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150 Hours is a Barrier – Really!

a locked fence to represent barriers to entry

By Sharon Lassar, PhD, CPA (Florida)
John J. Gilbert Professor and Director of the School of Accountancy, University of Denver

A friend asked why I believe the 150-hour requirement is more of a barrier of entry to the accounting profession than a 120-hour requirement with added experience.

That is a great question. Although, it does not matter what I think. What have we learned through research? And, how good is the research?

The AICPA and several state societies have cited a study by the Illinois Society of CPAs to say the 150-hour rule is not one of the top 5 reasons students do not pursue a CPA. A leader in the profession told me privately that the Illinois study is “bunk.”

So why is the Illinois Society study questionable? First – the survey went to accounting students, graduates, and young professionals. It did not go to those who chose to study something other than accounting. Those who decide NOT to study accounting are not in the sample. Additionally, 89% of students who responded were already on a CPA track. We need to know whether the 150-hour rule prevents students from entering the pipeline. This study does not give us that information.

Second – I question the results. The participants selected three challenges or barriers associated with becoming a CPA. Workload time commitments and personal time commitments are the top two reasons. These variables sound like they might be capturing the same thing. We do not know how the results would change if these two highly correlated variables were collapsed into one called “time commitment.” An independent reviewer likely would have asked for this analysis, if the study was submitted for publication in a peer reviewed academic journal. The next three variables are similarly highly correlated: difficulty of the exam content, difficulty of applying for the exam, and fear of failure. With multiple highly correlated variables, the ability to pick only three, and the fact that the respondents were already in the pipeline and therefore had already sunk time and cost towards obtaining 150 credit hours, it is no wonder that the 150-hour rule is not in the top 5 barriers listed. Additionally, the impact of the 150-hour rule might already be captured with the time commitment variables.

The Center for Audit Quality (CAQ) recently released a more credible study. The AICPA should be reading and reacting to this study. The CAQ surveyed all business majors and asked those who did not study accounting, why not? Some interesting results from this study are that more than 40% of non-accounting majors considered majoring in accounting. Of those who considered majoring in accounting but decided against it, 60% cited not wanting to pursue 150 hours as either the major reason or part of the reason they did not study accounting. Of those who did not consider studying accounting, 54% cite not wanting to pursue 150 hours as part of the reason. For those who considered but decided against accounting, starting salary was the primary reason. That is a topic for another day.

Even more credible than the CAQ’s study is one by Dr. John Barrios, based on his dissertation, and published in what is unarguably one of the top three academic journals for accounting research. I encourage you to read it. You will gain an appreciation for the peer review process and an understanding of why it can take a long time to do a thorough academic study. Although I have read it a few times, I was fortunate to see Barrios present his findings. It was much easier to understand that way.

Barrios’s study tells us a great deal. But, relevant to this commentary, it tells us that implementation of the 150-hour rule resulted in about a 40% decline in the number of first-time candidates taking the CPA exam. The loss of pipeline was all through the distribution; both high-performing and low-performing students decided against pursuing the CPA after implementation of the 150-hour rule. And, through collected LinkedIn data, he shows that there is no difference in the career outcomes for those who became CPAs under a 150-hour regime and those who became CPAs under a 120-hour regime.

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.

Based on the research, I suggest states reduce the barrier to becoming a CPA and recognize the value of graduate education by requiring two years of experience for baccalaureate degree holders and one year of experience for graduate degree holders. Notice I did NOT say, 150 or 120 hours. The education requirement should be based on earning a degree, not random hours.

11 thoughts on “150 Hours is a Barrier – Really!

  1. Criterion XYZ is a barrier to entry. Really?!
    Isn’t that the point? AND the problem?!

    Those who “practice accounting” (regardless of degree or certification) should do so with an ethical eye toward the “public good” and realize… The royal “We” CPAs are just “Rent Seeking Moochers” of the “Economy” “We” might of helped build once, before my generation and “highly probable” before anyone I’ve worked with.

    Business cases to study illustrating the problem are: 1 hairdressers needing certifications are bad for the economy, 2 if US tax code was simpler we wouldn’t have the healthcare system (AND fill in here practically any other societal ill of your choice), and 3 Times: they are a changin’ – MOOCs can’t do anything but eat “Mooch’s” lunch. It hasn’t happened yet, but it’s written on the wall. I hope it will within my lifetime.

    The Reputation and Social / Sharing Economy doesn’t care for Pedigree. May Meritocracy finally be realized and then maybe the next generation can atone for the sins of our fathers’ father (and our sins too). They’ll need to if our posterity are going survive in the world We molded.

  2. Approximately 30 years ago New Becker the Founding Father of the CPA exam review course anticipated the problem that 150 hours would cause. Newt launched CARE the Coilition Against Restricting Entry to becoming a CPA. CARE had the support of Jesse Jackson and the Rainbow Push Coilition and numerous other groups. The extra 30 hours weren’t even required in business or technology courses, basket weaving even counted, (nothing against basket weavers it is a beautiful art form). The AICPA, Higher Education Deans and State Boards of Accountancy ignored the warnings from CARE and pushed this legislative agenda. Be careful what you wish for – these groups couldn’t see the Forest amongst the trees

  3. I’ve been a cpa since 1975. I clearly remember the late 80’s when the AICPA, in its infinite wisdom, proposed the 150 hour rule. It was a deliberate attempt at restraint of trade designed to discourage people from entering accounting. The chickens have come home to roost. I am a former Big 8 partner.

