For the past decade, declining trends in accounting enrollments and CPA candidates have pointed to the need for bold action to rebuild the pipeline to the profession. The AICPA and NASBA’s Evolution Project represents a major initiative to expand the appeal of the profession and ensures candidates are better prepared for the current environment. This article describes and analyzes the Evolution Project and seeks to answer the question of whether it will successfully reverse the recent decline.
January 2024 will be here before you know it. That date signifies lights off for the current model of the Uniform CPA Examination and when the CPA Exam Evolution makes its formal debut. This joint initiative by the AICPA and the National Association of State Boards of Accountancy (NASBA) represents a new core-plus-discipline CPA licensure model. The AICPA has stated: “We’re trying to embrace what’s changing in the profession and the business environment and the skills a newly licensed CPA will need to possess for licensure (K. Tysiac, “Content for redesigned CPA Exam takes shape,” Journal of Accountancy, July 7, 2021, https://bit.ly/3CkTsW2).
The CPA Evolution project is rooted in a range of goals and desired outcomes that include the following:
- A strong core of accounting, auditing, tax, and technology
- Deeper knowledge in three primary disciplines [Business Analysis and Reporting (BAR), Information Systems and Controls (ISC), and Tax Compliance and Planning (TCP)]
- Reflections of the reality of practice
- An adaptive and flexible model to allow for more disciplines
- One CPA license
- One common core and one of three disciplines to pass
- Enhanced public protection.
The Evolution Project is a bold endeavor not seen since the 150-credit requirement was put in place and when the CPA exam moved from the paper-and-pencil to computer-based format. This article describes the path to Evolution and recent developments made to the Evolution Model Curriculum (EMC), the recently released Evolution Practice Analysis, and examines the supply and demand of accounting and non-accounting degree candidates. It concludes with an urgent call to action to mitigate the declining CPA candidate pipeline in New York State.
NASBA and AICPA Initiatives
NASBA and the AICPA began their collaboration by producing updated rules and requirements for the Uniform Accountancy Act (UAA) in October 2020 (NASBA, “UAA Model Rule Requirements—Education,” 2020, https://bit.ly/2VerI2k). The updated act guides students, educators, and regulators on the education needed to enter the evolving CPA profession in the years ahead. The UAA established quality standards for educational institutions: Level 1 requires dual accreditation for the accounting program and business school programs; Level 2 requires accreditation only for the business school; and Level 3 requires accreditation occurs only at the institution level (i.e., neither the business school nor accounting program are accredited). In addition to accounting and business content requirements, the UAA establishes skills for newly licensed CPAs that include critical thinking, professional skepticism, research and communication, ethics, and digital acumen. The UAA includes internships and independent study, which may assist CPA candidates in selecting one of the three disciplines in the Evolution Exam.
The UAA does not address the requirements to sit for the exam or to become licensed, leaving those decisions up to the licensing jurisdictions. Education requirements are however promulgated in section 5 of the January 2018 AICPA/NASBA Uniform Accountancy Act Standards for Regulation, which state: “The education requirements for a certificate, which must be met before an applicant is eligible to apply for the examination prescribed in subsection (d), shall be at least 150 semester hours of college education” (NASBA, 2020).
In 2020, the AICPA and NASBA formed task forces comprising 40 volunteers to develop the EMC. The task forces planned to assist educators as they realign existing curriculum to the Evolution model and prepare students to become CPAs. In mid-June 2021, following six months of work and fifty-plus meetings, the task forces revealed the EMC. The curriculum represents only a transition guide that demonstrates how programs may integrate Evolution content; the CPA Exam Blueprints published by the AICPA determine the exam’s content.
Exhibit 1 compiles what the task forces envisions as the EMC coverage by exam part, total estimated teaching hours, and estimated credit hours necessary to deliver the EMC content (J. Taylor and D. Dustin, “AICPA, NASBA publish revised CPA Evolution Model Curriculum,” Nov. 19, 2021, https://bit.ly/3SKrDvJ; updated for minor changes released in November 2021. See https://thiswaytocpa.com/program/modelCPAcurriculum.)
