional orientation.
The AECC advocates an educational model that lays the following foundation for lifelong learning: development of communication and interpersonal skills, integration of general education with business knowledge, exposure to professional responsibility and ethical values, practical real-world experience, and an introduction to the global business environment and the complexities of technology. A content-based educational model, such as the 150-hour program, does not provide students with the essential skills needed in business, or enhance their marketability as professionals in today’s rapidly changing business world.
The most popular educational model for implementing the 150-hour rule is adding a Master’s of Accounting degree (M.Acc.), which makes the opportunity cost of obtaining a CPA particularly high. Albrecht and Sack’s recent survey reveals the following:
[N]early 100% of accounting educators and 79% of accounting practitioners … stated that they would not get an accounting degree if completing their education all over again…. Six times as many practicing accountants would get an MBA as would an M.Acc., over three times as many practitioners would get a Master’s of Information Systems as would get an M.Acc., and nearly twice as many practitioners would get a law degree instead of an M.Acc.
Students often desire a graduate degree, but not necessarily in the same subject area as their undergraduate major. There is no clear additional value that justifies imposing the costs of an extra year of education in the same subject matter. Albrecht and Sack go on to assert, “Given the changes taking place in the profession, the 150-hour rule is almost universally seen as a mistake.” They continue, “almost everyone agrees that most 150-hour programs are not appropriate now, especially where we have added a fifth year [of] more detailed accounting to an already too technical course of study.”
Today, accounting majors have a wide variety of career choices, ranging from consulting to investment banking and financial services. The accounting degree still has high value within the traditional four-year undergraduate business education model because it gives accounting majors a wide range of career options without a fifth year of educational costs. In response to the changing business environment, educational institutions have recently instituted curricular innovations in their undergraduate business education programs.
Two of the most recent educational innovations have been implemented at the Undergraduate College of the Stern School of Business at New York University, and the College of Commerce and Business Administration at the University of Illinois. Both institutions have moved away from a content-based educational approach and adopted an integrative, 120-hour educational model that molds future business professionals with certain qualities and skills.
In 1997, NYU approved a revised undergraduate business curriculum with a mission to offer the following:
[A] fully integrated four-year program combining the critical thinking and humanistic focus of a liberal arts education with state of the art training in business administration. The program emphasizes communication skills, both written and oral, interpersonal and leadership skills, a global perspective, integrative thinking, and a thorough grounding in the principles, functions, responsibilities, and techniques of business.
A major innovation in Stern’s new undergraduate curriculum was to dispense with its former “layer cake” educational model and instead adopt a fully integrated four year program that combines the study of liberal arts with comprehensive technical training in business. Another fundamental curricular change was the identification of a target skill set for all Stern undergraduates, which includes: communication and interpersonal skills; creative thinking and professional skills; travel abroad to study firsthand the global dimensions of business; leadership, teamwork, and professional responsibility (ethics); state-of-the-art training in the functional areas of business; and cross-functional integrative business projects and experiences. These innovations have been implemented through close teaching and academic collaboration between the faculty in the College of Arts & Sciences and the Stern faculty, the creation of new Stern undergraduate courses designed to meet the target skill set, corporate visitations abroad, and the integration of the core business areas across departmental lines.
With an AECC grant, the University of Illinois at Champaign-Urbana, in partnership with the University of Notre Dame, has created an innovative undergraduate accounting curriculum program, Project Discovery. In 1995, Illinois voted to replace its traditional accounting curriculum with the Project Discovery accounting curriculum for the class of 1996. Project Discovery addressed shortcomings in the traditional accounting curriculum through the following features: development of critical thinking skills through active learning methods, integration of accounting courses with general education requirements, improvement of students’ interpersonal and communication skills, creation of a common conceptual framework for accounting courses, and marriage of real-world business experiences with academic studies.
Innovative educational models, such as those adopted by Stern and Illinois, do not create opportunity costs for students or employers, but they do provide a value-added educational experience. I believe that the 150-hour rule increases the opportunity costs for students and, as implemented in most states, does not give students the requisite value-added advantage. Students who choose the 150-hour option are forced to follow a narrow specialization in accounting at a time when it may be more advantageous to possess a flexible background.
