The dearth of minority CPAs has been a source of concern within the accounting profession for many decades (see Bert N. Mitchell, “The Black Minority in the CPA Profession,” Journal of Accountancy, vol. 128, no. 4, pp. 31–48, 1969, and “The Status of the Black CPA: An Update,” Journal of Accountancy, vol. 141, no. 5, pp. 52–58, 1976). Even though the CPA certificate bestows professional prestige and economic opportunities upon its holders, the number of minority accountants who have achieved CPA status has remained abysmally low. Among U.S. CPAs in 1969, only 0.4% were African American, 0.9% were Latino, and 1.9% were Asian American (Theresa Hammond, A White-Collar Profession: African American Certified Public Accountants Since 1921, Chapel Hill: University of North Carolina Press, 2002). By 2008, those percentages had increased to about 1% for African Americans, 3% Hispanic, and 4% Asian/Pacific Islander. In addition, according to a 2004 AICPA study, percentages for new hires had increased substantially: 12% of new CPAs are Asian/Pacific Islanders, 8% Hispanics or Latinos, and 3% African Americans (CPA Examination Summit, 2007, http://bit.ly/1PR6fjX).Despite the increases, the percentages for Hispanics and African American CPAs are still below that of their proportion in the general population. African Americans make up 12.6% of the U. S. population—why do they compose only 3% of the current CPA population? Similarly, Hispanics make up 16.3% of the overall population, but only 8% of new CPAs. This discrepancy exists despite numerous initiatives by prominent organizations such as the AICPA, National Association of Black Accountants (NABA), and Association of Latino Professionals in Finance and Accounting (ALPFA) to increase minority representation in the accounting profession. Some minority groups, on the other hand, have made major strides since 1969: Asian/Pacific Islanders make up only 5% of the American population, but 12% of new CPAs.
A Question of Utmost Importance
The underrepresentation of minorities within the CPA profession is a serious problem not only to the individual minority accountant, but also to the broader accounting community. The major accounting firms have long recognized the need for ethnic diversity in their work force. Demographically, minorities constitute 35% of the U.S. population, according to the 2010 Census (J. Green, M. Khanna, “Diversity Makes for a Stronger Accounting Profession,” Pennsylvania CPA Journal, vol. 82, no. 1, 2011, pp. 20–23).
The best and brightest are more likely to be interested in working for a firm that espouses ethnic diversity; therefore, it is in the best interest of accounting firms to build a diverse workforce proactively. Although most firms try to hire the brightest and best minority candidates, these individuals often do not become CPAs (Jason Bramwell, “Richard Piluso: NYSSCPA President Looks to Expand Membership and Minority Involvement,” Accounting Web, October 7, 2011). Most previous studies have focused on attracting more minorities into studying accounting, but this article seeks to understand why most minority accounting graduates do not become CPAs.
A diverse work force is essential when serving a diverse client base. According to the U.S. Census Bureau’s 2007 Survey of Business Owners, “minority-owned businesses accounted for 21.3% of all non-farm U.S. businesses.” Companies with employees of different ethnicities who can work with a culturally diverse client base position themselves for success. Companies that plan to do business with demographically and culturally diverse companies need to ask themselves, “Do we have the know-how, the understanding, and the in-house human capital to be able to fully understand the culture, needs, and the sensitivities of our minority clients?” (Green & Khanna, 2011). Furthermore, a diverse workforce is necessary in competing in the global marketplace (NABA, 2012, http://http://www.nabainc.org/; J. Lorinc, “The Business of Inclusion,” CA Magazine, vol. 143, no. 4, 2010, pp. 20–25).
Due to the changing business landscape, increasingly diverse demography, and the global nature of business transactions, it is imperative for companies to understand that an ethnically diverse workforce is a business necessity and not just a matter of affirmative action (C. Williams, G. P. Barenbau, “A Diverse Profession is Built by All,” Pennsylvania CPA Journal, vol. 82, no. 4, 2012, pp. 32–33).
The CPA credential opens many lucrative career paths. Unfortunately, most minority accountants have not been able to enjoy these opportunities because of a lack of certification. To this end, this article examines the factors that have impeded the progress of African American accountants toward achieving certification.
