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Does the 150 Hour Rule Provide Value to the Profession or to Students as Future CPAs? No, Says Professor

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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.


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.

In summation:

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]

7 thoughts on “Does the 150 Hour Rule Provide Value to the Profession or to Students as Future CPAs? No, Says Professor

  1. Returning to the 120 hour / 2 year experience standard is not “lowering the bar”, it’s raising it back up to where it was. The AICPA needs to stop representing only the big 4 interests – they are the ones who care about portability. Regional firms are dying.
    If the AICPA dropped the act and said – “OK, the 150 hour rule was a mistake, lets reset the common equivalency standard to 120 and 2”, I can’t imagine any states would stand in their way given the situation we are in.

  2. The last 30 hours I received were in a master’s program where I specifically learned from the Internal Revenue Code. Those tax classes were my most rewarding classes to date. Those classes could be offered at the undergraduate level.

  3. The 150 hour rule was put in place as a barrier to entry designed to project the job security of CPAs already in the profession. It never had anything to do with ensuring quality candidates. But the accountant shortage won’t improve simply by changing the 150 hour rule. ACCOUNTANTS NEED HIGHER SALARIES TO COMPLETE AGAINST OTHER, HIGHER PAYING PROFESSIONS. Period. Full stop. Current accounting partners don’t want to acknowledge this because higher salaries for their workers mean a smaller bottom line for their firms. I find it ironic that accounting leaders driven solely by profits and the almighty dollar refuse to acknowledge that workers are driven by higher salaries and a living wage. This just goes to show that accounting leaders are just selfish bean counters with low emotional intelligence, and make terrible businessmen.

    1. I can’t speak for large firms, but as a regional firm partner I can say with some authority that the margins are not what you might think they are – we will be lucky to break even this year. We pay our staff more per hour than big 4 – it is an investment. A staff accountant who first walks in the door has a negative impact on productivity since experienced people must be assigned to guide them and monitor their work. From there, the productivity improves and usually around 1 1/2 years they turn positive (producing more for the firm than their salary). With the experience requirement now only at 1 year, many never reach that point. I hear over and over from Seniors and Managers that they spent all this time training these folks and just when they are starting to be useful, off they go.
      Rational people weigh in their mind whether it makes more sense to go with one major or another. In that calculation, the cost of 30 credit hours and a year of lost time in the workforce are factors. I as an employer have to pay a premium to overcome that. I don’t want to pay even more to prop up an inefficient system.

  4. The 150-hour rule is hurting the future of the profession period. There is little evidence to support that completing 150 hours will help you pass the CPA exam. If you can pass the CPA exam after achieving a 4-year accounting degree that should be good enough. I have been a CPA for 30 years, and I have a niece who can choose between accounting, finance, and economics, and she’s brilliant, so she can do any of those, so my advice to her today is choose economics or finance to start because it’s simple return on investment. She can make more money with a 4-year degree in economics or finance than with a 150 hours in accounting. The AICPA and State Boards need to be realistic and revisit this requirement. The CPA was difficult 30 years ago, I do not expect it will be any less so if they go back to 120 hours for eligibility. Today, with the 150 requirement they are missing out on many potential candidates.

  5. 150 hour rule provides no added value. Experience provides more value than extra classes that can be mostly in any field of study, not even accounting. Let’s not burden these kids with more college debt because we want to be like attorneys that need that extra time to get through law school.

  6. Having a masters now is the equivalent of a Bachelor’s degree 30 years ago. The firms give you an extra $5,000 to $10,000 more in wages with a masters and you are more “promotable.” Truth or not – that is how it is. I suggest that the CURRICULUM of the extra 30 hours be made more useful and relevant. I have an MST and, as a newly minted CPA, I still had to ask questions on how to prepare a return and how to set up audit workpapers. The current curriculum prepares the student for the exam but not for the actual workplace. Shouldn’t it be combination of the two? The problem is also public perspective. As noted above – being a CPA is still viewed a as a Trade not a Profession. Like Henny Youngman said “I don’t get no respect” mainly because of public perception. So 150 hours may be one part – but there are other “Spins” to be addressed to make CPA, as a profession, more enticing.

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