September 19, 2021

Just Abolish the CPA Exam, Says Guy

For at least a year now, we’ve been getting emails from some guy who really, really doesn’t like the CPA exam. And for at least a year now, we’ve pretty much ignored them because, well, abolishing the CPA exam is up there with curing cancer and people learning how to use turn signals, as in there’s no way any of that would ever happen in our lifetimes, or ever.

Still, maybe he has a point? So we figured we’d toss this one to the peanut gallery and see what you think.

Let’s start with the first email he sent us, way back in January 2020.

I believe that sooner than some of us hoped. This exam will be history and will go down in the record books as the most outstanding failed attempt to test the knowledge of those we wish to be licensed by their respective state for the lawful practice of their profession. For time immemorial before the CPA exam was computerized, those who took it for the first time and passed all four parts were 5% of of all taking the exam at a particular time.

It would be incredible to anyone that after so many years that percentage remains more or less the same. Who failed? The institutions of higher learning? The student candidates?

It appears to many that the exam is designed to test not what you know but what you do not know. The exam appears to serve as the artificial barrier to entering the profession by testing the candidate rigorously not on his current knowledge but on his lack of it. In 2021, since the technology part will be added to the test, how about eliminating CPE and, instead, retesting everyone?

The time has come to eliminate the CPA exam, test the candidate on what he/she knows, develop at least three levels of expertise at the Bachelor, Master and PhD levels within the school curriculum and once graduated, the student will be automatically certified when he receives his diploma for different levels of expertise. Finally, the certified graduated student should be federally licensed automatically after paying a fee to be able to audit a client as required by the SEC. This will eliminate the massive conflict of interest presently existing between client and auditor.

The federally licensed auditor will file his audit report with SEC to protect the public interest.

In 2019, we addressed the CPA exam as a barrier to entry, namely how CPA review and exam fees can be a huge burden for someone from a less-than-privileged background who, in true American fashion, somehow managed to pick themselves up from the bootstraps and secure a degree but might not have much left at that point to put toward licensure.

Additionally, the 150-hour rule has been cited as putting further strain on candidates, as this 2006 paper by Charles G. Carpenter & E. Frank Stephenson in the Journal of Labor Research shows. From the abstract:

[T]he imposition of the 150-hour education requirement reduces the number of candidates sitting for the CPA exam by 60 percent and that the “grandfathering” provisions of the 150-hour rule produce a substantial transitory increase in the number of candidates sitting for the exam in the year prior to the rule’s effective date. Examination of candidates’ pass rates on the exam also finds behavior consistent with the hypothesis that the 150-hour rule is a barrier to entry.

OK so they’re guarding the gates. Not all that surprising nor scandalous, you can’t just let any old riff-raff go traipsing through the profession signing off on shit all willy-nilly.

Back to the guy who hates the CPA exam. A month after his initial email he was at it again. Although he strongly believes the CPA exam should be abolished, obviously he’s not completely insane and suggesting that people should be allowed to practice accounting as easily as someone who draws dicks on bathroom stall doors calls themselves an artist. There’s a plan, and he laid it out for us:

SEC should licence CPAs for auditing SEC – registered public companies. There is an undeniable and tacit conflict of interest when you pay millions to the professionals charged with auditing the records of your organization and you have been doing it for decades, year in and year out. All CPAs charged and licenced by SEC to audit should have a PhD in Accountancy from an accredited US institution and be specialized in one or more of several branches of Accountancy. All CPAs charged and licenced by US Treasury, IRS, should have a Master of Science in Accountancy and be specialized in one or more of several branches of Accountancy. All accountants graduated with a Bachelor of Business Administration and majored in Accountancy should not need to be licenced and their professional activity in the field of accounting should be limited to bookkeeping and under the supervision of a licenced CPA.

No more state boards of public accountancy, no more state licencing and no more inadequate education on which to base such a portentous statement that expresses your opinion as to whether or not the public company’s financial reports present fairly the financial condition of it for the business period measured.

For someone who understands the barrier to entry, he sure loves him some advanced education. Moving on. We got another email a few months after that, though I’m not sure what “great news” he was referring to as he makes no mention of the article he was responding to.

Great news! and looking forward to the online examination; and later, followed by graduate studies leading to the PhD in Accountancy requiring a dissertation comprised of a comprehensive audit and tax preparation together with an audit of the client’s internal control system effectiveness. Upon completion of the required courses to be awarded the PhD in Accountancy degree and the presentation of the dissertation to the university’s examining board for evaluation and approval the candidate will be invested of his doctorate and issued his licence to practice his profession as a Certified Public Accountant. This licence will automatically be legally recognized by the US Securities and Exchange Commission authorizing the CPA to audit the records of an SEC-registered public company. The CPA exam as we know it today will be a thing of the past and not soon enough forgotten forever.

