Threats to the CPA Credential in the International Marketplace

By Michael C. Campbell and C. Randy Howard

MARCH 2008 - Over the past 50 years, the financial and accounting world has been facing new challenges and opportunities. Growing global trade and a greater emphasis on worldwide investment opportunities have increased demand for reliable accounting information that is comparable across countries. This has led to more emphasis on international accounting standards and a desire for an internationally recognized accounting credential. Although these trends have caused demand for accountants to soar and are generally positive for the accounting profession, they create serious challenges for the U.S. CPA credential. For example, at a time when the number of candidates for competing credentials is increasing dramatically, the U.S. Uniform CPA Exam, until very recently, has been experiencing a sharp decline in candidates. In fact, it seems the CPA “brand” could lose some of its stature in the worldwide marketplace if the U.S accounting profession fails to address critical issues soon. Up to this point, few would dispute that the U.S. CPA has been the credential of choice globally for individual accountants, employers, and the global financial community. Its status, however, is being challenged, both by the move toward international accounting standards and by aggressive competition from other credentialing organizations.

Addressing these issues will require support from the entire accounting community. Support from individual CPAs through their state CPA societies and state boards of accountancy will be critical. Input from the American Accounting Association can provide helpful insight and analysis of alternatives. Collective support from the National Association of State Boards of Accountancy (NASBA) and by the AICPA will be crucial. Developing and implementing appropriate solutions will require the efforts of all the aforementioned groups.

This article is intended to shed light on what the authors see as an important problem and to explore current challenges to the preeminent global status of the U.S. CPA credential. The authors also suggest possible strategies to preserve and enhance the stature of the U.S. CPA credential. The CPA is a license issued by governmental licensing jurisdictions to regulate the practice of the profession, an important distinction between it and competing credentials issued by private-sector organizations. At the same time, global trends that affect demand for the U.S. CPA credential impact U.S. CPAs in ways not experienced by other state-licensed professionals.

Demand for Comparable Standards and International Recognition

Increased global trade and investment drive demand for comparable accounting standards and for professionals capable of implementing them. Consider the following:

  • According to world trade statistics by the International Monetary Fund (IMF), between 1993 and 2003, world exports nearly doubled, increasing from $4.7 trillion to $9.3 trillion.
  • According to a presentation at NASBA’s 2004 annual meeting, approximately 1,200 non-U.S. companies were operating in U.S. financial markets at that time.
  • According to US-China Business Council reports, investment in China alone by U.S. and European companies increased from $41 billion in contracted investment in 1999 to $115 billion in 2003.

Individual corporations see significant advantages to moving toward a single set of accounting standards that promises to reduce reporting costs, increase access to worldwide capital, and facilitate global mergers and acquisitions. The interpretation of internal accounting information would even be enhanced by convergence, as evidenced by this quote from Thomas Jones, then CFO of Citigroup (Forbes, July 22, 2002): “We had problems figuring out the financials within our own company, as subsidiaries in 101 countries reported under various standards.”

Movement Toward International Standards

Many countries are initiating changes to bring about convergence of their national accounting standards with International Financial Reporting Standards (IFRS). More than 7,000 companies listed on European Union (EU) stock exchanges were required to convert to IFRS as of January 1, 2005. Also in January 2005, the International Accounting Standards Board (IASB) and Japan began a project to reduce differences between Japanese accounting standards and IFRS.

In the United States, both the New York Stock Exchange (NYSE) and Nasdaq have been lobbying the SEC to allow foreign companies to submit their financial reports using IFRS without having to reconcile results to U.S. GAAP. In January 2008, the SEC began to take steps that would eliminate a requirement for foreign companies to reconcile their financial results with U.S. GAAP.

FASB and the IASB have agreed to work toward bringing U.S. GAAP and IFRS into agreement. In September 2002, these organizations signed the “Norwalk Agreement,” in which each body “pledged to use their best efforts to (a) make their existing financial reporting standards fully compatible as soon as practicable and (b) to coordinate their future work programs to ensure that once achieved, compatibility is maintained.”