CPA Evolution Model Curriculum Coverage
The EMC is an ambitious program, not only for an incoming college student to pursue; an educational institution will also secure the necessary resources to deliver the suggested content. A major challenge for educational institutions is the ability to deliver the core and three disciplines’ courses all within the accountancy unit. For example, according to the EMC, educational institutions that plan to deliver the core plus all three disciplines will need to schedule approximately a minimum of 36 to a maximum of 63 credit hours. (This calculation assumes sufficient enrollment exists for one section of each three-credit course offered over four to five academic years. Total teaching hours for one three-credit course over 14 weeks comprise approximately 42 hours.) The tax discipline seems ambitious, covering 625 learning objectives with 24 (low) to 39 (high) credit hours, including the core. Equally ambitious is BAR plus core, recommending 599 learning objectives that require 24 (low) to 45 (high) credit hours. Finally, ISC plus core appears to require less, with 24 (low) to 39 (high) credit hours to cover 504 learning objectives.
Offering courses that satisfy all the learning objectives for the three disciplines while developing faculty competency is a significant task for any educational institution. The EMC implies that all accounting courses, including those beyond the core, must be offered through the accounting unit. Faculty often specialize their teaching in specific areas, which limits the ability of course offerings. For example, a faculty member who specializes in accounting information systems topics are most likely not readily equipped to teach other specialized areas in taxation and vice versa. Although it remains to be seen which discipline candidates will pursue, it is reasonable to conclude that, given the demand for candidates experienced with audit-related technologies and its seemingly less stringent EMC exam content, ISC may prevail as the discipline of choice. It is prudent for educators to acknowledge that the EMC is not the CPA Exam Blueprint; therefore, institutions should be mindful of utilizing significant resources aligning curriculum to the EMC. The Blueprints also could potentially influence a candidate’s choice in pursuing a specific discipline. Because it is a guide for Evolution content, the EMC should be viewed within the context and capacity in which an institution could deliver it. Lastly, not included in the EMC is the non-accounting exam content, which is typically learned outside the accounting unit.
Other considerations for educational institutions include reflection on whom they serve and how they should strategize their program offerings relative to their environment. Depending upon student demand and enrollments, as well as faculty competencies, institutions might choose to only offer educational resources for one discipline. Partnerships with neighboring (and competing) institutions could mitigate some of these resource constraints. Some educational institutions may not offer courses for all three disciplines because doing so will require offering multiple specialized courses with constraints such as student enrollment and faculty experience. Creativity and strategic decisions are necessary because, unlike the current exam model, Evolution candidates should enroll in different course programming when preparing for the disciplines.
Concerns about Evolution
Professional organizations and the American Accounting Association (AAA) have voiced the following concerns about the EMC as follows (“Comment Letters with Concerns about the Proposed AICPA CPA Evolution Model Curriculum,” 2021, https://aaahq.org/CPA-Evolution-Model-Curriculum):
- EMC does not require managerial or cost accounting—“The Model Curriculum does a disservice to CPA candidates by failing to cover skills they will need both at the start of their careers as auditors and later in their careers as business advisors and finance leaders.” (IMA Briefing, June 8, 2021, https://bit.ly/3nbvVzY)
- AAA Education Committee—“CPA EMC is skewed toward topics and competencies that the CPA exam might assess rather than the body of knowledge and competencies that those entering public accounting might need for their careers.”
- AAA Council—“A model curriculum is not possible and is not advisable for academic institutions of accounting.”
- AAA Financial Accounting and Reporting Section—“The core knowledge plus discipline for [BAR] has an estimate (using the average of the proposed low and high hours for each topic) of 476 hours. With an estimate of 40 contact hours per semester per course, this is approximately 12 courses of [core-plus-BAR] knowledge alone (15 courses at the high end). A BAR faculty member’s dream!”
- AAA Forensic Accounting Section— “These courses tend to be among the most popular for college-going students because ‘fraud examination and forensic accounting’—seen as ‘auditing on steroids’—have an intrinsic appeal … Career opportunities in fraud and forensics are rich and rewarding; without inclusion of these topics in the MC, there is risk of being dropped from an academic program.”