It is time to consider alternatives to the 150-hour educational model first
conceived more than 30 years ago. Alternatives that are responsive to today’s
business and accounting environment will provide fledgling accounting professionals
with flexibility and choice in pursuing their careers.
Paul R. Brown, PhD, CPA, is the chair of the department of accounting, taxation, and business law, Stern School of Business, New York University.
By Brent Inman
We are concerned about the awareness and attractiveness of the accounting profession among students. This is evident in that the number of accounting degrees awarded dropped 25% from 1996 to 2001. We have also seen, at a number of our top recruiting schools, a 50% to 60% decline. And in the post-Enron environment, will this problem be even more acute?
To address the image of the profession, we have undertaken a comprehensive approach at Pricewaterhouse-Coopers, which includes the following:
Before discussing the 150-hour requirement, I want to emphasize that we believe that there are many issues related to declining enrollments. There is not just a single factor, and that is why we are committed to a comprehensive approach.
In terms of the 150-hour requirement, we have the following questions that we believe should be the focus of further discussions:
With these questions, our view is that the 150-hour requirement should remain but be changed to provide alternatives for meeting the requirement. These alternatives are as follows:
We feel that the 150-hour requirement should remain, but we believe that by providing these alternatives in the requirement, we are providing more flexibility in attracting high-quality talent—which we feel is a critical issue for the future of our profession.
Most important, we feel that various stakeholders should become engaged in
evaluating the requirement, as we are doing today. In this regard, we applaud
Bob Colson and The CPA Journal for assembling this forum so we can
discuss this important topic for our profession.
Brent Inman is responsible for U.S. recruitment and is a partner of PricewaterhouseCoopers.
By Victor S. Rich
In a day and age when just about every one of the learned professions regulated through the Regents of the University of the State of New York has a master’s degree requirement, it seems somewhat counterproductive to be thinking about rolling back the requirements from 150 hours to 120 hours of college education. Indeed, the accounting profession both deserves and requires even more than the current 150 hours in order to address all the educational demands so aptly identified by Professor Brown.
The expansion in accounting knowledge alone would justify additional education beyond the 120 hours, if our goal is to produce graduates with a working knowledge of accounting, auditing, and taxation. But when you add all the other disciplines, knowledge, and competencies necessary—from global business, finance, and management to speaking, writing, and ethics—it’s simply not reasonable to expect to produce a budding professional without a master’s-level education.
The accounting profession is falling into a trap of its own making. Firms pay entry-level accountants as if they were in a trade rather than in a profession. In many cases, so-called professional employees are treated as if they were in a trade, spending several years learning their job and earning the respect of the firm’s professionals. How can we expect students to prepare educationally as professionals when they are hired at a nonprofessional salary and with nonprofessional expectations? The accounting profession will not break out of this cycle until we pay more to more highly qualified individuals that have committed themselves to this profession through additional, costly education. The graduate or professional school degree has worked successfully for just about every other learned profession. We can make it work in accountancy, too.
Although we are all committed to the continuing education model for accounting professionals, it would be a mistake to rely upon it for the foundation of a young person’s career. Formal education plays a fundamental role in the development of a person’s knowledge bases, competencies, and ethical outlook, precisely because it is a step removed from the world of day-to-day business. The firms are simply not in a good position to teach many subjects. It would certainly be preferable to teach independence and professional ethics in a more idealistic setting than that found in most firms. The type of ethical sense that is so important for our profession, and will likely become even more important, is not something that you can learn in a quick four-credit CPE course on the Internet or acquire as a result of passing the excessively detailed AICPA ethics exam. It requires debate, situational analysis, and especially the sense of importance engendered by serious academic consideration.
