As you may already know the 2023 AICPA Trends report is out, here’s our earlier write-up on how many accounting degrees were completed for the 2021-22 period covered in the new report (saving you a click: it’s 65,035).
Today we’re going to look at CPA exam candidate numbers. In a vacuum the 2022 numbers aren’t terrible — 30,251 new CPA candidates, 67,336 unique CPA candidates, and 18,847 CPA candidates who passed their 4th section that year. These numbers are of course all down from 2021 — 32,186 new CPA candidates, 72,271 uniques, 19,544 candidates who passed their 4th section for 2021 — and very, very down from 2016’s high of 48,004 new candidates, 102,291 unique candidates, and 27,889 candidates who passed their 4th section that year but we expected that. 2021 to 2022 that’s a 6% decrease in new CPA candidates, a 6.8% decrease in unique candidates, and a 3.6% decrease in 4th sections passed. Given how ashy the pipeline is at the moment, it could be a lot worse.
Uniques are probably the most important metric here as unique candidates represent overall interest in sitting for the exam. Let’s look at the data going back to 2006.
So unique CPA exam candidates have decreased 34.2% since the last high in 2016 and 35% since the peak in 2010 and the number is the lowest it’s been in the 17 years included in the Trends report. Fun.
About that jump in 2010. I was working in CPA review at the time and remember it well because students were stampeding into the exam so they could sit before the big CBT-e change in 2011. CBT-e added questions on International Financial Reporting Standards to the exam for the first time along with “other sweeping and significant changes” per NASBA messaging at the time. “The new IFRS questions and other changes to the exam are the first major revisions since the CPA exam was computerized in 2004,” read a joint press release from AICPA, NASBA, and Prometric issued January 2011. The very idea of sweeping and significant changes scared the pants off of aspiring CPAs and led to artificially inflated candidate numbers the year prior, a phenomenon widely recognized by the AICPA and CPA review providers as a thing that happens any time there’s a big change coming down the pipe.
In 2017 the exam changed again. Test time increased from a total testing time of 14 hours to 16 hours as multiple choice questions decreased in favor of an increase of task-based simulations, the latter adding an hour of test time to both REG and BEC. Prior to this change there were no simulations in BEC so we can all understand why candidate numbers were high leading up to the April 2017 change. 2015-16 was also the year completed accounting degrees peaked at 79,174 total (BS+MS) and it’s been a downward slide since so there was also a larger potential CPA candidate pool that likely contributed to higher exam numbers in 2016.
All that to say, big change coming = big candidate numbers. There was another big CPA exam change in 2018 though that was mostly a user experience improvement (hello, Excel!) and did not appear to lead to artificially higher candidate numbers.
Being less clairvoyant and more occasionally observant, when I wrote about the 2021 AICPA Trends report last year I predicted big candidate numbers because the redesigned 2024 CPA exam is a big change, bigger even than the biggest change to date since the computerization of the exam nearly 20 years ago. Here’s what I said:
CPA Exam Numbers and The Pandemic
More than any other data point in the 2021 Trends report, CPA exam candidate numbers were most affected by the pandemic due to test center closures, government lockdown restrictions preventing in-person testing, and candidates quarantining after exposure to coronavirus or avoiding in-person testing entirely due to virus concerns. The CPA Evolution project will see the launch of a fully transformed and refined CPA exam in 2024, no doubt “artificially” inflating new candidate numbers in the next few years as we saw happen ahead of the launch of CBT-e in 2010/2011. The sweeping change will mean a flood of candidates who might otherwise have waited to take the exam if taking it at all, a thought that should be comforting to Barry Melancon as he lies awake at night trying to figure out why no one is taking the CPA exam. Should candidate numbers remain where they are or dip even lower in the next Trends report despite the massive CPA exam change in 2024 ahead we have a big, big problem. Let’s not think about that for now.
The AICPA backed up my supposition in this mention under Trends in the number of new CPA candidates by year in the 2021 Trends report:
And this under Trends in the number of unique CPA candidates by year:
Hate to say it but we all might be disappointed and probably shouldn’t play the lotto any time soon. In August of this year, Surgent EVP Liz Kolar wrote a great guest post for us covering pipeline woes and shared her own observations about expected candidate numbers as we approached the final months of testing before CPA Evolution takes over in 2024. She wrote:
Many of the discussions about these shocks have come in a vacuum, mentioning either the pipeline collapse or CPA Evolution, but the two are as connected as they’ve ever been. I’ve seen several major changes to the CPA exam throughout my career as a practicing accountant, university professor and exam prep instructor: 1994 – the exam was shortened from 19.5 hours to 15.5 hours; 2004 – the exam went from a paper and pencil exam to a computerized exam; 2011 – the first Computer-Based Testing Evolution (CBT-e) was enacted and the task-based simulation format was introduced; 2017 – higher order skill testing was introduced; and 2018 – Excel was added as a tool, along with a new user experience. Now, we’re facing the CPA Evolution’s arrival in 2024. Typically, each major change is accompanied by a tsunami of candidates rushing to test before the change takes effect and is followed by a drought of candidates signing up to test immediately after the new exam changes go live. We’re seeing more of a ripple than a tsunami this year and could be in for a massive drought in 2024 and 2025.
