Big 4 alum and professor of accounting and finance at the College of Saint Benedict and Saint John’s University in Minnesota Boz Bostrom has penned a piece for the MNCPA blog on why, in his opinion and supported by research, the 150 hour rule must change. As you know, there is a battle brewing in his state over adding a second pathway to CPA licensure that would allow Minnesota candidates to be licensed with 120 units and additional work experience, a move the AICPA has publicly (and privately, we hear) spoken out against. A recent quote from AICPA CEO of Public Accounting Sue Coffey to Financial Times is one example:
[She] said having the equivalent of five years of higher education remains a good idea, and removing the requirement is no silver bullet for dealing with a talent shortage. It took about two decades of work to align all 50 US states around the current standards and get agreement to recognize each other’s licences, and trying to repeat the feat looks daunting.
“What exists is a very delicate system of agreement and trust,” she said. “This has been my challenge with Minnesota. It just takes one to upset the apple cart and that could upend mobility across the country.”
With the AICPA’s position in mind, here are some highlights from Boz’s apple cart-upsetting post on the MNCPA blog:
Simply put, the 150-hour requirement is a barrier to entry into the accounting profession. Research done by John Barrios, an assistant professor of accounting at Washington University in St. Louis, found that the 150-hour rule reduced those taking the CPA exam by 15%. When that barrier is reduced, more candidates will take the exam. Research done by Berry College professors Brian Meehan and E. Frank Stephenson found that elimination of the 150-hour rule (to take the exam) increased those taking the CPA exam by 25%.
What is troubling is there is no evidence that this barrier has elevated the profession. Barrios found that those with 150 hours did not have higher CPA exam pass rates, nor did those people stay longer in public accounting or more quickly become a CPA firm partner. Meehan and Stephenson found that elimination of the 150-hour rule (to take the exam) did not impact CPA exam pass rates, suggesting that the 150-hour rule does not necessarily eliminate poorer performing candidates.
GET OUT OF HERE WITH YOUR FACTS AND RESEARCH.
In a guest article published here on GC in August titled “150 Hours is a Barrier – Really!,” fellow educator Sharon Lassar, John J. Gilbert Professor and Director of the School of Accountancy, University of Denver, wrote of the Barrios study:
Satisfyingly, Barrios found value in earning a master’s degree. He did not find value in a hollow extra 30 credit hours. Those with a master’s degree are promoted faster. As the academic director of the MACC and STEM-Qualified Master of Science in Accounting, Technology, and Analytics at the University of Denver, I enjoy reading research that supports my personal observations. Our graduate degree holders are promoted quickly, given big raises, and constantly recruited by placement professionals.
Back to Boz:
I have not seen one single piece of research that supports the 150-hour rule. The AICPA has provided no evidence to support its claims that Minnesota’s efforts to offer alternative pathways are “lowering the bar” or that the 150-hour requirement has “elevated accounting from a trade to a profession.” For a profession that prides itself on evidence-based decision-making, the AICPA’s comments are quite troubling.
But MuH MoBiLiTY
This fall, I began my 20th year of teaching as a university accounting professor. It will be my 20th year of helping students navigate how to earn the 150 hours needed to become a CPA. I imagine very few professors in the nation advise more students than I do. When my students ask me why they need 150 hours, all I can tell them is, “Because it’s the rule.”
When they ask if the rule provides value to the profession or to them as future CPAs, all I can tell them is what the evidence has shown: No.
Students take a hit on both the revenue and expense sections of the income statement with the requirement to have 150 college credit hours: lost wages and increased tuition and fees. When aggregated, this is tens of millions of hours and hundreds of millions of dollars.
And yes, he did the math on that:
My simple estimate, which needs refining and is for discussion purposes only, is that the nation’s 33,000 new CPAs each year require an average of 20 additional credits, which is 660,000 total credits. One credit is intended to be 40 hours of work. The result is 26.4 million extra hours per year. Applying an inexpensive rate of $300 per credit, I compute an annual cost of $198 million. My sense is the number of hours is high but the cost may be low.
Education is valuable. As a profession, we are lifelong learners. As an educator, I acknowledge that learning includes both classroom and work experience. The debate about 150 hours is not about the value of education, it is about setting practical requirements for CPA licensure that align with the demands of the profession. Flexibility in combining formal education and work experience supports the values and demands of the profession.
If you’d like to jump into the fray to discuss the topic on Boz’s LinkedIn you can do so here or let ‘er rip in the comments. If you prefer, you can write a letter to the editor with your opinions on the 150 hour rule, for or against.
We must change the conversation around pathways to CPA licensure [MNCPA]