Modified Accounting Profession Landscape: The Influence of CPA Licensure Amendments on Our Digital Platforms and Personnel
CPA Licensure Overhaul: Understanding the Shift Towards Greater Accessibility
As states revamp CPA licensure requirements, aiming to provide alternative pathways to the 150-hour rule, accounting leaders, finance professionals, and CPAs from across the spectrum are urging financial industry leaders to stay informed about these changes. These alterations aim to tackle the shortage of financial talent, but they also bring up some intriguing questions.
While state societies conspire to ensure that their changes remain uniform, they do so at a peculiar moment. Some have expressed concerns regarding the uniformity of these decisions, as well as their timely alignment with the retirement of longtime AICPA president Barry Melancon, whose firm opposition to modifying the 150-hour rule was extensively publicized.
Originated with the intention of fostering well-rounded accountants, some argue that the 150-hour rule has run its course, necessitating changes to simplify the CPA licensure process and the profession's pipeline. However, opinions differ regarding accounting curriculum development, the value of the CPA, and more.
Occupational Challenges and the Big Four's Impact
Despite the potential shortening of the time necessary to become a CPA when restructuring the 150-hour rule, the actual impact on the real world varies broadly among finance leaders. Dr. Tim Naddy, vice president of finance at the Savannah Bananas and a professor of accounting at the Savannah College of Art and Design, points out that this issue has become a generational concern.
"The root of our problems in accounting lies within an industry disconnect from the incoming generation," Naddy says humorously. "On the inside, the industry might look at students and think, 'They don't understand us.' But that's incorrect; we need to understand them."
Naddy underlines the need for productive communication channels between mentors and mentees in accounting, popular seminars, and workshops that offer limited value when addressing the genuine challenges that future accountants confront.
"We need to be stations on campus holding real conversations with students, not the standard route of attending Beta Alpha Psi meetings, hosting icebreakers, or participating in homecoming," he explains. "This isn't when these conversations should occur. We need to interact with them during the year - when they're overwhelmed by coursework, skeptical about jobs, pondering whether they even need a CPA license - to genuinely connect and provide guidance."
Andrew Hunzicker, CPA, and founder of the DOPE Program, agrees that it's a generational problem, but he argues that the CPA remains the preeminent financial credential. He asserts that the aging of the Baby Boomers causes talent shortages to be an "unsolvable problem" across industries, not just accounting. Nevertheless, he claims changing qualifications, such as removing the 150-hour requirement, lowers standards.
"Suppose we consider brain surgeons, for instance. We realize there's a deficiency, but should we make it easier to become a brain surgeon? Or a pilot? Of course, we wouldn’t," Hunzicker adds. "There are some industries where we must solve the problem in a different way - lowering the bar isn't the answer."
He also underscores how, due to the talent shortage, high-quality accountants have lucrative professions because of the demand.
"Most industries still rely on individuals who are, frankly, uninformed, whether they're CPAs, accountants, or our websites," Hunzicker concludes. "They're scarcely doing outstanding work, and their clients are dissatisfied. On the upside, if you're a high-quality CPA, you can earn a substantial income right now, but it begins with obtaining expertise, and the CPA is that first step."
Naddy concurs that eliminating the 150-hour rule is merely a minor step in addressing challenges associated with the shortage. He also emphasizes that the current structure has inadvertently established a system wherein firms employ bachelor's-level graduates, utilize them for two busy seasons, and then see them depart for private industry.
Reviewing Curriculum and Student Concerns
Dr. Jack Castonguay, an associate professor of accounting at Hofstra University, voices a growing concern among finance leaders: the potential consequences these changes might have on the CPA exam passing rate. Castonguay argues that some fear that with a transition to a bachelor's degree, two years of experience, and passing the CPA exam for licensure, there will be fewer students passing the CPA exam.
"Some have voiced concerns, though I don't necessarily agree with these opinions, that if we move to a bachelor's degree, two years of experience, and passing the CPA exam to be licensed, you'd actually have fewer students passing the CPA exam," Castonguay explains.
Naddy and Castonguay both teach accounting but disagree about the order in which to teach accounting subjects. While Castonguay promotes the traditional model of teaching financial accounting before cost accounting, Naddy advocates for addressing cost accounting first.