Potential Impacts on the U.S. CPA Credential

Clearly, a financial world is evolving in which reporting standards will be compatible around the globe. The question is: Who will be viewed as the consummate accounting professional to ensure that these reporting standards are followed? Because the U.S. CPA designation has heretofore been viewed as the preeminent credential, why would this special status not continue?

Several important factors have the potential to relegate the U.S. CPA to lower status:

  • The number of U.S. CPAs is not growing, while other organizations’ memberships and numbers of credential-holders are increasing.
  • The U.S. CPA exam focuses on U.S. GAAP and GAAS at a time when much of the rest of the world is moving toward IFRS.
  • U.S. CPAs are becoming more concentrated in the United States, while other organizations increase their membership and number of credential-holders worldwide.
  • Because international accounting standards decisions are made largely outside of the United States by individuals with little or no knowledge of U.S. GAAP, U.S. CPAs’ input into these standards is declining.

The real danger to U.S. CPAs is that, as their number declines relative to other credential holders, and as knowledge of U.S. GAAP declines and U.S. GAAP is replaced by IFRS, the U.S. CPA credential may lose its stature, and perhaps even its relevance. If other credentials become accepted both worldwide and in the United States, they may be accepted as alternatives to the U.S. CPA credential. Holders of these alternative credentials could even possibly perform accounting activities similar to those of U.S. CPAs and be regulated, not by state boards of accountancy, but by some international body.

Globalization of Accounting Organizations and Examinations

For the U.S. Uniform CPA Examination to be offered only in the United States and its territories drastically limits access to the exam, and thus to the U.S. CPA credential. Many other bodies have noted the tremendous international demand for accounting credentialing and have offered their exams internationally for many years. These entities are essentially competitors with the U.S. CPA credential, and their numbers are impressive. They include six U.K.-based institutes, which together boasted a 2003 membership of nearly 330,000, comparable to the AICPA’s membership. While the AICPA lost 2,000 members from 2000 to 2003, one of these organizations, the Association of Chartered Certified Accountants (ACCA;, gained 37,000 members during the same period. In addition, as reported by the U.K. Financial Reporting Council (“Key Facts and Trends,” February 2005), international membership in the ACCA increased from 29,543 in 1999 to more than 45,000 in 2004.

The ACCA offers several certificates. The two most comparable to the U.S. CPA are the Certificate in International Auditing (CIA) and the Certificate in International Financial Accounting (CIFA), both based on international standards. The ACCA operates more than 200 examination centers in more than 140 countries.

The exhibits provide additional detail on relative membership growth for the AICPA and several other organizations (Exhibit 1) and the percentage of international members in each organization (Exhibit 2). Notably, the AICPA is the only organization to have lost membership over the period illustrated, and the AICPA has by far the lowest percentage of international members—only 2%.

In addition to the six U.K. entities, other organizations also offer exams internationally. Exhibit 3 compares the Uniform CPA Exam with the examinations offered by four other organizations, and Exhibit 4 illustrates the longer-term decline in number of candidates sitting for the Uniform CPA Exam. For example, note that nearly 80% of all the candidates taking the Certified Internal Auditor (CIA) exam (not to be confused with the aforementioned Certificate in International Auditing offered by the ACCA) were international candidates, even though the sponsor of the CIA exam, the Institute of Internal Auditors (IIA;, is a U.S.-based organization. The IIA achieves this high level of international participation by offering the CIA examination in dozens of countries around the world.