That last line reminds me of myself 13 years ago screaming into the abyss about how all the evil banksters were going to jail for blowing up the economy, which I sincerely believed at the time (spoiler: only one did). Ah to be young again.

So what do we think? Is this dude completely off his rocker? Or the next Barry Melancon, here to lead the chosen people out of Egypt (Prometric) and into the promised land? I’d love to know what the benevolent overlords at the AICPA think about all this.

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28 Comments

  1. ‘Guy’ doesn’t appear to have much of an understanding of graduate education.

    To be admitted to doctoral candidacy, normally one must have successfully completed comprehensive exams (the ‘new’ CPA exam). A doctoral dissertation is normally expected to be a new contribution to the body of knowledge of the field–I don’t see how doing an audit could possibly fit that description.

    I suppose the field could be like law or medicine and actually be a ‘professional’ doctorate (not requiring a dissertation).

    This past year, many states adopted a temporary work around to the bar exam, where they provisionally admitted the law graduates to practice.

    I’m not a fan.

    Although there are a lot of discontented individuals who don’t like the current licensing regime, I don’t favor the concept as proposed by ‘guy’. Just as some business schools and law schools have a higher pass rate for the CPA or bar exam, the quality of unexamined CPAs under the proposal would be uneven, and nothing would be solved. I did not favor of the 150-hr requirement, since it seemed to be an additional burden to potential entrants into the profession; and I think that changing to a masters/doctoral system would just increase the burden on potential entrants into the profession by sacrificing additional years in educational preparation, in the same manner.

  2. He is going about this all wrong. A standardized exam is fine – it’s the years of formal schooling that is the problem, particularly the 150 credit hour rule. Let people take the exam regardless of their level of schooling and if they pass and get their work experience in, let them become CPAs regardless of whether they have a degree or not. Too many Americans are pushed to go to college and chase degrees in general.

  3. I took all 4 parts in 3 months in 2017. I’m a licensed CPA and I can’t distinguish a barrel of dicks from a public company.

  4. Yes, please also do away with all medical licensing exams, the BAR exam, all professional financial services licensing exams. Then do away with all professional licensing requirements in general.

    That way when a non-licensed contractor builds my house, and a non-licensed electrician wires that house, it either catches fire or falls down. When I’m hurt, I’ll have a doctor who doesn’t know how to treat me. I’ll have an attorney that has no idea how to help me. At that point, I’ll have no money and no need for a CPA to do my taxes. I’ll have no need for a CPA to audit the financials of the companies that help my 401k and other investments grow. All of my problems are solved! Yay!

  5. CPA exam is definitely required and AiCPA is doing a great job revising the coursework in accordance with the current trends. Uniform licensing should be monitored based on education, experience and professional exam.

  6. I had to take it
    You have to take it
    Deal with it
    But it’s so much harder now than in the Dark Ages
    You kids are much Smarter than we ever were.
    Or so you keep reminding us.
    Get over it.
    Just because you grew up getting participation trophies, doesn’t guarantee success on a Professional Exam.
    Just get your act together and study.
    If you’re half as smart as you think you are, you shouldn’t have any trouble. ????

  7. While I am not entirely on board with everything that Guy has presented, I will admit that I am not, generally a fan of the current model. It is a huge barrier to entry, Forcing people to get graduate degrees in order to sit for the exam is one thing, but I have yet to see anyone who can write the exam without using a prep service.

    If you have to spend money beyond school to prep for the exam in order to ensure passing then this isnt so much a barrier as it is a racket.

    It might be better to perhaps provide exemptions for PhD holders, and retailer the exam and or qualified accounting program standards to be in line with one another. There is a real gap in cultural diversity among CPA holders. Perhaps there is a way to make the process more level, without sacrificing quality.

  8. No, let’s keep the deadbeats out of the profession.

    Non-CPA’s don’t have a clue about professional responsibility.

    Isn’t it a lot of fun to sound smart by throwing around terms like EBITDA and working capital ratio?

    Letting a non CPA do your taxes is like letting a barber take out your tonsils.

    1. What a ridiculous answer and stinks of elitism. There are many reasons why the IRS license Enrolled Agents. Their tests are centered around taxation and representation. Many of these EAs have degrees in taxation or accounting.

      Work experience and testing seem to be the two most important factors in competency. Anyone that can afford it can go to school and be called a Dr. even if they have no self awareness.

