In Brief

The debate over how well the accounting curriculum in the United States serves the needs of both students and practitioners continues unabated. A key focus remains on how well students are actually prepared to take and pass the CPA exam. The authors analyze CPA exam performance data to determine whether the path students take to amass the required 150 hours of education or the credentials of the accounting faculty who teach them are correlated with exam performance.

With the short supply of accounting majors, recruiters face a continuous challenge in identifying new talent for their firms. While many factors enter into hiring decisions, an important consideration is the candidate’s potential for success on the CPA exam. Two aspects of accounting education that may affect such performance are which path students take to acquire the 150 hours required for licensure and whether the faculty in their accounting program themselves possess the CPA license. This article presents the results of research into how these two characteristics actually affect CPA exam performance, based on an analysis of exam performance data reported by the National Association of State Boards of Accountancy (NASBA) from 2013 to 2016.

Graduate versus Undergraduate Path

Proponents of the 150-hour requirement have argued that the additional education strengthens the competency of accounting students, better preparing them for the CPA exam and their professional careers (Arthur Allen and Angela Woodland, “The 150-Hour Requirement and the Number of CPA Exam Candidates, Pass Rates, and the Number Passing,” Issues in Accounting Education, August 2006, http://bit.ly/2KZ4ggB). When the 150-hour requirement was originally conceived, the presumption was that students would obtain the incremental credit hours by completing a graduate degree, similar to the legal profession. This has not universally been the case. With the rising cost of higher education and growing concerns about student debt, many students have satisfied the additional 30 credits by taking extra undergraduate classes while completing their degree.

Completing undergraduate coursework in order to satisfy the additional 30 credits has two distinct financial advantages. First, it allows students to qualify to work as CPAs in just four years, thus avoiding the opportunity cost of delaying employment until the completion of a graduate degree. Second, completing undergraduate coursework can greatly reduce tuition costs when compared to graduate coursework. Students attending schools that offer undergraduate flat-rate tuition can often complete 18 or more credits per semester at little or no additional cost. Even for students attending schools that do not offer flat-rate tuition, the cost of undergraduate credits is typically well below that of graduate credits. Given that entry-level accounting salaries do not significantly differ between candidates with graduate degrees and undergraduate degrees (Nicholas Mastracchio, Heather Lively, and Elizabeth Carlson, “Should a Master’s Degree Be Required for CPA Licensure?” The CPA Journal, November 2011, http://bit.ly/2zcAuzy), there seems to be little economic advantage for accounting students to complete a graduate degree to satisfy the 150-hour requirement.

Accounting students have been strategic in selecting the additional 30 undergraduate credits. While many of these students complete a second major, others take myriad elective courses in order to fulfill the 150-hour requirement. Although each of these alternatives can provide significant cost savings, the additional classes are often not accounting related, nor do they encompass material specified in the AICPA’s Uniform CPA Examination Blueprints. As a result, students may satisfy jurisdictional education requirements, but the knowledge obtained by completing the additional 30 credit hours may have minimal, if any, impact on exam preparation.

Interestingly, completing 150 credit hours by taking only undergraduate credits may actually diminish the quality of one’s accounting education. Completing the additional 30 credit hours concurrently with the accounting undergraduate degree requirements necessitates the completion of six or more courses in multiple semesters, increasing students’ time commitment (both in and out of the classroom) to nonac-counting courses. Unfortunately, this increased time spent on nonaccounting courses will likely reduce the time students spend on their accounting courses. Considering all of the demands on students’ time, one might question how well these students are prepared to enter the profession compared to their counterparts from a previous generation, who were only required to complete 120 credit hours.

Faculty Credentials and Accounting Program Quality

Both intuition and research indicate that the quality of an accounting program affects CPA exam performance. While many characteristics can be attributed to program quality, faculty credentials are often cited in the professional and academic literatures as key indicators. Indeed, the Association to Advance Collegiate Schools of Business’s (AACSB) standards qualify faculty as either academically or professionally oriented. The former are qualified based on having earned a terminal (i.e., doctorate) degree and sustaining currency through academic scholarship and published research; the latter are qualified based on extensive business experience and sustaining currency through continued professional activities and engagement.

