the Decline in CPA Candidates
Is the 150-Hour Requirement a Factor?
Nicholas W. Schroeder and Diana R. Franz
events, changes in business conditions, and new career alternatives
have contributed to the decade-long decline in the number
of aspiring CPAs. One event in particular, an increase in
the education required of new CPA exam candidates in most
states (usually referred to as a 150-hour requirement),
is frequently cited as the primary cause of the declining
number of college accounting majors and new CPA exam candidates.
the number of first-time CPA exam candidates has dropped
in nearly every state over the last few years, the authors’
research indicates that the decrease was most dramatic in
the first year a state implemented a 150-hour requirement.
In the year of implementation, the number of first-time
CPA exam candidates dropped approximately 75%. Over time,
the number of first-time candidates in 150-hour-requirement
states rebounds fairly quickly. While the number of first-time
candidates does not recover to the level experienced before
the 150-hour requirement, it does recover to a level comparable
to the trend for first-time candidates from colleges in
states not affected by a 150-hour requirement.
CPA Exam Candidate Requirements
1988, the membership of the AICPA voted to amend the organization’s
bylaws to require that all new members after the year 2000
have completed 150 semester hours of education. With strong
backing from the AICPA, many states began considering modifications
of the education required to sit for the CPA exam. The AICPA
and NASBA (National Association of State Boards of Accountancy)
drafted model language for prospective 150-hour legislation
and, in coordination with state CPA societies, urged state
legislatures to modify their accountancy laws to comply.
Currently, 41 states have implemented revised accountancy
laws that incorporate at least a portion of the AICPA/NASBA
model 150-hour language. An additional five states have
passed revised accountancy laws that are scheduled for implementation
by 2009. Only four states have not passed—or have
passed and subsequently rescinded—150-hour legislation.
most states, the revised accountancy laws reflect much of
the model language suggested by the AICPA/NASBA initiative.
The AICPA anticipated that differences in state education
philosophies would lead to diversity in the academic content
of the required 150 semester hours. This has turned out
to be true. The AICPA also expected that the minimum requirement
to sit for the CPA exam in all states would include 150
hours of education, with at least a baccalaureate degree
and a concentration in accounting. This has not turned out
to be true.
Legislation: Current Status
map in Exhibit 1 categorizes each of the fifty states by
type of 150-hour legislation. Thirty-five states are (or
soon will be) “150-to-sit” states. These states
have passed legislation requiring that candidates complete
150 semester hours of education before sitting for the CPA
exam. Another nine states have passed “120/150"
legislation, allowing candidates to sit for the CPA exam
after completing their baccalaureate degree with a concentration
in accounting (approximately 120 semester hours) but requiring
completion of 150 semester hours before obtaining certification
or licensure. The remaining six states allow candidates
both to sit for the exam and to obtain certification and
licensure without completing 150 semester hours of education.
California and Pennsylvania allow the candidate a choice
between alternative routes to qualify for CPA licensure,
only one of which requires completing 150 hours of education.
In both California and Pennsylvania, the experience requirement
for licensure is reduced by one year for candidates who
elect the 150-hour route. Delaware, New Hampshire, and Vermont
have not passed 150-hour legislation. Colorado passed
and then subsequently rescinded 150-hour legislation.
in First-Time CPA Exam Candidates
that implemented 150-hour legislation in the early or mid-1990s
now have had several years of experience with the effects
of the increased education requirement. Each of these states
experienced a significant change in the number of first-time
CPA exam candidates in the years surrounding the implementation
of their 150-hour requirements. The experience of these
states provides useful information about both the short-
and long-term effects of 150-hour legislation.
analysis of the change in candidates was based only on trends
in first-time CPA exam candidates. Most 150-to-sit states
allow repeat candidates that sat for the CPA exam before
the increased educational requirement to sit and repeat
the exam. All first-time candidates will have satisfied
the 150-hour requirement.
trend in the total number of first-time CPA exam candidates
in all 50 states is shown in Graph 1 for 1988 to 2002. From
1988 to 1997, the annual number of first-time candidates
fluctuated between 42,000 and 49,000. Since 1993, there
has been an overall downward trend in the number of first-time
candidates, which is about one-third lower. Exceptions to
this trend occurred in 1997 and 1999. Both of these exceptions
were the final year before 150-hour legislation was implemented
in states that have significant numbers of first-time candidates.
