Changing educational requirements to sit for the CPA Exam are throwing the future of accounting education into doubt. In the years since the 150-hour requirement has been established, it is questionable whether its original intent is still operative. This is evidenced by declining enrollment in Master of Accountancy programs, a trend that should raise concerns about the future. The future of work means that the skills demanded of entry-level accountants are changing and will continue to do so. This article examines these current trends and poses questions as to what the future of accounting education will look like.
The future of accounting education is currently being impacted on several critical dimensions: The educational requirements to take the CPA exam keep changing. Candidates may take the CPA exam with only an undergraduate degree, thus weakening the original intent of the 150-hour educational requirement. Finally, enrollments in Master of Accountancy (MAcc) programs and MBA programs with a concentration in accounting continue to decrease. These trends raise concerns for both the current and future state of masters’ level accounting education.
Survey data from the Association to Advance Collegiate Schools of Business (AACSB 2020, 2015) (AACSB, “Overview of AACSB-Accredited Accounting Programs: Data from the 2018-2019 Accounting Programs Questionnaire,” 2020; AACSB, “Overview of AACSB-Accredited Accounting Programs: Data from the 2014-2015 Accounting Programs Questionnaire,” 2015) on enrollment in MAcc programs with AACSB accounting accreditation indicates average MAcc enrollment per reporting program decreased 1.4% (87 vs. 86) from 2014/15 to 2018/19 (see Exhibit 1). Average full-time MAcc enrollment decreased 18.1% (72 vs. 59) during this period, and average part-time MAcc enrollment increased 72.1% (15 vs. 26). AICPA survey data from a larger sample of schools indicates a decline of 30.6% in MAcc enrollment from 2014/15 to 2017/18 (“2019 Trends in the Supply and Demand for Public Accounting Recruits,” AICPA 2019). The AICPA data from 2017/18 also shows that U.S. CPA firms hired 19,498 bachelor’s degree graduates, but only 11,405 master’s degree graduates, which indicates that MAcc recipients have not overtaken undergraduate recipients for entry-level positions in CPA firms.
Master’s in Accounting Enrollment: Descriptive Statistics 2018/19 and 2014/15
In recent years, almost all state boards of accountancy have relaxed the 150-hour requirement to permit accounting undergraduate degree holders to immediately sit for the CPA exam (subject to the satisfaction of specific accounting course requirements) upon completion of their baccalaureate degree and then require the additional hours or an experience requirement to obtain licensure. As a result of these changes, increasing numbers of students are now foregoing a MAcc program and completing the requisite additional hours on a part-time basis while concurrently employed in an accounting position on a full-time basis.
This article assesses these current trends and offers recommendations to address them as well as other challenges:
- The first section is an examination of the future of work and how selected accounting profession influencers have responded by defining in-demand skills for entry-level accounting professionals.
- The second section considers the original objectives of the 150-credit hour educational requirement for CPA licensure, measures the subsequent impact on MAcc programs, and assesses whether these objectives have been fully realized.
- The third section presents questions to consider concerning the future of graduate accounting education.
The Future of Work and the Impact on In-Demand Skills for the Accounting Profession
The digital revolution, the so-called Fourth Industrial Revolution, has resulted in a massive disruption and transformation of businesses, economies, and society. The breadth, depth, and velocity of the resulting changes have brought about fundamental shifts in the nature of work and new definitions of high-demand competencies.
For example, in its Future of Jobs Report (2016), the World Economic Forum projected the top ten in-demand skills for 2020: complex problem solving, critical thinking, and creativity were the top three skills expected to see increased demand. Exhibit 2 presents the complete list. The accounting profession is reacting and responding to these shifts in the nature of work, as discussed in the five examples below.
The CPA Exam Evolution Initiative.
The CPA Evolution Initiative is a joint initiative of the National Association of State Boards of Accountancy (NASBA) and the AICPA that is currently updating and transforming the existing CPA licensure model to reflect the rapid transformation in the nature of the required competencies. This initiative began during the summer of 2019 (see Susan S. Coffey, “Our proposal to evolve CPA licensure,” CPA Evolution blog, AICPA, 2020, https://blog.aicpa.org/cpa-evolution/).