    2. Oh so sarcastic. You and I know that having a license does not means you can do ‘Jack’ many study to take the exam and pass because they may be a good exam taker. Ask them about the text couple days after see if they know anything. I am on board with most of what Guy has started. Some people just don’t like to see others succeed. Period!

  9. No, let’s keep the deadbeats out of the profession.

    Non-CPA’s don’t have a clue about professional responsibility.

    Isn’t it a lot of fun to sound smart by throwing around terms like EBITDA and working capital ratio? 404k

    Letting a non CPA do your taxes is like letting a barber take out your tonsils.

  10. I have failed the CPA exams 15 times now. Usually, by 1-4 points, it’s a huge barrier to entry given that I pay $285 dollars to fail amid the prep course expenses. The true problem is that the actual CPA exams are that I set for and take at Prometric are completely different than the review course. So, it’s always a big surprise and I am never adequately prepared to pass. The problem is that there is a lack of coherent sharing with the review course and the actually exam.

    So, the truth is I have to able to answer question that I don’t know and have not studied for.

  11. This person’s obsession with higher education is like a disease. The beauty of a degree in accounting is its practicality. A PhD is thoroughly impractical unless you are determined to teach accounting at a university — which, go nuts, I guess, but the pay will be garbage compared to what you’d make at the local tax accounting firm in the strip mall. Forcing degree inflation on people who want to do good work in public accounting would worsen gatekeeping and classism in the profession, not ameliorate it, and if everyone has a PhD, then nobody does. Accointing should be a refuge from the snobbery of academia, not an arrow in its quiver. But that all seems beside the point, since this person doesn’t establish any meaningful connection between education, the CPA exam, and the conflict of interest in auditing. These emails are a series of unhinged non sequiturs loaded down with bad grammar and a complete misunderstanding of how higher education works.

    Publish more emails about how LIFO is bullshit, please.

  12. There is a part of his argument I agree with though the way he has mapped the path to qualifications. I am one of those students who could not afford to pay for the review course. I have met the requirements and can’t afford to pay hefty fees on materials and for exams. My uncle paid for it once but I didn’t pass it the first time! Financially if it was an exam required to be passed as a part of the bachelor’s or Master’s degree colleges would be required to keep the tabs on the laws every year as a part of their certification process and the students will be more and more knowledgeable because you are working on that material throughout your college degree! People with financial aid can’t be discriminated and there is no need to change the rigor just the way certification is provided and everyone gets to attempt it. Not just the ones with enough money to be able to pay for it. My cousins are from wealthy families and they got to stay at home and study day and night and I couldn’t afford that because I’m not from financially well off family.

    1. Anonymous, I feel for you on this! I am so sorry to hear how your story went. I love your idea on integrating the tests into the courses; however, it would be best if the outcome of the exams are separate from course grading. You know first hand how different the exam is from schooling and I don’t think that simply because one fails the CPA portion that he/she should fail the class entirely; if they pass the course otherwise, afford them that grade and let them proceed with the same degree plan, less the credential, and allow them to seek another path in the same field.

  13. The only people who don’t pass the exam are the ones who don’t take it or don’t study for it.

  14. This guy is off his rocker. He wants only PhD holders to audit public companies but seems to think a doctoral dissertation would be doing an audit and preparing a tax return. That isn’t what doctoral level degrees are for. A dissertation is a piece of original research in a field, not an audit or tax return. I wonder if he got a PhD from the University of Phoenix but couldn’t pass the CPA exam.

  15. Oh so sarcastic. You and I know that having a license does not means you can do ‘Jack’ many study to take the exam and pass because they may be a good exam taker. Ask them about the text couple days after see if they know anything. I am on board with most of what Guy has started. Some people just don’t like to see others succeed. Period!

  16. As someone who went through their higher education (BBA Accounting, BAS Ops mgmt and an MBA) with a certain career plan in mind that didn’t pan out. And is now contemplating the CPA after having tackled the CMA (Certified Management Accountant). I’d kindly tell Guy to shove it.
    CPA’s are expected to be at a certain level, just like Drs and lawyers. And earning something means way more than being handed it. (There are absolutely ways to coast through school, earn a degree and still know nothing.) College was easy, the tests shouldn’t be.

  17. Sounds like the rantings of Justin Enbody. Biggest mistake I ever made was to hire this clown as CFO. But my track record in this area is consistent.

  18. Interesting thought process.
    I’m not sure how I feel about the topic, but there are some really good comments in response.

  19. I wish all you fucking babies would stop crying and just study for the exam. So many lame excuses. You just have to prioritize the damn thing and get it done. Babies.