More and better education will certainly lead to a more desirable and better
CPA profession. Although I wish that we could populate our firm with bright,
well-educated and well-rounded young people with 120-hour degrees, the reality
is that such individuals are rare. The optimum solution right now would be
to find MBA students, preferably with a major in accounting or with an undergraduate
degree, and offer them the high starting salaries and good working conditions
that are necessary to have them consider accounting as their profession rather
than as a stepping-stone to something better. The end result is that an accountant
should acquire an MBA as part of the requirements to become a CPA.
Victor S. Rich, CPA, is a senior partner of McGladrey & Pullen LLP.
By G. Peter Wilson
There is no question that accounting education is facing many problems, foremost among them the decreasing numbers of students expressing an interest in majoring in accounting. In addition to my co-panelists and the AECC, there are many professional accountants, business leaders, and educators seriously concerned with addressing what all believe are serious issues. Certainly, accounting educators all over the country are engaged in efforts to modernize their courses and to make curricula more responsive to current students’ needs.
Because of the public expectations that CPAs be engaged in SEC auditing and other regulatory or oversight purposes, the profession has apparently had more difficulty than others in adjusting to the phenomenal changes in the business world over the past 20 years. Accountancy, whether at the university or at the firms, has not adapted as rapidly as other business disciplines to the information revolution and innovations in technology. At one time not that long ago, accountancy was by far the most developed of the business academic disciplines. In the past 20 years, however, finance, marketing, management, and other business disciplines have overtaken it, with the popularity of the MBA degree overshadowing accounting.
In considering the educational background necessary for entry-level accounting professionals, it is critical to focus on the core set of competencies that define accountants as distinct from other disciplines. Some aspects of those competencies must be learned in an educational setting, but others would be best developed on the job. Most accountants must not only know their own competencies but also the competencies of other disciplines to sufficient depth in order to account for items correctly. Accounting does not occur in a vacuum, but within the context of a vibrant and varied economy.
Certainly, the types of competencies that are most specifically identified with accountants include the ability to measure, the knowledge to process various types of information, the objectivity to audit the transactions or behaviors of others, and an intense interest in ethical practices. The most important role for leaders in the profession and academia is to enable young people with the competencies and predispositions that would make them good accountants to discover a path that leads them to the accounting profession. Our current educational model shuts the door too early for many students that would otherwise be interested in an accounting career. We shut it too early by insisting on education that is overly technical early in the educational process. This may have worked successfully in the past, but times have changed, and the trend is now toward general education and competency development at the undergraduate level with technical training at the graduate level.
Some have suggested that a different type of student is needed and the CPA profession must attempt to recruit students that might once have majored in a different area. I do not subscribe to this belief. We really do not need a different type of student. Rather, we need to think about processing students differently. Although I do not teach undergraduates, programs like those described by Paul Brown at NYU and Illinois have a great deal of appeal and should provide models for others to follow.
Nonetheless, I would also look to other types of programs for accountants and, as Victor Rich has suggested, such programs might require CPA firms to change their hiring, compensation, and employee development practices. Specifically, many fine students leave undergraduate programs with liberal arts or science degrees and continue to get a master’s degree of some type, frequently an MBA. I would think that a bright student with an MBA accounting concentration (typically 18 of 60 graduate credits) would be a great candidate for a CPA firm. I believe that many such students would be interested in the CPA profession if it were not for the need to retrace their steps in order to accumulate the undergraduate credits in accounting necessary to satisfy state licensing requirements. What would you do if offered the choice between an MBA working in an industrial or financial company or an MBA with many undergraduate courses working for a CPA firm? In other words, we have set up a system where the incentives for someone to enter the CPA profession are negligible unless they already have an undergraduate accounting degree.
The great lesson to take from all the work of the AECC, from the research
of Albrecht and Sack, and from forums such as this one is that the current
accounting curriculum as approved in most states requires too much technical
coursework in accounting. Accounting is fundamentally a specialization within
a larger branch of learning. Accounting education is one of the many branches
of the education tree, not the trunk. The goal should be for accountants to
know the trunk and the accountancy branch when they finish their formal education
and to fill in the leaves as they gain practice experience.
G. Peter Wilson, PhD, is the Joseph L. Sweeney Chair in Accounting, Wallace E. Carrol School of Management, Boston College.