"I've been mulling over this concept for 25 years, suggesting that if we introduced cost accounting first, we'd significantly improve the accounting profession by allowing students to comprehend how to run a business," Naddy proposes. "If they opt to pursue accounting, they'd be able to learn how to report, possibly specializing in audit, where the job involves assessing whether financial statements are accurately represented according to GAAP. Or alternatively, they could take the business track, earning an accounting degree, and employ it to manage their own company—without delving into SEC-level stuff."
Naddy delineates how adopting cost accounting at the forefront of accounting curricula would enhance students' understanding of running a business. "Financial reporting is a separate expertise, and frankly, if you're managing your own business and don't require loans or investors, no one cares about your financial statements. You only need to ensure there's enough money in the bank," Naddy states.
Alternatively, Castonguay emphasizes that cost accounting coursework and textbooks often focus on conventional manufacturing examples, calculating inventory and overhead costs, such as those for automobile manufacturers. He adds that this is an area where most students would not work and therefore teaching them this first may create confusion or lack of interest.
"You're introducing students to this concept of costing, and they're stating, 'Well, this is somewhat boring, because the chances of me functioning in a manufacturing company are one in five,' so the reaction is, 'How is this relevant to me when I graduate?'" Castonguay states.
Calvin Harris, CEO of the New York State Society of CPAs and a former nonprofit executive, offers that the confusion surrounding the credentialing process might persist for a while, but a roadmap for emerging accounting talent can be developed.
"The unfortunate truth is that it's going to be confusing for a few years," Harris reflects. "When students visit, such as the group from Marist University, I attempt to break it down by class. I told them: Freshmen and sophomores will likely have both options, the 120 credits plus two years of experience or 150 credits plus one year of experience. Juniors are on the borderline, depending on the state you intend to obtain a license in. Seniors should assume 150 plus one will be their only option, and maybe they'll get lucky with a second pathway."
Harris explains that although the confusion is highly prevalent (Castonguay mentions that this is the biggest challenge in his role), Harris lays the onus on organizations like the NYSSCPA to improve their communication about emerging requirements.
"When I graduated from Morehouse College in Georgia and moved to Maryland, I found out I was missing two classes that Maryland required," Harris reminisces. "So my first year at Arthur Andersen, I had to go to night school. Now, that was more than 30 years ago, so the difference now is, the information is easier to find through NASBA, AICPA, and state societies. But we all, the schools, societies, and firms, need to do a better job of educating students on state-specific requirements."
Harris also provides some context concerning the timing of Barry Melancon's retirement with the simultaneous updates in state requirements. He acknowledges that it might appear that Melancon's retirement was the last thing holding the 150-hour rule in place, but Harris clarifies that this is merely coincidental. He did, however, emphasize that dialogue among state societies on this issue increased over the years.
"I can appreciate how some might think that, but it's not entirely fair to him," Harris states. "He's been a consistent leader, and regardless of whether people agree with his stance or not, he's been reliable. I've been in this position for about three years, and from my very first meeting with state society CEOs, it was evident that these conversations [about the 150-hour rule] had been occurring for quite some time."
He underscores that "states converse more than people realize," with collaboration happening constantly, yet denies that Melancon's retirement influenced the decision-making process. "Did people quietly hope to progress without his tenure? Maybe. But I've never heard anyone declare, 'As soon as he retires, we go.'"
- CPA licensure alterations aim to tackle the shortage of financial talent, but they spark debates on accounting curriculum development, the value of the CPA, and more.
- Dr. Tim Naddy advocates for addressing cost accounting first in accounting curricula, suggesting it would significantly improve the accounting profession.
- Some professionals fear that a transition to a bachelor's degree, two years of experience, and passing the CPA exam might lead to fewer students passing the CPA exam.
- High-quality accountants can earn substantial incomes due to the demand, but well-rounded communication between mentors and mentees is crucial to bridge the generational gap.
- Andrew Hunzicker argues that changing qualifications like removing the 150-hour requirement lowers standards and might not be the best solution to the talent shortage.
- Calvin Harris emphasizes that organizations like the NYSSCPA need to do a better job of educating students on state-specific CPA licensure requirements.
- The confusion surrounding the credentialing process might persist for a while, but Harris believes a roadmap for emerging accounting talent can be developed.
- Barry Melancon's retirement did not necessarily influence the decision-making process on the 150-hour rule changes, but his firm opposition to it was a topic of discussion.
- Accounting education and self-development, careers, and business are crucial aspects for the financial industry as they navigate through the changes in CPA licensure requirements, aiming to foster well-rounded accountants and address the shortage of financial talent.
