For several years, our industry has warned us about the shrinking CPA pipeline. We have seen plenty of reports and articles dissecting the problem, but not enough big, bold solutions to reverse a trend that doesn’t just create labor shortages, but could undermine our entire accounting profession.
No single solution will solve the pipeline issues. What’s needed is a comprehensive approach that begins well before potential CPAs enter college and continues through the start of their careers. Before we describe the bold steps needed to advance the profession, it’s important to recap how we got here to make sure our solutions address the root causes of the crisis we’re facing.
When addressing the CPA candidate pipeline, there are two major areas that need to be examined. The first issue the profession is experiencing is a decline in the number of college students graduating with a degree in accounting. The second is that even among those students who do select accounting as a major, many are deciding to not pursue the CPA designation. Both pipeline issues must be addressed concurrently to maintain the level of professionalism and integrity that companies, clients and the public have come to expect from accountants.
What is causing the decline in accounting majors?
In numerous articles, firm representatives and academics suggest our profession merely needs an image campaign. While that would be beneficial, I believe we need to go much further and address the real systemic issues that are turning young people away from the major. The problems preventing potential candidates from choosing accounting as a major are many, and include:
- The 150-credit hour rule (a standard undergraduate degree is only 120 hours);
- The cost of an accounting education and opportunity cost of the additional year in school;
- The perceived workload of accounting majors while in school;
- Low and stagnant starting salaries;
- Other majors offering more attractive and engaging jobs; and,
- The disparity between what accountants do today and what students perceive accountants as doing (i.e., the image problem).
What is causing the decline in CPA candidates?
- The workload when starting and busy season pressures;
- Lack of relevance to their career goals;
- The time commitment and financial costs to pass the exam;
- Not seeing relevance to their careers;
- Not seeing the initial value or return on investment;
- Their employers or prospective employers do not require the CPA to advance;
- Other credentials or specialties are more valuable to their careers; and,
- The level of difficulty of the exam, along with fear of failing.
Fixes
Now that we established the root causes of our pipeline problem, let’s explore bold, actionable solutions to reverse this trend at various points along a CPA candidate’s journey.
1. Before college: High school and middle school. The primary goal for student engagement before they enter the collegiate environment is to increase awareness. We need to educate students about the opportunities available in the field earlier in their education process by connecting accounting to their everyday lives such as budgeting for a purchase or saving for college. For example:
- Offer AP accounting courses at the high school level that focus on financial planning and fraud detection, which have immediate relevancy and a “wow” factor given the high-profile scandals that make headlines.
- Dispel the myth that accountants must be good at math.
- Engage middle schools and high schools in a more meaningful way with programs driven by state societies, the American Institute of CPAs and other professional organizations. Provide greater support and encouragement to students by helping them understand the rewards of becoming a CPA.
- Focus on the entrepreneurial opportunities available to CPAs and highlight how quickly CPAs can become their own bosses.
Through focusing on engagement and early exposure, state societies, the AICPA and firms in their local offices could coordinate and organize Accounting Career Days by inviting local schools to meet accounting professionals who work in different fields (public accounting, private companies, governmental accounting, FBI agents, business owners, etc.). These career days would broaden the perception of what an accountant is and provide early positive interactions to the students, similar to firm leadership conferences, externships, elevate programs, and other collegiate opportunities geared towards underclassmen.
2. During college: Students in or considering accounting but not the CPA. Once students enter college, the goal should be to help them navigate the education and application process associated with the CPA exam and enhance their chance of passing it. To achieve this, we need to encourage students to study for the exam before they seek full-time employment, starting once they finish 120 hours in states where that is permissible (40 of the 55 jurisdictions allow candidates to take the CPA with 120 credits or less). Based upon the most recent data available, recent college graduates have a 75% pass rate completing all four parts of the CPA Exam within 140 days. The pass rates decrease and for those who do pass, the time it takes to pass increases drastically as a candidate gets farther away from graduation.
State boards of accountancy, the AICPA and the National Association of State Boards of Accountancy could make the CPA exam more accessible by replacing the 150-credit hour rule with an education requirement or an expanded work requirement, where candidates could choose between 30 additional credits or an additional year of work experience.
3. Employer-related: Candidates seeking or changing employment. None of the changes made in middle school, high school or in colleges will expand the CPA pipeline if firms and other employers don’t make starting positions more attractive to graduating students. Employers must increase starting salaries and improve benefits. Compensation is lagging other industries that only require a four-year degree and without a lengthy or expensive exam. In 2014, the average starting salary for an accountant was about $54,000 (NACE 2013). The 2022 Salary Guide from consulting firm Robert Half finds that the starting salary today for an entry-level audit or assurance associate is between $50,500 (50th percentile) to $58,000 (75th percentile). Accounting salaries have barely kept pace with inflation while other fields of study (finance, marketing, information systems, etc.) have raised wages beyond merely cost of living adjustments.
Because of the pipeline issues, there is a shortage of new hires and experienced staff. As a result, employees are being asked to work multiple busy seasons and longer hours, potentially pushing more CPA candidates out of the pipeline before they finish their exam. Firms need to address these employee shortages through upskilling, automation, offshoring, higher pay, and offering more work/life balance to their employees. Asking candidates to work longer hours for lower pay while studying for the CPA exam will only push out those candidates that colleges attract. And when they leave, they are unlikely to come back to the profession.
What’s next
The pipeline issues may seem daunting, but the solutions are right in front of us. We must start educating students early on the opportunities a career in accounting provides and must do a better job explaining the benefits, career options, and value proposition of those students obtaining their CPA. Employers must make positions more attractive, financially and professionally. These actions must be done concurrently. No single policy change or approach will work on its own. We need a coordinated and expansive strategy that factors in the points along the career path where we lose people to reverse the trend and protect the profession so many of us have found valuable. Failure at any point in potential candidates’ career paths only exacerbates our pipeline issues. We cannot let tradition stand in the way of meeting new potential candidates where they are. In fact, the future of the profession depends on it.
