The AICPA's 150-hour requirement, to be implemented by the year 2000, will require college study beyond the usual four-year period. The potential short-term impact on the supply of CPAs is tremendous. For example, when Florida implemented the 150-hour requirement in 1984, the number of first-time candidates sitting for the CPA exam decreased to 49. Table 1 shows the decline in first-time candidates in Florida over the period from 1982 to 1989. A nationwide drop in the supply of CPAs for a three-year to five-year period would create an enormous problem for CPA firms.

Paraprofessionals can be used by CPA firms to decrease costs and compensate for a decline in the available supply of CPA candidates much as dentists have used dental assistants to enhance productivity and contain costs. CPA firms are facing increased competition, increased costs and a possible decrease, even before the effects of the 150-hour requirement, in the supply of CPAs because of a decline in the number of students choosing accounting as a career. These are not new problems. They are old problems that are becoming more severe. The decline in the number of students choosing accounting as a career is exacerbated by the decline in the total number of college-age people in the U.S.

It has long been suggested that CPA firms use paraprofessionals to alleviate cost and personnel supply problems. Twenty-five years ago, John L. Carey suggested in The CPA Plans for the Future: "Much of the staff work involving routine, detailed, repetitive chores might be handled by nonprofessional personnel." In the August, 1989 issue of the Journal of Accountancy, A. Tom Nelson suggested: "CPA firms will need to make increased use of paraprofessionals and artificial intelligence performed by new recruits" to improve professional productivity in accounting.

These paraprofessionals would be individuals who do not meet the educational requirements for membership in the public accounting profession, but who, under the supervision of professionals, perform some of the professionals' tasks. The paraprofessional has been described by David G. Freeman, CPA, as: "An individual used in place of a professional to perform tasks for which the full range of professional expertise is not required; an individual classified by the scope of his or her education and/or training, which might encompass only a small portion of the full range required for professional status; an individual characterized by the absence of a license to practice or other formally recognized professional status."

Paraprofessionals have been used successfully in the medical and legal professions for some time. A study was conducted to determine if this is also true of the accounting profession.

Prior Research

Loeb and Rymer examined the use of paraprofessionals by surveying a large number of AICPA members in 1973. They concluded that the use of paraprofessionals was becoming an accepted practice. The results of their survey include:

* A majority of the respondents agreed that: 1) there was a growing need for the use of paraprofessionals, 2) paraprofessionals should only perform audit tasks requiring minimal or no professional judgment, and 3) the use of paraprofessionals might help to develop managerial ability among junior accountants;

* Twenty-seven percent of the respondents agreed that paraprofessionals would enable CPA firms to reduce their billings;

* Ninety-two percent agreed that paraprofessionals would require close supervision from senior accounting staff.

Neil R. Bersch, CPA, with a multinational public accounting firm, examined the financial implications and problems of using paraprofessionals in tax work. He found that firms could reduce operating costs, which could result in lower billings to clients, but there could be "human relations" problems between junior accountants and paraprofessionals performing the same tasks. There may also be problems in maintaining high professional standards with nonprofessionals. Bersch concluded that firms cannot afford not to use paraprofessionals.

Ted R. Compton provided an overview of the auditing function and pros and cons of using paraprofessionals. Pros included an increase in job satisfaction and a decrease in turnover of the professional staff. Cons included concerns regarding increased cost of supervision and maintenance of the quality of audit work. Compton concluded that the benefits outweigh the cost of using paraprofessionals.

The national director of human resources at Price Waterhouse & Co., Sheridan C. Biggs, Jr., wrote "The Changing Economics of the Public Accounting Profession." He reported the Price Waterhouse experience in examining the composition of its audit staff and the tasks performed on audit engagements. He found that the lower level staff "viewed a fairly significant portion of their work as mechanical and uninteresting and could, in their judgment, be done by persons without full professional training." Price Waterhouse developed formal plans for hiring, training, and using paraprofessionals for specified tasks on audit engagements. These tasks include: tests of mathematical accuracy, security counts and physical inventory observations, schedule preparation, gathering information for use by professional staff, and entering data into microcomputers.

Overall, the results of studies involving paraprofessionals have indicated successful use for specified tasks performed by junior staff accountants, some concern for proper supervision to ensure audit quality, expectations for decrease in turnover, and increased use in the future.

What is the extent of current use of paraprofessionals? In what areas of public practice are paraprofessionals currently being used? For what tasks in auditing are paraprofessionals being used?

The Survey

To examine the current use of paraprofessionals, a random sample of 400 AICPA firms with two or more professional members were surveyed. Ninety-six percent of the respondents were from local firms, and the remainder from large and regional firms. The questionnaire contained two parts, one concerning demographic data and the other inquiring as to audit procedures performed by paraprofessionals within the firm.

Seventy-one percent of the respondents used paraprofessionals. Table 2 indicates the areas of current use within firms. The survey found that the use of paraprofessionals in the tax area is almost twice the use in auditing. Of firms using paraprofessionals, 38% informed their clients. Eighty-one percent expected to continue or begin usage in the future.

Audit Procedures

The second section of the questionnaire requested those firms using paraprofessionals on the audit staff to indicate whether paraprofessionals were used to perform selected audit procedures. The results are shown in Table 3.

Conclusion

Although it has been 25 years since John Carey suggested the use of paraprofessionals, our survey indicates that 71% of the respondents use paraprofessionals, but only 26% use them on the audit staff. Of the 11 audit tasks, only seven were performed by paraprofessionals in a majority of the firms employing them on the audit staff. The reasons for the lack of use of paraprofessionals in auditing were not evident in this survey or any additional comments collected from the respondents.

It would appear that accounting firms and the profession will be forced to focus on the use of paraprofessionals in auditing in order to meet the declining supply of CPA candidates. Perhaps firms will require specific guidance from the AICPA before they are fully comfortable using them. Without such guidance, firms may believe they would be exposing their practices to additional legal liability risks which they presently are not willing to do.