Time to Change Introductory Accounting

By Amy Diller-Haas

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The old curriculum—which emphasizes memorization of accounting pronouncements and the mechanics of recording transactions—does not provide a complete picture of today’s environment. Students receive a distorted view that could discourage them from majoring in accounting, and many that are attracted might not be well suited to the current demands of the field. Moreover, the focus on memorizing technical knowledge leaves little time for developing the skills that most employers seek.

Increased emphasis on consulting services and neglect of attest services by large accounting firms have contributed to declining professionalism. Furthermore, recent financial frauds and misleading financial statements—undetected by the very firms responsible for providing assurance—have further eroded public confidence. Considering the ethical environment in which fraud breeds, integrating ethics into accounting education, along with updated curricula, is crucial to a healthy profession.

A specific recommendation of the Accounting Education Change Commission (AECC) was to overhaul the method and content of introductory accounting (Exhibit 1). The author’s survey of New York City metropolitan area accounting programs found that although some programs have updated their introductory course, 71% still use a traditional approach. The academic community’s failure to update its accounting programs may be partially responsible for the declining accounting enrollment.

Background

Student enrollment in accounting programs declined during the 1998–99 academic years, down by 23% from 1995–96, according to an AICPA survey. In addition, the number of accounting degrees awarded during the 1998–99 academic year declined 20% from three years earlier, reversing a trend in which this number had been stable for more than 20 years, according to Albrecht and Sack. There has been no corresponding decline in the number of students hired for accounting positions. A 1996 study by Hanno and Turner in the Massachusetts CPA Review found that 16% of new staff hired at public accounting firms did not hold accounting degrees.

Accounting firms hire graduates with strong analytical skills, regardless of their academic preparation. Employers are hiring and paying larger salaries to graduates with majors in information systems, computer science, consulting, finance, and investment banking than to accounting majors. Albrecht and Sack found that brighter students are choosing these fields, which they perceive as providing greater opportunities for advancement.

The AECC has recommended that the first course in accounting be a broad introduction to accounting taught from the user’s perspective, rather than introductory accounting for future preparers. They suggest that educators focus on what accounting information is, why it is important, and how economic decision-makers use it (see Exhibit 1).

An approach that stresses understanding accounting information seems more relevant to introductory classes filled mostly by nonaccounting majors. The “preparer” approach—which focuses on learning debit and credit, rules, accounting procedures, and the preparation of financial statements—is particularly ineffective in classes where the majority of students will not become accountants. Precious class time should not be devoted to teaching tasks routinely performed by software. Students are better served learning how to analyze and draw conclusions about financial statements and the impact of alternative accounting choices.

An emphasis on accounting procedures can allow little time for developing other nontechnical skills that have become essential. According to a 1997 survey of Fortune 500 executives, the relative importance of technical accounting knowledge for entry-level positions had declined from approximately 44% in 1992 to 33% in 1997; it was expected to further decline to 28% in 2002. Communication skills, problem-solving abilities, and technological competency rank importantly in the list of desired characteristics.

Most business students form their perception of accounting during their first accounting course. The AECC has recommended that introductory courses provide students with a more realistic perception of the field and the skills needed for success. A 1998 AICPA report found that most high school and college students were unable to accurately describe accountants’ work or their role in the business world. Albrecht and Sack found that students perceived accountants as boring “number crunchers” who often work alone. The traditional approach appears to do little to thwart these misconceptions. Friedlan (1995) found that these unrealistic perceptions continued when students were subjected to preparer curriculums; however, students that took courses with a “user” focus developed a greater understanding of the skills and abilities required for success.

Survey

The author’s survey questioned 33 accounting departments in the New York City metropolitan area about their approach to teaching introductory accounting. Personal interviews were conducted and syllabi for accounting courses were obtained. The purpose was to determine if the AECC’s recommended changes in the approach to teaching introductory accounting had been adopted. The survey noted the type of approach being used, and whether a change had been made. The survey considered introductory accounting courses for both accounting and business majors; additional questions solicited faculty opinions on the overall success and impact of any changes made, or why changes were not made.