The forum, which was scheduled for three hours, could have continued for a much longer time. I asked the panelists to limit their remarks to less than 15 minutes, which they all were able to do, in order to permit the forum’s attendees to engage freely with the panelists, agreeing, disagreeing, challenging, and offering further insights during the live discussion and afterward. One participant from public practice, Bruce Nearon, contributed “a radical proposal” for a complete overhaul of accounting education, and Steven Kachelmeier from the University of Texas at Austin contributed a response to Nearon’s proposal, both of which will be published in the October issue of the Journal. Several other participants accepted this challenge, and their comments follow.
Charles A. Spector, CPA, MBA, Director, SUNY Oswego
Comments by your panelists kept ringing in my ears on the long trip back to SUNY Oswego. I would like to offer, therefore, the opinions of someone who teaches at a state school in rural New York, in what James Fennimore Cooper called Leather-Stocking Country.
Several years ago, after fighting the 150-hour trend in the ’70s and ’80s, our school changed course. We shed the old paradigm and added courses in ethics, forecasting, statistics, speech, communications, and business literature. In short, we tried to create a program that would graduate our collective vision of the enlightened accountant. Our school became the first SUNY school to adopt a completely integrated 150-hour program. Though we have not attained the enrollments originally envisioned given the investment of faculty and other resources, we do not consider our efforts to be wasted, and our experiences are in many ways quite different than schools in major urban areas.
Many of our students, like the community around us, do not know what a petit four is. That is a distinct disadvantage when being interviewed by PricewaterhouseCoopers. We have moved some of our accounting courses into the fifth year and encouraged general education, writing, public speaking, and statistical analysis in the undergraduate environment. We think ours is a unique program designed for the needs of our students and other stakeholders. I agree 100% with Peter Wilson’s comment that different schools have different missions! We are a small school that believes in a personal touch. Recruiters often discuss candidates over lunch and point to specific students who would benefit from an additional year of education. The recruiters even come back and hire those students.
More important than having a higher pass rate on the CPA examination than traditional 120-hour students, our 150-hour students have a materially higher probability of being hired into public accounting. Many of them are going into regional firms as well as the Big Five. I am sure that a Stanford MBA is not only unlikely to go into auditing, but also unwilling to admit to a peer that they took a job with a regional accounting firm. Our students are proud to serve small or large clients. Some of our students would never be hired into public accounting after only a four-year degree. I have been told that the fifth year gives them the sophistication that they lack. I was surprised, however, to hear the salaries being offered to NYU students in New York City. The salary range is quite different in upstate New York. I think that $40,000 for a person even with a master’s degree is closer to the norm in the public accounting field west of the Catskills.
Your conference was being held because we do not have enough accounting students. But it is not just accounting that has suffered. According to the February 1, 2002, issue of the Chronicle of Higher Education, business enrollment is down to 16.6% of college students, quite a bit below the 25% that was being reported at many schools 10 years ago. Enrollments change as the economy changes. Accounting enrollments have been a victim of a good economy. Those enrollments were going down many years before the 150-hour regulations. I believe they will rebound in the next few years.
Call me an optimist, but as Peter Wilson more eloquently stated, the Enron catastrophe might turn things around completely. It is entirely possible that the audit function will come to be regarded as the core business and profit-maker of public accounting firms in a changed profession. For a short period of time, firms lacking sufficient numbers of auditors to handle new clients brought to them in the wake of an Arthur Andersen meltdown will have to raise not only starting salaries but also billing rates. With the economy in a state of confusion, students are looking for academic majors that lead to good jobs. Information systems majors are now walking the streets and bemoaning the fact that they lacked the foresight to become accountants, even at $40,000 per year. Master’s degrees have not caused the teaching shortage, and the 150-hour requirement is not the only contributor to the accountant supply problem. The economy is a much more likely suspect.
The 150-hour regulation has not gone into effect in New York yet. It makes sense to talk about alternatives now. But we are in the middle of the bridge and it might make as much sense to move forward and implement the regulations before deciding that we have failed. We are second-guessing ourselves. Talking about it only confuses everyone. Schools now preparing programs to implement three to four years down the road might soon be wondering if they should move forward. We need to stay the course for several more years.