The last year before implementing an increased education
requirement typically draws significant numbers of additional
candidates that meet the old but not the new education requirement.
The third exception occurred in 2002, when 39 states reported
an increase in first-time candidates. This may be indicative
of an increased level of interest in the CPA profession.
2 provides more detail on the decline in number of first-time
CPA exam candidates illustrated in Graph
1. In Frame 2A, the trend in first-time candidate numbers
is shown for each of the four types of states in Exhibit
1. This frame shows that nearly all of the decline and
the 2002 recovery in first-time candidates found in Graph
1 occurred in Category 1 states. Frame 2B presents the same
trends on a percentage-of-change basis where 100% is the
average number of first-time candidates from 1988 to 1990.
Frame 2B indicates that first-time candidates in 150-to-sit
and 120/150-hour states both declined by 50% between 1993
2A and 2B also show that the total number of first-time
candidates sitting in states that have not passed 150-hour
legislation was relatively stable until 1997, when it increased
dramatically. In 1996, states in this category reported
1,074 first-time CPA exam candidates. In 2002, these states
reported 4,345 first-time candidates, 405% of their 1996
total. This dramatic increase could be caused by nonresident
candidates who are attracted by the relatively lower education
standards and lack of a residency requirement for CPA exam
candidates in these states. As part of his commentary in
NASBA’s 2002 Candidate Performance on the Uniform
CPA Examination, Park Leathers noted that states without
residency requirements “appear to have benefited from
nonresident candidates.” The annual number of first-time
candidates reporting degrees earned at colleges and universities
in these same states between 1996 and 2002 dropped by nearly
300 candidates, a 40% decrease (Candidate Performance
on the Uniform CPA Examination, Report 12-A and Report
12-B), meaning that these states must be hosting a steadily
increasing number of nonresident first-time CPA exam candidates.
Predictability of Changes
states implemented a 150-to-sit requirement between 1993
and 1998 (Tennessee, Alabama, Mississippi, Kansas, Louisiana,
Montana, Arkansas, Georgia, Nebraska, South Carolina, and
South Dakota, in order of adoption). In Graph
3, these 11 states were grouped by year in which they
implemented a 150-to-sit requirement. A “pre-150-hour”
baseline number of first-time candidates was computed for
each group by averaging the number of first-time candidates
in the third, fourth, and fifth years before the 150-to-sit
legislation took effect. Beginning with the second year
prior to implementation, the actual number of first-time
candidates for each implementation group was expressed as
a percentage of that group’s base period.
3 shows that each state that implemented a 150-to-sit requirement
has experienced a remarkably similar pattern of year-by-year
change in number of first-time CPA exam candidates. The
number of first-time candidates peaks in the year immediately
prior to implementation of the more demanding education
requirement. In the year that the 150-to-sit requirement
takes effect, first-time candidate numbers typically drop
to approximately 25% of the baseline. Over the next few
years, the number of first-time candidates recovers at a
relatively uniform rate to approximately 50% to 60% of the
baseline period. This long-term trend suggests that the
150-hour requirement is not primarily responsible for the
ongoing decline in first-time CPA exam candidates and that
other factors may be hindering growth in CPA exam candidates.
believe that issues other than the 150-hour requirement
have contributed significantly to the decline in both the
number of college accounting majors and the number of CPA
exam candidates. A July 2000 study by the Taylor Research
and Consulting Group found that students, especially those
at the age where career and academic major decisions are
most often made, do not consider a 150-hour requirement
to be a barrier to entering the accounting profession. In
fact, graduate education was already in the plans of 76%
of the high school students and 80% of the college students
who participated in the study. Boone and Coe’s August
2002 statistical analysis of the declining number of college
accounting majors concluded that, at most, 38% of the national
decline in accounting majors during the 1990s might be attributable
to the 150-hour requirement.
test this view, the authors compared actual first-time candidate
trends in states with the 150-hour requirement to first-time
candidate trends in states where 150-hour legislation has
not been passed, or has passed but will not be implemented
until after 2005, seven states in total.
seven “no-150-hour-effect” states are depicted
in Graph 4. The data is based on the number of graduates
rather than number of first-time CPA exam candidates, since
first-time candidate totals in these states may be distorted
by increasing numbers of nonresident candidates. Because
Delaware, New Hampshire, and Vermont individually have relatively
few graduates per year, these states were combined into
a single trend line. Each trend line follows a similar path,
peaking around 1993 and steadily declining in nearly every
subsequent year. By 2002, four of the five trend lines have
dropped to between 42% and 56% of their 1991 total. The
weighted average trend line in Graph
4 represents the best available estimate of how nationwide
first-time CPA exam candidate numbers would have changed
between 1991 and 2002 even in the absence of proposed, passed,
or implemented 150-hour legislation.
of this weighted trend line for non-150-hour-effect states
against trends in 150-to-sit states yields interesting results.
