Why Are Students Not Choosing Accounting?
In July 2023, the Center for Audit Quality (CAQ) published a report, “Increasing Diversity in the Accounting Profession Pipeline: Challenges and Opportunities,” which surveyed more than 1,800 students and recent graduates across all demographics to identify themes among students who chose not to pursue accounting (https://tinyurl.com/mrccbh53). As seen in Exhibit 1, among non-accounting majors, the leading reason (32%) for not choosing accounting as a major was a lack of interest in or passion for the subject, followed by higher starting salaries for other majors (29%). The third highest reason (28%), tied with “not good enough at math,” is the first mention of the 150-hour licensure requirement. A related concern appears as not being able to afford the 150 hours due to a need to start earning (25%), but other reasons came up almost as often: insufficient skillset (24%), difficult courses (23%), lack of career path variety (23%), long hours (22%), and perceptions of the profession as “niche” (20%).
EXHIBIT 1
Major Reason for Not Choosing Accounting as a Major
In the responses for “part of the reason” students did not choose accounting as a major, the 150-hour requirement is even less of a factor. As seen in Exhibit 2, 70% of students cited lack of interest/passion as the top reason for not choosing accounting, making it again the most common reason. The second-most cited reason was again students feeling that they could earn a higher starting salary with a different major (61% of students). The 150-hour requirement is only the sixth-most cited reason (57% of students).
EXHIBIT 2
Part of the Reason for Not Choosing Accounting as a Major
Even specifically among students who considered accounting, the data tells a similar story, as shown in Exhibit 3. The leading reason was to pursue another major offering a higher starting salary (67% of students). The second-most cited reason among this population is students believing that there is not much variety in the career paths of accountants (63% of students). Concerns about the 150-hour requirement only appear as the third most frequent reason on the list (60%), tied with four other choices, including lack of interest or passion for the profession, and closely followed by others.
EXHIBIT 3
Reason for Not Choosing Accounting as a Major (students who considered accounting)
As seen in Exhibit 4, for those students who did not consider accounting, lack of interest or passion for the subject (78%) and difficult course-work (62%) were the most cited reasons. The 150-hour requirement only appears as the seventh-most common reason (54%).
EXHIBIT 4
Reason for Not Choosing Accounting as a Major (students who did not considering accounting)
This data contradicts the idea that the 150-hour requirement is the only obstacle to CPA recruitment; low starting salaries and lack of professional interest are just as common, if not more important, issues. The 150-hour requirement was never cited in the top two reasons for students to pursue another major, no matter how the data is divided, and almost never appears in the top five.
History Proves 150 Hours Is Not the (Only) Problem
While the discussion of improving accounting education and the need for a graduate degree for CPAs dates to the 1950s, the 1978 AICPA report “Education Requirements for Entry into the Accounting Profession: A Statement of the AICPA Policies” also known as the Albers report, often gets credit for kickstarting the 150-hour requirement (see University of Mississippi, eGrove, https://tinyurl.com/882585yw). Only five years after its publication, Florida became the first state to adopt the 150-credit hour rule for candidates to sit for the CPA exam. From 1983–1984 through 1993–1994, the number of bachelor’s and master’s degrees in accounting awarded by nine Florida universities increased by 35%, from 1,438 to 1,941. In addition, from 1983 through 1993, first-time CPA exam candidates pass rates for those passing all parts in Florida increased from 11.4% to 35.3%. By 1999, 45 states had passed similar 150-hour requirements (J. Cumming, and L. Rankin, “150 Hours: A Look Back,” Journal of Accountancy, April 1, 1999, https://tinyurl.com/54rsvb52).
Ten years later, after those states all moved to 150-hour requirements, according to the AICPA 2009 Trends Report (see University of Mississippi, eGrove, https://tinyurl.com/5n7hukdt), total enrollments for bachelor’s accounting students had increased, from 134,775 in 2000/2001 to 181,075 in 2007/2008, a 34% increase over seven years (Exhibit 5). Total graduate and doctorate student accounting enrollments increased from 18,110 in 2000/2001 to 31,759 in 2007/2008, a 75% increase over the same period. During that same time frame, the number of accounting degrees awarded by all schools increased from 46,555 in 2000/2001 to 66,459 in 2007/2008, representing a 43% increase. Furthermore, a major concern at the time was that 16% of AACSB-accounting accredited programs were turning away an average of fifty-six qualified applicants apiece annually due to space constraints, while 6% of universities with AACSB Business Accreditations were turning away an average of 134 qualified applicants apiece annually. In other words, the adoption of the 150-hour requirement was followed by explosive growth in the profession, resulting even in qualified candidates being regularly turned away by programs at top universities.