- AAA Government and Nonprofit Section—“GNP accounting is an important part of students’ accounting education because it motivates them to consider their roles, current and future, as a citizen and contributing member of the nonprofit community.” Citing student interest in working in public service and NFPs provides evidence in favor of retaining this content. There is concern, however, that GNP will not survive within the BAR discipline relative to ISC discipline and thus pose the following question: “Will CPAs be able to interpret governmental financial statements when being tested on the [core] knowledge?”
- AAA International Accounting Section—“In addition, we see the document as conveying to the world the mistaken notion that the knowledge base of accountants in the U.S. is devoid of any international context … Accounting for Hedging and Derivatives was removed in the last Practice Analysis but the MC included it in BAR. Why not IFRS? Understanding differences between U.S. GAAP and IFRS reporting entails critical thinking. The importance and magnitude of international trade, $7 trillion market capitalization of foreign private issuers, and 120 countries using IFRS supports exam inclusion. Convergence is not complete.”
- AAA Auditing Section—“Accordingly, we believe that students will be better prepared for their careers in accounting if they develop higher-order skills in the classroom, while acquiring incidental accounting knowledge through self-study CPA exam review courses. It’s extremely challenging to cover the comprehensive content in the available time during a course or two. Generally external auditing is limited to one course.”
- AAA Management Accounting Section—“The current efforts surrounding the CPA [EMC] suggest that an accounting education’s primary source of value lies in the passing of the CPA exam. However, tightly linking accounting education with a single certification exam will likely deter the brightest students from pursuing an undergraduate degree in accounting.”
AICPA Releases the Evolution Practice Analysis
On June 27, 2022, the AICPA released the Evolution Practice Analysis (EPA), which represents the exposure draft for the Evolution CPA Exam Blueprints (https://bit.ly/3ycAjTS). The EPA is a proposal derived from research, the profession, and other interested stake-holders who advance knowledge expectations for newly licensed CPAs. New content is expressed in the ISC and TCP disciplines, most of which is captured in the EMC. Although nearly 50% of the Business Environment and Concepts (BEC) is now included in BAR, the remaining BEC content (written communication content is excluded) is embedded in Auditing and Attestation (AUD), Financial Accounting and Reporting (FAR), and ISC; Regulation (REG) and TCP are void of BEC content. Although most BEC knowledge is typically gained through the business disciplines of a curriculum, BEC content residing in certain core and disciplines may imply specific knowledge application to that exam section.
New content for data technology concepts is evident throughout the EPA. Candidates will be expected to evaluate outputs for completeness, structure, usefulness, and actions; they will not be expected to create reports or demonstrate competence in use of data analytics software. Applied research skills using source materials is expected of candidates, with the goal of identifying and analyzing to further a response. The comment period for the EPA ended September 30, 2022. The Evolution Blueprints should be finalized by early 2023.
Some might consider the January 2024 launch date means that the transition time is too short. Students currently enrolled in a 150-hour licensure program may be caught in-between exams, needing to take the new Evolution exam yet finding themselves unprepared for it. CPA review courses may need to be swift to fill the knowledge gaps until academia catches up.
The transition model allows credit for the current BEC part passed in the pre-evolution exam as the substitute for a discipline exam. (There is an 18-month window to pass all four parts of the Evolution model; see https://nasba.org/blog/2022/02/25/transition-policy/.) That transition model might result in a rush to pass BEC, because it traditionally has higher pass rates than the other exam parts (https://bit.ly/3EbNPL8). A BEC rush could be exacerbated if candidates perceive the discipline exams to be more Draft Maintaining the Relevance of the Uniform CPA Examination – Aligning the Exam with the CPA Evolution Licensure Model,” https://bit.ly/3ycAjTS). The same applies to pre-Evolution candidates passing BEC before January 2024; otherwise, candidates would be required to retake the core and/or a discipline.
Re-registration of licensure programs by jurisdictions may be time consuming; candidates with pre-Evolution education may feel pressure to pass the Evolution Exam before their education no longer meets Evolution jurisdiction requirements. The process of reconciling programs to comply with the EMC as well as the Evolution Blueprints might not proceed as quickly within academic as candidates might hope. Attention could also be given to BEC content embedded in specific exams and its relevant mapping within the accounting and business disciplines. The patience of the academy may also be further tested while jurisdictions complete the arduous task of approving new licensure programs.
