Saturday, February 11, 2023

Accounting: How to Wreck (and Rescue) a Profession

In my earlier life, becoming a CPA was, in a sense, easy.  To be sure, the two-day exam itself was very tough.  Unlike state bar exams which sometimes have an 80% first-time pass rate, the November 1996 CPA exam, for example, had a 17% pass rate for first-time test takers.  But the process of becoming a CPA was very simple.  Just get a B.S. or B.B.A. in accounting, sign up for and pass the CPA exam, and then wait for your certificate to arrive in the U.S. mail.  Granted, it wasn’t that way in every state, but that’s the way it was in my neighboring state of Illinois where I got my CPA certificate.  The certification allowed you to use “CPA” after your name, and, as the accompanying letter from the Illinois Board of Examiners informed me: “The certificate is good for life and does not need to be renewed.”  Congratulations and welcome to the profession!

Today, there are many articles about the declining number of CPAs and, especially, of accounting majors in the CPA pipeline.  The latest such article is here, in today’s WSJ (subscription required).  That article’s title indicates its proposed solution to the problem: How can we make accounting cool?  And there are many articles like this one, angsting about how to replenish the numbers within the profession.  But I doubt people are now avoiding accounting because it’s un-cool.  It has always been un-cool (which, in some circles, can be cool). 

It is true that some might avoid accounting because, unlike many areas of study, it is serious and difficult.  I’m not just comparing it with frivolous majors such as sexuality studies, puppetry, video games, and grievance studies.  Unlike law, for example, accounting involves numbers and sometimes actually requires you to arrive at the “right” answer.  And even in the areas of accounting that require judgment—and there are many—not all opinions are equally valid.   Nonsensical and disorganized babbling—I’m thinking of some prosecutors as I write this—won’t earn you a passing mark in an accounting class or on the CPA exam.  But just as with its lack of coolness, accounting’s rigor is also nothing new.  As the great Arthur Andersen said long ago, accountants must “think straight, talk straight.” 

Given that its un-coolness and rigor has not changed, my hypothesis is that the number of accountants and would-be accountants in the pipeline has dwindled because of what the profession has done to itself since I became a CPA.  Today, instead of the difficult, but short and straightforward, path of earning a B.S. or B.B.A. in accounting and then passing the CPA exam, the profession has erected numerous costly and time-consuming barriers to entry.  Here are the hoops that a prospective CPA may have to jump through, depending on the state:

  1. Extra classes.  Because of its rigor, an accounting major, combined with general university requirements, may already take up nearly all of your 120 credits for the bachelor’s degree.  But today, earning that major may not be enough.  Depending on your state, you may have to take an extra course or courses, such as accounting information systems or philosophy’s introduction to ethics, merely to sit for the CPA exam.
  2. Thirty extra credits.  On top of the extra course(s) within your 120 credits, the bachelor’s degree in accounting is not enough!  Today, 150 credit hours are required.  Here’s a sure way to know if the thirty-extra-credits requirement is bogus: the extra credits often can be in anything.  Those “anything credits” are just time killers—a nonsensical barrier that benefits the educational industrial complex but stands in the way of otherwise serious CPA candidates.  It’s not just an extra thirty credits and the (often) staggering cost to get them.  It’s another year of your life. 
  3. Ethics exam.  When I took the 15-hour, two day CPA exam, one of its four sections was titled “law and professional responsibility.”  Today, however, in addition to passing the exam, you may also have to pass a second exam on ethics.  Just one more step in a long, winding road where the end point is barely visible when standing at the starting point.  The longer the road, of course, the less likely people are to walk it.  But read on; we’re just getting started.
  4. Work experience.  In law school, you finish your degree, pass the bar exam—or, for MU and UW grads in Wisconsin, skip the bar exam entirely thanks to the “diploma privilege”—and you are a lawyer!  It used to be similar for the aspiring CPA.  Now, a year or two of work experience is required, which puts the prize of the CPA certificate even farther away on what is already a distant horizon.
  5. CPE.  Perhaps the biggest nonsensical deterrent to the CPA certificate is the merger of the certificate with the license.  When I got my CPA certificate, it was just that: a certificate.  I didn’t want or need a license because I had no interest in signing off on audits or financial opinions.  In fact, most CPAs have no interest in doing that, but instead want to work for corporations in some capacity—usually in accounting but very often in related fields.  Nonetheless, today the profession has largely merged the two.  Now, in most states you can’t get the certificate without the license, and to keep the license you have to undergo annual Continuing Professional Education (CPE) forever, which, if it’s anything like Continuing Legal Education (CLE) in law, is a useless, time-consuming, money-draining endeavor.