NASBA and the AICPA solicited feedback from more than 2,000 stakeholders. The feedback obtained emphasized the need to: 1) change CPA licensure requirements to better emphasize technology skills, and 2) require CPAs to demonstrate core competencies in accounting, auditing, taxation, and technology. Based on the feedback and additional research, NASBA and the AICPA developed a “Core + Discipline” CPA licensure model. This model works as follows:
- Each candidate completes the same “core” education and examination requirements in accounting, auditing, taxation, and technology.
- Each candidate selects one of the following three disciplines to demonstrate deeper knowledge—
- Business reporting and analysis
- Information systems and controls
- Tax compliance and planning
- Regardless of the chosen discipline, each successful candidate receives a CPA license with the same rights and privileges of today’s licensed CPAs.
The key factor is that the Core + Discipline model is flexible and adaptable over time as disciplines change and new ones emerge.
In May 2020, the AICPA Governing Council voted to support advancing the CPA Evolution initiative, and the NASBA Board of Directors approved this initiative at its July 2020 meeting.
AICPA-ASB 2020/21 Strategic Plan and digital disruption.
The AICPA Auditing Standards Board (ASB) is responding to the digital disruption in its 2020/21 Strategic Plan, asserting: “Rapid developments in technologies are having a profound effect on audit and assurance engagements, including the use of automated tools and techniques and changes in how engagement teams are structured and interact.” In Initiative D, the ASB committed to monitoring the use of digital technologies to determine whether existing audit standards associated with client-acceptance decisions and assurance services remain relevant and appropriate.
The 2018 AACSB Accounting Program Accreditation Standards.
The Association to Advance Collegiate Schools of Business (AACSB) is an accreditation body for business schools that also provides a separate accreditation process for accounting programs. The most recent revision to the standards (2018 Eligibility Procedures and Accreditation Standards for Accounting Accreditation) emphasizes academic curriculum and experiential learning opportunities that are relevant to the changes in the nature of work and high-demand skills in the accounting profession (e.g., data analytics, technology agility). Exhibit 3 lists these in-demand skills. The standards also emphasize greater collaboration and social interactions among all faculty, students, and professionals.
Comparison of In-Demand Skills Advanced by Selected Influencers
ACCA: Future Ready Accountancy Careers.
The Association of Chartered Certified Accountants (ACCA) advanced accounting career “opportunity zones” and skills informed by a range of disruptive global forces, such as data analytics skills, digital transformation skills, and data governance skills (ACCA, “Future Ready: Accountancy Careers in the 2020s,” 2020, https://bit.ly/3gNPUxA). These are also listed in Exhibit 3.
IFAC: Re-imagining the Future Accountant.
In January 2020, the International Federation of Accountants’ (IFAC) International Panel on Accounting Education proposed transforming accounting education globally to prepare future-ready accountants (see A.M. Vitale, 2020, “Re-imagining the Future Accountant–Our Call to Action,” https://bit.ly/2DiD1xY or https://www.youtube.com/watch?v=Pvtt7SqsI2Y). Five competencies were identified by IFAC, including digital acumen and data interrogation. These are listed in Exhibit 3.
The Original Purpose of the 150-Hour Requirement
This Fourth Industrial Revolution is disrupting the accounting profession, including accounting education, workplace relevancy and readiness, and CPA Exam relevancy and readiness. In this context, it is instructive to re-visit the original purpose and desired outcomes of the 150-credit hour educational requirement for CPA licensure and its linkage to the historical popularity of MAcc programs. Have the original outcomes have been achieved? Are such objectives still relevant? The objectives and the authors’ evaluations follow below.
Objective 1: Promote a graduate education model for the accounting profession.
One of the original objectives of the 150-hour requirement was to promote a graduate-level education model for the accounting profession. A graduate degree was not mandated, but it was widely expected that the addition of 30 credit hours would lead accounting students to pursue a graduate accounting degree (which requires a typical minimum 30–36 credit hours for a master’s degree).
Was this objective achieved? Not fully, based on the results of the AICPA 2019 Trends Report:
- MAcc graduate degree enrollment increased 271% from 1982/83 (the first inception of the additional 30–credit hour requirement) to 2017/18. However, MAcc graduates in 2017/18 represented only 28% of all undergraduate accounting and MAcc graduates.
- The overall number of students obtaining accounting master’s degrees declined between 2014/15 and 2018/19. (The data supporting this conclusion is presented in the online supplement to this article on https://www.cpaj.com/.)
