Time To Get Rid of the 150 Hour Requirement for CPAs

So I see a lot of people talking about the best of 2013 and how to flourish in 2014 but I refuse to do it. I want to talk about something much sexier instead…accounting. Yes, you read that correctly.

As the end of our winter break nears, I wanted to make sure I caught up on a few things on the personal front, one of which was visiting the +AICPA┬áLinkedIn group to see what interesting discussions are shaping up there since I fell off the face of the earth a few months back. What I found was a discussion based on this blog post asking if the CPA education requirement is achieving its goal. I’ve been debating the purpose of the change in education requirement since mid-2000s when this trend got popular and nothing has happened to change my view on it so here’s my 2014 campaign:

Get rid of the 150 hour requirement to sit for the CPA exam

The AICPA has a page here citing the reasons for the increased education requirement but it misses the mark, despite the fact that 40 states have adopted this requirement, and I’ll tell you why.

All states where I’ve seen this requirement for 30 additional semester hours on top of the 120 they had in the past (undergrad degree equivalent) place no restriction on how the candidate obtains those 30 hours. In other words, you can overload with a bunch of fluff classes like beginning painting (which I did) or go get a masters in philosophy and have it count towards your CPA educational requirement. Neither of those scenarios improves your capability as an accountant.

Some might argue that most people will achieve the additional hours by obtaining a masters degree in a related field, most commonly referring to accountancy and MBA programs. To that I say, if obtaining a master was the intent then the requirement should say “now on top of everything else you had to do, you also need a Masters in a business-related field.”

In addition, it has been shown that students who get a graduate education have a substantially higher rate of success on the Uniform CPA Examination. Further, master’s degree holders receive starting salaries that are approximately 10 to 20 percent higher than the starting salaries of those with only bachelor’s degrees. Finally, there is evidence that promotions to manager and partner and to corporate managerial positions are increasingly going to individuals with master’s degrees.For these reasons, leading professional organizations such as the AICPA, the National Association of State Boards of Accountancy, and the Federation of Schools of Accountancy have consistently supported the 150-hour education requirement for entry into the accounting profession.

That would at least make more sense than what we see now (above) which has all of this “evidence” about masters degrees without requiring candidates to have one to sit for the exam…

Even if we put all of this sensible logic aside there is another issue that many in the field seem to ignore…

For a field that already struggles to attract a lot of new blood and people from diverse backgrounds, adding additional obstacles to obtain the designation doesn’t seem like a move in the right direction. Considering how tuition skyrockets every year, this path becomes much less attractive to most prospects, especially people from lower socio-economic backgrounds. You would think a bunch of accountants would understand the numbers aspect of this requirement!

And for the nail in the coffin. I got my CPA by completing 150 hours without a masters and I subsequently went back to school for my MBA so I want to share a little secret with you from BOTH perspectives. Your most valuable learning happens on the job. Understanding the theory behind certain business/accounting practices and having some strong fundamentals to build on is great and everything but the truth is you really know nothing until you start working.

So if the goal is to have individuals better prepared to stand on their own, then the right answer is to take another look at experience requirements to sit for the CPA exam, not to spend more time studying textbook hypothetical situations.

Disagree? As always, let me know in the comments!

photo credit: andres.thor via photopin cc

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  • http://www.blogger.com/profile/05584719060017948333 Eric Butts

    I’m not happy with the AICPA. Not at all. I do not understand
    what they are trying to do to the profession. It seems to me that they are working against CPAs by directly diminishing our brand.

    In my opinion, the 150 hour requirement is not the big issue, I believe the administration of the exam is the biggest issue. The CPA exam needs to return to a paper-based exam where the pass rate was around 20%. I predicted that the computerization of the exam would affect practicing CPAs and I was right. Since the exam has been computerized, the
    market has been flooded with CPAs largely due to the pass rate being around 50% now. This reality has flooded the market with more CPAs with lower technical competencies. This has reduced the overall value of the CPA brand. Per review of job postings, you will see some jobs requiring a CPA for an entry-level accounting position. This is ridiculous.

    Again, I’m not on board with the AICPA as I really don’t understand what they’re long-term vision for the profession is. Currently, they seem to be on course to make the profession easier to enter.

    I can tell you that passing the CPA exam does not have the same cache today as it once did. Where you once had to study for 4 grueling sections at once, now you can take the sections individually at your leisure. This has completely tarnished the value of the credential, and I for one fault the AICPA for that. What do you think about this?

  • http://www.blogger.com/profile/05584719060017948333 Eric Butts

    Interesting comment to which I had a couple of thoughts:
    1) taking the exam is still no easy task considering the rolling window to pass all 4 sections and some of the complexity that’s been added as a result of computerizing the exam. That rolling way window also makes it so taking the exam isn’t quite at your leisure.
    2) I was unaware of the current pass rate of the CPA exam, but from what I can tell there is still a shortage in the marketplace. Maybe more people are passing but fewer people taking it because of the education requirement?

    In any case, I think the credential of licensed CPA carries just as much weight as ever and is still one of the most trusted professionals out there.

    As you already saw, I have some gripes with the AICPA but diluting the value of a CPA is not one of them.

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