The Accounting Pipeline
The well-documented shortage of qualified accounting professionals is a manifestation of several interrelated forces. One major factor is the aging workforce. Many experienced accountants are nearing retirement age—the AICPA has suggested that 75% of accounting professionals are within 15 years of retirement (https://tinyurl.com/52nn47t4)—and there are not enough young professionals to take their place.
A second major factor is that the accounting profession has not kept up with the changing demands of industry. Employers desire accounting candidates who have not only strong technical accounting backgrounds, but also skills in areas such as data analysis, information technology, and project management. But many accounting programs have not fully adapted to meet these changing demands.
A third major factor, and the focal point of this article, is a decline in what is commonly described as the accounting pipeline. The accounting pipeline refers to the process of attracting, developing, and retaining talented individuals who have the potential to become successful accountants. The pipeline is a critical component of the accounting profession, as it helps to ensure that there is a steady supply of skilled and knowledgeable professionals available to meet the needs of businesses and individuals. The profession has begun to recognize that the pipeline starts with attracting high school students into college accounting programs, and then from college accounting programs into professional accounting careers.
Though the data to precisely describe the state of the pipeline lags behind the present day, the noticeable decrease in qualified accounting candidates between 2015 and 2020 (the most current data available) is well-established and widely cited. See, for example, the AIPCA’s 2021 Trends Report (https://www.nysscpa.org/trends21) and two recent CPA Journal articles (A. Gabbin, J. Irving, and E. Shifflett, “Accounting Education at a Crossroads,” September 2020, https://www.nysscpa.org/200930alg; M. Dawkins and M. Dugan, “An Update on the Future of Accounting Education,” September/October 2022, https://www.nysscpa.org/230109mcd). In the years ahead, the shrinking supply of qualified accounting candidates could be further exacerbated by the forecasted “enrollment cliff” at U.S. colleges and universities, which is expected to occur between 2025 and 2029 and for which experts project a decline of up to 15% in future enrollments (https://tinyurl.com/4h9rynwt).
The authors believe it is imperative for accounting practitioners, accounting educators, and other constituents to understand why the pipeline has been both “drying up” (fewer students electing to study accounting at the collegiate level) and “leaking” (accountants migrating from the profession; see https://tinyurl.com/yc6ef4hy). This article investigates the factors affecting the decision to pursue and continue a career in accounting using survey data collected from individuals in the pipeline. Three important constituencies were surveyed: 1) current accounting professionals, 2) current students studying accounting, and 3) current business professionals working in non-accounting roles. The perspectives of these groups are presented as they pertain to the skilled-labor shortage in accounting.
During the summer of 2022, the authors conducted a survey to gain a better understanding of why fewer students are selecting accounting as a college major, why retaining accounting employees has become a challenge, and why accountants are leaving the profession altogether. A total of 551 completed survey responses were received. The respondents were NYSSCPA members or alumni/students of the authors’ universities. Exhibit 1 provides demographic information about the three respondent groups.
Summary of Survey Respondents, By Group
The survey consisted of specific questions tailored for each of the three groups. Some questions asked respondents to select only one option. For example, a question of this type directed to current accounting professionals was, “How satisfied are you with your decision to work in the accounting profession, both in your current position and in any previous positions?” followed by a 5-point Likert scale of options, from “very satisfied” to “very unsatisfied.” Other questions asked respondents to select all that apply from a menu of options. For example, a question of this type directed to non-accounting professionals was, “Did any of the following factors influence your decision not to study accounting or your decision not to enter the accounting profession?” followed by 10 options presented alphabetically (e.g., “Ability to maintain a work-life balance,” “Work will not be interesting,” “Workplace will not be diverse and inclusive”) as well as an option for “Other-text entry.”
Collectively, the information shared by these three groups of respondents was enlightening and provided additional clarity on the growing imbalance between supply and demand in the accounting labor market. Key insights from their feedback is highlighted below.