- For all accounting degrees, a three-year decline in enrollment at selected higher education accounting programs in the United States has occurred.
CPA firm hiring data are also relevant. AICPA Trends data from 2018 indicates that CPA firms hired undergraduate degree holders approximately 70% more frequently than graduate degree holders (AICPA, 2019).
It is instructive to revisit the original purpose and desired outcomes of the 150-credit hour educational requirement for CPA licensure and its linkage to the historical popularity of MAcc programs.
Objective 2: Improve workplace readiness.
During the years leading up to the nationwide adoption of the 150-hour requirement, CPA firms and other stakeholders emphasized the need for accounting graduates to be ready to enter the workplace. As a result, a stated goal of the additional 30 credit hours of education was to provide accounting students with the requisite skills to be workplace-ready upon graduation, and to be better prepared to assume greater responsibilities earlier in their career.
Was this objective achieved? Not fully. On the one hand, CPA firms consistently offer a salary premium to students with MAcc and other graduate degrees concentrating in accounting, as compared to an undergraduate degree with an additional 30 credit hours. CPA firms perceive students with MAcc degrees to be better positioned to be workplace ready.
On the other hand, there is a perception that accounting graduates are simply not workplace ready today. For example, in 2015, PricewaterhouseCoopers issued a call-to-action to accounting educators (“Data driven: What students need to succeed in a rapidly changing business world,” https://pwc.to/3bbk2Sm). More recently, as discussed above and illustrated in Exhibit 3, accounting profession influencers have issued calls-to-action for upskilling accounting professionals.
Objective 3: Improved CPA exam pass rates.
Institutions of higher education, CPA firms, the AICPA, and accounting professionals all place a strong emphasis on successful completion of the CPA exam. According to NASBA, just as a lawyer is validated by attaining law licensure, the CPA license is a similar indicator to the public that an accountant has mastered the vital competencies of the accounting profession (https://nasba.org/licensure/gettingacpalicense/).
A study examining the relationship between the 150-hour education requirement and the number of CPA exam candidates found that: “On average we find a large drop (36%) in the number of candidates in each state taking each exam, a small increase in pass rates for first-time candidates only (3%), and a large drop (31.5%) in the number passing the CPA exam after the adoption of the 150-hour requirement” (A. Alan and A. M. Woodland, 2006, https://aaapubs.org/doi/10.2308/iace.2006.21.3.173). Another study found that for the period 2013–2016, CPA exam results showed candidates with graduate degrees had higher pass rates (58.3%) than candidates holding only undergraduate accounting degrees (48.8%), a 19.5% difference supporting the premise that a graduate accounting degree produces improved CPA exam results (S. E. Rau, B. M. Nagle, and K. B. Menk, “CPA Exam Performance,” The CPA Journal, September 2019, https://cpajournal.com/2019/10/02/cpa-exam-performance/). Rau et al. (2019) also found other factors correlated to higher CPA exam outcomes for graduate degree holders, implying that a graduate degree alone does not account for the increased CPA exam scores. There is no available data regarding CPA candidates who have taken the additional 30 credit hours but not earned a graduate degree.
Was this objective achieved? The results are mixed, and other factors are likely contributing to the mixed results.
Why Have the Outcomes Not Been Fully Realized?
Several factors may have contributed to the fact that the original objectives of the 150-hour requirement have not been achieved. According to the 2019 AICPA Trend Report, enrollment in accounting programs is declining:
- Master’s degree. Approximately 33,000 projected students enrolled in master’s programs in 2017/18, representing a 6% decline from 2015/16. This decline may be attributable in part to more students opting to enter the workforce with only an undergraduate degree.
- Undergraduate degree. Approximately 208,000 students were enrolled in undergraduate accounting programs during 2017/18, a decline of 4% from 2015/16. Part of the problem is the additional time and cost required to complete the 30 additional credit hours. Another contributing factor is the emergence of in-demand majors, such as data analytics, STEM (science, technology, engineering, and mathematics), and digital technologies. For example, according to the 2019 AICPA Trend Report, CPA firms hired 11% fewer accounting graduates in 2018 than in 2016, and 30% fewer than in 2014.
- College-age demographics. Changing demographics have led to a lower number of college-age applicants, which is affecting college enrollments nationally.
