The accounting profession has faced several challenges lately, stemming from calls for heightened standards amid a progressive shortage in the talent pipeline. Paul Munter, the Securities and Exchange Commission’s Chief Accountant, recently called on auditors to reverse the “troubling trendline” in audit deficiency rates that can mask operational and financial risks the CFOs of public companies may face amid economic uncertainty.
However, elevated standards come with a cost. From the auditors’ position, the availability of qualified accounting talent threatens to constrain their ability to meet these heightened standards. While a recent study conducted by EY indicates nearly four in five college accounting majors believe their degree will produce long-term success, the pool continues to shrink. And, according to a recent study by MIT, the licensing standards have impacted minority participation as well, as the accreditation standards have caused a 26% drop in those entering the accounting field.
The Association of International Certified Professional Accountants (AICPA) released its findings last October that college students completing bachelor’s degrees in accounting fell 7.8% in the 2021-2022 school year, creating a smaller pool of candidates to enter the audit pipeline. And this correlates to what CFOs are indicating about facing a significant talent shortage in staffing.
In 1983, the AICPA increased the demands on would-be accountants from 120 to 150 credit hours, or essentially a fifth year of university study. The argument was accounting students needed the extra hours to keep up with the evolving regulations and audit standards.
However, the State Boards of Accountancy could use discretion over when to enact this 150-hour rule, and it wasn’t until 2015 that all states had adopted it. And yet, according to the MIT study, it did not impose any requirements on what courses were needed to comprise these 150 hours.
The net result, according to the three authors of the study — Andrew Sutherland, Matthias Uckert, and Felix Vetter — which examined the profession from 1986 to 2019, was an increase in barriers to entering the profession, but no correlation to improved CPA service quality, as Munter’s call to action has indicated. The profession experienced a 26% decline for minority CPAs and a 14% decline overall.
“Tuition in professional fields like accounting is expensive, and forgoing a year of income to complete a fifth year of college entails a sacrifice ... Naturally, the burden of such requirements tends to fall on those least able to afford the additional year,” Sutherland said.