  4. Nice article. I would hope everyone agrees that it is a barrier. The goal was to elevate the societal perception of an accountant from a a trade (i.e., bookkeeper) to a *profession* (insert sparkles). The means of achieving the goal was through exclusivity.

    The law profession does the same thing. 46 states require a candidate to graduate from a law school before they can practice. That’s (generally) three additional years of additional very expensive school. The 46 states with this requirement do not have a shortage of lawyers. But wait, that’s odd… if four states let anyone who can pass the test practice law, doesn’t that demonstrate the additional education requirements are superfluous? If non-substantive education requirements are creating staffing shortages, wouldn’t a requirement to unnecessarily attend three years of highly specialized school at exorbitant cost create a much bigger issue than a requirement to obtain 30 additional credits?

    It’s almost as if there is something else going on. Perhaps it could be that accounting is not viewed as prestigious, lucrative, or appealing. If that is the case, reducing the barrier to entry will only make things worse. Instead of making the profession more like any other job, maybe we should look at making it more like a profession, not just one in name only.

    *I mean no disrespect to trade workers. I only observe that society expects to pay a professional more than a tradesman (right or wrong). The technical skill and knowledge required to assemble a transmission far exceeds that required to file a divorce agreement with the court. Notwithstanding, society is not willing to pay the mechanic $800 an hour, whereas the attorney would be in line with expectations.

  5. As a graduate with an accounting degree (2013) that chose not to pursue the CPA, the 150 hours is a side effect, not the cause. The real issue is the profession is that its considered overhead, so pressure to keep salaries lower is real for any for profit organization, in that same time the complexity involved with accounting has increased precipitously. Sarbanes Oxley, ACS 606, 842, tax reform, wayfair all of these things have happened within the last decade. This is your real problem, in order to be successful you have to know too much, in order to stay successful you have to keep on top of too much and it only keeps getting worse with little to no relief in sight. The entirety of the economy industry has lost perspective on the benefits of simplicity in the name of increased transparency because its addicted to a stock market that has been artificially boosted by easy monetary policy for decades, but the result of that is a lot of people forging a CPA, because its too much trouble.

    1. I read all of these word and I have no fucking idea what you’re talking about.

      P.S. You can make up whatever silly reason you’d like for not wanting to put the effort into studying for and passing the CPA exam. Yours was not the best I’ve heard.

  6. I think the 150 hour rule was well intentioned, at the time. It was an attempt to create additional barriers to entry, which would result in more prestige for the profession and more money. It would’ve worked if there were a lot of kids wanting to be accountants, like there are aspiring lawyers.

    There aren’t enough kids wanting to be accountants right now though, for a variety of factors. The main reason is that it’s hard work and there are easier ways to make at present. So the smart thing to do, if there really is a talent shortage crisis (I’m not convinced that there is), would be to remove the 150 hour requirement.

    Side note: I’ve been in the work world for a long time now, and I can honestly say that 95%+ of what I know about accounting I learned on the job, not in school. So if you take the “barrier to entry” question about of this debate, then all you are left with is “Are 150 hours really necessary for someone to become a competent accountant?”

  7. The 150 credit hours is not a barrier. The long working hours (bad WLB) and low salary are main reasons why we are facing accounting professional shortage. Look at what the salary level in data analytics! An experienced CPA only gets half of the pay comparing to a data analyst with same years of working experience. Besides, there are so many regulations on CPA to keep you learning in your lifetime. Should we can get fair pay for all those long hours working and lifetime learning? Definitely YES!

  8. The Illinois CPA Society would like to clarify a couple points raised within this article regarding its CPA pipeline research and resulting report.

    The survey, which was deployed in fall 2020, was intentionally limited in scope to specifically target accounting students, graduates, and young professionals to better understand why they would pursue accounting degrees/careers but not the CPA credential, as a large and growing percentage of accounting graduates never sit for the CPA exam. Surveying non-accounting students, graduates, and young professionals about why they chose non-accounting paths was not within the scope of this project.

    In the survey, we purposefully requested respondents to only select three challenges/barriers to identify those of most pressing concern or influence over their decisions to pursue the CPA credential or not. While some of the challenges/barriers that could have been selected by respondents are similar in nature, even by combining or excluding some of the potentially overlapping choices, “Overall cost of obtaining additional 30 credit hours” would not have become the leading issue among any respondent category.

    The Illinois CPA Society respects that there are widely varying viewpoints on the 150-credit hour requirement to become a CPA and welcomes new findings, from all perspectives, that continue to drive productive dialogue on how to move the CPA profession forward and protect its relevance.

    Anyone with questions about the survey and report is welcome to contact the Illinois CPA Society directly.

    1. Yet, the AICPA quotes your limited scope survey to support its position when more robust studies that do not support its position are not even mentioned. Shame on the AICPA for serving the results of your study in a misleading way and shame on leaders in the profession for eating this yummy morsel.

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