Shrinking CPA Pipeline Fuels Calls to Relax Education Mandate

The requirement that US accountants attend college for five years to earn their CPA licenses has become a flashpoint in the profession’s struggle to attract newcomers.

Criticized as a barrier to entry for minorities and low-income candidates, the two-decade old requirement that accountants take an extra year of college to be eligible for their certified public accounting credentials is now also seen as a central cause for the deepening drought of accountants. The CEO of one of the largest US accounting firms is among those calling for changes to rules set by state accounting regulators.

New entrants to the accounting profession have declined for years, but the pandemic supercharged departures among experienced workers—with a 16% drop in employed accountants since 2019, federal labor figures show.

“In a lot of ways, we’re going backwards,” said Guylaine Saint Juste, president & CEO of the National Association of Black Accountants. “We need to just stop and realize that a barrier of entry is a barrier of entry. Full stop. Period. And it has impact on the problems we’re trying to solve.”

To make accounting more attractive, many in the industry have focused on overhauling licensing requirements that CPAs earn 150 college credit hours, the equivalent of another year of school beyond the typical undergraduate degree. Critics of the rule face resistance from top leaders in the profession and firm executives who have long supported the extra training that a fifth year of college provides.

Still, those leaders are jostling to come up with remedies to fill the void.

Critical Shortage

The number of accounting graduates earning a bachelor’s or master’s degree shrank 4% in 2020—extending a yearslong decline. An updated report this fall from the American Institute of CPAs due is expected to provide a tally of the post-pandemic toll on graduation rates.

The year before the pandemic, US universities and colleges graduated nearly 73,000 accounting students from undergraduate and graduate programs—a 9% drop from the height in 2016, the same year the number of new candidates for the CPA exam peaked.

The field lost experienced workers during the pandemic as Baby Boomers retired and accountants pivoted to other careers—opening their own businesses or going back to school, said Brandi Britton, global executive director at staffing firm Robert Half.

The US workforce hemorrhaged 334,000 accountants and auditors, including CPAs through the first two years of the pandemic. Employment improved slightly last year, adding back 22,000 accountants and auditors, according to the Bureau of Labor Statistics.

“You can no longer deny the pipeline issues,” said Jack Castonguay, vice president at Surgent Accounting & Financial Education, which offers professional training and CPA exam prep. “There’s no way to look at the data and say this is not a sustained decline,” said Castonguay, who wants the to eliminate the strict education mandate.

Remedies

To combat the crisis, the American Institute of CPAs has developed remedies to close the financial gap on the 30 extra credit hours and expand the window for candidates to pass all sections of the CPA exam, among others.

A recently formed advisory group will shepherd those efforts and dig into the underlying causes of the shortage, including education requirements. A draft of a strategy is expected in May, said Sue Coffey, CEO of public accounting for the Association of International Certified Professional Accountants, a sister organization to the American Institute of CPAs.

“More people are starting to focus more holistically on all of the root causes, not just the 150,” Coffey said.

Coffey described those various efforts to turn the tide as “significant” and said that “everything is on the table.”

Jen Leary, CEO of the eighth-largest US CPA firm, CliftonLarsonAllen LLP, wants more action to fix what she called the “broken” pipeline. But the focus should be on the skills firms will need in the next five years as technology reshapes how accountants work, she said.

“I would like to see us as a profession focusing more on the talent we need to be designing for the future,” Leary said. “We are spending a lot of time on this current issue of the CPA designation.”

Leary backs legislation introduced in Minnesota, where the firm has a large presence, to provide an alternative path to the CPA license based on a standard four-year degree. She argues that relaxed education requirements would open the profession to more candidates.

Over the past few years, top firms including the Big Four have stepped in with programs and scholarships to refill the shrinking pipeline and also boost the number of minority accountants.

CLA has started a paid internship for high schoolers to introduce 60 students taking part this year to accounting and consulting careers. The firm has also teamed up with NABA on a certificate program to get non-accounting graduates the training they need to join the firm’s teams of accountants, Leary said.

But those initiatives and the millions spent so far still don’t provide the wide-scale relief that would encourage more students to consider accounting careers.

To Saint Juste, the CPA exam should be the only barrier to the license. Anyone who can pass the test should be eligible for the license regardless of what they studied or for how many years.

“The exam is the bar,” said Saint Juste. “There should be multiple pathways that people should be afforded the opportunities to reach their dream.”

CPAs Wanted

First-year audit associates can expect to earn $59,000 on average this year, up from previous years, while entry-level corporate accountants can bring in $65,500 on average, according to Robert Half salary data.

Wages rose quickly in the last two years, although growth has slowed this year, Britton said.

Companies, not just CPA firms, are struggling to fill senior accountant roles and jobs for accountants with three to five years of experience. The staffing shortage has driven up market rates, pushing typical salaries for senior accountants to $100,000, said Frances Moreno, managing partner of staffing firm Vaco’s Los Angeles office.

Despite recent pay increases, salaries haven’t kept up with the high cost of college tuition and wages for roles in competing fields such as finance, data analysis, or computer science.

Surgent’s Castonguay dismissed the recent raises, calling them a “temporary blip, not a correction.”

“How you improve the brand is by improving the work experience,” he said. “That’s getting rid of the 150 hours so people come into the profession, and paying them more.”

Bob Patterson routinely scours the market for experienced tax accountants to join his growing, 22-person firm in Louisville, Ky. The president of Patterson & Company CPAs Pllc. said he worries that he might not have enough staff to keep up with demand for tax season two years from now.

Patterson went back to school in his 50s to earn his accounting degree and master’s and had to take 150 credit hours to earn his license. That extra schooling helped him pass the grueling CPA exam, said Patterson, who is also a former president of the Kentucky Board of Accountancy, a state regulator.

To Patterson, pay—not the education requirements—is the top deterrent to pursuing a career in accounting. The industry doesn’t compensate new accountants for that extra year of school, he said.

“We’re not stepping up to the plate as an industry,” Patterson said. “They’re not buying what we’re selling.”