The pros and cons of both qualifications have been extensively discussed. Kenton Walker (“What’s Going On in Business Schools? Part II?” The CPA Journal, September 2017, http://bit.ly/2gRiK40) attributes the decline in accounting education to the shift away from professionally oriented faculty toward more research-oriented faculty. Charles Jordan and Stanley Clark (“The Prevalence of CPAs in the Accounting Academy,” The CPA Journal, September 2017, http://bit.ly/2KBkESB) suggest that accounting programs emulate legal and medical programs by requiring faculty to have practical experience as well as professional certifications. David Emerson and Kenneth Smith (“The Value of Certification and Professional Experience,” The CPA Journal, September 2018, http://bit.ly/2Z307SN) argue that faculty with the CPA credential are in a better position to mentor students as they pursue the CPA license. On the other hand, Nicholas Mastracchio (“A Positive Look at Accounting Education,” The CPA Journal, September 2017, http://bit.ly/2x8QyQr) argues in favor of academically qualified faculty, stating that the best educators are current with the latest research.

Collecting the Data

The authors examined CPA exam performance data published in NASBA’s Candidate Performance on the Uniform CPA Examination from 2013 to 2016, analyzing first-time overall performance data for each school’s undergraduate and graduate program. Thus, schools for which bachelor’s degree and graduate degree results are reported contribute two data points for a given year.

NASBA reports results for 3,656 bachelor’s degree and 1,690 graduate degree programs for the period under study. To understand the effect that accounting faculty credentials (i.e., CPA and doctorate degree) have on a school’s exam pass rate, the authors eliminated schools that were not listed in James R. Hassel back ‘ s Accounting Faculty Directory. The proportion of academically credentialed faculty was measured as the number of a school’s full-time accounting faculty holding a PhD or DBA divided by the total number of the school’s full-time accounting faculty. Similarly, the proportion of professionally credentialed faculty was measured as the number of a school’s full-time accounting faculty with a CPA license divided by the total number of the school’s full-time accounting faculty.

Factors other than degree type and faculty credentials may also contribute to exam performance differences across programs. The authors attempted to isolate the impact of the variables of interest by including several of these other factors in a regression model. For example, differences in exam performance across accounting programs may be attributed to the caliber of students that are admitted to specific accounting programs, and not the programs themselves. In order to isolate the effect of type of program on CPA exam performance, standardized admission test data (SAT or ACT for undergraduate programs and GMAT for graduate programs) was used to control for students’ abilities prior to starting an accounting program. Accounting programs for which college entrance exam data was not listed in U.S. News and World Report or the Princeton Review’s The Best 296 Business Schools were also eliminated from the sample. As a result, the final sample consists of 4,016 degree-level CPA exam performance measures, 2,884 of which are bachelor’s degree results and 1,132 of which are graduate degree results.

The pass rate for graduate degree holders was significantly greater than that for bachelor’s degree holders, supporting the claim that the graduate degree is important to success on the exam.

A generally acknowledged indicator of a quality institution is based on an external review of the school of business or accounting program by an accrediting body. The AACSB is the accrediting body that relates directly to the quality of education in business schools. The association claims that its accreditation process includes a rigorous external review of a school’s ability to provide the highest-quality programs and that member schools are reported to have better faculty, students, and overall programs when compared to non-member (i.e., nonaccredited) schools. The authors used one variable to indicate whether the business school was AACSB accredited and another to indicate whether the school also has separate AACSB accounting program accreditation.

