150-hour Requirement Research Articles

The Effect of Public Accounting's 150-hour Requirement on Black Accountants' Career Choices and Income

The Effect of Public Accounting's 150-hour Requirement on Black Accountants' Career Choices and Income

Research Initiatives in Accounting Education: Providing Access to Education and Obtaining Credentials

ABSTRACTIn this essay, we draw from prior literature to suggest needed future research that may clarify and influence the value proposition of accounting education and professional credentialing. We recommend investigations that challenge educators to develop professional competencies more efficiently and effectively. In addition, we suggest research that examines the costs and benefits of obtaining an education in accounting, especially the costs associated with the 150-hour requirement for CPAs and differential tuition rates for accounting majors. Research is also proposed to address the possibility that certain costs and regulations create barriers to entry to the accounting profession, particularly for some socioeconomic groups.

The impact of market orientation on the growth of accounting-related master’s options to fulfill the 150-hour requirement

This study examines which factors influence the number of master’s programs being offered to complete the 150-hour accounting curriculum requirement and whether there is a link among the number of programs, accounting program performance, and market orientation. Survey responses were analyzed from 201 business school deans and accounting chairs from universities with undergraduate accounting programs in the United States. The results indicate that the number of accounting-related master’s program offerings has increased in the last five years. The results also indicate that a significant relationship does not exist between the number of master’s program offerings, accounting program performance, and market orientation, suggesting that quality, and not quantity, is important.

CPA credential perceptions: a case study of Hispanic accountants

ABSTRACTOne of the recommendations of The Pathways Commission report was to increase the number of diverse entrants into the accounting profession. While the Commission’s recommendation is commendable, the lack of diversity in the accounting profession is not a new problem. Hence, the accounting profession has attempted to address the underrepresentation of minority Certified Public Accountants (CPAs) for many years. To this end, organizations such as American Institute of CPAs (AICPA), National Association of Black Accountants (NABA), Association of Latino Professionals in Finance and Accounting (ALPFA), and the Ph.D. Project have provided different types of support to alleviate the problem. However, the numbers are still disturbingly low. This is particularly true for Hispanic accountants. Therefore, the purpose of this study was to examine Hispanic accountants’ perception of the CPA credential. While the results indicate that gender, exam affordability, and job incentives are positively associated with the likelihood of being a CPA, the 150-hour requirement was not perceived as a hindrance for certification.

The 150-hour Requirement For CPA Licensure: One Institution's Response

Virtually all states now require candidates for the Certified Public Accountant (CPA) examination and subsequent licensure to have completed 150 semester hours of college education. The rationale behind this requirement is to improve the preparation of students entering the profession and to increase their chances of successful completion of the exam as well as ensuring a wellrounded entrant into the profession. This paper presents the findings of one institution's reaction to this challenge. Sixty-nine junior and senior accounting majors at an AACB-accredited institution were surveyed regarding how they would satisfy the requirement. The vast majority of respondents intending to become 150-hour compliant, indicated their intent to fulfill the requirement through the completion of additions coursework, primarily in the summer semesters before commencing full-time employment and to do so within four years. On-line courses were reported to be the primary means of fulfilling the requirement. Cost and convenience of acquiring the credits were the most significant determinants in completing the credit hours. The intended coursework and subject matter was primarily non-business related. The implications of the findings should be of interest to current and future students, academicians and the employing firms.

An Analysis of the Development of Regulation of CPAs: Experience and Educational Requirements

This paper examines the development of education and experience requirements for CPAs. Relying on the past work of Siegel and Rigsby (1989) and others, we frame the current state of CPA education in the context of changes over the past century plus. Beginning with the first passage of CPA legislation, through the current state of affairs, this study adds to our understanding of the current state of education and experience requirements. The goal of this study is to combine an understanding of past events with a thorough discussion of relevant current forces, and offer a unique perspective into the future in terms of anticipated changes in accounting education including experience as well as the 150-hour requirement.