Of course this latest Trends report doesn’t cover 2023 so we may be surprised when the next report rolls out in 2025. But everyone’s known since 2019 that a huge CPA exam change was coming and CPA Evolution was officially announced more than three years ago. Where’s the tsunami?
If a 6.8% decrease in unique candidates is the artificially inflated number then things are even worse than they seem. The smaller decrease in 4th sections passed (3.6%) suggests that there may be people with some sections passed who are motivated to finish the exam before 2024 if we analyze historical decreases going back to 2016:
- 5.6% decrease 2020-2021
- 11.4% decrease 2019-2020
- 2.4% decrease 2018-2019
- 6.2% decrease 2017-2018
- 8.5% decrease 2016-2017
So that’s good if true. Let’s hope we’re just being unreasonably negative as usual and wait until the next report comes out before anyone starts freaking out.
I may be accused of being dense for saying this (it wouldn’t be the first time), but I don’t see what the problem is. Can someone please explain it to me like I’m a dumb marketing major?
It’s mostly a problem for the CPA firms and businesses looking to hire CPAs, as they will need to deal with shortages
For those of us working as CPAs there isn’t much of a problem, either firms will need to pay higher salaries and offer better benefits, work life balance, etc., or outsource, or some mix, so likely there will be some better opportunities for existing CPAs to make more money/get better benefits.
Sure. Financial accounting and reporting is as unnecessarily complex and just as irrelevant as ever, tax is at peak complexity in my 37 years of practice (which includes phase-in of TRA86), and the peak skills of the typical new staff is doing a pivot table of data he doesn’t understand at home while looking at Glassdoor for his next job six months into his first.
Holy cow guy, you literally nailed my situation to a T. Working on a pivot table while browsing LinkedIn currently.
A CPA shortage isn’t the worst problem in the world from our perspective but let me explain why this is a real concern. A few decades back, doctors in the US intentionally engineered a physician shortage by lobbying for legislation to cap the number of residency spots. This has obviously driven up doctors salaries, but the problem has gotten so bad that you can’t find a doctor in my rural areas and now states are expanding scope of practice laws for nurse practitioners, pharmacists, etc and letting them do work doctors used to do. CPAs have the same sort of risk with non-CPAs taking on more work, plus the issue of more work getting offshored to India and the Philippines.
Hah! I’m an OCI, so if they do offshore all the CPA work to India, I can move there and get a high paying salary in a low cost of living country (I speak fluent American English, am a CPA, and know American culture and some Indian culture, I’d be in super high demand), Checkmate!
There is no problem, the market is just efficiently allocating resources. Since the profession isn’t worth it to new entrants they’re going somewhere else.
The problem has been around ever since you started requiring 150 credit hours prior to allowing candidates to sit for the exam. Big mistake. 21 year olds don’t know what they want to be when they grow up, but they have big loans to pay off. If you pass the exam, you can address your future while working a much higher paying job than intern in public accounting. The incentive to just get a masters degree just gets you only more debt without the promise of the payday
What about the actively licensed CPAs who decide to go to law school, for example? No one talks as much about the image problem accounting than the money problem accounting has.
For example, I, along with about six other actively licensed CPAs, decided to go to law school after working in public accounting. Being a lawyer was something that I always wanted to do and I am glad I went to law school.
But attending law school and being around lawyers highlights the serious image issues accountants have. Sure, the legal field has its issues and oversupply of attorneys, but law school enrollment and the supply of lawyers has nonetheless been steady compared to accounting. Moreover, the legal field surely has its fair share of “jerks,” but the jerks pale in comparison to how rigid and narrowminded accountants can be. The accounting profession is just missing the flamboyance and money of other professions, which will be very hard to overcome. And what’s worse, the “safety” factor of the industry has been decimated by the level of outsourcing that goes on all the way from the Big 4 down to local, small CPA firms. It’s a shame because we need accountants who live, work, and know the dynamics of how the US operates to assess financial statements and keep the economy churning.
That’s because the CPA exam is rigged. The pass rates have been the same for each exam for each quarter for the past decade. Statistically impossible. Furthermore; the method of grading the exam is kept “secrete”; no transparency when it comes to grading correct vs incorrect responses. A Huge lawsuit is in the works.
Here’s my 2 cents and why I am not working as a CPA…the pay sucks for the amount of work. Take this job and shove it.
CPA, CPA..
In 5 years most accounting (not only routine bookkeeping) tasks will be done by AI.
No need in so many accountants