Philip Wolitzer, CPA, Long Island University
The forum raised some fundamental issues related to the education requirement for CPAs. The 150-hour educational requirement versus the 120-hour requirement always raises some heated discussion, and this was no exception. Interaction and discussion brought out many points, and the winner was … ?
It should be remembered that it has been nearly 70 years since the educational requirements were changed in New York. Before then, only a high school education was required to be a CPA. At present, all 54 U.S. jurisdictions require a baccalaureate degree. Considering that change is occurring at a geometric rate, a graduate degree requirement for the CPA certificate is, in my opinion, necessary.
Because we have 54 jurisdictions granting the CPA certificate, differences among them will always be the norm. Thus, we will never settle the arguments that the student should take course A versus course B or an English course versus an IT course. A graduate degree will differ among thousands of degree-granting institutions in the United States. Uniformity can never be achieved. Quality should be stressed in every course, no matter the label, and a well-rounded program should be the goal.
Implementation of the 150-hour program can occur when the profession agrees on broad areas rather than on specific courses. Differences can even be healthy, because they allow the student to choose among alternatives. In all areas, the quality of the course and the teaching should be the paramount factor. Unfortunately, the profession has never involved itself meaningfully in these educational areas.
It pained me deeply when the media began to call the AICPA a trade association rather than a professional association. A graduate degree for all new CPAs, together with current CPAs consciously improving their practice of professionalism, will ultimately protect the public interest and restore CPAs to professional status.
We thought we had rid ourselves of the green eyeshade image and reached the status of professionals in the public’s mind. Recent events have pushed us back quite a few steps. It will take us a while before the public can again perceive CPAs as true professionals. Graduate degrees and the quality practice of professionalism will help us join the other recognized professions and put us back into serving the public interest.
Mary Ellen Oliverio, PhD, CPA, Pace University
Peter Wilson, in his elegant, unambiguous statement, established the significance of accounting as a field of specialization! What a contrast his comment is to what those of us in the university have been hearing for the last 15 years. What have we heard? From employers: “We want 150 credits, but we don’t want candidates to have any more accounting. We want well-rounded employees and we don’t care if they have studied accounting because we can teach them all the accounting they will need.”
And what do our students hear? As of early March 2002, several of my students, in interviews with Big Five recruiters, learned “You don’t need to be an accounting major. We have wonderful training and we can prepare you for the accounting you will need to know.”
And Andersen CEO Joseph Berardino pleaded before a Congressional Committee, “The American people must tell us what they want.” He did not elaborate, but it seems strange that the head of a major public accounting firm suggested that “the American people” be polled to determine what financial information they want. Are we to conclude from his comment that accounting is a commonsense matter that requires no special education?
At the same time, the recent Enron-related Congressional hearings have shown
politicians struggling to phrase reasonable questions about technical matters,
and witnesses-such as the former CEO of Enron and the current CEO of Global
Crossing-who insisted that they were not accountants and had relied on
specialists from their public accounting firm.
There is indeed confusion about the value of accounting as an academic specialization and its need in the marketplace. The 150-hour program as currently designed and implemented is being revisited in a number of states. That revisiting needs to be done more systematically-it needs to be both critical and objective-than seems to be the case currently.
The critical, objective review should conclude with support for, or a challenge to, these hypotheses:
Recent disclosures of judgments and decisions on the part of so-called professionals in the business press and in congressional hearings are very disquieting. Yet, public accounting firms have prided themselves on their astute hiring practices, their insistence on integrity, their carefully monitored quality-control programs, and their continuing education. Reconciliation between what we are now observing and what have been the claims of the accounting firms would be an invaluable undertaking.
The current leaders of the profession are graduates of our colleges and universities. Can we deduce that what has gone wrong since the mid-1970s, when Congress completed its first comprehensive study of the public accounting profession, has been the result of a non-professional educational model? What will be the educational model for accountancy in this new century?
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