The New York CPA Pipeline
According to NASBA, as of August 2022, there are 665,612 licensed CPAs covering 54 jurisdictions (NASBA 2022). As of January 1, 2022, 65,164 are licensed CPAs in New York State (see the New York State Education Department, Office of the Professions, http://www.op.nysed.gov/prof/cpa/cpacounts.htm). Between 2015 and 2020, the number of NYS licenses issued declined by approximately 20%. Licenses issued in 2015 and 2020 were 3,282 and 2,626, respectively; this decline in 2020 may be partially attributed to COVID-19 as well as pipeline decline; in 2019 and 2021, 2,796 and 3,092 licenses were issued, respectively, which each represent decreases of 15% and 6% compared to 2015. The clear conclusion is that there has been a declining trend in the number of accounting degrees awarded in New York over recent years. According to the Integrated Postsecondary Education Data System (IPEDS), for all not-for-profit institutions in New York State, the total number of accounting degrees (both graduate and undergraduate) awarded between 2015 and 2020 decreased by approximately 7% in New York. Master’s degrees awarded in accounting, which are programs that qualify for licensure, declined by 10% over the same period. (According to the NYS Inventory of Registered Program, as of May 6, 2022, there are 204 total licensure programs, of which 183 are at the master’s level, 20 are bachelors, and 1 advanced certificate; see http://www.nysed.gov/heds/IRPSL1.html.)
Conversely, from 2015 to 2020, the total number of computer science completed degrees in New York State increased by 130%. Master’s degree in computer science master’s programs increased 76% during the same period. Although in 2020 total accounting degrees completed exceeded computer science degrees by approximately 27%, this is much less than the 216% excess in 2015. Exhibits 2 and 3 illustrate these trends over time.
A primary reason for these divergent trends in accounting and computer science degrees may be attributed to current salary levels for recent graduates. Computer science graduates earn approximately over $100,000, IT auditors $96,000, and public accounting graduates $66,000 (RobertHalf, “2022 Salary Guide,” 2021, https://www.roberthalf.com/salary-guide). Normally, graduates of public accounting and IT auditors typically will have 150 hours of education upon employment; an undergraduate degree in computer science is generally required for entry-level positions.
The profession has sought to mitigate the declining enrollment trends through partnered programs. Specifically, KPMG, EY, and Deloitte have established programs with academic institutions that provide funding and branding while ensuring a direct and experienced candidate pipeline to public accounting firms (KPMG, “Learn About Participating Universities: KPMG Master of Accounting with Data and Analytics Program,” 2020; A. Gee, “EY and Hult International Business School announce new Masters in Business Analytics, free for all EY people,” Oct. 18, 2021, https://go.ey.com/3SQSE0E; S. McCabe, “Deloitte Foundation partners with Ohio State University for diversity scholarship,” 2021, https://bit.ly/3rsnYaf). In addition, PricewaterhouseCoopers has numerous early to the profession programs to further engage new college students (e.g., see https://accessyourpotential.pwc.com/, https://pwc.to/3e76Dke, and https://bit.ly/3Cazyf0).
Trends in Private versus Public Institutions
Between 2015 and 2020, the total number of accounting degrees issued in New York State fell by 461, or 7%. A deeper perspective shows that the decrease was 10% and 5% for private and public institutions, respectively. The reasons for this discrepancy could be attributed to funding the 150-credit licensing requirements with lower state/city tuition rates due to the availability of Excelsior Scholarships starting in fiscal year 2017 (https://on.ny.gov/3VagIO4). Given the very recent declines in total accounting degrees completed in New York State (Exhibit 2), it is reasonable to conclude that private institutions may absorb most of any future declines. Exhibit 4 illustrates these trends.
A primary reason for these divergent trends in accounting and computer science degrees may be attributed to current salary levels for recent graduates.
In the aggregate, computer science degrees increased by 130% from 2015 to 2020. Significant increases were both realized by private (97%) and public (95%) institutions. The difference in computer science degrees between private and public institutions of 31% in 2015 narrowed to 12% in 2020, which suggests that both sectors are benefiting from increased enrollment in computer science majors.