In sum, today the CPA certificate is no longer a glittering prize at the end of a very rigorous but short and clear path, as it once was.  Rather, the path is now lengthy and winding, and the prize is not even visible, let alone glittering, from the starting block.  Further, even if you win the prize many years down the road, the fun only then begins, as keeping it may require your hard-earned money and valuable time in the form of ongoing, mandatory CPE.

I wonder: how many people have passed on the accounting profession for the legal profession?  Instead of (A) going to school for five years, taking a CPA exam with a 17% pass rate, and then hoping to find qualifying employment for two years before taking a second exam (ethics) to become certified & licensed, you (B) take a soft major and graduate in three years, go to law school—maybe even one that has a two-year JD program (see, e.g., here)—and then take a bar exam where average pass rates often break the 80% mark.  (The CPE / CLE would be a wash.)  I’m not recommending law as a career; but, no doubt students have chosen law over accounting for the above reasons.  And if a person’s interest is in taxes, for example, the law path might even be superior to the CPA path.

Because the profession has made getting the CPA certificate more logistically difficult than becoming a lawyer, it now faces the inevitable shortage of accountants.  But letting would-be accountants again see the CPA-certificate-prize at the end of a short path will draw more students into the profession without sacrificing genuine rigor.   

The fix is simple.  The states and/or other regulators should simply go back to the old formula: a B.S. or B.B.A. in accounting + passing the CPA exam = CPA certificate.  No ethics exam, work experience, or annual CPE upkeep required.  Then advertise the hell out of that new policy at the state’s colleges and universities.  It will take a few years, but the pipeline will eventually be replenished.  States can still require the CPA license for those who want to sign off on audits or whatever else the state thinks should require a license, but an incredibly small percentage of CPAs want to do that type of work.  Those who do will have to jump through the extra hoops to obtain and maintain licensure.

Problem solved, profession saved.

Updated 2/13/23

When comparing the accounting and legal professions, above, I claimed that, once licensed, the CPE / CLE requirements would be a wash.  However, that may not be true.  As an attorney, I have to complete 30 CLE credits every two years.  On the other hand, CPAs may have to complete as many as 120 CPE credits every three years (e.g., IL) or 80 CPE credits every two years (e.g., WI).  On an annual basis, that's 15 credits for the lawyer and 40 for the CPA.  Given that, and given the accelerated path available to would-be lawyers (i.e., completing a less demanding college degree in three years and completing law school in two years), the law option might be even more attractive than the CPA option—particularly for those interested in tax.


  1. It;s not just the maintenance required. It’s how dramatically the work has changed, toward data entry at best and drudgery at worst. And - much of the accounting technical requirements is established by lawyers, knowing little and not caring about actual business and products and sales and so on. The guts of a business. So much information is maintained electronically that there’s hardly any interaction with the humans on the business side of things. And the humans on the business side of things are also data entry and quite removed from the business, if they are even in the same location to talk to. The staff interaction on the firm side is minimal - there’s very little mentoring going on and no way of knowing what one can aspire to. Partners treat new hires like data entry people and nobody really knows accounting - they know how to meet the regs. And this was before Covid shut off all interpersonal interaction. I really feel sorry for the new grads who hired on in the last 3 years who have gotten ZERO training on business stuff. An accounting grad could look ahead to learning about a business or industry and being able to make something of it. No longer.

  2. I earned my CPA license in Florida in 2004. The biggest issue was that the pay was very mediocre even at a Big 4 accounting firm. I billed 1900 hours to make $46,000/year with no pay differential for non-CPAs. I went to law school and now I work the same hours but make more than 4 times my previous salary and I get to interact with people. I let my CPA license go inactive because I'll never sign financial statements.

  3. I've been an accounting professor for several decades. At my university, the loss of accounting majors has been to other business majors (especially finance) rather than law school. The starting salaries in finance, marketing, etc. are comparable to or better than accounting, and students perceive their courses as less difficult.