The appetite and incentive for change in higher education are generally insufficient, and the speed and efficiency of change are inherently slow.
Lack of workplace readiness.
Several factors may contribute to the perception of a lack of workplace readiness:
- The content of accounting program curricula generally, and of the 30 additional credit hours specifically, may not reflect the in-demand skills. Part of the problem is that the nature of the 30 credit hours required varies and is under the purview of each school’s faculty and each state’s board of accountancy.
- Far more than an additional 30 credit hours are required to prepare accounting students for the transformation in the nature of work, the increasing complexity of business models and transactions, and the emergence of new in-demand skills.
- The appetite and incentive for change in higher education are generally insufficient, and the speed and efficiency of change are inherently slow. While some substantive changes have been made in accounting program curricula (e.g., integration of data analytics), they are incomplete and not timely.
- The current composition of accounting professors is dominated by doctorally trained academic researchers who lack sufficient experience in professional accounting practice. As Dawkins and Dugan (2020) recently expressed, research productivity is the primary activity that drives faculty personnel decisions such as promotion, tenure, and merit raises for these faculty at many universities [M. C. Dawkins and M. T. Dugan, 2020, “Why Accounting Research Must Change,” BizEd Magazine (online), February 2020]. Consequently, faculty are not incentivized to invest their time in developing and delivering courses that focus on experiential learning and other curriculum innovations that enhance workplace readiness.
Declining pass rates and candidate pools.
According to Rau et al. (2019): “The debate over how well the accounting curriculum in the United States serves the needs of both students and practitioners continues unabated. A key focus remains on how well students are actually prepared to take and pass the CPA exam.” According to another recent study, “there is mixed evidence on the impact of the 150-hour requirement on the passage rates of first-time CPA candidates” (L.J. Conteh and O. Oke, “An Examination of the Pass Rates on the CPA Exam: A Suggested Redesign of the Accounting Curriculum 2013–2017,” Journal of Higher Education Theory and Practice, vol. 19, no. 6, 2019, https://doi.org/10.33423/jhetp.v19i6.2304).
Part of the problem is inconsistency in the nature and rigor of the undergraduate curriculum and the additional 30 credit hours that fulfill the 150-hour requirement in each state and institution. According to Conteh and Oke (2019): “the undergraduate accounting curriculum in the United States (U.S.) differs considerably from college to college. There are also considerable differences between the undergraduate accounting curriculum and the Uniform Certified Public Accountant (CPA) examination chapter review contents. It is puzzling that as these disparities continue, most undergraduate accounting programs would have encouraged the harmonization of accounting curriculum with the CPA chapter review contents.” Furthermore, many faculty members are philosophically opposed to accounting curricula that “teach to the CPA exam,” thus leading to some students completing accounting programs that are not directly linked to the topics appearing on the CPA exam.
Questions about the Future of Accounting Education
This article is not intended to provide a holistic view of the subject. Instead, it narrowly focuses on perspectives associated with the statutory 150-hour requirement for CPA licensure and MAcc programs.
Important and complex questions continue to emerge about the future of accounting education generally, and the future of MAcc programs and the additional 30-credit requirement for CPA licensure, specifically:
- How can schools—on a timely, continuing basis—integrate in-demand skills into an accounting program curriculum that is already overflowing with required courses?
- How do the inherently slow and complex curriculum change processes in institutions of higher education impact the ability to meet the need for in-demand skills on a timely basis?
- Are faculty appropriately incentivized to create curricula, teach in-demand skills, and facilitate experiential learning?
- What is the impact of the considerable differences that exist in the quality of the undergraduate accounting curriculum across states and across schools?
- How does a master’s program improve competency? What is the objective of the program? What does it purport to do? And how do the program’s 30 credit hours satisfy that objective?
- Why is the additional credit requirement for licensure 30 hours? Why not more? Why not fewer?
- Should accounting programs priori-tize passing the CPA Exam?
- Which specific courses should a master’s degree or 30 additional credit hours undergraduate accounting candidates complete to be ready to enter the workplace and sit for the CPA Exam?
Sustainability Questions for MAcc Programs to Consider
A wide range of explanations for these and other related questions and concerns have been advanced over the years, such as the need for flexibility to address academic freedom and differences in statutory requirements. What are the root causes informing such enduring and unresolved questions and concerns?