Obstacles for International Candidates

The following are reasons why offering the U.S. Uniform CPA Exam only in the United States creates such a problem for foreign candidates:

  • Travel expenses—including airfare, food, hotel, car rental, and incidentals—frequently total more than $2,000 per trip.
  • Year-round computer-based testing has changed the exam-taking strategy employed by most U.S. candidates, who now generally opt to study for and take only one or two parts of the exam at each sitting. Because of the significant costs in terms of money and time away from jobs, most international candidates feel pressure to take the entire exam in a single sitting, or at most in two sittings. Of course, the reality is that candidates often do not pass at least one part of the exam on their first attempt. Consequently, the typical international candidate can expect to make at least two to three trips to the U.S. to sit for various sections of the exam, resulting in total travel costs of $4,000 to $6,000.
  • The number of temporary visas issued for travel to the U.S. has plummeted since the terror attacks of September 11, 2001, especially for candidates from certain parts of the world. For many potential candidates, this absolutely eliminates the possibility of taking the Uniform CPA Exam. For others, the significant uncertainty about the timing and likelihood of getting a visa means that investing a significant amount of time and money studying and preparing for the U.S. CPA Exam is a very high-risk proposition, one that few are willing to undertake.
  • Foreign candidates must sacrifice vacation time, or take time off work, to travel to the United States.
  • Environmental factors, such as jet lag and unfamiliar food and surroundings, can negatively influence test scores for international candidates.

These factors make it much more difficult and expensive for international candidates to be successful on the Uniform CPA Exam, and also make other credentials, available through exams offered closer to home, much more attractive.

Exploring Solutions

Several strategies could be employed to address the challenges to the U.S. CPA credential. Offering the Uniform CPA Exam internationally would be an excellent first step.

Challenges related to offering the Uniform CPA Exam internationally include concerns about exam security, the cost of administration, and the ability to regulate CPAs in other countries. These challenges can be effectively addressed.

Exam security is less of an issue now that the computer-based test (CBT) format has been successfully implemented for more than two years. The relationship established with the Prometric testing centers in the U.S. can be expanded to include international sites. Prometric currently administers numerous “high stakes” exams around the world. For example, the company internationally administers the National Board of Medical Examiners’ licensing exam to become a U.S. medical doctor. The Securities Investment Institute and the Project Management Institute also use Prometric to administer their exams internationally.

The prior experiences of the many other accounting credentialing exams offered internationally would be useful in planning the offering of the Uniform CPA Exam internationally.

Cost of administration is a serious consideration, but offering the Uniform CPA Exam internationally will probably be profitable in the long run. The large numbers of candidates taking other exams indicates that demand for the Uniform CPA Exam will be substantial. Exhibit 3 shows that between 56% and 78% of the candidates sitting for each of the other U.S.-based accounting credentialing exams are international candidates. Because the CPA still is considered the most valuable “brand” of accounting credential, a reasonable assumption is that 50% of candidates could become international candidates. If 50% of the candidates taking the U.S. CPA exam were international candidates, the result could look like this:

  Actual Projected
U.S. 90,000 90,000
International 20,000 (18%) 90,000 (50%)
Total 110,000 180,000

Given the substantial costs and barriers to international candidates, a $1,000 surcharge for the privilege of taking the exam closer to home would not be unreasonable. Assuming 90,000 international candidates and a surcharge of $1,000, offering the exam internationally would yield additional annual revenue of $90 million over and above the regular exam fees.

This additional revenue could be used to offset costs incurred by NASBA, the AICPA, and individual state boards of accountancy, and also to reduce regular exam fees for candidates. Increasing candidate numbers by administering the U.S. CPA exam internationally should have a snowball effect. First, Prometric likely will be able to reduce the per-seat charge for all candidates, because more seats will be filled. Second, the AICPA likely will be able to reduce its fees, because the fixed costs of preparing exams, validating exam questions, and creating the exam-taking software will be spread over a larger number of candidates. Third, the revenue from the international surcharge could be used to reduce exam fees for all candidates.

Regulating CPAs practicing in other countries is complicated by the fact that U.S. CPA certificates and licenses to practice are issued by individual states, not by any national organization. This highlights a major difference between the CPA and competing credentials. The CPA certificate and license to practice are granted by governmental bodies—the various states—that have a legal responsibility to protect the public interest and the legal power to sanction or revoke the licenses of CPAs who abuse the public trust. In contrast, the most common competing accounting credentials are issued by private-sector organizations, which undoubtedly have an interest in policing their members but lack the legal mandate and enforcement mechanisms held by the various states.