Professionals are satisfied with their decision to work in accounting.
The survey findings reveal that current accounting professionals are satisfied with their decision to work in the accounting profession, and this level of satisfaction increases with experience. Exhibit 2 shows that 78% of all current accounting professionals are very satisfied or somewhat satisfied with their decision to work in the accounting profession. Greater than 80% of current accounting professionals with four or more years of experience are very satisfied or somewhat satisfied with their career decision, whereas less than 70% of current accounting professionals with three or fewer years of experience are very satisfied or somewhat satisfied with their career decision.
Career Choice Satisfaction for Current Accounting Professionals (By Years of Experience)
Students are also satisfied with their decision to pursue accounting.
The survey also found that students are satisfied with their decision to pursue accounting as their area of study, with 90% of current accounting students reporting they are very satisfied or somewhat satisfied. Students made the decision to pursue accounting very early in their educational path, with 42% deciding in high school and another 22% deciding before taking their first college accounting course. Students’ decisions to study accounting were heavily influenced by family members and friends (54%) as well as by high school teachers and college professors (44%).
One-third of the current accounting student respondents considered pursuing finance as their area of study, whereas another 31% considered computer information systems. Ultimately, these students indicated that they selected accounting because they believed the profession provides excellent career alternatives, the opportunity to earn a good salary, and the prospect of a rewarding career. Students cited competitive salary and benefits, work-life balance, and a positive company culture as the most important factors when choosing an accounting employer.
Attracting and retaining high-quality professionals.
The overarching challenge revealed by this survey is the profession’s ability to attract and retain high-quality accounting talent. Whereas 74% of current accounting professionals plan to continue working in the accounting profession for the remainder of their careers, 55% plan to leave their current employer within the next three years. When asked, “If you were to leave your current employer, what factors would be important in your decision process?” the most frequent answers were increased compensation (79%) and a better work-life balance (72%).
Current accounting professionals were also asked, “In recent years, what strategies has your employer incorporated to help attract and retain high-quality accounting professionals?” The share of respondents citing increased compensation and better work-life balance was only 46% and 43%, respectively. Exhibit 3 illustrates an apparent disconnect between what accounting professionals are seeking and what strategies employers are pursuing to attract and retain employees. It appears that accounting employers are not entirely in tune with the preferences of their employees.
Disconnect Between What Current Accounting Professionals Are Seeking and What Strategies Accounting Employers Are Pursuing to Attract and Retain Employees
“Stop being penny wise and pound foolish. Stop being surprised when highly talented employees leave because you’re unwilling to pay people their worth.”
The above quotation summarizes the frustration of current accounting professionals at the perceived pay gap between accounting and other business disciplines. Many qualitative responses from professionals echoed this frustration, including:
- ▪ “Accountants are expected to work major hours without receiving a comparable salary.”
- ▪ “Many job offerings outside of public accounting offer much higher starting salaries.”
- ▪ “Accounting salaries are not competitive with what students see they can make in finance/consulting roles. If accounting firms want to attract talent, they need to pay people more.”
To corroborate that this perceived pay gap exists between accounting and other business disciplines, data from two public sources were analyzed. The first was the Department of Labor’s Bureau of Labor Statistics data for 2021 (https://www.bls.gov/bls/blswage.htm). These data indicated that accountants and auditors have annual mean earnings of $83,980, while finance analysts and advisors have annual mean earnings of $103,020, and computer and information analysts have annual mean earnings of $104,840.
Next, the authors considered whether lower accounting salaries might be a salary inversion issue, with more experienced accounting professionals experiencing wage compression as compared to new hires. The starting salaries of business school graduates were examined using publicly available data for the 2020/21 academic year provided by the U.S. Department of Education (https://collegescorecard.ed.gov/). The Department of Education provides data at the institution-level by field of study and matches student loan data with earnings information from the IRS.