Richard Piluso, 2011/2012 NYSSCPA president, set minority representation in public accounting as a goal of his term in office. He referenced the AICPA’s 2011 “Trends in the Supply of Accounting Graduates and the Demand for Public Accounting Recruits” report noting that minorities made up 21% of employees at CPA firms, but only 9% were CPAs. Comparing these percentages with those of all CPAs indicates that the amount of CPAs in public accounting might not be as high as those in industry.
The purpose of this article is to conduct an empirical investigation of the possible factors associated with the dearth of African American CPAs and to provide recommendations for solving the problem.
A Brief History of Diversity
In the United States, the 1960s represented a turbulent decade of political and social changes. It was during that decade that the accounting profession decided to focus on the issue of minority underrepresentation among CPAs. In response to this need, in 1969, the AICPA created the Minority Recruitment and Equal Opportunity Committee, renamed the Minority Initiatives Committee (MIC). The committee was formulated to carry out the following resolutions:
- Encourage minority men and women of high potential to attend college and major in accounting.
- Provide educational opportunities for minority men and women to prepare them to enter the accounting profession.
- Encourage hiring minority men and women to integrate the accounting profession. (AICPA, “CPAs of Color Celebrating 40 Years,” 2009, http://bit.ly/1I1Jsk9).
In the same year that the AICPA was addressing the issue of racial discrimination, NABA was established in New York to address issues about African American representation in the accounting profession. The primary purposes of the organization are 1) to promote and develop the professional skills of its members; 2) to encourage and assist minority students in entering the accounting profession; 3) to provide opportunities for members to fulfill their civic responsibility; 4) to ensure long-term financial stability and provide adequate resources to implement chapter, regional, and national programs; and 5) to represent the interests of current and prospective minority accounting professionals. Since its establishment, “NABA has provided more than $8 million in scholarship funds to deserving students preparing to enter various business professions” (National Scholarship Program).
In 1994, the KPMG Foundation, under the leadership of Bernie Milano, founded the PhD Project, which aimed to increase the diversity of corporate America by diversifying business school faculty, specifically in PhD programs. When the program began in 1994, there were only 293 minority business faculty members; today there are more than 1,000 minority business faculty members. This unprecedented success rate is reflective of the exceptionally low dropout rate. While the national average attrition rate for doctoral students is 25–33%, the PhD Project prides itself with a less than 10% dropout rate (B. J. Milano, “Taking a Systematic Approach,” Journal of Accountancy, 2008, http://www.phdproject.org/downloads/journal-of-accountancy_systemic.pdf).
Although there has been a concerted effort by different entities to increase minority representation in the accounting profession, the numbers are still low. For that reason, both the AICPA and the NYSSCPA have implemented recent programs to promote greater interest in accounting by minorities. The question still remains: What deters minority accountants from reaching CPA certification?
Since 1896, when the first CPA certificate was issued, the CPA exam has evolved in terms of content, exam eligibility, and delivery methods. One constant has been the status of credibility and excellence that the designation gives to its holder. At present, there are more than 380,000 CPAs in the United States who are members of the AICPA and many thousands more who have eschewed AICPA membership. Fewer than 3% of these CPAs are African Americans (CPA Examination Summit, 2007). The most controversial point of discussion for this data is the 150-hour requirement to sit for the CPA exam. In the 1990s, the effect of the 150-hour requirement on African American accounting majors became the focal point of research. Dissenters to the requirement posited that the requirement might encourage African Americans with high academic potential to select other professions, increase the financial burdens of historically black colleges and universities (HBCUs) and their students, and limit the access of African Americans to the profession (V. L. Flintall, “The 150-Hour Requirement: Good or Bad for African Americans?” Journal of Accountancy, 1993, pp. 95–96).
Booker, Hill, and Wright examined the perception of African American accounting students concerning the 150-hour requirement, and found that they are more likely to pursue alternative accounting certification that did not require 150 hours. Their results indicated that the CPA eligibility requirement of additional education beyond the standard four-year credit hours could be a disincentive to African-American accounting majors. Interestingly, they found that African American accounting majors, while concerned with the “opportunity cost” associated with an additional year, nevertheless believed that the rule enhanced the quality of the CPA candidates (Q. Booker, C. Hill, C. Wright, “African American Accounting Majors and the 150-hr Requirement,” Journal of Education for Business, 2010, vol. 85, no. 2, pp. 85–94).