CPA Firms’ Hiring Preferences and the 150-Hour Requirement

The 150-hour rule for CPA licensing has been widely adopted throughout the US and its territories. However, the CPA licensing requirements in most jurisdictions allow multiple options for fulfilling that requirement. (NASBA, 2013b) Specifically, candidates can satisfy the 150-hour requirement by completing an undergraduate degree followed by a graduate degree, or they can take all 150 hours at the undergraduate level. Additionally, students can choose to seek a position with a CPA firm immediately after completing their undergraduate degrees and then finishing the 150 hours while working, or they can choose to finish all 150 hours before trying to enter the job market. To date there has been no evidence presented which would indicate the degree to which CPA firms prefer any of these approaches. The purpose of this research was to provide that evidence. 42 The BRC Academy Journal of Education Vol. 4, No. 1

Have CPAs Captured State Accountancy Boards?

ABSTRACTAll states in the U.S. regulate the practice of public accounting. An important part of the regulatory apparatus is the state accountancy board (SAB). SABs implement the laws that govern public accounting. State societies of CPAs (SSCPAs), in contrast, are advocacy mechanisms that can potentially be used by members of the profession to achieve their regulatory objectives. Economic theory raises the possibility that regulatory bodies such as SABs might be captured by the profession that they regulate. We examine the composition of SABs and find that the majority of members are CPAs. A survey of CPA SAB members reveals that nearly one-third of the respondents are past leaders of their SSCPAs. We further find that the percentage of board members who are CPAs and the percentage of our respondents who are past leaders of their SSCPAs are positively associated with the rapidity with which states adopt two important accountancy laws (interstate mobility and the 150-hour education requirement) that can be viewed as being in the best interest of the profession. These findings support the hypothesis of regulatory capture and suggest that states may benefit from reconsidering the qualifications of SAB members.

The Ongoing Debate of and Direction for Future Research about the Impact of the 150-Hour Education Requirement on the Supply of Certified Public Accountants

ABSTRACT:In this paper we reflect on two streams of research on CPA examination candidacy and accounting enrollments that include studies by Allen and Woodland (2006), Gramling and Rosman (2009), and Allen and Woodland (2012). In our response to the more recent Allen and Woodland (2012) article, we observe that the literature is split on causes for declines in accounting enrollments and CPA exam candidacy. The reversal of both of these declines in a relatively short period provides further evidence to question whether the 150-hour education requirement was actually the cause of decreases in accounting enrollments and CPA exam candidacy.With the adoption of 150-hour requirement in virtually all jurisdictions, we recommend that research refocus the questions to address how to structure the additional education to maximize the benefits of the increased education to the public, academe, students, and the profession. The continuing need for research into the content and the implications of the 150-hour requirement for members of the CPA profession is discussed and we call for additional research in a number of areas, including a concerted examination of the effects of changing delivery of accounting education on performance on the CPA exam and in practice.

The Marketability of Options for Meeting the 150-Hour Requirement: An Empirical Analysis of Public Accounting Firm Recruiting Intentions

ABSTRACT: Students are often concerned with, and advisors are often confronted with, questions about the best way to obtain the 150 hours required for CPA licensure in most states and jurisdictions. This research provides insight through an experiment in which CPAs in public accounting provide assessments about how actively their organization would recruit job candidates whose profile descriptions differ only as to how they met the 150-hour requirement. By manipulating, at seven levels, the independent variable describing the method by which a hypothetical student obtained 150 hours, the study indicates that, in general, CPAs tend to value more accounting-specific coursework leading toward a degree, preferably an advanced degree. The study also provides suggested courses of action for students who do not have the option of pursuing a graduate degree.

Response to: The Ongoing Debate about the Impact of the 150-Hour Education Requirement on the Supply of Certified Public Accountants

ABSTRACTIn an earlier paper in this journal, Allen and Woodland (2006; hereafter AW) provided evidence that the 150-hour education requirement for licensure significantly reduced the number of candidates taking and passing the CPA exam, but had little effect on pass rates. Gramling and Rosman (2009; hereafter GR) extended AW by examining the number of candidates based on whether the 150-hour requirement applies to the exam or for licensure, concluding that the 150-hour requirement does not reduce the number of candidates taking and passing the exam. In this paper, we reopen the discussion of whether the 150-hour education requirement affects entrants into the accounting profession by comparing the AW and GR research designs and conclusions. We conclude that the GR research design yields results about whether differences in 150-hour implementation methods affect the number of candidates taking and passing the exam, but does not directly provide evidence about whether the 150-hour education requirement itself affects the number of candidates.