The authors believe that two fundamental underlying problems render it difficult to answer these questions, and also make it a challenge to propose actions for the necessary changes to satisfy the value propositions advanced above.
First, while consensus was achieved at the outset on institution of a graduate education model for the accounting profession, it was decided that a master’s degree would be optional. Instead, the 30 additional credit hours were not well defined; each jurisdiction and institution was allowed to determine the nature and content of these additional credit hours. This decision had substantial repercussions, including contributing to the variability and inconsistency in the nature, rigor, and depth of courses taken to satisfy the additional 30 credit hour requirements. Furthermore, it remains unclear as to whether 30 additional credit hours continues to be the appropriate amount to meet the in-demand skill needs of employers (i.e., competency and work-place readiness), while at the same time satisfying the objective of CPA exam readiness.
Second, there is a lack of a mandated Common Body of Knowledge (CBOK) that would align and integrate a consensus about in-demand skills, CPA Exam readiness, AACSB accounting accreditation standards, and statutory educational requirements. This lack of consistency contributes to the variability as to which courses should comprise the additional 30 credit hours, whether more or fewer hours are needed, and whether a master’s degree should be required.
Why is a CBOK elusive?
Several potential reasons exist, including the following:
- There is a lack of consensus among stakeholders about the nature and priority of in-demand skills.
- The process of changing the topics appearing on the CPA Exam is inherently slow and insufficiently aligned with higher-education curricula and workplace readiness.
- The AACSB accounting accreditation standards are intentionally vague about the precise skills to be prioritized in deference to the principles of academic freedom and the differences in statutory educational requirements.
- Exercising academic freedom within individual colleges and universities creates substantial variability in accounting programs across schools.
- No single group or organization is institutionally, or politically, in a position to define and facilitate such a consensus-based CBOK for the accounting profession.
If such a consensus-based CBOK existed, it would bring about clarity and consistency about what is taught, what is tested on the CPA exam, and what constitutes workplace readiness. Without the existence of such a CBOK, the aforementioned questions and concerns will continue to yield a wide range of perspectives, opinions, and excuses.
A Proposed Accounting Core Curriculum
For those colleges of business whose accounting program offerings include a MAcc degree program, it is essential that the faculty who coordinate and teach in the program frequently evaluate its quality and sustainability. Given the rapid changes in the professional accounting, general business, and macroeconomic environments, accounting program administrators, faculty, and external stakeholders who provide program support must be proactive in developing, implementing, and rewarding the creation of accounting curricula that are innovative and reflect state-of-the-art accounting practice. A sustainable accounting program should provide graduates with a competitive professional career advantage over newer and potentially more lucrative (at least at the entry level) options such as data analytics and supply chain management.
Accounting program administrators and core MAcc program accounting faculty must frequently evaluate their overall program quality, curriculum relevancy, and continuing sustainability against the benchmarks necessitated by the ever-changing professional accounting environment.
The pedagogical approaches that faculty often use must become more interactive and experientially based (e.g., by requiring an internship in public accounting or industry accounting). Furthermore, the curriculum revision process must be more streamlined than usual. To this end, the authors propose the following as an accounting core curriculum for MAcc programs:
- Financial accounting theory
- Financial statement analysis
- Advanced auditing
- Advanced managerial
- Advanced financial accounting
- Advanced taxation
- Forensic accounting
- Accounting applications of data analytics
- 2–4 nonaccounting courses (2courses for 30–credit hour MAcc programs; 4 courses for 36–credit hour MAcc programs).
Reversing the Trend
Declining trends in full-time MAcc program enrollments have raised substantial concerns. Despite the widespread adoption of the 150-hour requirement, MAcc programs must still compete for applicants with MBA programs and with specialized master’s programs offered in other disciplines (e.g., data analytics). MAcc programs must also compete with alternative strategies to fulfill the 150-hour requirement, such as non-degree options often available in a number of colleges of business.
Given the substantial challenges and disturbing unfavorable trends discussed above, accounting program administrators and core MAcc program accounting faculty must frequently evaluate their overall program quality, curriculum relevancy, and continuing sustainability against the benchmarks necessitated by the ever-changing professional accounting environment. Timely improvements to the MAcc program curriculum must be implemented on a continuous basis to enable graduates to have skills needed to be ready for the workplace.