On the other hand, a different study found that the 150-hour rule could be a deterrent to women, but not to racial minorities (J. L. Bierstaker, M. Howe, I. Seol, “Accounting Major’s Perceptions Regarding the 150-Hour Rule,” Issues in Accounting Education, 2004, pp. 211-218). In addition, Flintall asserted that the rule actually attracts high-quality African American students to the accounting profession, arguing that similar financial burden and delayed employment “seem to be inconsequential to those preparing to enter medicine or law” (Flintall, 1993, p. 97).
Another study examined the entrepreneurial influence of role models on minority youth. Walstad and Kourilsky found that half of the African American youth in their study did not know any business owners (W. B. Walstad, M. L. Kourilsky, “Entrepreneurial Attitudes and Knowledge of Black Youth,” Entrepreneurship Theory and Practice, 1998, pp. 5–18).
The influence of role models on minority youth has been a focus of many studies. According to a survey by Wells, Stewart, and Ross, “about one-half of the respondents did not know a CPA before they started college” (p. 12). A limited number of minority CPAs leads to limited numbers of potential role models for the current minority accounting majors to emulate. Thus, one aspect of this study was to examine the relationship between the availability of CPA or accountant role models and the likelihood of passing the CPA exam.
Since the AICPA officially approved the 150-hour requirement to sit for the CPA exam in 1989, the requirement’s effect on African American candidates has been debated. According to Booker et al. (2010), most African American accounting majors prefer to take additional undergraduate hours to fulfill the requirement because of the availability of federal financial assistance for undergraduate work, the limited likelihood of graduate school admission due to low Graduate Management Admission Test (GMAT) scores, and the low perception of a graduate degree due to its associated opportunity cost. About half of students in another survey did not think that their exam preparation in relation to undergraduate work and review courses was adequate. An accounting student’s preparedness for the CPA exam rests on a strong accounting curriculum that includes a CPA review course, the availability of a Master of Accounting (MAcc) program, CPA accounting instructors who serve as role models, and the ability to afford exam-related costs (J. T. Wells, J. L. Stewart, F. Ross, “Promotion and Retention of African American Accountants in the 21st Century U.S. Public Accounting Profession,” Howard University School of Business Center for Accounting Education and NABA, http://bit.ly/1QyUMae).
Survey and Results
An online survey of African American accountants was conducted through the auspices of the Center for Accounting Education (CAE) at Howard University and NABA, which developed a questionnaire that measured factors such as the availability of role models, CPA certification, the type of schools attended, the different routes used by respondents to fulfill the 150-hour requirement, the type of reviews undertaken to prepare for the CPA exam, and exam and CPA certificate perceptions. There were a total of 624 usable responses from African American accountants used for further analysis. A cross-tabulation of the demographic variables was conducted for CPA as well as the non-CPA respondents to capture notable differences between the variables and the results are presented in the Exhibit, Demographic Data for CPA and Non-CPA African Americans Accountants. A discussion of the more interesting results follows here and a fuller set of data will be included at http://www.nysscpa.org/docs/default-source/CPAJ-Supplemental-Materials/december_diversity_infocus.pdf with the online version of this article.
Demographic Data for CPA and Non-CPA African American Accountants
The majority of the respondents were female (62.2%; thus 37.8% respondents were male), consistent with higher female enrollment (see, e.g., I. T. Nelson, V. P. Vendrzyk, “Trends in Accounting Student Characteristics: A Longitudinal Study at FSA Schools, 1991–1995,” Journal of Accounting Education, 1996, pp. 453–475). The results show that that female African American accountants are less likely to be CPAs than their male counterparts. Only 32.6% of the total African American female accountants in the study are CPAs, compared to 49.8% of the male population.
Only 33.5% of the subjects stated they were able to afford all the necessary costs of the exam. It is not surprising that exam affordability is also significantly associated with the likelihood of becoming a CPA. Almost 67% of the African American accountants who afforded the registration, exam, and the review costs are CPAs. Therefore, it can be cautiously concluded that accountants who can afford all three exam costs are more likely to become CPAs. In other words, becoming a CPA may be more associated with economic status than with minority identity.