The Travels of a T-Shirt in the Global World of Taxation: Teaching Multi-Jurisdictional Taxation

ABSTRACT: A creative and useful solution for teaching multi-jurisdictional taxation was found and successfully implemented. The revised course pedagogy better meets the needs of a student body with wide-ranging differences in prior business experience and preparation for the course when the 150-hour requirement resulted in an influx of five-year full-time graduate students. The new course methodology incorporates Pietra Rivoli’s award-winning documentary The Travels of a T-Shirt in the Global Economy. The author tells the life story of a T-shirt, beginning with the cotton grown for the shirt’s manufacture in a field in Texas and concluding with the shirt’s sale in a secondhand market in Tanzania. Course evaluations improved in all dimensions after the addition of the auxiliary text in spite of a perception of increased difficulty.

Decrease In The Number Of People Taking The CPA Exam Not Due To The 150-Hour Requirement

This paper reports the results of a study that examined the association of the 120/150-hour education requirement with the number of CPA exam candidates during 1998 and 2008. Data gathered from the NASBA Candidate Performance Reports 1999 and 2009 found no relationship between the number of CPA exam candidates and the education requirements in each of the US jurisdictions. Approximately 48% of the total decline in candidates in 2008 as compared to 1998 occurred in jurisdictions that only required 120 hours of education to sit for the exam in 2008. Approximately 20% of the total decline occurred in jurisdictions that required 150 hours of education in 2008. The 150-hour requirement is not the cause for the decrease in the number of people taking the CPA exam.

Education Requirements, Audit Fees, and Audit Quality

SUMMARY: We examine whether additional education requirements to enter the accounting profession lead to higher costs to clients. Using the 150-hour education requirement in the U.S. and the audit services market during the period 2000–2004 as the setting for our study, we find that corporations headquartered in states that have implemented the 150-hour requirement pay, on average, 4.8 percent more in audit fees than corporations in states that have not implemented the 150-hour requirement. Additionally, we find that audit fees increase as time passes after implementing additional education requirements. We also provide evidence that corporations headquartered in states with higher general wage levels pay higher audit fees. In supplementary analyses, we do not find an association between additional education requirements and differential quality of work product as measured by discretionary accruals.

The Ongoing Debate about the Impact of the 150-Hour Education Requirement on the Supply of Certified Public Accountants

ABSTRACT: Many factors, including Sarbanes-Oxley, fueled an increase in demand for accountants in recent years, particularly those who are professionally certified, so that demand exceeded supply in the U.S. (Anonymous 2007) and elsewhere (Hambly 2007). Future challenges facing the profession, such as implementing XBRL and IFRS, may also increase demand, perhaps again creating shortages. It is within this context that we examine the issue of the shortage of accountants by focusing on factors that affect supply. We study trends in two types of data: graduation rates for accounting majors (i.e., the number of accounting graduates divided by total business majors) and CPA exam candidacy. The former provides a measure of the total pool of potential CPA exam candidates and the latter is the subset of those who are attempting to become professionally certified. Various studies have observed a decline in CPA exam candidacy and have proposed that it results from the additional education requirement associated with the 150-hour rule (e.g., Allen and Woodland 2006). Several states have reacted by allowing candidates to take the CPA exam with 120 hours of education rather than 150 hours in order to increase supply. Following this line of reasoning, we should observe declines in candidacy and graduation rates only in states that have adopted the 150-hour requirement, but not in states that retained the 120-hour requirement. However, in our extension of existing studies that did not segment data by type of jurisdiction, we find similar rates of decline regardless of whether the candidacy requirement changed to 150 hours or remained at 120 hours. Thus, while some individuals may be deterred by the additional education costs, the finding of no jurisdictional difference in graduation and candidacy rates suggests that policy makers need to consider a variety of issues to comprehensively address shortages in the supply of accountants.