In the United States, monitoring and regulation activities are conducted by the individual state boards, which have the authority to revoke a U.S. CPA’s license to practice, and by the AICPA, which has the authority to revoke membership. Discussions among the various state boards, NASBA, and the AICPA could lead to joint solutions that would address various monitoring and regulation issues. For example, the AICPA could establish chapters in other countries. This approach has been used effectively by the ACCA. These chapters would be similar to local U.S. chapters, but would have added regulatory responsibilities, to be determined jointly by the AICPA, NASBA, and individual state boards.

Other accounting organizations have taken this approach, which aids in the monitoring of local credential holders, facilitates recruitment of student affiliate members, and allows the coordination of lobbying efforts aimed at relevant accounting bodies in their respective countries. These efforts would encourage a steady stream of CPA exam candidates, and increase the stature and influence of the CPA credential in the local area.

Another option would be to develop a proof-of-passing (POP) document to verify that a candidate has successfully completed the Uniform CPA Exam. Candidates receiving a POP document would not be licensed to practice as CPAs. Individual states would not need to issue a certificate or a license to practice. This alternative would create a credential based on knowledge of U.S. accounting and successful completion of the Uniform CPA Exam, but without the risk that POP holders could abuse the public trust, because they would not be licensed to opine on financial statements. Assuming agreement could be reached between the various state boards, the AICPA, and NASBA, it may be possible to have the POP document distributed by NASBA. This document probably would be useful to many different kinds of candidates, but would be particularly helpful for international candidates whose primary goal is not a license to practice but simply proof of their knowledge of U.S. accounting. For most international candidates, the POP document probably would be all they would need. If discussions among the AICPA, NASBA, and the individual state boards are successful, application for the U.S. CPA exam by candidates who need only the POP document could be made directly through NASBA, thus relieving a burden on the state boards.

Another possibility would be to create a two-tiered credentialing system similar to what exists in some states. Again, the reason many international candidates take the U.S. CPA exam is so they can demonstrate a substantial knowledge of U.S. accounting in order to obtain a job with a U.S. company that has international operations or with a local company that must issue financial reports in accordance with U.S. GAAP—not to become a CPA licensed to practice publicly and to sign audit reports. Such a two-tiered system could provide for issuing a credential verifying successful completion of the U.S. CPA exam for people who do not desire a license to practice. Monitoring these individuals would be much less extensive, perhaps even unnecessary. This process would be more similar to a university granting a degree that indicates a certain level of knowledge and training than to a state authority granting a license to practice and monitoring license holders for compliance with standards.

The above possibilities assume that the various stakeholders are comfortable adding a credential component to the CPA. Thus, when a state issues a CPA certificate and a license to practice, the CPA retains its original purpose as a license to practice, with the attendant rights and responsibilities. However, when a candidate’s intention is only to demonstrate knowledge of U.S. accounting, a POP document could be issued, perhaps by NASBA rather than the individual states, to indicate that the candidate had successfully passed the Uniform CPA Exam.

Even if the possible solutions offered by the authors were not able to be implemented, the authors hope to draw the profession’s attention to the important issues raised above. To this end, NASBA, at its annual meeting in October 2006, formed a group to address the possibility of offering the CPA exam internationally. The charge to the committee is to “develop and implement a program and process for the expansion of the administration of the Uniform CPA Examination to international locations.”

At least one state board of accountancy is supportive of offering the CPA exam internationally. The Illinois Board of Examiners had the following to say in a July 26, 2005, letter from its chair, Kenneth J. Hull, to John E. Katzenmeyer, chair of the NASBA Examinations Committee:

The Illinois Board of Examiners would very much like the Examinations Committee to consider administration of the Uniform CPA Examination at secure Prometric testing centers in international locations…

We believe that offering the CPA exam to international candidates at secure Prometric sites in their home countries would expand the value of the world’s most prestigious accounting and financial credential. We believe the following issues should be considered in making a decision about offering the CPA exam at international locales:

  • It is [in] the best interest of all of us to promote the CPA designation as the [premier] world standard of professional expertise.
  • The more people taking the Uniform CPA exam, the more we spread out the capital costs of the computerized exam, while maintaining its excellence.
  • The easier we make it for foreign residents to take the CPA exam, the more candidates we will encourage to seek the credential in lieu of other professional credentials.

