By Mark Maurer

States are considering allowing prospective accountants to bypass a fifth year of school, one of the barriers to entry contributing to the shortage of workers in the field.

Under a proposal by two national accounting groups, CPA candidates can use an additional year of work experience instead of schoolwork to demonstrate professional and technical skills. That is on top of a bachelor's degree, a passing grade on the qualifying exam and one year of work .

Companies, audit firms, professional groups and some state boards have been looking for ways to make the profession more appealing to students as fewer students graduate with an accounting degree and more workers quit for higher paying, less stressful jobs.

Many prospective accountants say they are daunted by the barrier to entry, including 150 college credit hours, which requires a master's degree or additional college credits, to become a certified public accountant. After all that, graduates say the entry-level salaries for accounting are generally lower than comparable tech and banking roles.

The associations' suggested alternative to the 150-hour requirement could make the path to a state accounting license less expensive.

But defenders of the 150-hour rule say it's a purposeful hurdle for meeting a standard needed to service clients around the U.S. Florida was the first state to adopt the requirement in 1983, with all other states following suit over the next two decades.

Under the new proposal, candidates could become a CPA by demonstrating skills in areas such as ethical behavior, critical thinking, audit services, tax engagements and financial reporting based on an additional year of work experience.

Candidates would be required to exhibit all seven professional competencies and at least one of the three technical competencies, which would be verified by at least one evaluator in their organization, the groups said. Supervisors already sign off on CPA candidates' work experience, but that process appears more intensive under the proposal. The public has until December to provide feedback.

Students are scrutinizing the proposal. Martha Pierre-Louis, a 19-year-old sophomore at Loyola University Chicago, said the proposed alternative to the 150-hour rule would save her in cost and anxiety. She would have to take out more loans on top of her existing debts to pay roughly $25,000 for a fifth year of school resulting in a master's degree. A new option could help remove that burden.

"It's been on my mind since I entered college as a freshman," Pierre-Louis said. "I want my CPA license. How will I afford this?"

Auggie Davidson, a 23-year-old junior studying accounting at Temple University, said the proposed extra work experience would be his best option because he tends to learn better on the job. But he was disappointed that internship credit earned toward a bachelor's won't count as hours of competency-based experience.

"To me it's a little silly that that isn't counted," Davidson said. "That's a professional enough environment that that should count toward that first two years of experience."

A potential new path

Some audit firms began turning away or offshoring work as the accounting shortage became acute, and companies such as Advance Auto Parts and Tupperware Brands said they failed to file financial reports on time due in part to insufficient accounting personnel.

National accounting groups reviewed the cost and time of education for CPA candidates, and in September, the American Institute of CPAs, an advocacy group, and the National Association of State Boards of Accountancy, which represents 55 U.S. boards, issued this proposal.

The groups are aiming to finalize the framework as early as February, which would guide state boards and legislators on law changes, said Sue Coffey, chief executive of public accounting at the AICPA.

If state legislatures vote to pass a new CPA law, the accountancy board would implement it by granting licenses and regulating those who have them.

"There's a high likelihood that we will see change because of so much work being done in the background, frankly, for a year or two to get to this point and to try to bring people to a place that's as converged as possible," said Jen Cryder, CEO of the Pennsylvania Institute of CPAs.

Her organization plans to advocate for the state licensing law to be re-evaluated in January, but it hasn't decided yet which changes to make, Cryder said.

"It becomes so critical in the coming months to see where are the states going, each individually, and if we don't all stay substantially equivalent, how far off are we?" Cryder said.

The proposal calls for preserving mobility, or the ability of CPAs to serve clients across state lines, while many state groups prefer strengthening it by automatically recognizing a certificate issued by another state. States say the latter would aid CPA services across state lines. The proposal's approach to mobility isn't "conducive to today's environment," Cryder said.

Strengthening interstate mobility through state legislation related to automatic approvals ensures that U.S. businesses have unimpeded access to qualified CPA talent, said Scott Wiley, CEO of the Ohio Society of CPAs.

"Simply preserving the present system of CPA interstate mobility in its current form places capital markets and the public interest at risk at a time of great economic uncertainty," Wiley said.

Separate paths

As the national accountancy groups rally for support and feedback from the states, states such as California, Minnesota, Arkansas and South Carolina are moving ahead with different plans.

The California Board of Accountancy is drafting legislative proposals that would allow work experience to replace school credits as a CPA requirement, but potentially without the need for testing on competencies. The board, which also wants to expand eligibility for automatic mobility, is seeking a senator or Assembly member to introduce the proposals in early 2025. California has the largest CPA licensure population in the U.S.

"As we continue to have conversations with the national groups, there may be morphing of some of that experience to come closer together," said Denise LeDuc Froemming, CEO of the California Society of CPAs.

The AICPA is aligned with the California board on their aims, such as creating greater accessibility while increasing the number of accountants, Coffey said. But the organization wants as much uniformity as possible across states, she said.

Minnesota accountants, who have struggled to loosen the state's mandate, hope a similar version of a previously stalled bill will be introduced when a new legislative session starts in January.

The earlier bill, introduced in February 2023, initially faced staunch opposition from national CPA groups that said it would lower the bar. It would have allowed licensure for those who passed the CPA exam and earned a bachelor's degree in accounting and two years of work experience.

"The mere fact that we have this new framework out here seems to be an acknowledgement that it is not going to be lowering the bar," said Boz Bostrom, board chair at the Minnesota Society of Certified Public Accountants and an accounting professor.

Write to Mark Maurer at mark.maurer@wsj.com

(END) Dow Jones Newswires

October 02, 2024 06:00 ET (10:00 GMT)

Copyright (c) 2024 Dow Jones & Company, Inc.