The 150-Hour Requirement and the Number of CPA Exam Candidates, Pass Rates, and the Number Passing

This study examines the association of the 150-hour education requirement with the number of CPA exam candidates, pass rates, and the number passing. Proponents of the 150-hour requirement argue that additional education produces higher quality students who are better prepared for the CPA exam and accounting careers. Opponents argue it imposes opportunity costs on students and costly barriers to entry into public accounting. On average we find a large drop (36 percent) in the number of candidates in each state taking each exam, a small increase in pass rates for first-time candidates only (3 percent), and a large drop (31.5 percent) in the number passing the CPA exam after the 150-hour requirement. Our results may be useful to accounting educators evaluating the success of their 150-hour programs, state boards considering revisions of their 150-hour requirements, and public accounting firms setting strategies to achieve audit quality.

The 150-hour rule as a barrier to entering public accountancy

In many states, CPA licensure now requires 150 credit hours of college coursework thereby adding an extra semester or year of schooling beyond typical undergraduate degree requirements. Thus, the “150-hour rule” should increase the cost of becoming a CPA and, consequently, reduce the supply of new CPAs. We test this hypothesis using panel data on the number of first-time candidates for the CPA exam in each state over the years 1985 to 2002. We find that the 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.

The associations among accounting program attributes, 150-hour status, and CPA exam pass rates

Abstract This study contributes to the extant literature by providing a better understanding of the associations among attributes of schools providing accounting education, 150-hour status, and CPA exam pass rates. We model program-level pass rates as a function of the state’s 150-hour status and several program-specific attributes, including: the level of AACSB accreditation, student selectivity, the percentage of candidates with advanced degrees, and faculty research productivity. We examine the average pass rates of 520 accounting programs that provided 43,711 first-time candidates for CPA exams given in 1998 and 1999. Similar to most prior studies we find that candidates from more selective schools, candidates with advanced degrees, and candidates who attended schools located in jurisdictions with the 150-hour requirement fully in place have higher average pass rates. However, we also find a significant decline in average pass rates during the 150-hour transition period, and in contrast to the strong positive effects of accreditation reported by [Grant, C. T., Ciccotello, C. S., & Dickie, M. (2001). Barriers to professional entry: how effective is the 150-hour rule? Journal of Accounting and Public Policy , 21 , 71–93], we find only weak evidence of an association between program-level pass rates and college-level or separate AACSB accounting program accreditation.

Factors Affecting the Supply of Accounting Graduates

We use a cobweb model to construct a labor market model that can be used to analyze the impacts of changing labor market conditions on the market for new accounting graduates. These conditions are partitioned into macroeconomic and academic-specific changes. We find that 73.2 percent of the decline in the number of accounting baccalaureate degrees since 1990 can be explained by such factors as the decline in the relative salaries of entry-level accountants, the decline in academic preparedness of incoming freshmen, implementation of the 150-hour requirement, and increases in freshmen enrollments. Furthermore, we explain 60.1 percent of the observed increase in master's level accounting degrees. This increase can be attributed to a rise in the salary premium associated with earning a master ‘s degree and implementation of the 150-hour requirement.

Accounting Majors' Perceptions regarding the 150-Hour Rule

Most states now require students who sit for the Certified Public Accountant (CPA) examination to have 150 semester hours of college education. The 150-hour requirement is intended to, among other benefits, improve the preparation of students for the profession, increase their chances of success on the CPA exam, ensure a more wellrounded education for new entrants to the profession, and attract better students to the field of accounting. The purpose of this paper is to examine whether accounting majors' perceptions regarding this requirement match the anticipated benefits of the 150-hour rule, and whether they match the realities of what has occurred in localities where the rule has been in effect. Data were collected from 247 accounting majors via a questionnaire. The results indicate that, in most respects, students' perceptions align fairly well with the intentions and the realities of the 150-hour requirement. For example, most students indicate an interest in obtaining a Master of Business Administration (MBA) degree for their fifth year of education. This would be a more balanced education envisioned by the framers of the requirement. Most students feel that they should receive additional compensation for the added education. In contrast to the reality in most locations, they do not expect accounting firms to increase compensation for those with 150 hours of education. Although students generally were not in favor of the 150-hour rule, a majority indicated they would continue to pursue becoming a CPA despite the 150-hour requirement. Still, a substantial number of students indicated they would pursue the Certified Management Accountant (CMA) designation rather than pursuing the CPA.