The Role of NASBA and State Boards in Accounting Education
How Should an Accounting Curriculum Be Determined?

By Nicholas J. Mastracchio Jr.

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How should board members fulfill their responsibility of determining what education is sufficient? Should they determine the specifics of a curriculum, or should they rely upon educational institutions or accrediting bodies? The individual state boards look to the National Association of State Boards of Accountancy (NASBA) for direction in this area. NASBA has been considering what guidance it could provide to state boards on this issue, and has sparked controversy with academia over what role the boards should play. The AICPA has also been involved, given its role in determining the content specifications of the Uniform CPA Examination through surveys of practitioners.

NASBA has been actively considering ethics, course requirements, and general topical requirements issues since 2003. As part of its final recommendations, NASBA convened a joint panel on education in April 2007. The moderator was Jan Williams, past president of the American Accounting Association (AAA) and dean of the school of business at the University of Tennessee. The panel consisted of two representatives from the AAA, two from the AICPA, two from the Big Four, two from accreditation organizations, and one from the Federation of Schools of Accountancy.

Although NASBA’s original suggestions had already been modified before the April 2007 panel, some attendees and panel members still resisted the idea of regulators being involved in setting curricula. One thought was that regulations were not needed. Instead, changes should be made to the CPA content specifications, the hypothesis being that if the content were tested in the Uniform CPA Examination, academia would follow and include the subject matter in business and accounting courses. This idea received some support, particularly among educators, at the April 2007 panel meeting. The author’s survey below tested that hypothesis.

Using the CPA Exam to Drive Changes in the Curriculum

A survey of AICPA members in the education sector was conducted in the summer of 2007. One objective was to determine whether the CPA exam content specifications influenced course content and whether a change in specifications would alter the curriculum. This survey asked respondents what type of accreditation their institution had, what kind of students they taught, and what their primary areas of instruction were. A total of 980 active teachers responded.

On accreditation, 37% indicated that the accounting department was accredited, 32% indicated the school of business was accredited, 28% indicated the institution was accredited, and 3% stated that there was no accreditation. Regarding students, 60% of respondents said they taught primarily undergraduates, 8% taught primarily graduates, and 32% had a balanced schedule of graduates and undergraduates. The third question gave respondents the opportunity to designate two areas in which they taught. Of the leading subjects, 74% of respondents mentioned financial accounting, 37% managerial accounting, 31% audit, 23% tax, and 15% accounting information systems (AIS).

One question directly addressed what influence the CPA exam content and state regulation would have on curriculum (Exhibit 1). When broken down by the level of students taught, regulation maintained a significant margin, with no significant variation between levels except that graduate teachers gave more responses that neither exam content nor regulations would influence curriculum.

When broken down by teaching area, there is slightly more variance, with AIS giving a higher influence to regulations, and auditing giving a slightly higher influence to the exam than other areas. The very clear sentiment here is that state board regulations have more influence on curricula than do the CPA exam content specifications. Therefore, the proposal not to regulate but to let the CPA exam drive topic coverage is not supported by this survey.

Are Instructors Aware of Exam Content?

Further questions were asked to determine if the CPA exam content specifications were used in determining course content (Exhibit 2). Although the majority of respondents in all categories were aware of the content specifications of the CPA exam, a significant number did not know or were not sure.

The results varied more by subject matter than between levels of students taught. Auditing leads the way with the most knowledge of the specifications. Managerial and tax, areas that do not have their own section of the CPA exam, demonstrated less familiarity, although AIS, also without its own exam section, was essentially average. Almost one-third of the auditing instructors responding were unable to say they knew the content specifications.

Even if instructors are aware of the content specifications, they may not always refer to it in determining topics for their courses (see the second question in Exhibit 2).Therefore, one cannot conclude that CPA exam content drives accounting course content, and the hypothesis that the exam drives curriculum and can be relied upon to determine content of courses is not supported.

Do Instructors Rely Upon Textbooks to Stay Abreast of Exam Content?

A question was asked to determine if instructors relied upon authors of their textbooks to determine the CPA content that should be taught (Exhibit 3).

The reliance on textbook authors is significant with the undergraduate instructors, but graduate instructors show less reliance.

The response is fairly consistent across courses. Tax is lowest in reliance on authors. It was also lowest in CPA exam content knowledge, probably because the tax laws change rapidly and instructors must keep up. In fact, CPA exam content specifications are very broad when it comes to tax requirements.

Do Courses Include the Content Specifications?

Another question asked instructors’ opinions about whether the content specifications were covered in their courses (Exhibit 4). More than three-quarters of respondents said they covered “all” or a “majority” of the content specifications in their courses. The general consensus was that although textbook authors cannot be relied upon to cover all areas, and the instructors themselves do not always refer to the specifications, somehow most of the material does get covered.