Striving for Accessibility

As the world moves to a global economy, accountants are looking for a single credential to serve as the international-standard credential for the profession. Such a credential must be internationally accessible. Currently, the U.S. CPA does not meet that criteria.

The ACCA 2004 annual report includes the following passage in describing the organization’s objectives and strategy:

ACCA is a professional accountancy body which awards internationally respected qualifications. It regulates members, students and public practices, and holds examinations in over 100 countries.

Council’s goal is for ACCA to be the leading global professional accountancy body in size, influence and reputation. It therefore provides opportunity and access to people of ability around the world and supports members throughout their careers …

Council believes that ACCA must be competitive if it is to lead the global profession. It recognizes that its presence and reputation have been achieved, and will continue to be achieved, by consistent and sustainable growth. ACCA will remain alert to new opportunities and markets for its qualifications, recognizing that numerical strength helps its case when negotiating professional and legal recognition.

Once again, addressing these issues does not fall on the shoulders of any one group in the United States. Rather, it requires the involvement of the entire accounting community. NASBA and the AICPA can provide leadership and coordination, but only with the support of the state boards of accountancy, state CPA societies, and individual CPAs throughout the country. The authors hope that this article will generate discussion and spark development of alternatives to address this serious issue.

David Costello, president and CEO of NASBA, commented:

There seems to be increasing interest on the part of some of our member boards of accountancy in pursuing the administration of the CPA examination outside of the 54 states and jurisdictions. NASBA will respond to the requests we’ve received from our boards, including the consideration of establishing an appropriate research group and studying the feasibility of implementing an international strategy for the CPA examination. (correspondence with authors, October 14, 2005)

Robert Bunting, 2004/2005 chairman of the AICPA, had this to say:

The state boards of accounting are charged with protecting the public interest by licensing and regulating CPAs in their states. There is a significant risk that the tendency to adopt a literal and provincial view of this mandate may cloud their vision of an equally important, but less obvious need to ensure that the certification behind the licenses they issue remains among the most prestigious and respected in the world.

There is a major opportunity for state boards, NASBA and the AICPA to show some leadership in this important area. However, it will require a more global and long view of the CPA profession than seems currently to be the case (correspondence with authors, June 26, 2005).

Fulfilling a Global Need

The window of opportunity is closing. If the professional community does not act soon, then credentials offered by organizations like ACCA are likely to usurp the position of the U.S. CPA credential. Surely a decline internationally in the status of the CPA would not serve the interests of the various state boards of accountancy, the public they protect, or the CPA profession itself.

Expanding the U.S. CPA Exam internationally benefits key stakeholders in a number of powerful ways:

  • Strengthening and reinforcing the market’s perception of the U.S. CPA as the world’s premier accounting credential;
  • Responding to the needs of the global business community;
  • Reaching out to a broader talent pool of prospective U.S. CPAs;
  • Enhancing the U.S. CPA’s relevance within the global accounting industry;
  • Providing U.S. CPAs with the opportunity to remain competitive in a global economy; and
  • Creating an opportunity for state boards of accountancy, the AICPA, and NASBA to capitalize economically on latent demand.

Accountants around the world are searching for a global-standard credential. At the moment, there is a void to be filled, but this situation is unlikely to last much longer. Already, competing organizations are moving aggressively to fill the need. If the U.S. CPA credential is to endure and flourish, immediate action is required. The most important first step is to make the U.S. CPA credential internationally accessible, which requires administering the U.S. CPA exam internationally as soon as possible.

Michael C. Campbell, CPA, and C. Randy Howard, CPA, are professors of accounting at Montana State University–Billings.