In accounting, few credentials are as respected as that of the CPA. It is a symbol of professionalism, expertise, and trust, but the CPA license is also challenging to obtain. In addition to passing a rigorous four-part exam, CPA candidates must meet specific educational requirements, including completing 150 semester hours of education or roughly five years of college education. Florida added this requirement in 1983, and every other state followed over the next few decades.
The need for talent
As someone who transitioned into accounting mid-career, I experienced firsthand the struggles associated with this education requirement. I had already earned a bachelor's degree when I pivoted to accounting. Yet, despite my previous education at a prestigious university, I found it necessary to pursue the equivalent of a second major to meet the specific coursework requirements for CPA licensure. I enrolled in a certificate program to minimize costs, joining other career changers eager to enter accounting. Sadly, many could not complete the program due to the time and financial burden. I saw many potential CPAs who would have excelled in the profession wash out of the program. And that was in a certificate program, one of the most cost-effective ways to meet the 150-hour requirement.
Many aspiring CPAs choose, instead, to pursue a master's degree, which can cost up to $100,000 when you factor in the opportunity cost of forgoing a year of salary. The AICPA's 2021 Trends Report shows that just more than 20,000 students completed a master's program during the 2019-2020 school year, resulting in a potential $2 billion financial burden on young accountants just starting their careers.
Yet our profession desperately needs new talent. The Bureau of Labor Statistics projects demand for 136,400 new accountants and auditors annually over the next decade. However, the United States has never produced more than 80,000 accounting graduates annually. We face a significant supply-demand gap, and the 150-hour requirement exacerbates the issue. If we are going to fill this talent gap, we need to look beyond traditional CPA candidates. We need to recruit career-changers like myself, and college students who rule out accounting as a major due to the extra time and cost of education.
The 150-hour mandate discourages economically disadvantaged individuals who cannot afford the extra time in school from pursuing a career in accounting. They simply cannot afford an additional year in college while giving up a year of income, especially considering that many other business majors pay higher starting salaries after just four years of education. We must make accounting more attainable to make meaningful strides toward diversity and solve our talent shortfall. Reducing the cost of education is crucial to bridging the accessibility gap that prevents diverse candidates from joining the profession.
See it from both sides
There are counter arguments, of course. One concerns CPA mobility. The argument is that reducing the education requirement might limit the ability of CPAs to practice in different states. However, the National Association of State Boards of Accountancy (NASBA) already has the discretion to waive the 150-hour requirement for accountants licensed abroad, who often only have three or four years of formal education. Undoubtedly, similar accommodations could be made for domestic CPAs. It’s absurd that we force our CPA candidates to assume massive amounts of student loan debt for an unnecessary requirement that we happily waive for those from other countries. It may not be as easy as flipping a switch, but it can’t possibly be as challenging to change as our leaders at the AICPA and NASBA have portrayed it.
Another counter argument suggests that reducing the education requirement would lower the bar for becoming a CPA. This viewpoint presumes that additional education produces better CPAs. However, there is no solid evidence to support this claim. In fact, two academic studies found that the only impact of the 150-hour rule has been to reduce the number of CPAs:
- A 2019 study by John Barrios, a University of Chicago Booth School of Business professor, found that the number of first-time CPA exam candidates decreased by 15% after states implemented the 150-hour requirement. Barrios observed this decline over multiple years. The study also found that work quality remained the same after the 150-hour requirement.
- A study published in 2020 by Brian Meehan and E. Frank Stephenson from Utah State University found that the 150-hour education requirement acts as a barrier to entry, and their analysis suggests that the additional educational requirement does not enhance candidate quality.
The quality of a CPA depends on a myriad of factors, including practical experience, ethical standards, and continuing professional education. Does anyone believe an additional classroom year makes a measurable difference?