NASBA’s Historical Involvement

The issue of topics to be covered in the accounting curriculum was undertaken by NASBA at the request of its constituents. In 2003, NASBA was approached by a number of state boards requesting guidance on education requirements for CPA licensure. The state boards, charged with protecting the public interest in licensing candidates to become CPAs, are responsible for deciding if students’ education and experience, coupled with passing the CPA examination, are sufficient for licensure. Some states, such as New York, had very specific requirements for education content in accounting, business, and liberal arts. Most states’ statutes and regulations, however, lacked such guidance. Some of those states were specifically looking for what the minimum education requirements should be.

In May 2003, NASBA’s Uniform Accountancy Act (UAA) Committee, with the consent of the NASBA board of directors, asked the education committee to develop and recommend changes to the UAA education rules that would address the content of the 150-hour requirement and would include contemporary education rules that were easy to apply. The education committee, then chaired by Wes Johnson, agreed to undertake the challenge, and because of the auditing failures occurring at that time, it incorporated the specific issue of addressing ethics education.

The ethics recommendation that was developed resulted from a study of current offerings. In an effort to gather information on current education practices regarding ethics, the AAA agreed to cosponsor a survey of educators on the issue of ethics education on campus. The NASBA staff engaged an outside survey company. The subcommittee received 204 responses (an acceptable response rate of 14%). The results were as follows:

• 46% of the schools offered a separate course in ethics.
• 68% of the courses offered were in the school of business.
• 18% were offered in the accounting department.
• 56% provided separate coverage for protecting the public interest.
• 51% stated the ethics course was a requirement for accounting majors.
• 45% stated it was a requirement for other business majors.
• 90% indicated that protecting the public interest was covered in the auditing course.

Survey participants were offered the option of identifying what institutions they were affiliated with. From those who identified themselves, the committee obtained syllabi of designated ethics courses. Although some institutions had a good, solid ethics course, most of the courses designated as ethics courses were business law–related with a brief look at ethics and, with a few exceptions, did not provide adequate coverage of ethics, values, and appropriate professional conduct. In essence, these were not the type of courses the committee believed would result in the appropriate level of education to help ensure an awareness of the ethical and professional responsibility of CPAs.

The education committee concluded that there should be an education requirement for ethics. The committee discussed whether a separate course or integration of ethics into the overall accounting and business curriculum would be better. The integration approach was considered to have merit in that there would be the ability to address ethics issues specific to the subject matter and that it would avoid the perception of simply another course requirement divorced from other business applications. Additionally, it could be implemented faster, without the need to create an additional course and the resources that would entail.

There was concern that the education committee was giving guidance to regulators charged with protecting the public interest, who would find it difficult to ascertain whether certain subject matter was actually integrated. The perceived advantages of a separate course was that regulators would be able to easily verify compliance, and that having an instructor qualified in ethics teach a course might be easier than having the faculty as a whole teach the subject. One disadvantage was that creating a new course would take time and resources. The committee suggested that two separate courses in ethics would work better. One course would cover the underlying philosophical reasoning and ethical foundations; the other would cover application, using business and accounting rules and regulations.

Ethics education is also supported in academia. In a 2007 survey of members in the AICPA education section, 49% indicated that all of their courses had an ethics component, and 41% stated they had an ethics component in some of their courses. Only 10% did not have an ethics component. Cindy Blanthorne, Stacy E. Kovar, and Dann G. Fisher (“Accounting Educators’ Opinions About Ethics in the Curriculum: An Extensive View,” Issues in Accounting Education, June 2007) reported on a 2004 survey which indicated that 18% of accounting instructors do not teach ethics in their courses; 75% indicated they should probably teach more ethics. The integration of ethics was supported by 98% of the respondents, while 27% thought that a philosophy class that teaches normative ethical theory should also be required.

Proposed Education Rules

NASBA issued a draft of the proposed new education rules. It had two components. First, it provided for state boards to rely on different levels of accreditation.

Level 1 accreditation was defined as the accreditation of the accounting department. In a Level 1 accreditation, the institution, business school or program, and the accounting program are all separately accredited. This level is granted to an accounting program or department that has been accredited by a national accreditation agency recognized by the NASBA board of directors. Currently, the Association to Advance Collegiate Schools of Business (AACSB) is the only body with that authority. Accounting programs or departments accredited in this manner have met standards substantially higher and much more specific than those required for Level 2 or Level 3 accreditation.