While the value of academic research has sparked much recent debate, earlier studies have found CPA exam pass rates to be positively related to faculty research productivity (Jeff Boone, Joseph Legoria, Deborah Seifert, and William W. Stammerjohan, “The Associations among Accounting Program Attributes, 150-Hour Status, and CPA Exam Pass Rates,” Journal of Accounting Education, December 2006, http://bit.ly/2Z6ydFH; Dennis Bline, Stephen Perreault, and Ziaochuan Zheng, “Do Accounting Faculty Characteristics Impact CPA Exam Performance? An Investigation of Nearly 700,000 Examinations,” Issues in Accounting Education, August 2016, http://bit.ly/2Nksdlq). In addition, Mastracchio (2017) points out that CPA exam candidates from “very high-research institutions” have higher pass rates than those from “high-research institutions.” All other candidates had the lowest pass rates. As a result, the authors included a variable for each school’s accounting research ranking as reported by Brigham Young University’s Accounting Rankings for Universities (http://bit.ly/2TOS5a8).

Whether a school is private or public may also be an indicator of its quality. In general, private schools have smaller class sizes that may provide a better learning environment. Tim Lindquist and Gerald Smith (“Top Schools’ Success on the Computerized CPA Exam,” The CPA Journal, May 2013, http://bit.ly/30ja76Y) state that smaller class sizes provide more opportunities for students to interact with professors. Brad Trinkle, James Scheiner, Amelia Annette Baldwin, and George Krull (“Gender and Other Determinants of CPA Exam Success: A Survival Analysis,” The Accounting Educators’ Journal, 2016, http://bit.ly/2KJ3eXl) found that students from private schools outperformed their public school counterparts on the CPA exam; the authors therefore included a variable to indicate whether a school is a private institution.

Finally, it is possible that a program could report an unusually high (or low) pass rate because relatively few candidates attempted sections of the exam in a given reporting period. Rather than assigning an arbitrarily minimum number of sections attempted, the authors used the actual number of sections attempted for the first time by a program’s exam candidates.

Results and Discussion

The overall average pass rate and exam score for all first-time test-takers were 54.7% and 72.5, respectively (Exhibit 1). When focusing on the schools represented in the sample, the pass rate for graduate degree holders (58.3%) was significantly greater than that for bachelor’s degree holders (48.8%), supporting the claim that the graduate degree is important to success on the exam. The results were similar when comparing average exam scores, as graduate degree holders earned an average score of 74.0, compared to 70.4 earned by undergraduate degree holders. The differences were statistically significant for both measures (see Exhibits 24).

Exhibit 1

Summary of CPA Exam Performance, All Testing Candidates

Year; Sections Attempted; Pass Rate; Average Score 2013; 142,221; 54.6%; 72.6 2014; 136,288; 55.0%; 72.6 2015; 140,099; 55.0%; 72.6 2016; 157,655; 54.4%; 72.3 Overall; 576,263; 54.7%; 72.5 Source: NASBA, Candidate Performance on the Uniform CPA Exam

Exhibit 2

Summary of CPA Exam Performance, Graduate vs. Bachelor’s Degree, Sample Testing Candidates

Year; Graduate Degree Pass Rate1; Bachelor's Degree Pass Rate1; Graduate Degree Average Score2; Bachelor's Degree Average Score2 2013; 57.7%; 49.0%; 74.0; 70.7 2014; 58.9%; 49.4%; 74.1; 70.7 2015; 59.2%; 49.3%; 74.3; 70.7 2016; 57.6%; 47.8%; 73.5; 69.6 Overall; 58.3%; 48.8%; 74.0; 70.4 1 Differences between graduate degree and bachelor's degree pass rates in each year and overall are significant at p < .01.; 2 Differences between graduate degree and bachelor's degree average score in each year and overall are significant at p< .01.

Exhibit 3

Pass Rates, Graduate Degree versus Bachelor’s Degree

Exhibit 4

Average Exam Score, Graduate Degree versus Bachelor’s Degree

While the study did not investigate specific graduate curriculums, it is clear that exam candidates benefit from additional accounting coursework.