Most of the recent decline in accounting graduates is attributed to the master’s level (10%), which signals a decline in students seeking the degree for licensure. A closer analysis of master’s level degrees completed shows a decrease from 2015 to 2020 by 8% and 13% for private and public institutions, respectively. Bachelor’s level degrees completed at private institutions decreased by 11% from 2015 to 2020. Bachelor’s level degrees completed at public institutions decreased by 2% from 2015 to 2020.
That significant difference in the decline in bachelor’s degrees between private (11%) and public (2%) institutions from 2015 to 2020 suggests that the private institutions will experience fewer candidates progressing into a master’s licensure program than public institutions. This trend signals that fewer candidates will progress to the Evolution Exam, and ultimately a licensure program, unless the enrollment in undergraduate accounting programs significantly improves.
The data also suggest that students in private institutions pursue licen-sure programs significantly more often than students in public institutions do, expressed as a percentage of total degrees completed for a given year. Despite a lower number of total degrees completed, candidates from private institutions that completed master’s degrees represented 39% (1,088) of degrees in 2015 and 40% (998) of degrees in 2020. Significantly different results are found for public institutions. That group represents 24% (894) of master’s degrees completed in 2015 and 22% (779) of master’s degrees completed in 2020. This trend exists despite a significantly higher volume of undergraduate degrees completed at public institutions as compared with private institutions. The result from the public institutions signals that emphasis is placed on completing the bachelor’s degree, not the master’s. Because candidates cannot be licensed unless they pursue a licensure program, in the aggregate, the trends in accounting graduate degrees completed at New York public institutions are discouraging, especially in light of the Evolution Project’s goal to increase the number of CPAs. (See Exhibit 5 for a further breakdown of degrees completed.)
In a startling development, the AICPA 2021 Trends report found a 44% decline in accounting associate degrees awarded over the recent 10 years.
Certificate Programs, the Pipeline Supply, and Employer Demand
IPEDS defines certificates as “a recognized post credentials that is conferred upon the satisfactory completion of a postsecondary education program.” [The AICPA 2021 Trends report uses IPEDS, which represents all institutions participating in federal student aid programs and reports by Classification by Instructional Programs (CIP) for degrees completed. This may include both non-profit and for-profit institutions; the New York data presented excludes for-profit entities for comparison purposes. (Search “Terms”, “C”, and “Certificate” at https://surveys.nces.ed.gov/ipeds/public/glossary.)] In the case of accounting education, a certificate may qualify as meeting a jurisdiction’s education requirement for CPA licensure. Certificates are attractive to candidates who possess a non-accounting degree in another field of business field degree and subsequently decide to pursue accountancy licensure education requirements. Advanced certificates may be offered at a discounted price and delivered in an accelerated time frame than the typical master’s degree [see, e.g., Santa Clara University’s Certificate in Advanced Accounting Proficiency (CAAP), https://www.scu.edu/business/caap/admissions/]. The AICPA 2021 Trends report notes that between 2018 and 2020, certificates in accounting increased 7%; between 2002 and 2020 that increase was 39%, to an astounding total of 18,298 certificates completed in 2020. Although accounting certificates appear to be a popular path to accounting education, caution should be taken to determine that certificate programs qualify for licensure education by a jurisdiction. According to the New York State Education Department Inventory of Registered Programs, the only advanced certificate that qualifies for licensure is offered by the John Jay College of Criminal Justice (see https://bit.ly/3V8M084). Although there are many other New York institutions offering accounting certificate programs that report completion data in IPEDS, only the John Jay certificate is registered as licensure qualifying. It should also be noted that IPEDS reports zero certificates completed at John Jay during the past 10 years.
The AICPA 2021 Trends reports that, from 2010 to 2020, the total employer demand for accounting graduates at both the undergraduate and graduate levels declined by approximately 17%; but the past five years alone saw a decline of approximately 20%. From 2010 to 2020, the supply of total accounting undergraduate and graduate degrees completed dropped by approximately 4%, but the past five years saw a decline of approximately 9%. Although one may surmise that declines in employer demand may be due to absent or changing and preferred skill sets, a significant reason is the decline in the recent supply of accounting graduates. The AICPA further reports that 60% of 2020 new hires into CPA firms had accounting and tax degrees; the remaining 40% of new hires had predominately non-accounting business (23%) and computer science (6%) degrees.
