In the May 1989 issue of The CPA Journal, Dr. J. Pastore of Pace University offered some thought provoking comments concerning the issues of business school accreditation requirements of the American Assembly of Collegiate Schools of Business (AACSB) and the needs of students entering the accounting profession. We recently completed a study of the AACSB's business law standards, with particular focus on their place in the accounting curriculum. Consistent with Dr. Pastore's observations, our study indicates that there are serious questions of whether AACSB business law standards meet the needs of students entering the accounting profession.

Our Study: The Business Law Curriculum

Our study identifies and analyzes the current status of the undergraduate business law curriculum for accounting students in AACSB accredited institutions and compares this curriculum with the business law requirements of the CPA exam. Our study examines the difficulties in meeting both AACSB requirements and CPA requirements for business law. It concludes with some suggestions for restructuring the approach to business law instruction to meet the needs of both AACSB and CPA requirements, and thus the educational and functional needs of accounting students and, ultimately, practitioners.

Methodology

To meet the objectives of our study, a survey questionnaire was developed. This questionnaire was sent to the Deans of all AACSB accredited schools of business offering undergraduate programs. One hundred seventeen usable responses were received, a very high response rate of approximately 48%. Among the data requested, respondents were asked to identify the number of business law courses and credit hours required for undergraduate business students in general, and for accounting majors.

Conclusions and Recommendations

Our study clearly shows that with respect to business law, AACSB standards and the needs of accounting students (and ultimately practitioners) are not the same. The two semester fundamentals business law curriculum has all but vanished. Our study indicates that only six institutions surveyed continue to offer such a course. Twenty-five percent of respondent institutions require a one semester legal environment course for accounting majors, the same requirement as for all other undergraduate business students.

The study thus indicates a drastically diminished place for business law, particularly fundamentals, in the required curriculum of undergraduate accounting students in AACSB accredited institutions. Accordingly, graduates of these AACSB accredited programs face a challenge in dealing with the law related rigors of professional accounting practice and the demands of the business law content of the CPA exam.

Even in the AICPA's five-year 150-hour program, business law is presented in only two courses--one legal environment and one fundamentals--which, while more than many accredited schools are now requiring, is still fewer than was generally required of accounting majors prior to 1982.

As we close in on the twenty-first century, with our need for knowledge increasing on all fronts, including law, the need to optimize and the pressure to do so will only increase on the accounting curriculum. In short, while there is insufficient time in traditional undergraduate accounting programs to comprehensively present each and every individual topic which may be important, we must strive to provide at least adequate coverage. Thus, it is time to reformulate the accounting curriculum to better meet both the stated goals of the AACSB and of those of the accounting profession.

In business law, Legal Environment courses as currently presented fail to meet the needs of accounting students in many individual business areas. At the same time, fundamentals courses are too time restricted in their one semester format to cover the essential materials. Taken together, these courses clearly fail to meet the functional need of accountants to understand the substantive legal basis of business transactions, and to conduct professional practice in a way that is careful and ethical, and avoids legal liability.

Accordingly, a new approach is needed. We suggest elimination of the labels "legal environment" and "fundamentals." "We stress an integrated approach which examines law as a whole, while adequately presenting specific legal areas.

Specifically, we recommend:

1. Adoption of a two course business law requirement for accounting majors, the first course being an introduction to all relevant legal areas, their nature, their interrelationships; and the second course detailing further the subjects critical to accountants and auditors. The first course should be a prerequisite to the second course;

2. Taking a transactional approach, especially in the second course. Legal transactions of a financial nature are the subject of both accountants' and auditors' work. Functional understanding of the substantive nature of transactions is critical to this work, and is as important as understanding the underlying conceptual information, which is traditionally taught;

3. Integrating related areas to show legal interrelationships while gaining efficiency of presentation. We have tended to teach law in its component areas--the area of contracts; the area of sales warranties; the area of consumer protection. There is ample opportunity to integrate these "separate" areas to efficiently present what a contract is and how it may contain express and implied sales warranties, while teaching how the Consumer Product Safety Commission helps ensure that consumer products sold by contract are safe;

4. Integrating concepts with specific areas where possible. For example, standards of negligence, strict liability, etc., may be presented both generally as concepts and in specific application. Rather than presenting them twice, once as a general concept in a legal environment course and once in a fundamentals course to present Accountants' Liability, present them once, indicating both the concept and its applicability to accountants in professional practice; and

5. Employing outside reading, student projects and other methods which afford access to a greater quantity of legal information that can be presented in class.

These are just some general recommendations as to how efficiency may be gained in the business law curriculum for accounting majors so as to truly optimize the time available for business law curriculum in meeting the needs of accounting practitioners. These must be fine tuned and still others developed. It must further be recognized that no one approach may be determined to be "best," and that there must be room for some curriculum flexibility.

Accordingly, it is imperative that the academic accounting community, including the accrediting agencies, and the accounting and legal professions join forces to resolve the very important question as to how best to educate our accounting students to meet their challenges of tomorrow, particularly in the area of business law.

Martha S. Weisel, JD, and Eugene T. Maccarrone, JD, CPA, Assistant Professors at Hofstra University in the Department of Accounting and Business Law