Level 2 accreditation was defined as an accreditation of the institution and the business school or program, but not the separate accreditation of the accounting program. Level 2 is granted to a business school, program, or college of business that has been accredited by a national accreditation agency recognized by the NASBA board of directors, such as the AACSB, following a specific and comprehensive examination of its strategic management, participants, and assurance of learning processes.

Level 3 accreditation was defined as accreditation of the institution, but not separate accreditation of the business school or the accounting program. Level 3 is granted to a four-year degree-granting college or university that is accredited by one or more recognized regional accrediting agencies.

Level 4 was defined as educational institutions that do not have an accreditation of the institution, business school, or accounting program, and includes institutions that have an accreditation from agencies not recognized by the NASBA board of directors.

NASBA suggested that transcripts from Level 1–accredited accounting programs should require little scrutiny of the accounting and business subject matter requirements. Transcripts from Level 2–accredited business programs should require little scrutiny of compliance with the business subject matter requirements, but should require detailed scrutiny of compliance with the accounting subject matter requirements. Transcripts from Level 3–accredited institutions should require detailed scrutiny of compliance with both the accounting and business subject matter requirements. For Level 4 institutions, it was suggested that reliance on other procedures and information be used if the board were to accept the education.

Second, NASBA addressed specific course requirements. The proposed rules suggested the following:

• That the accounting component of the applicant’s educational program include at least 30 semester credit hours (SCH) of accounting at the upper-division undergraduate level, or 20 SCH at the graduate level, or an equivalent combination thereof. It included a list of specific courses and credit hours.
• That the business component of the applicant’s educational program include at least 36 SCH of business other than accounting at the upper-division undergraduate level, or 24 SCH of business other than accounting at the graduate level. It also listed the courses and credit hours to be covered.

NASBA’s draft called for ethics to be taught in two courses: one on ethical foundations, and the other on the application of ethics to accounting.

Reaction to the Suggested New Rules

From 2002 through 2004, NASBA addressed accounting education at its annual and regional meetings. In addition, state boards were questioned about their views on education issues.

On March 2, 2005, the NASBA board of directors exposed a draft of new education requirements that specified credit-hour requirements. The comment period, originally to end on June 30, 2005, was extended to August 26, 2005, because of the huge response. In total, 178 responses were received. The greatest number was from academia, with 108 responses from 97 different institutions. State boards provided 32 responses, nine came from state societies, and seven came from organizations such as the AAA and the AACSB. Individuals accounted for 17 responses. The results primarily objected to the provisions.

Respondents felt that the requirements were not flexible enough, and were too specific with regard to subjects and the number of credit hours per subject. They were also concerned with the administration of the rules. Many academics argued that the rules were input-oriented rather than measurements of output. It was evident that some respondents did not understand the responsibility of state boards in ensuring that future CPAs have the appropriate education, and had a “leave us alone” attitude. Respondents were generally supportive of an ethics component in the curriculum. Regarding the proposed changes in curricula requirements in general, respondents expressed concern about the number of credit hours and the integration of ethics throughout the accounting and business curriculum versus a stand-alone ethics course.

NASBA’s Next Attempt

As a result of the comments, NASBA’s education committee recommended to the board of directors that the rules not go forward in the form they had been exposed. The committee recommended that a joint panel, led by NASBA with representatives of relevant stakeholders, continue to work on the proposed rules.

NASBA formed a six-person task force with representatives from the AACSB, AAA, and NASBA. The task force met in December 2005 and January 2006, and created a first draft of an education proposal that was exposed in March 2006. Again, the greatest number of responses came from academia, with 19. State boards provided 15, six came from various organizations, and individuals accounted for two responses. The Education Committee considered the comments and revised the draft.

A joint panel on education convened in April 2007 brought together various stakeholder groups. Approximately 75 people attended the panel discussion. The education committee considered the comments and gave its final recommendations. On October 26, 2007, NASBA’s board of directors approved a final draft of the new rules to be incorporated into the UAA. The proposed rules were exposed for comment in November 2007. The course guidance revision does not, for the most part, include credit-hour specifications.

The reliance on accreditation for Levels 1 through 3 (as described above) was adopted essentially the same as prior drafts. [Notable additions were a comment that Level 4 courses would generally not be accepted, and the inclusion of the Association of Collegiate Business Schools and Programs (ACBSP) as a Level 2 accreditation agency.] The curriculum guidance in the proposed rules eliminated credit-hour specificity in most cases but would provide that candidates do the following:

1. Earn a minimum of 24 SCH (or the equivalent) of accounting courses at the undergraduate or graduate level, excluding principles or introductory accounting courses, covering some or all of the following subjects, which are to be contemporaneously derived from the Uniform CPA Examination Content Specification Outline (CSO):

i) Financial accounting and reporting for business organizations
ii) Financial accounting and reporting for government and not-for-profit entities
iii) Auditing and attestation services
iv) Managerial or cost accounting
v) Taxation
vi) Fraud examination
vii) Internal controls and risk assessment
viii) Financial statement analysis
ix) Accounting research and analysis
x) Tax research and analysis
xi) Accounting information systems
xii) Ethics (accounting course), as described in Rule 5-2 (c)(6)
xiii) Other areas included in the CSO or as may be approved by the NASBA board of directors.