In a startling development, the AICPA 2021 Trends report found a 44% decline in accounting associate degrees awarded over the recent 10 years. These degrees serve as a pipeline of students who intend to complete the accounting major by entering senior colleges. In New York, associate degrees completed in accounting (CIP 52.030) declined 84%, from 126 in 2010 to 20 in 2020. For all other accounting services—dominated by accounting technology, technician, and bookkeeping—associate degrees completed in New York increased by 14%, from 1,001 in 2010 to 1,137 in 2020 (data compiled from IPEDS). The availability of NYS Excelsior scholarships may explain some of the accounting associate degree decline; it may reveal that and if they have the option, accounting students prefer a four-year institution for their study rather than risking a transfer policy. According to the AICPA 2021 Trends report, 90% of those surveyed expected that number of non-CPA professional staff in accounting/finance functions at CPA firms would be higher or remain the same in 2021 compared with 2020.
Based on these findings, the authors conclude that associate degree accounting and business students provide significant value to the profession. Without greater efforts at the community college level, enrollment in accounting programs will further stress efforts to improve enrollment in senior colleges. Further declining enrollments in NYS community colleges that may result from proposed recommendations for education regulations for CPA license is expressed in a 2022 comment letter from the NYSSCPA to the New York State Board of Public Accountancy (https://bit.ly/3RB0oms).
What Can Be Done Next?
There exist significant challenges to growing accounting enrollment and attracting students to the profession. Although there is no magic trick that will reverse declining trends, collective efforts, which include early and targeted intervention to curtail further declines in the number of students choosing the accountancy discipline, are necessary from all those vested in the profession. Demographic shifts in the expected student population, especially in the Northeast, will further shrink the available pool of high school students (S. Jaschik, “Are Prospective Students About to Disappear?” Inside Higher Ed, Jan. 8, 2018, https://bit.ly/3V1Tp97). Given the licensure requirements of passing a seemingly daunting new exam, five years of education, and at least one year of experience, the benefits of an accounting career must exceed the return on education costs provided by other disciplines that require just a four-year college degree.
Existing partnerships between professional societies and academia, at both college and high school levels, require creativity and stability to yield results. Further integration and engagement between accounting firms and college and high school representatives could not only deepen professional ties, but also lead to collaborative efforts to address the Evolution curriculum and its effective delivery. Through impactful programs and early internships, prospective pre-college students would be informed of the public value that the profession provides—along with its career flexibility, diversity, and rewards. Collaborative and creative partnerships within the academy, such as strategic program initiatives with units outside of accounting (e.g., non-accounting business fields, computer science, and related fields), and through professional engagement could further promote the profession. Ongoing efforts at the K-12 level—such as STEM designation, finance academies, and college level programs in accounting—not only provides early exposure to the discipline as a science, but also attracts college level candidates to the pipeline. (For more on the efforts for STEM designation, see https://bit.ly/3RIBDF5 and https://bit.ly/3EnC9Fb.)
Further integration and engagement between accounting firms and college and high school representatives could not only deepen professional ties, but also lead to collaborative efforts to address the Evolution curriculum and its effective delivery.
The cost of education required for CPA licensure is of widespread concern. Public institutions attract many undergraduate students for whom financial aid is available for a net lower tuition cost. It seems, however, that a similar financial model does not persist at the graduate level at public institutions, particularly in New York. Private institutions attempt to compete with public institutions by tuition discounting on the undergraduate level. Private institutions may further grow their graduate pool within capacity limits by providing attractive financial support than public institutions provide to their graduate pool. Creative solutions—such as certificate programs, firm funded programs, scholarship support and other advancement efforts—are needed to defray the cost of an accounting education, and particularly to mitigate declining enrollment trends at the undergraduate level. Extraordinary efforts to promote the profession (e.g., financial, professional engagement, work-life issues, value to the public) should be considered to encourage candidates to pursue the licensure programs. The alarms that have been ringing for at least the past 10 years have become deafening and call for urgent actions, including and beyond the Evolution initiative. Only once changes have been implemented will the profession know whether the students have come back.