The regression results presented in Exhibit 5 reveal that the three main variables of interest in this study are each significantly and positively associated with CPA exam performance. First, graduate degree holders significantly outperformed bachelor’s degree holders on the exam. Second, the percentage of accounting faculty with a CPA is significantly associated with exam performance. Finally, the percentage of accounting faculty with a doctorate degree is significantly associated with exam performance. For the regression results reported in Exhibit 5, the dependent variable is the accounting program’s reported pass rate in a given year. The authors focused on pass rate because the main goal of candidates is to pass the exam; however, the results were similar when using an accounting program’s average exam score as the dependent variable.

Exhibit 5

Regression Results, Pass Rate

β; t-value; p-value Constant; −0.124; −3.647; < 0.000 Graduate degree; 0.078; 13.191; < 0.000 % Faculty with CPA; 0.027; 2.889; 0.004 % Faculty with doctorate degree; 0.031; 2.849; 0.004 AACSB accounting accreditation; 0.027; 4.389; < 0.000 AACSB business accreditation; 0.013; 1.960; 0.050 Research rank; 0.000; −3.524; < 0.000 Admission selectivity; 0.584; 22.862; < 0.000 Private institution; 0.007; 1.302; 0.193 Exam sections attempted; 0.000; 5.272;< 0.000

These results clearly indicate that candidates who completed a graduate degree performed significantly better on the CPA exam. This is important to CPA firms that recruit accounting students with the expectation that their new hires pass the exam at the earliest point possible. While the study did not investigate specific graduate curriculums and therefore cannot comment on specific courses that may contribute to the enhanced pass rates, it is clear that exam candidates benefit from additional accounting coursework.

Possible explanations for the findings regarding the path to 150 credits include the quantity of exam topics covered and the quality of time spent while completing the coursework. With respect to the quantity of topics covered, the fact that the exam’s content has grown over time makes it difficult to substantively cover everything in undergraduate courses. Gaps in coverage can, however, be readily addressed in graduate level accounting classes. Graduate accounting programs also provide an opportunity for educators to incorporate a broader and more rigorous set of topics into their curricula to better prepare graduates for the challenges of the profession. In addition, graduate study provides future accountants with the opportunity to further refine their critical thinking, analytical, communication, and problem-solving skills, which are in high demand in the profession and emphasized on the new version of the CPA exam.

Regarding the quality of time spent while completing coursework, a more time-managed approach of completing an undergraduate and graduate degree over five years will likely foster a deeper understanding of exam topics. A cognitive investment that requires students to mentally process and reflect on the material is necessary to learn complex concepts. It is more difficult to make this cognitive investment when students are taking an overloaded academic schedule to fit 150 credit hours into just four years. In short, spreading the learning process out over an extended period of time better allows topics to sink in.

A counter-explanation for the higher pass rates of graduate students is that the best undergraduate accounting students are more likely to attend graduate school. While this may have been true in the past, it may no longer be the case. A recent study at Duquesne University revealed that over the past three years, more than 70% of the best accounting students fulfilled the 150-hour requirement by completing only undergraduate classes. Another 10% were close enough to 150 (i.e., within three classes) that it made little economic sense to pursue a graduate degree. While this pattern of behavior may not be representative of all institutions, recent articles have pointed out discouraging enrollment trends in graduate business and graduate accounting programs (Richard Vedder, “Why Enrollment Is Shrinking at Many American Colleges,” Forbes, July 2018, http://bit.ly/2L3RUns; Jeffrey J. Selingo, “MBA Enrollment Is Down Again. What’s the Future of the Degree?” Washington Post, Oct. 7, 2018, https://wapo.st/2TOu2sa; and Ken Tysiac, “College Accounting Enrollment Continues at Historic Pace,” Journal of Accountancy, August 2017, http://bit.ly/33Rb6xi). If the best accounting students are completing 150 hours in just four years, graduate programs may be forced to accept students with lower qualifications in order to meet enrollment targets.

The data supports the idea that faculty credentials—both professional and academic—are important. It is intuitive that accounting students taught by faculty who have been successful on the CPA exam and possess practical experience are more likely to succeed on the exam. While the CPA might not be essential for an academic career or appropriately valued in college and university tenure and promotion decisions, the authors find a positive association between exam performance and the proportion of an accounting program’s faculty that holds the credential. The experience that these individuals bring to the classroom contributes to CPA exam success. Despite the decline in number of CPAs on the accounting faculty at AACSB-accredited schools noted by Jordan and Clark (2017), this study provides evidence of the important role of CPAs within accounting programs, supporting Emerson and Smith’s (2018) argument that the CPA is a highly desirable credential for accounting faculty.