EXHIBIT 5
Accounting Student Enrollment
Most importantly, similar growth was seen in the total number of graduates hired by public accounting firms and those taking the CPA exam. While in 1999, 20,210 accounting graduates were hired by public accounting firms, that number grew by 26%, to 25,488 in 2008. This includes increases in both those with bachelor’s and master’s degrees. Those who cite the 150-hour requirement as an issue will point to the total number of individuals taking the CPA exam decreasing between these same periods; however, this data is skewed due to the introduction of computer-based testing in April 2004. While it is true that 116,906 responses were received for individuals taking the CPA exam in 1998 and that number was only 77,236 in 2007, these numbers are misleading. Although it appears that the number of CPA exam candidates decreased significantly during this time, under the previous paper-and-pencil examination format, individuals who took the exam in May and November were counted twice. Under the computerized format of the examination, each candidate is only counted once per year, regardless of how many times a section is attempted or how many windows they test in (see AICPA 2009 Trends Report, p.57). Adjusting for this change, only 58,453 unique individuals took the exam in 1998 therefore, the 77,236 test-takers in 2007 reflected a 32% increase, despite almost every state having enacted a 150-hour requirement by this time.
Minority Entrance Concerns
Additionally, several recent articles indicate that the 150-hour requirement is a more serious barrier to entry for minority candidates than white candidates. While according to the CAQ report this is true, there are other issues to consider. Black and Hispanic students were more likely than White students to respond that not wanting to pursue the 150-hour requirement, not being able to afford the 150 hours, and not wanting to take the CPA exam were major reasons for not choosing accounting as a major. The CAQ report also noted, however, that only 71% of Black accounting graduates working in the profession are totally satisfied with their organizational culture, far lower than the 83% satisfaction rate of both their White and Hispanic counterparts. The CAQ report notes that this has been expressed repeatedly in qualitative research and is reinforced by its data. Also, only 66% of Black students indicated that they had a professor or mentor who encouraged them to pursue a CPA license and profession in public accounting, as compared to 85% and 75% for White and Hispanic students, respectively. Finally, 18% of all respondents in the CAQ study indicated that they did not choose accounting as a major mainly because they did not see people like themselves represented in the profession. As 77% of CPAs in U.S. CPA firms were White as of 2020, these respondents were likely to be non-white (AICPA 2021 Trends Report, p.48, https://nysscpa.org/2021-trends). It is therefore possible that continued expansion of DEI initiatives within the profession and mentoring efforts specifically targeted at these minority students could increase their desire and willingness to enter the profession.
Recommendations
While many recent articles have focused solely on the 150-hour requirement as negatively impacting the accounting pipeline, it is the author’s belief that professional leaders must look more broadly at other deterrents, evident from the CAQ survey and historical data. Now more than ever, newly licensed CPAs need the education and skillset to succeed in a rapidly changing environment. Proposals such as the bifurcated 120/150-hour model that many states (including New York, Pennsylvania, Florida, and California) have moved to, in which students must have 120 credit hours to sit for the CPA exam but 150 credit hours to become licensed, should be more widely adopted (see https://becker.com/cpa-review/requirements). Firms should also consider hiring students with 120-hour bachelor’s degrees, as many online graduate programs are available to fulfill the 150-hour requirement and may be taken in conjunction with working part-time. In addition, firms should consider covering the cost of this final year, thereby mitigating the barriers to entry, particularly for minority candidates.
Beyond these items, the author believes that priority must be given to further addressing starting salary issues as well as correcting what has been identified even by the AICPA in its “Pipeline Acceleration Plan” as a concern over the image of the CPA. A recent Journal of Accountancy article, “MAP Survey Shows Firms on Upward Trajectory,” indicated that perceptions of low salaries have caused fewer students to go into accounting as well as established CPAs to leave the profession (J. Drew, “MAP Survey Shows Firms on Upward Trajectory,” Journal of Accountancy, Oct. 1, 2023, https://tinyurl.com/3ztnwvfa). While average compensation did increase by double digits from 2021 to 2023 for new professionals, senior managers, directors, and equity partners, the $50,000 average starting salary for recent graduates (and the meager increases for those with 1–7 years of experience) must climb rapidly to catch up to other professions (Drew, 2023). In addition, as evidenced in the AICPA’s “Plan to Accelerate Talent Pipeline Solutions” (https://tinyurl.com/2dcban65), the profession must get involved much earlier with students, even at the elementary-to-high-school level, to give students a clearer, more realistic view of accounting’s range of opportunities. Such efforts would help reach those students who lack interest in, passion for, and understanding of our valued profession.
