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Keeping the 150 Hour Rule Is Making the Profession’s Diversity Problem More Pronounced

a hand opening the door to a professional office

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

The AICPA announced the formation of a National Pipeline Advisory Group, published an article about its focus on the accounting talent shortage, and scheduled a webinar titled “Special Pipeline Series: Path to 150.” All of this happened after the Center for Audit Quality (CAQ) released its study titled “Increasing Diversity in the Accounting Profession Pipeline.” I previously wrote about this CAQ diversity study and I have been watching for the AICPA to acknowledge its existence. I have yet to see it.

Why is the AICPA ignoring a study that provides insight on an issue the AICPA has been trying to address since the mid-1960s? From 2008 to 2011, I served on the AICPA’s Minority Initiatives Committee and learned the history of various initiatives. Yet, the AICPA is ignoring a sound study that identifies root causes for the lack of diversity in the profession pipeline.

Maybe the study shows something the AICPA and NASBA do not want known. That is, the 150-hour rule has a disproportionate effect on underrepresented minorities. Those arguing to keep some version (any version – no matter how watered down) of the 150-hour rule will not consider other points of view.

The CAQ surveyed 1399 undergraduate business students with 35% identifying as Black/African American and 33% identifying as Hispanic. Black and Hispanic students change majors during college at a higher rate than other students. Overall, 40% of non-accounting majors considered majoring in accounting, and the percentage is higher among Black and Hispanic business students at 50% and 48%, respectively. Given such a high percentage considered majoring in accounting, it is important to understand why they ultimately decided against it. There are many reasons; please read the study.

Relevant to this commentary, is that 56% of White students who decided against accounting as a major identified not wanting to pursue 150 hours to become a CPA as a reason. This percentage jumps to 64% and 70% for Black and Hispanic students, respectively. Data show the 150-hour rule is a barrier and it is more of a barrier for Black and Hispanic students than for White students.

Rather than removing the barrier, some professional associations propose alternative paths to obtain the 150 hours. Those paths, however, may be a way to keep down those from humble beginnings.

Academic research finds no value in a 150-hour rule. Conversely, it demonstrates the value of a master’s degree. Dr. John Barrios found those with a master’s degree are more likely to be employed by a Big N firm, spend less time at each position, have more jobs, and are promoted more quickly. Dr. Alisa Brink and her coauthors found that individuals obtaining a 150-hour bachelor’s degree compare unfavorably to those who obtain a graduate degree in the likelihood of promotion from Senior Manager to Partner. The Experience, Learn and Earn (ELE) program created by the AICPA and promoted by NASBA falls in the 150-hour bachelor’s program category. ELE students do not earn a graduate degree.

A master’s degree is the most valuable way to meet the 150-hour rule. Students with the means to pursue this path will continue to do so. For those students without the means, less-valuable paths are available and ELE is yet another one. That less-valuable path may just “keep you in your place” – with more time in your position and a slower promotion track. Is that really what we want? The decision to keep a 150-hour rule where NO research demonstrates it has value is making our lack of diversity more pronounced.

If you believe that the CPA profession can be a life-changing choice for individuals, particularly those who come from humble beginnings and are willing to learn, work hard, and improve their communities, remove the 150-hour barrier.

7 thoughts on “Keeping the 150 Hour Rule Is Making the Profession’s Diversity Problem More Pronounced

  1. 150 hours, as implemented is a mistake. A graduate degree in accounting is the way to go for the additional hours.

    But, there should be an alternative path. That’s why I’m a fan of dual paths: undergraduate in accounting + 3 years experience, or undergraduate + accounting graduate degree + 1 year experience.

  2. There’s no good argument for keeping the 150 hour rule at this point. It was put in place years ago simply as an additional barrier to entry for the profession in an attempt to increase the CPA’s stature and drive increased compensation. But that was before the accounting talent shortage we are experiencing now.

    We need more accountants now, not less. If having 150 credits does nothing to make one a better accountant, then dump the stupid rule.

  3. This is an issue where the AICPA should be showing leadership. Lack of staff accountants in the US means nothing to the Big 4- they can just open another office overseas. For regional firms it is an existential threat. The 150 hours was a bad idea 15 years ago and it remains a bad idea today. The National Pipeline Advisory Group needs to advise raising the requirement back up to the 120 and two years experience. I don’t understand why this is even a debate at this point.

    1. The AICPA doesn’t care about showing leadership. All they care about is enriching their board and executives.

  4. I’ve worked in the profession for 23 years and obtained my license before the 150 rule was implemented. Based on my observation the 150 hour rule has done nothing to improve the quality of the people in the profession. If anything it has actually make it worse by making people that would have been great CPA’s choose to go a different direction. When the 150 hour rule didn’t exist there were a lot of smart people that saw the value in being able to get a CPA with a four year degree. Many of those people are now choosing to get their MBA or other options other than accounting. It’s time to get rid of this requirement so the industry can start attracting more quality talent again.

  5. The 150 hour rule is a mistake, because it is unnecessary from a learning perspective, not because it is punitive to candidates from ‘humble beginnings’ . You can can accomplish all of the collegiate level learning that you need to pass the exam in 120 hours, if such an undergraduate program is designed correctly.

    The logic of lowering the barrier to entry into a profession that is charged with public trust, because it represents some sort of social and moral high ground is complete nonsense.

    1. Agreed. It is unnecessary from a learning perspective. So, how is removing it lowering the bar? I would argue that a well-designed bachelor’s program with a 2-year experience requirement would result in more learned CPAs than a 150 hour requirement with one year of experience. But, in addition to being unnecessary, the 150hour rule is also a barrier that is hard for those from humble beginnings to cross. That is what the data show.

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