The institution-level data indicated that the median earnings for both undergraduate and graduate accounting students trail other business disciplines. For example, the median earnings one year from graduation for accounting majors with a bachelor’s degree are $46,875, while comparable median one-year earnings for finance and management information systems graduates are $49,745 and $52,702, respectively.
The disparity in starting salaries across business disciplines is even more stark when examining recent graduates with master’s degrees. Specifically, accounting graduates of master’s degree programs have median earnings one year from graduation of $58,980, whereas comparable median one-year earnings for finance and management information system graduates are $71,001 and $71,822, respectively.
Taken together, the evidence from these two databases validates the compensation criticism cited by many survey respondents.
“Find a way to create better work-life balance by decreasing workload. There is no longer a ‘busy season.’ Basically, the whole year is busy with the exception of a couple of months.”
Work-life balance was a concern of both accounting professionals and accounting students, with 72% of accounting professionals asserting that they would leave their current employer for a position with a better work-life balance. When asked what made them the most nervous about pursuing a career in the accounting profession, 83% of accounting students selected the inability to maintain a work-life balance.
Yet only 43% of accounting professionals agreed that their employers have attempted to attract and retain high-quality accounting professionals by improving work-life balance. And these professionals were skeptical about whether things will change:
- ▪ “Firms say they’re working on work-life balance, but they are not actually doing so in practice.”
- ▪ “Focus on work-life balance, but with actual results backing up the focus and not just words. More action, less [sic] words.”
Included in accounting professionals’ qualitative feedback were several suggested solutions:
- ▪ “Improve work-life balance by hiring enough employees so we can work less hours.”
- ▪ “Avoid burning out smart and talented young people by assigning them to woefully understaffed engagements.”
- ▪ “Allow a full-time work from home option.”
Nearly 70% of accounting professionals indicated that their employers had increased opportunities to work on a hybrid basis or entirely from home. Whether these flexible work arrangements persist in the post-pandemic era remains to be seen.
Barriers to Entry—150-Hour Requirement and the Uniform CPA Exam.
“Accounting majors with a CPA and a master’s degree make less than finance/management majors with a bachelor’s degree at the same firm (who also work less [sic] hours).”
All three groups of respondents acknowledged that the 150-hour requirement and the Uniform CPA Examination are barriers to choosing the accounting profession. Current accounting professionals repeatedly remarked that the 150-hour requirement is anticompetitive relative to other business disciplines. They also observed that passing the Uniform CPA Exam is an additional prerequisite of accounting candidates that is not faced by their counterparts in other business disciplines. Moreover, professionals characterized the 30 additional credit hours as a “six-figure opportunity cost,” the compensation premium for a master’s degree in accounting as “seemingly zero,” and the reward for passing the exam as a “modest one-time bonus.” Given the sentiment of accounting professionals, perhaps it is unsurprising that 60% of the accounting student respondents indicated that they were nervous about passing the exam.
Nature of the Work.
“Work is uninteresting, unmeaningful, and solitary.”
Interestingly, 62% of the non-accounting professionals indicated that they considered entering the accounting profession. However, 75% of non-accounting professionals opted for a career path other than accounting because they believed that the work would not be interesting. Even the current accounting professionals and current accounting students cited the nature of accounting work as a drawback. As previously indicated in Exhibit 3, 45% of current accounting professionals acknowledged that one reason they would leave their current employer is to seek more meaningful work, whereas 56% of current accounting students responded that they are nervous that an accounting career will be uninteresting. Qualitative responses from current accounting professionals support this view:
- ▪ “The work doesn’t get more interesting or less tedious.”
- ▪ “The work is so repetitive, it drains me mentally.”
On an optimistic note, one current accounting professional observed: “We understand that today’s graduates are not interested in mundane, mind-numbing work such as data entry and manual journal entries. As a result, we are making a cognizant effort to infuse more automation and tech into our finance function. Our rule of thumb: If the process does not require judgment, automate it. We hope this will allow our personnel to focus more on tasks that require higher-order thinking such as descriptive, predictive, and prescriptive analytics. With a more impactful purpose, we believe it will allow us to attract and retain top talent.”