Results

As shown in Exhibit 2, only 29% of the responding schools have made major changes to their introductory curriculum. Schools that made a change have opted for a “blended” rather than a strict “user” approach. All respondents felt that a strict user approach was inappropriate for accounting majors; the blended approach incorporates some of the user perspective and shifts emphasis away from accounting mechanics.

The departments that made a change are mostly satisfied and report that the updated curriculum is more interesting to students. One department chair commented that not only has the new approach helped recruit accounting majors, it has even attracted nonbusiness majors to the course. Most faculty find the new approach more rewarding to teach. One instructor observed that test grades were more evenly distributed with the new approach, and that students were more likely to complete the course.

In regard to the changes’ effects on other accounting courses, many believe the new approach provides accounting majors with a greater understanding of accounting concepts. One instructor pointed out that the new approach was actually a more challenging curriculum, because students cannot rely on memorization as they do in a mechanics-based course. A department chair commented that their accounting majors demonstrated greater critical thinking skills with the new approach. All respondents did mention a need to spend additional time on the basic accounting cycle during intermediate accounting, but thought that student performance was on a par with that of students taught with a traditional approach. Another instructor remarked that, ultimately, accountants need a strong foundation in accounting procedures to succeed, and if these are taken out of introductory accounting they must be emphasized elsewhere. One school has implemented a one-credit, online course for students to reinforce procedural skills; other programs have added computer assignments that reinforce procedures.

Schools that did not make a change are comfortable with the traditional curriculum and are concerned that changing it will undermine the foundation of the accounting major’s education. One program adopted a strict user approach, only to switch back to a blended approach, because they thought accounting majors were being shortchanged. Although there is general agreement that nonaccounting majors are better served by a nontraditional approach, there is also great reluctance to offer two separate tracks. This is ironic, given that the AECC’s recommendations were focused on improving the education of accounting majors. Others schools have not considered the AECC’s recommendations at all.

Rethinking the Traditional Approach

Colleges can respond to the AECC recommendations by continuing to use the traditional preparer curriculum or moving to an updated approach. The latter may require restructuring upper-level accounting courses; more time would have to be spent on recording transactions, if procedural aspects were de-emphasized in the first course. Schools using a newer approach have reported that students require less time to understand more conceptually complex intermediate topics. Computerized accounting courses can be used to reinforce technical procedures. This would not only expose students to “real-world” accounting systems, but also provide marketable skills. In the long run, teaching students the conceptual aspects of recording transactions is more valuable than having them memorize journal entries and pronouncements.

Another alternative would be to offer two tracks: a traditional track for majors and a new approach for nonmajors. Unfortunately, this would require students to choose their major early, and deter students from transferring into accounting from another subject.

Continuing with a traditional approach, however appropriate in the past, may no longer meet current needs. A user or blended approach can be implemented without much disruption, by restructuring the credits and curriculum in current programs. These changes should not preclude accounting majors from being well prepared for upper-level courses. The new approach also provides an opportunity to emphasize the relevance and usefulness of accounting to the nonaccounting majors that fill the majority of seats in introductory courses. In addition to these reasons to change, almost all respondents mentioned a decline in the quality of students majoring in accounting in comparison to past decades. This stresses the need to update accounting programs in order to attract brighter, higher-quality students back into the field.

Finally, recent events, coupled with the economic downturn, make it crucial to respond to the environment in which accountants operate today. Accounting’s future as a profession appears to be at an important turning point. Implementing many of the curriculum changes suggested by the AECC, and integrating ethics into the accounting curriculum, can help restore the profession’s integrity to its former status. Failure to update accounting programs is likely to lead to continued declines in the number and quality of accounting majors, as well as funding for accounting programs. Ultimately, the consequences for the profession—and society—are yet untold.