Florida and Utah, two states with a 150-to-sit requirement
in effect prior to 1990, exhibited a remarkably similar
rate of decline in the number of first-time CPA exam candidates
from 1991 through 2000 when compared to non-150-hour-effect
states. The only difference between the two trends occurred
in 2001 and 2002, when there are two successive years with
increasing numbers of candidates in the 150-to-sit states
while the number of first-time candidates continued to decline
in no-150-hour-effect states.
states show a spike in first-time candidates just prior
to adoption of a 150-to-sit requirement, followed by an
immediate decline once this requirement takes effect. Although
the adoption of a 150-to-sit requirement clearly affects
the number of candidates in the years immediately surrounding
the change in law, once the short-term effects have passed,
actual first-time candidate numbers recover to what would
have been expected based on the long-term, no-150-hour-effect
declining number of first-time CPA exam candidates is a
concern to many. This decline is most pronounced in states
that have recently adopted 150-to-sit legislation. Most
states find that the number of first-time candidates plummets
by approximately 75% in the year that a 150-to-sit requirement
is implemented. However, within a few years after implementing
a 150-to-sit requirement, the number of first-time candidates
recovers to a level comparable to states without a 150-hour
requirement. Because the number of first-time candidates
recovers from 150-hour effects after a relatively short
period of time, factors other than increased educational
requirements must be the primary cause of the overall decline
increased educational requirements to sit for the CPA exam
are not a concern to most students for a variety of reasons.
One reason is that, according to the Taylor Research and
Consulting Group’s Student and Academic Research Study
(July 2000), 74% of high school students indicated that
they already plan to earn a graduate degree. Another reason
that increased educational requirements are not a deterrent
is that most states allow considerable latitude in meeting
them. Candidates can typically satisfy the 150-hour requirement
by completing additional undergraduate classes, pursuing
a specialized graduate degree such as a Master’s in
Accounting or Taxation or a general business program such
as the Master’s of Business Administration. In addition,
many students transferring into business from another field
of study or from a community college have enough transfer
hours to fulfill the 150-hour criteria while they complete
a bachelor’s degree in accounting.
the required additional education is not the underlying
cause of the decline, then what is? The Taylor Research
and Consulting Group’s study identified three reasons
that students do not pursue accounting as a career: ignorance
about a career in accounting; faulty information about the
profession; and negative perceptions of the role of accountants
in society. Steve Albrecht and Robert Sack, in Accounting
Education: Charting the Course through a Perilous Future
(August 2000), also mention decreased salary levels
and the availability of more-attractive career alternatives
as other contributors to the declining interest in accounting
AICPA and many state CPA societies have initiated efforts
to address these issues. Some of their efforts include sponsoring
innovative student-oriented websites. Exhibit
2 lists some of the more creative sites.
efforts include increased scholarship funding and programs
that reach out to high school and college students about
the wide array of career opportunities available with a
degree in accounting. For example, the Florida Institute
of CPAs has instituted an “Accounting for Success:
CPAs in Florida’s Schools” program, which is
nearing its goal of having a CPA volunteer serve as designated
coordinator for each of Florida’s 684 high schools.
The New York State Society of CPAs sponsors COAP (Career
Opportunities in the Accounting Profession), a five-day
summer program for high school juniors. The program involves
visits to accounting firms and corporate offices along with
attending classes taught by CPAs and other business professionals.
The Ohio Society of CPAs initiated a “Student Ambassador”
program where accounting majors with good communication
skills work 10 hours a week on their own college campuses
to change student perceptions of the accounting profession.
The continuing success of these initiatives will be critical
to the future of the accounting profession.
W. Schroeder, DBA, CPA (inactive), and Diana
R. Franz, PhD, CPA, are both professors in the department
of accounting at the college of business administration, University
of Toledo, Ohio.