By Guest Columnist Joseph Petito
The accounting profession is exploring multiple options to reverse the loss of students seeking to become CPAs, in addition to encouraging those eligible to sit for the Uniform CPA Exam to do so – and do it sooner rather than later. The AICPA estimates the number of accounting graduates decreased by 3% for bachelor’s degrees and 8% for master’s degrees during the 2019-2020 school year, continuing a downward trend. Diversity in the profession has also remained a very significant challenge. As of 2020, the AICPA estimates only 2% of all CPAs are Black. There clearly is a need for more students, and especially more students of color, to enter accounting.
Among CPA pipeline initiatives currently being discussed by AICPA, NASBA, state CPA societies and other interested parties are changing Uniform Accountancy Act Model Rules to lengthen the time for candidates to pass all parts of the CPA exam and allowing college credit for less expensive, online academic courses to be taken while working part-time. Concurrently, through CPA Evolution, the Uniform CPA Exam will be modified starting in 2024 to have a greater emphasis on emerging technology and greater flexibility in how the exam is taken. The AICPA and NASBA hope to maintain the high quality of the CPA designation while providing additional, and less expensive, opportunities to enter the profession. But more could – and should - be done to keep the CPA pipeline strong.
Entry requirements into the accounting profession and becoming a CPA have often been described as a ‘three-legged stool’; the legs being 150-Hours of education, one year of experience, and passage of the Uniform CPA Exam. Recently, the Minnesota CPA Society sought legislation that would allow CPA licensure with 120-hours of education, plus 2 years of experience among other options. This action stoked a long-simmering debate within the profession over the impact of the 150-Hour requirement on the supply of accounting students and resulted in the AICPA and NASBA objecting to the Minnesota legislation and any other effort which eliminated the 150-hour education requirement due to concerns about undermining CPA ‘mobility’ from state to state. The AICPA and NASBA argued there were no reliable studies identifying the 150-hour requirement as the cause for the drop in students entering the profession.
There is no question that difficult times call for significant and varied responses including addressing the cost of meeting the college education requirement as clearly that is weighing heavily on students’ minds. About a dozen colleges, including Georgetown University in Washington, DC are currently exploring developing baccalaureate degree programs that could be completed within three years, specifically with cost as a driver for the change. Surely, the accounting profession could also explore approaches that reduce the cost of becoming a CPA.
One option gaining interest is to allow experienced-based programs which, somewhat like Minnesota’s proposed law, substitute a certain amount of experience for college-level academic credit hours – but without eliminating the 150-Hours of Education requirement or sacrificing ‘mobility’ for those who utilize the program. An experience-based program would not have to be dependent on colleges for its development, though it could have a college link and could be quickly and widely rolled out nationally.
A framework for Experiential Learning
To become a CPA under the most recent AICPA-NASBA Uniform Accountancy Act (Eight Edition), an individual must obtain a baccalaureate degree and have 150-hours of education including an accounting concentration or its equivalent; pass the Uniform CPA Examination; and, complete one year of general accounting-related experience. Most states enable a candidate to sit for the Uniform CPA exam upon completion of 120-semester hours of education and a baccalaureate degree.
While education and the uniform exam have garnered a great deal of attention, experience, the third leg of the accounting stool has been somewhat of the ‘stepchild’ of a CPA’s foundation. When the 150-hour education requirement was formally adopted by the profession, one year of a then two-year work experience requirement to be licensed as a CPA was eliminated. While studies at the time showed the advantage of requiring additional classroom hours, relatively little attention was given to the impact of dropping one year of experience or of the possibility of utilizing experience in place of traditional academic hours. This move to more classroom education and less work experience was and remains counter to what most other countries do with their CPA-equivalent professional designations Most of the foreign designations allowed to practice in the United States through Mutual Recognition Agreements with the AICPA and NASBA, are this way.
There is no shortage of criticism within the profession about the current one-year experience requirement, largely because the framework for what constitutes ‘experience’ is so broad. The current UAA Model Rules Section 6-2(a) provide that “any type of services or advice using accounting, attest, compilation, management advisory, financial advisory, tax or consulting skills” will suffice. Further, there is no national qualitative review or analysis for it. An experiential learning program could significantly improve the quality of experience obtained by prospective CPAs, and provide greater consistency for such experience.
Why experiential learning
Experiential learning typically refers to the process of learning through direct experience, reflection, and application. It requires engaging with the material or subject matter through hands-on, interactive, and usually practical activities. Classroom learning, on the other hand, typically involves lectures, readings, and assessments that take place in a more traditional classroom setting.
Numerous studies have shown that experiential learning’s active engagement with the material being learned can lead to better retention and understanding of the subject matter than traditional book learning. Because experiential learning is typically designed to reflect real-world situations and challenges, students are more likely to remember what they have learned and are better able to apply it in real-world situations.
By combining experiential learning with traditional in-class or online academic learning programs, students can more quickly and effectively develop the skills and knowledge they need to succeed in a rapidly changing world. For this reason, many colleges utilize experimental learning as part of their programs. These may include:
2. Study Abroad
3. Service Learning
4. Research Projects
5. Simulation-based Learning
An experiential learning program for CPAs
The Experiential Learning Program outline below is intended to enable students to substitute supervised on-the-job learning for up to 30 semester credit hours of in-class or online academic courses. It is drawn heavily from programs used outside the United States, and particularly the Canadian CPA Practical Experience Requirements (April 1, 2023) program. The objective is to provide the student with the same knowledge and critical skill sets as would be obtained through a traditional 150-hour academic program, but enhanced through the benefits provided by experiential learning. As a result, a student completing an Experiential Learning Program would be deemed to have completed 150-Hours of education.