The method of fulfilling the 150-hour requirement was significant, but not in the expected direction, because a relatively higher percentage of African American accountants, regardless of the method of choice, are non-CPAs. A higher percentage of respondents (66.3%) who fulfilled the requirement by acquiring a masters degree and 67% of the subjects who completed a fifth year in the undergraduate program were non-CPAs. The results suggest that a particular method of fulfilling the requirement does not necessarily contribute towards becoming a CPA.
The academic credential of the undergraduate professor was analyzed in terms of its contribution to becoming a CPA. The results indicate that having PhD professors was significantly associated with the likelihood of becoming a CPA. In some respects, this faculty criterion was another indication that passing the CPA exam is more of an economic issue than a racial issue. Small schools with inadequate budgets often cannot afford to hire PhDs, whereas wealthier schools will have employed more PhDs.
The analysis for the type of undergraduate school exhibited a significant association between type of school and the likelihood of becoming a CPA. The majority of African American accountants (53.4%) who matriculated in private HBCUs became CPAs. Future research should focus on the role of private HBCUs in facilitating the progress of the African American community in the accounting profession. Since non-HBCU private schools are the second best in preparing candidates for the CPA examination, this is another indication that the passing of the exam is an economic issue rather than a racial issue. Minorities who attend higher-priced private universities are more apt to pass the exam.
Based on the reported perception of African American accountants, the likelihood of becoming a CPA is 1.27 times higher for accountants who perceive occupational incentives as motivational as compared to those who did not perceive the advantage of the support. On the other hand, African American accountants who perceive that the CPA exam is expensive, difficult, and time consuming are 0.60 times less likely to become CPAs than accountants who have a positive perception.
In general, minority CPAs have a positive attitude about the CPA credential in terms of guaranteeing prestige and mobility. They also report that undergraduate professors, job requirement, and employer incentives to be motivational factors for sitting for the CPA exam. On the other hand, non-CPA minorities agree that the challenges of sitting for the exam involve insufficiency of exam information, lengthy preparation time, family responsibility, and high cost.
The majority of survey respondents were African American female accountants, yet the percentage of women CPAs in the population is lower than that for men. It is not too audacious to conclude that this paradoxical fact reflects the general gender trend in the accounting profession. According to a 2011 Bureau of Labor Statistics report, women make up 60.1% of all accountants (Women in Accounting, 2012, http://www.catalyst.org/publication/204/women-in-accounting).
While this positive trend is gratifying, there is still a lag in the percentage of women who become CPAs. Although women outnumber their male counterparts in the overall statistics of the profession, they still lag behind in terms of becoming CPAs; the same report stated that women represent 40% of the total CPA population in the United States. Likewise, while 62.2% of African American are female accountants, 67.4% of African American female accountants are non-CPAs (see the Exhibit). The main gender differences were related to perception; women felt that the exam was too difficult and too expensive.
One of the most debated accounting issues involving minority accountants has been the issue of completing 150 hours as a requirement for sitting for the CPA exam. It has been argued that the burden of fulfilling the requirement would rest heavily on economically disadvantaged minority students, since it would entail more schooling and delayed entry to the workforce (Booker et al., 2010). While the argument could be valid, the results in this study do not demonstrate negative perception by minority accountants concerning the rule.
Affordability of Exam Costs
A deeper look into the results shows a significant association between review affordability and the likelihood of becoming a CPA. Female minority accountants in general, and female African American accountants in particular, agree that the exam is expensive, difficult, and requires a lot of preparation time. To tackle the issue of exam difficulty and lack of preparation time, it is imperative that accounting programs include CPA review courses in their curriculum. When CPA exam preparation is part of the school curriculum, minority accountants, especially female accountants, will take these courses as part of their degree completion requirements. This is most crucial especially for HBCU educational institutions, as the majority of the student body in these institutions constitutes the respective ethnicity. Although taking a CPA review course did not guarantee exam passage, the failure to take such a course virtually guaranteed failure. In addition, organizations such as NABA and accounting firms might be able to alleviate the financial problems of new graduates through exam or review course scholarships based on the level of commitment of the particular student as measured by accounting GPA and level of professional participation.
