The agrarian economy of the nineteenth century was served by one-room schools that taught and honed basic skills in self-reliant individuals prepared to participate in an economy of family-run farms and small shops. By the twentieth century, schools had changed to assembly lines that moved students through the ranks, toward diplomas and jobs in an industrialized, assembly line economy. During the twenty-first century, education and business will both change to reflect a service-oriented, technology-based, worldwide economy.

At a Crossroad

Accounting is a part of that change. Merging accounting firms and the utilization of technology ranging from computers and fax machines to expert systems and artificial intelligence mean that accountants are expected to know more and deal with more complex situations.

As a result, accounting education is at a crossroads. It may well be that the fundamental textbook-based, rule-intensive, lecture/problems style of instruction will soon end. The managing partners in major accounting firms are concerned that accounting graduates lack problem- solving skills. Managing partners state:

"Individuals seeking to be successful in the diverse world of public accounting must be able to use creative problem-solving skills in a consultative process. They must be able to solve diverse and unstructured problems in unfamiliar settings. They must be able to comprehend an unfocused set of facts; identify and, if possible, anticipate problems; and find acceptable solutions."

Actions of the AICPA membership have already prompted several states to adopt a requirement for a fifth year of education. The implementation of the fifth year represents a unique opportunity for curriculum development. This, however, does not mean that courses must be added to the accounting curriculum in an effort to achieve the impossible goal of encyclopedic coverage of all accounting rules.

Because of the lack of professional experience, entry level accountants often face the frustrating problem of dealing with unfamiliar topics. These situations can be grouped into three categories:

* Difficult technical questions not covered in the typical accounting curriculum;

* Determinations requiring professional judgment; and

* Areas of professional ethics involving borderline judgment calls.

Difficult Technical Issues

When CPAs tackle a problem it sometimes involves only the routine application of familiar rules. Undoubtedly, accounting education trains students well for this. Much of accounting, however, involves situations not found in textbooks or covered in college programs. Special and regulated industries, state taxes and taxes of foreign countries, accounting standards of foreign countries, SEC rules, and bankruptcy are typical problem areas that are not covered or are only briefly mentioned in accounting programs. Yet accountants must learn to deal with these situations. Persons with accounting experience recall situations like having to prepare a State of Utah tax return when they had not previously known that Utah had a state income tax, or being assigned to an audit of an SEC reporting bank when they knew little of either SEC rules or bank regulations.

No amount of education will prepare someone for every contingency; and even if it were possible to cover every technical issue, the standards and laws would quickly change, leaving the accountant to learn the new rules.

Professional Judgment

Accountants must learn to exercise professional judgment in difficult, changing situations. Is the going concern assumption still valid for a troubled company? Is an amount sufficiently material to require disclosure? Is an estimated allowance for bad debts adequate? Is the available authority sufficient for a taxpayer to claim a questionable deduction on a tax return? Textbook coverage and classroom discussions seldom cultivate the professional judgment necessary to cope with such problem situations.

Ethical Issues

Learning ethical behavior is more complicated than simply reading ethical standards. Accountants must maintain a confidential relationship with clients, yet adequately disclose necessary information on financial statements. Accountants must understand the difference between audit independence and tax advocacy. Ethical and unethical behavior are not two extremes separated by a large vacuum. Instead there are shades of difference between sometimes conflicting standards; there is often only a very fine line separating the two. Ethical behavior often involves knowing where that line must be drawn and having the willpower to stand on the correct side of the line.

Implications of Current

Educational Approach

When graduates of strong accounting programs fail on the job, it is often because they lack the ability to cope with the variety of situations not covered in class.

Teaching students to deal with these situations represents perhaps the greatest challenge to accounting education. Students can be taught to deal with these problems only if the focus of accounting education is altered. The managing partners of the largest accounting firms believe that, "The current textbook-based, rule-intensive, lecture/problem style should not survive as the primary means of presentation." This is not to say that attempts to cover a variety of specific rules need to be eliminated. Rather, accounting education must adapt to the changing needs of the profession. Law schools do not attempt to teach law students every law; they attempt to provide students with skills needed to conduct legal research. Moot court serves to provide students with simulated courtroom experiences before they serve real life clients.

The requisite knowledge base in accounting is not merely increasing; it is growing exponentially. Intermediate accounting was originally one course at most schools and in many places was expanded to two. Today, many schools cover intermediate accounting in three courses. The three intermediate courses are often preceded by two principles courses and followed by one or two advanced courses, as well as courses in systems, auditing, and theory.

Suggested Changes

Problem-solving skills should be taught, even if it means reducing coverage of some technical topics in existing classes. It is necessarily true that every successful accountant is a problem solver. Yet it is not true that every successful accountant is a technician. Would a successful accountant after a few years out of school want to retake the CPA exam? A successful tax accountant may not have an in- depth knowledge of financial accounting, and the government accountant may not be up to date on recent tax developments. Both, however, will be able to attack accounting problems and resolve them.

What Can be Done?

The case method is a promising approach. Instructors can assign cases that cannot be solved by reading the assigned texts. These cases can entail research, team projects, and consultations with experienced accountants. Classes should discuss what constitutes acceptable sources of accounting authority and what represents a reasonable interpretation of that authority. Thus, a case might provide detailed information relating to a troubled company. Students can then be asked to determine whether the company is a going concern. This case could lead students to read not only accounting and auditing standards, but also court cases dealing with litigation relating to accountant's liability. Practitioners can be both a source of such cases and participants in classroom discussions of potential solutions. Alternatively, professionals could evaluate case presentations by individual students or teams. These techniques are most useful in advanced courses; the students should be able to make presentations and communicate critical ideas to their peers.

