In recent years, US firms have shifted heavily into offshoring and it seems it never crossed anyone’s mind that offshore talent might be a finite resource. So far it seems dwindling accounting graduate numbers in the Philippines are mostly affecting in-country businesses and firms, still something worth keeping an eye on.
This is from CNN Philippines in March:
The country is facing a shortage of accountants as college enrollment for this field of study dropped while those licensed chose to work abroad, a group of certified public accountants said on Friday.
The Philippine Institute of Certified Public Accountants (PICPA) said local accounting firms already hit a tipping point and began hiring non-certified public accountants to fill the widening gap that started five years ago.
The group added that the country has produced just around 199,000 CPAs in the past 100 years.
“That’s a big problem now of the profession because several of the CPAs here in the Philippines are migrating abroad, or they are working online for foreign companies,” said PICPA national president Erwin Alcala.
OK that’s not so bad for us, it says right there their CPAs are choosing to work for foreign companies. A user on r/philippines offered their perspective on that article and the driving forces behind the shortage:
As an accountant, I see the following reasons why:
The CPA Board Exams (CPALE) is one of the hardest, if not the hardest board exam to pass. Can you even imagine taking five to six exam subjects that are all mathematical and analytical in nature? It doesn’t help that the Board of Accountancy (BOA) with its mindset of “Our profession is of the elite” and applying a quota over the number of examinees that will pass the CPALE. There are some people within the BOA that think that if a lot will pass, the value of CPAs will be dragged down. Hence, them applying a quota. That is why the passing rate is on par with the Bar exam.
And no it’s not the examinees are lacking knowledge, it’s the Board that is somehow, doing something behind closed doors. Well, you can take this with a grain of salt but this is for real.
2. The industry. Ten to fifteen years ago, as soon as we graduate from Accountancy school, we would be employed by accounting firms or other local corporations. Now? In my area alone, as soon as you graduate, you go straight to the BPO-sector serving clients either based in the United Kingdom, United States of America or Australia. It’s like accountancy school became a factory of well, BPO agents who have accounting as their specialization to serve foreigners. Brain drain right?
3. The salary. This circumstance is tied with number two. Locally, CPAs make Php 15,000 for a start or maybe Php 20,000 if such person lands in a good company. Non-CPAs of course starts a bit lower, Php 12,000 to Php 15,000. Again, the figures provided are for local companies such as accounting firms or well, any other in the local industry. Go to the BPO industry, to those who serve clients in the UK, USA or AUS, that figure gets doubled for a start. A cousin of mine, landed Php 45,000 for his starting salary as a basic bookkeeper of a US accounting firm. I, myself, started with Php 20,000, then jumped ship to another company, landed Php 65,000 and now, in my current, I am at six-figure already, and I am not a CPA too (not boasting). Bottomline is, can you imagine the pay disparity between a CPA and non-CPA in the BPO industry? If you cannot, I can explain it in one sentence: The BPO industry is a disruptor for the local industry that the disparity between the salary of a CPA to a Non-CPA working in the BPO industry is just Php 5,000 to Php 10,000 the most.
4. Going abroad. Well, this is true too. For those people who can’t find their green pastures here, they tend to go abroad. 80% of my college batch are in abroad to be honest. Some, chose to take the exams, pass but not practice the profession and just manage a business.
BPO = Business process outsourcing (BPO).
Point #3 says the starting salary for a CPA in the Philippines is about $270-360 USD if they choose to work close to home compared to $800 for a basic entry level role at an accounting firm here in the United States. Non-CPAs make about $90-$180 less than CPAs in outsourced roles which sort of makes sense as both groups are doing mostly grunt work. You can see why accountants in the Philippines would prefer to work for accounting firms in the UK, US, or Australia, and based on that Php 45,000 starting salary we can see why onshore firms would prefer that talent.
Another thing mentioned in that comment is the difficulty of CPA Board Exams. Off the top of my head, the pass rate is around 25%. Because “off the top of my head” isn’t sufficient fact-checking even for Going Concern, I looked it up and came across this December 2022 post about historical CPALE pass rates written by Joel L. Tan-Torres, Chairman of the Professional Regulatory Board of Accountancy from 2014 to 2018:
During my term of less than five years, the total number of passers come up to just below 32,000, with the most number of CPAs of 5,468 entering the profession after the October 2015 examinations. For the 13 examinations conducted during my term as Chairman, there were about 94,000, with a record number of 14,816 taking the examinations in October 2017. These numbers translate to an average passing percentage of about 34%.
Interesting because right around that time, the AICPA was observing a gap in people who graduate with an accounting degree and people who go on to sit for the CPA exam. Additionally, US accounting degree completions peaked in 2015-16 and have trended down since. Was there some horrible anti-accounting ad campaign launched in the mid-2010s or something that we missed?
The trend in 2019, where two tests were given and three pandemic-era examinations, indicates passing rates reaching the lowest levels for the CPA examination in recent history. For these five examinations, only 6,847 out of 35,918 examinees passed. This represents a passing percentage of 19 percent. I understand that the American Institute of CPAs examination has passing rates historically averaging from 45 percent to 55 percent.
This declining trend of both new CPAs passing and examinees applying for the licensure examination is disturbing. This raises questions and issues such as whether the pandemic caused these declines; if there is a growing disinterest in students pursuing the accountancy profession; the state of accounting education and schools in the Philippines; the impact of the decreasing supply of new CPAs to employers in the local and global markets; the image of the Philippine CPA or accountancy brand in the global business and accounting communities; and even the state of the CPA licensure examination process and system.
Bringing us back to current day, Kristine Ismael (who herself is a professional) has written about the growing Philippine CPA shortage for The Manila Times:
At the recent accountancy centennial celebration, Professional Regulation Board of Accountancy Chairman Noe Quiñanola mentioned the issue of a shortage of accountants in the Philippines. There are about 200,000 certified public accountants (CPAs) as of 2023. Recent CPA licensure examinations add only about a few couple of thousand CPAs every year due to the passing rates not going above 25 percent.
Traditionally, new passers get their professional experience at audit firms in order to land better job opportunities and higher compensation in the future. This entails going through the busy season where accountants usually experience 50- to 90-hour work weeks for about three to four months. This job requires a lot of personal sacrifices, physical and mental stamina, emotional stability and spiritual strength, especially during the busy season.
Having gone through several busy seasons myself, I’ve experienced and witnessed people miss a lot of sleep, miss out on some social activities outside work and develop unhealthy habits to cope with the stress, to name a few.
Gee, can’t possibly imagine why young people would choose other professions.
As I said at the outset, for now it seems US firms shouldn’t panic about these numbers. But if the trend continues both in firms increasing their offshore resources and in the foreign countries we get talent from seeing declining accountant numbers, this pipeline might end up as dry as ours. Can someone check on India and see how they’re doing for talent?
It will also take you too long to establish your own firm or name. The application and retention of certifications are rigorous and costly. And the major players are happy to pay their bare minimum wage. That’s a habit among Filipinos: complying with the minimum possible.
The BPOs are not disruptors. More like the audit firms milking the new graduates letting them work for dismal pay. Working for BPOs actually provide new graduates with lots of new skills allowing giving them flexibility – some even gain IY experience. Let us face it times have change.
The Philippine government should also do its part to encourage the youth to pursue accountancy. Even CPA parents don’t want their children to take the same career path due to the course’s difficulty and the low salary of CPAs. I understand the youth, it is not worth the trouble.
You are absolutely right