The accounting profession has begun to address some of the issues highlighted above. To address the compensation challenge, evidence exists that accounting salaries are starting to rise amid shortages of qualified professionals and record turnover of employees (e.g., see https://tinyurl.com/mnakh33r; https://tinyurl.com/rkurest9). To address the work-life balance challenge, employers have granted employees more autonomy over when and where they work.
Other notable initiatives that have been introduced or proposed to reverse the declining supply of accounting students and practicing accountants include the following:
- ▪ Increasing the visibility of the accounting major in high schools (e.g., https://www.startheregoplaces.com/);
- ▪ Classifying accounting as a STEM major (Science, Technology, Engineering, and Mathematics). Legislation has been introduced in Congress (STEM Education in Accounting Act, S. 3398 in the Senate; https://tinyurl.com/4eczzh8x; Accounting STEM Pursuit Act of 2021, H.R. 3855 in the House of Representatives; https://tinyurl.com/mwcb65k5);
- ▪ An alternative pathway to CPA licensure. This legislation is pending in Minnesota (SF 1660 in the Minnesota Senate; https://tinyurl.com/53rktaxz; HF 1749 in the Minnesota House, https://tinyurl.com/nhh2wan2);
- ▪ An increased commitment to diversity, equity, and inclusion programs (e.g., the work-for-credit option in New Jersey, where students can earn up to 30 educational credits toward CPA licensure through paid, full-time experience; https://tinyurl.com/3ya923xm);
- ▪ Changes to modernize the Uniform CPA Examination, forthcoming in 2024 (https://www.evolutionofcpa.org/);
- ▪ An increased focus on the skills demanded by accounting employers (e.g., KPMG’s Master of Accounting with Data and Analytics program, https://tinyurl.com/yckbwea3).
The AICPA’s 2021 Trends Report (https://www.nysscpa.org/trends21, pp. 8–13) and Draft Pipeline Acceleration Plan (https://www.nysscpa.org/aicpa-dpap) summarizes a host of additional pipeline initiatives.
Opening Up the Pipeline
The accounting pipeline is a critical component of the accounting profession, as a properly functioning pipeline ensures a steady supply of skilled and knowledgeable professionals. It remains an open question whether the nationwide trend of declining accounting enrollments, dating back to 2015, represents a temporary or permanent reduction in the accounting pipeline.
Due to the nature of survey data, this study is subject to potential limitations. First, the subsample of 313 current accounting professionals is somewhat slanted towards CPA firms. Specifically, 59% of respondents work in public accounting firms, compared with 35% in industry (e.g., corporate accounting, internal audit) and 6% in government/not-for-profit organizations. Accordingly, the survey findings may not generalize to all types of accounting job roles and responsibilities. Second, this survey did not directly address the accounting employer’s point of view. The conclusions to be drawn from this study may be limited if survey respondents’ perceptions of hiring processes and strategies by their employers are not representative of actual hiring processes and strategies.
Nevertheless, this survey captures unique insights from individuals who are a part of the accounting pipeline (current accounting professionals and current accounting students) as well as individuals who made a conscious choice not to become a part of the accounting pipeline (current business professionals working in non-accounting roles). One encouraging finding from this survey is that 78% of current accounting professionals are satisfied with their career decision and 90% of current accounting students are satisfied with their major choice. On the other hand, the findings also highlight several significant challenges that continue to confront the profession and the pipeline in particular.
The accounting profession has taken steps to address these challenges. Whether one or more of these proposals will help to replenish the pipeline remains to be seen. It is not hyperbole to suggest that the profession has its work cut out for itself; however, with practitioners, educators, and advocacy groups all working toward a common goal, the authors hope that a vibrant and sustainable accounting profession will emerge from these challenges stronger than ever.