Given that the Experiential Learning Program is expected to take at least a year and likely two years, the student could also concurrently satisfy their one-year experience requirement, depending on the nature of the program. As a result, a student finishing an Experiential Learning Program should be deemed as ‘substantially equivalent’ and able to utilize state mobility laws.
The composition of an accounting experiential learning program
Key to the Experiential Learning Program is self-certification ‘modules’. A module would be utilized for each of the critical skills subject areas. The student would use the modules as a learning guide and would self-assess him or herself against the knowledge skill set contained in the module, then would be reviewed by the CPA mentor. Each module would correspond to a specific learning skill set and be equated to a specific number of academic credit hours.
Experiential Program Proposal
The most likely candidate to utilize experiential learning to complete their 150-Hour education component would be a student with an accounting major without 150-hours of education, but who:
- Has a baccalaureate degree with an accounting concentration;
- Has at least 120-hours of academic courses; is
- Eligible to sit for the CPA exam or has taken the exam in states which permit it; and, has
- No substantive accounting-related work experience
Because this individual already has a core accounting foundation, their experiential learning program would involve a High-Level Learning Program, typically requiring between 1-2 years of full-time work experience. There would be a focus on high-level skills and proficiency in accounting, and a depth of education outside of accounting and business-related knowledge (competency levels 2 and 3*).
Core Knowledge Skills
Management and Governance
Audit and assurance
Higher-Level Learning Skill Set
Explanation, Preparation and Analysis
1 - basic understanding/simple actions
2- analysis, preparation and application
3 - evaluation, development and reporting
The second, though less likely and less traditional student to utilize experiential learning to complete their education component, would be a student who has not been an accounting major, does not have 150-Hours of education, and who:
- Has a baccalaureate degree but without an accounting concentration – will have some accounting and/or business courses;
- Has at least 120-hours of academic courses;
- Not Eligible to sit for the CPA exam: and has
- No substantive accounting-related experience
Because of their lack of accounting knowledge, this individual’s experiential learning program would be initially concentrated on obtaining core accounting and business knowledge and skill sets required to equate that of a concentration in accounting prior to proceeding to the High-Level Learning Program, the total program typically requiring between 2-3 years of work experience. There would be a focus initially on developing basic accounting-related skills, core competencies and breadth of knowledge (competency level 1*) then progress to High-Level Skills and Proficiency (competency levels 2 and 3*).
Either Experiential Learning approach could be combined with accredited online academic courses, especially for core accounting courses. Internships or apprenticeships which are operated through an accredited educational institution could also be utilized by the student as part of the Experiential Learning Program.
Experiential Learning Program process within an accounting firm or other entity
The typical Experiential Learning Program would take place within an accounting firm though could also be done within non-accounting entities. The program would incorporate a self-certification process overseen at the firm and individual levels, including by a specifically assigned CPA mentor who would be responsible for reviewing the individual’s progress and guiding the experiential learning, through the various self-certification ‘modules’ that would be utilized for each of the critical skills subject areas against which the learner would self-assess.
Students engaged in experiential learning programs would perform Self-Evaluations using pre-developed Self-Evaluation Forms specifically created for each competency area. The Self-Evaluation forms would contain information on:
- the type of experience obtained
- the duration of the experience
- a self-assessment of the experience, and
- verification of the type and duration of the experience
The firm or other entity would specifically designate a Program Manager/Supervisor who would:
- oversee the firm’s program
- validate student self-evaluate forms
The firm or entity would designate a CPA Mentor for each student in the Experiential Learning Program. The mentor would be required to:
- meet a minimum of twice yearly with the student
- assess/approve self-certification forms
- maintain records/provide sign off
- submit materials to the state accountancy board when the student completes the Experiential Learning Program, and
- be subject to state accountancy board audit
Rather than the individual self-certification approach, a Firm or other entity may develop and submit for state accountancy board approval a prepared training program which satisfies each of the required competencies. Completion of the program would satisfy the Experiential Learning Program requirements.
The pre-approved firm experiential learning program
This approach is somewhat like existing firm training programs in that it:
- is a pre-structured program
- covered competencies can vary depending on the firm’s objectives
- involves a set timeframe
- includes firm documentation and verification, and
- supervision, mentorship and is subject to accountancy board audit
A firm or other entity could combine its program with that of other firms and non-accounting organizations’ programs and may rotate students among the programs to ensure sufficient knowledge and skill competencies are obtained.
Going forward - Possible state accounting Board/NASBA roles
Individual state accountancy boards, working with their state CPA societies and in-state educational institutions, could develop Experiential Learning Programs either within the parameters of their existing statutes, by modifying their rules, or could make statutory changes specifically to create the program. Given most states’ unique accountancy laws, this would have to be a state-by-state analysis on how best to proceed. States would have to be cautious that their self-certification learning modules would be ‘substantially equivalent’ to the knowledge gained through a traditional academic course. Educational institutions may be interested in helping devise the modules, partly as a guide for their students who seek to enter the profession, and possibly as a revenue means. Additionally, large CPA firms which have very significant resources dedicated to staff training and development may also seek to develop their own in-house modules or Experiential Learning Programs, partly as a means to attract students to join the firms.
Joe Petito, Esq., is a retired PWC principal, a current member of the Maryland State Board of Public Accountancy, a current member of the board of directors of National Association of State Boards of Accountancy’s (NASBA’s) Center for the Public Trust., and a past member of the AICPA-NASBA International Qualifications Appraisal Board Committee and numerous NASBA committees