African American accountants perceive that employer induced incentives and mandates (e.g., occupational motivators) to acquire the certificate significantly contribute to becoming a CPA. According to this study, the high cost of the exam seems to be a central issue, representing one of the primary challenges associated with acquiring the credential. Therefore, it is not surprising that they appropriately recognize that employer incentives would be an important motivator to acquiring the credential. Once an employer establishes a mandate, it is obligated to support the effort. Thus, firms that hire accountants should make a concerted effort to encourage and support accountants to sit for the exam. Frank Ross, one of the founders of NABA, summarized the following suggestions for firms that hire minorities:
- Include certification as a measure in employee evaluation and aggressively monitor progress. For employees who don’t take or pass the exam, discuss during the counseling session any hurdles standing in the way of the exam and develop an action plan to address them.
- Assign a CPA mentor for all new hires who are not already a CPA. The primary role of the mentor is to encourage the new hire to pass the exam and answer any questions they may have.
- Offer to pay for CPA review courses as well as fees to sit for the exam the first time. Reimburse candidates when they enroll rather than waiting for them to pass the exam. The risks inherent in early reimbursement are well worth the long-term benefits of a highly qualified staff.
- Give candidates time off to study and sit for the exam.
- Provide a bonus or pay increase, and other recognition, if an employee becomes a CPA within a defined time period. Many firms already do this, but for those firms that do not, I strongly recommend that they incorporate such a policy.
The surveyed African American accounting professionals who have either a CPA or an accountant family member exhibited a slightly positive association with being a CPA. According to CPA Summit 2007, “there continues to be a general lack of African American CPA role models in African American communities, and as such, having a CPA is not perceived to be a bellwether for ‘making it professionally.’” One additional factor of no less value adds to the complexity of this problem: Unlike medicine and law, accounting is not a visible profession (Symposium on Upward Mobility and Retention of African Americans in the Accounting Profession, 2010, http://bit.ly/1HdiXrX). It is likely for an African American to have doctors of similar ethnic background. In addition, the law profession is portrayed constantly by the entertainment industry; but it is hard for students to emulate a career direction based on limited information.
Conversely, there is also the reluctance of professionals to reach out to future minority accountants:
Once individuals have achieved a high level of success in public accounting or industry, they may not want to leverage their status by doing outreach, speaking in underserved communities, or participating in networking events to support African American professionals (CPA Examination Summit, 2007).
To increase the visibility of minority CPAs, the NABA and state CPA societies must make their members aware of their responsibility in terms of encouraging other accountant family members. Additionally, university accounting programs must reach out to the business community to secure internship opportunities for minority students. Working around other certified accounting professionals during the undergraduate program would enhance the motivation to become one. Moreover, student organizations such as Beta Alpha Psi and other accounting clubs could be instrumental in this effort by making the profession visible by inviting minority accounting professionals as speakers. Last but not least, undergraduate professors must make a concerted effort to mentor their students toward the goal of achieving the CPA certification by providing information about the credential.
Trust in the Future
Throughout its history, the accounting profession has struggled with the underrepresentation of minority accountants. The low number of minority CPAs has persisted in spite of the large investment of human resources and money by different organizations; therefore, the purpose of this study was to investigate the determinant factors for the dearth of minority CPAs.
The results suggest that African Americans possess a very positive perception of the credential in terms of providing job security, prestige, career mobility, and added compensation. This study has affirmed the importance of gender differences, exam affordability, exam perception, and employers’ commitment to support minorities in their pursuit to acquire certification. Negative perceptions of the CPA exam’s expense and difficulty can be alleviated through concerted efforts by accounting firms in providing CPA review courses and employer support. Professors and employers must encourage individuals to sit for and pass the exam. A diverse and thriving community of qualified CPAs depends on students, teachers, and employers all doing their part.
The authors are grateful for the support of the National Association of State Boards of Accountancy (NASBA) in awarding the grant that funded this research. The authors also thank the National Association of Black Accountants (NABA) for providing access to its membership database.