  20. I don’t think they should get rid of the test, but get rid of the 150 hour requirement. I currently don’t have my CPA because I don’t have enough hours. It’s harder to take classes once you start working. Now I’m at 9 years of experience with different industries. You definitely learn more with work experience than you do when taking classes. Studying for the tests would would be a learning experience on its own.

    What they could also do is find a way to break up the licensing based on each part. People assume that just because you have a CPA that you know everything about taxes. Most CPAs that work for private companies have assurance experience working for a public accounting firm, so they don’t have the same understanding of month-end accounting or taxes. I feel like it’s misleading in a way. I understand you can make the same argument for doctors or lawyers, but this is just an observation.

    1. I also think the author using the example of cancer and how it will never be curable is pessimistic, and quite frankly fucked up.

      1. Were you raised by wolves? “Cure for cancer” is a wildly common phrase used to describe something important and unlikely. What’s fucked up is that you’ve spent however many years on this planet and haven’t interacted with other human beings enough to have ever heard anyone use it until now.

        1. No need to get defensive. I don’t tend to interact with pessimistic people like that. Clearly you do.

  21. You guys should have to go back to the dark ages before the online exam and the 150 hr rule. We had to all go into a big unheated room and take the exam on paper and pencil, without calculators, and we had to take all 4 parts at once. And if you passed a part, but didn’t make a minimum score on the other parts, your passed part didn’t count.

    And get off my lawn.

  22. Okay, so I am a CPA. And I served as an independent auditor focused primarily on auditing SEC registrants while working for one of the Big Four firms. I spent 14 years at that Big Four firm.

    I then became a partner at a regional firm with 200 partners serving as the SEC practice leader for my region – five years.

    Guy makes on salient point: an auditor is required to be independent in fact and appearance. He is correct that when you accept fees from a client, you appear to lack the due amount of independence.

    So, he is correct that when you pay an auditor to opine on your books and records you are creating an environment where the auditor would seem to have a natural and inherent inclination to lean towards making judgements that are a favorable outcome for the client.

    However, in my near 20 years of experience the vast majority of licensed, practicing CPA’s who serve as SEC company auditors make moral and ethical decisions based on rules promulgated by the FASB and our Securities Exchange Act regulations which are in place to protect the public.

    To be blunt, we could give two shits what a client may or may not want to do, nor do we care about why. All we care about is finding 95% of the truth and ensuring the truth is properly reflected in the financial statements used by the public.

    Why don’t we care about the wants and desires of our client? Few reasons:

    1. As decision making partners in large CPA firms we are bound by an operating agreement with the other partners in our partnership. If one of us makes a decision to allow a fraud or defalcation to exist we are exposing the entire firm to risks of failure. And we, as partners are making hundreds of thousands of dollars a year and we have a natural inclination to protect ourselves, our partners and our firm.

    2. The “barriers to entry” described are intended to weed out less minded individuals without the moral and ethical intellect to behave and make decisions which are protective of the public trust. Yes, the CPA exam is difficult. Yes, you need years of experience serving publicly under the supervision of an experienced CPA to even be licensed. Yes, you need to graduate with an education. These barriers are unfortunately part of the gate keeping process. There is a significant burden of trust laid upon CPA’s who audit SEC registrants (and all CPA’S for that matter) and we all take that responsibility seriously.

    3. During SEC registrant audits decisions are made to align with the rules and principles of accounting, we truly don’t care what the client “believes” is accurate or fair. I can recount thousands of interactions between auditor and client that were not “pretty.” If need he, what we do in the most difficult circumstances is to “consult” with a subject matter specialist in the firm who is separated from the client relationship completely. This individual digests the facts of an issue and decides the appropriate accounting and reporting action. This person has no interest in no tie to the client or the related fees.

    4. Each audit undergoes internal independent audit partner review and approval

    5. Each audit is subject to assessment by the firm’s technical experts (a group separate and distinct from the engagement team, independent audit reviewer or subject matter experts).

    Last, SEC registrant audit firms are governed and annually reviewed by the Public Company Accounting Oversight Board (PCAOB). The fear of findings as a result of their review is real and audit partners are aware of the potential consequences.

    Now, does all of this stop the infrequent fraud that can occur when an SEC auditor colludes with his or her client? No.

    But whether you hold a doctorate, CPA, PhD. or have to take 100, 200, or 1,000 credit hours and are employed by the US Government is not going to stop the one-off frauds that are so damaging to our stock exchanges and economy in general.

    The CPA exam is a barrier, yes. Without it I believe we would see even more fraud than we do now.

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