Consequences of the 150-Hour Requirement

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MAY 2005 - In his article “150 Hours and the Market” (The CPA Journal, February 2005), John Yelvington asserts that the market must move to raise salaries for five-year graduates in order for the profession to attract a sufficient number of new CPAs to meet demand.

From my perspective, the evidence is clear: The 150-hour rule has resulted in a decline in the number of candidates sitting for the CPA exam that is especially notable in those states that have enacted it. Numerous states passed the provision, which in many cases became effective between 1998 and 2000. Although the number of candidates sitting for the exam has increased since then, the number sitting today remains remarkably lower than it was in the 1990s.

This decline can be seen within the context of the demands on the profession for implementing the Sarbanes-Oxley Act. Suddenly, CPA firm demand for graduates has soared, with supply remaining a relative trickle.

The result is what an economist would expect: With demand outstripping supply, starting salaries have indeed increased. Thus, in my part of Georgia, one graduate was offered $22,000 more by an Atlanta office of a Big Four firm than another graduate was offered by a small, community-sized CPA firm.

One can speculate about possible consequences of this supply-demand imbalance:

  • Increasing salaries offered by CPA firms;
  • Salaries by industry perhaps increasing, as this sector strives to also attract the “best and the brightest” in competition with the profession;
  • Struggles by non–Big Four firms to move their salary offers closer to the Big Four in an effort to attract personnel;
  • Salary structural issues, as compression creates pressure to increase the salaries of those not at entry level;
  • Fee pressure, as firms seek to recover higher operating costs from clients, especially when the client is not affected by Sarbanes-Oxley requirements; and
  • Pressure to use paraprofessionals to offload some of the workload burden to less-costly workers.

Charles G. Carpenter, PhD
Professor of Accounting
Campbell School of Business,
Berry College
Mount Berry, Ga.




















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