What might be surprising to some is the importance of the academic credential with respect to CPA exam performance. Doctoral programs typically emphasize the development of research skills to a much greater extent than teaching skills. Academics prioritize advancing the state of knowledge in the field; as a result, their research often focuses on topics that may not be viewed as practical or even relevant from a practitioner’s perspective. While it might be argued that academics’ teaching is influenced less by practical experience than that of their professionally credentialed colleagues, clearly accounting students benefit from studying under the tutelage of doctoral-trained accounting faculty. As Mastracchio (2017) asserts, it is wrong to think of research as the enemy of good teaching; the two actually go hand in hand. The current findings support this argument, indicating that an accounting program’s research rank is significantly associated with that program’s pass rate.


The importance of the CPA license for advancement in the accounting profession is widely understood. While there are alternative paths to completing 150 credit hours, the authors find that CPA candidates who have completed a graduate degree outperform their undergraduate-only counterparts on the CPA exam. While this finding should be useful to accounting recruiters, there are indications that they are already aware that accountants with a graduate degree outperform those with just an undergraduate degree. In separate meetings between the authors and recruiters, individuals from two of the Big Four firms commented that surveys conducted by their national office indicated that staff with graduate degrees were promoted more quickly and had lower turnover rates compared to staff with just an undergraduate degree. Given that tuition cost is a key driver in a student’s decision whether or not to pursue a graduate degree, accounting firms should encourage the graduate path by increasing the entry-level salary premium for staff with a graduate degree. The enhanced performance on the job and in completing the exam, coupled with savings from lower turnover rates, should outweigh the incremental salary increase necessary to encourage more accounting students to pursue a graduate degree.

Over the past decade, the AACSB has placed increased emphasis on outcome assessment. The results indicate that accounting programs with a higher proportion of CPAs on the faculty are associated with superior exam pass rates, providing empirical support for the value of the CPA in academia. Emerson and Smith (2018) claim that “basic indicators of professional competence, such as practical experience and profession certification” have regressed in importance to academic qualifications at academic institutions. This should not be the case, given the extent to which accounting programs are heavily scrutinized for their ability to prepare graduates for success on the CPA exam; accounting departments therefore should consider the benefits that CPAs provide to their programs when making faculty-hiring decisions.

Finally, the results suggest that criticism directed at higher education for emphasizing academic research may be overstated. While research may be viewed as esoteric by some and not fully appreciated by practitioners, it serves an important role in higher education. Of equal importance, the doctoral-trained accounting faculty who conduct this research also significantly contribute to the exam success of their students.

One cannot lose sight of the fact that accounting is but one of many academic disciplines that make up the fabric of a college or university; while it is an applied discipline, the expectations placed on accounting faculty should be congruent with those placed on other disciplines. These expectations almost always encompass scholarly contributions to the field; to diminish this expectation of accounting faculty because of the applied nature of the discipline would be neither equitable nor supportable.

While the value of both the CPA and the PhD have been debated, the prevalence of the PhD in the classroom will continue to be a reality in most university settings due to the established standards in higher education. Because accounting professionals still need to be well grounded theoretically and possess the ability to reason through and solve practical problems, the results of this study support the notion that academically and professionally oriented accounting faculty are complementary in terms of developing students with the skills necessary to be successful in the profession.

Stephen E. Rau, PhD is an associate professor of accounting at Duquesne University, Pittsburgh, Pa.
Brian M. Nagle, PhD, CPA (Inactive) is an associate professor of accounting at Duquesne University, Pittsburgh, Pa.
K. Bryan Menk, PhD, CPA is an associate professor of accounting and director of accreditation at Duquesne University, Pittsburgh, Pa.