Fundamentals of problem solving methodology should be discussed in classes. These include identifying issues, gathering facts, locating authority, weighing authority, reaching a conclusion, and communicating the solution. Students must become familiar with the sources of accounting information such as journals and treatises, as well as professional standards. Databases such as LEXIS, Westlaw, PHInet, and NAARS are becoming routinely used tools in many offices. Although it may be appropriate for students to rely on textbooks early on, it is essential that they learn to use and rely on other sources as well.

Artificial intelligence is gaining a foothold in the accounting profession. Just as accounting education had to adapt to computers, it must also prepare students to use artificial intelligence. In time, accounting education may come to realize that expert systems will represent an extraordinary learning tool. Perhaps professional judgment can be learned through the use of expert systems, as students can develop answers to cases and match their solutions against those of an expert system.

Internships provide students with real work experience. When interns return to the classroom, they have experienced practical problems and can relate those experiences to the classroom discussion and share their experiences with others. Even entry level experience makes interns more willing to accept answers that are based on facts and circumstances.

Obstacles to Change

Accounting programs generally attract students with strong quantitative skills and a desire for closure. Historically, accounting students prefer problems with clear cut answers that can be obtained from the application of rules that entail math-like certainty. For example, students are comfortable with an exercise that entails the application of a specific depreciation method for a specific fact situation, and textbooks are filled with assorted and rarely used methods. Yet, the important issues such as selecting the appropriate depreciation method, estimating useful life, and estimating salvage value are only discussed in general terms.

The accreditation of business and accounting programs and the CPA exam are both obstacles and incentives to change. Both seek to standardize the common body of knowledge possessed by those who enter the profession. For example, one need only review a few questions on recent CPA exams to observe the emphasis on the recollection of rules and the application of those rules. The tax questions deal with specific tax rules. There is no consideration given to tax research methodology or to the role of advocacy. In the area of auditing, however, the CPA exam has long addressed issues relating to professional judgment. Similarly, accreditation standards encourage the coverage of business policy and ethics. Individual universities, however, are left with the responsibility of seeing to it that graduates have exposure to problem solving cases.

Two Views to Contend With

Managing partners and their front line staff personnel seem to have different views of accounting education. Seniors and managers note that staff personnel with a traditional four-year accounting program do well in the entry level jobs and progress just as fast as those staff personnel who hold advanced degrees. They further note that the starting salaries for staff with advanced degrees is higher, and they feel that this may be an unnecessary expense. Managing partners often have a different perspective. They note that turnover is lower among staff with advanced degrees, that personnel with advanced degrees are more likely to become partners, and that the advantages of the advanced degree become evident as the individual advances through the organization. They are aware of the extremely high cost of recruiting and training new staff, and they note the inefficiency of new personnel. Perhaps most importantly, the managing partners believe that individuals with advanced degrees are more likely to possess the communication skills, the interpersonal skills, and the business savvy necessary to hold advanced positions within the firm.

The interests of national accounting firms are not always the same as those of local firms. Nevertheless, both national and local firms serve as advisors to clients. Clearly, those who serve in a consultative capacity need problem solving skills and perspectives. Similarly, professional liability often stems from situations where accountants failed to address problems, not from situations in which rules were intentionally disregarded. Therefore, in the case of both small and large firms, problem solving is critical.

Present Efforts

Accounting education has not entirely ignored practical problems and problem solving. One area that has made exceptional progress is the teaching of tax research. Over 80 schools offer tax research courses, and there are three leading books available to instructors. These books and courses do an excellent job of explaining tax research methodology, identifying the sources of authority, and outlining how to locate and use published materials. If there is a major weakness in the courses and texts, it probably is the fact that limited attention is devoted to dealing with research efforts that produce ambiguous results. Advocacy is an intricate and delicate relationship that balances professional liability, professional standards, taxpayer and tax preparer penalties, client relationships, and an understanding of fundamental technical rules. One cannot relate the results of tax research to a practice problem without an appreciation of these.

In spite of this weakness, tax research courses are generally well designed. Unfortunately, there are few if any parallels in other accounting subject areas. Moreover, tax education is often encyclopedic in coverage. Such programs cannot be justified in terms of a normal university objective of providing graduates with a well-rounded education along with career preparation, and, in fact, few universities expect students to take dozens of tax courses even if they are pursuing a master's degree. Instead, the courses are offered as electives to students who do not take all courses while earning a degree and provide a source of continuing education for professionals who choose to enroll in credit courses.

Conclusion

Over the decades, accounting education has developed the approach of providing encyclopedic coverage of extensive topics. This methodology developed because of the fundamental misconception that the objective of accounting education is to teach accounting. One might ask, what could possibly be wrong with this effort? If it is all right to teach history in history classes, why is it not all right to teach accounting in accounting classes? The answer relates to the fundamentally different objectives of history and accounting courses. The purpose of history classes is to teach history. The purpose of accounting classes is not to teach accounting, but rather to teach students to be accountants. Many history classes are aimed at teaching history to individuals who do not plan to be historians, and, as a result, these basic courses do not cover the methodologies used by historians. Accounting, however, is more than just the mechanical application of accounting rules. Accounting education must adapt to these changes.

What are your views on accounting education? Please send your comments to: Managing Editor, The CPA Journal, 200 Park Avenue, New York, NY 10166-0010.

Dale Bandy, CPA, University of South Florida