2. Earn two credit hours in research and analysis in accounting through a discrete undergraduate and/or graduate accounting course, or two credit hours integrated through the undergraduate and/or graduate accounting curriculum.

3. Earn a minimum of 24 SCH (or the equivalent) of business courses, other than accounting, at the undergraduate and/or graduate level, covering some or all of the following subjects:

i) Business law
ii) Economics
iii) Management
iv) Marketing
v) Finance
vi) Business communications
vii) Statistics
viii) Quantitative methods
ix) Technical writing
x) Information systems or technology
xi) Ethics (business course), as described in Rule 5-2 (c) (6)
xii) Other areas as may be approved by the NASBA board of directors.

4. Earn a minimum of two SCH in communications in business or accounting in an undergraduate and/or a graduate accounting or business course, or two SCH integrated through the undergraduate or graduate accounting or business curriculum.

5. Earn a minimum of three SCH in an undergraduate and/or a graduate accounting or business course in ethics. As an alternative, colleges or universities may choose to integrate the course through the undergraduate and/or graduate accounting or business curriculum.

In summation, the suggestions now being exposed in the revised UAA provide for reliance on accreditation depending on the level, and less specificity on credit hours. The revised draft also recognizes the CPA exam content specifications in listing accounting topics.

Development of CPA Exam Content

The AICPA Board of Examiners (BOE) is responsible for the content of the Uniform CPA Examination and its validity for determining entry into the profession. It fulfills this responsibility by periodically conducting a practice analysis. The 2008 practice analysis was authorized by the BOE in 2006 and is being conducted under the supervision of BOE’s Practice Analysis Oversight Group (PAOG). The BOE Content Committee and Psychometric Oversight Committee (POC) also play a direct role in the project. The new content specifications are expected to be ready by late 2008.

Practice analysis studies focus on the job responsibilities of entry-level CPAs and the knowledge and skills they need to protect the public interest. The process includes:

• Developing and distributing a survey to gather data on the tasks performed in the workplace by entry-level CPAs, and the knowledge and skills needed to perform these tasks;
• Analyzing the results;
• Drafting new content and skills specifications outlines based on survey results;
• Ensuring that specifications provide a comprehensive framework representative of the knowledge and skills required for the various practice areas of the profession;
• Developing and distributing an exposure draft; and
• Approving the new specifications.

Those surveyed included individuals who directly supervised entry-level CPAs and had been certified for two to 15 years. An appropriate balance of public, industry, government, and education participants were sought from across jurisdictions.

To identify qualified participants, invitations were sent to about 99,000 CPAs nationwide between May and June 2007. Names were drawn from the AICPA database and lists provided by state boards of accountancy. Survey participants were given a list of knowledge, task, and skills statements and asked to indicate the relevance of each to entry-level CPAs.

More than 6,600 CPAs participated in the survey. Nearly 3,100 of them supervised entry-level CPAs, and were sent links to the electronic survey. About 2,100 completed surveys were received. Survey respondents were representative of the population from which the sample was drawn in terms of region, years certified, and area of employment.

Looking to a Future of Cooperation

State regulators have the responsibility of protecting the public interest and are charged with determining the experience, education, and examination requirements for CPA licensure. Ideally, educators should lead the way; the reliance on accounting and business-school accreditation is an acknowledgement of this. However, state boards cannot shirk their responsibilities, and when an institution receives only a general accreditation, some additional assurance is needed if the state board is to meet its responsibilities. The CPA exam content specification will not accomplish this. In fact, many schools take issue with the thought of teaching to the CPA exam. The degree to which regulators can rely on academia depends on the level of outside scrutiny that individual institutions undergo through accreditation. The state boards have the right and the responsibility to expect that important topics, including ethics, are covered.

In looking to the future, NASBA believes that a comprehensive, well-resourced task force of educators, CPA professionals, and other recognized and trusted individuals must be formed to:

• research and develop revisions to the accounting curriculum;
• address the 120-hour exam/150-hour licensing issue (with reliable empirical data if they exist);
• tackle the issue of foreign students wishing to take the CPA exam, as well as possible overseas exam sites; and
• address the supply of accounting professors, as well as their demographics (including possible changes in their qualifications).

NASBA notes that the recommended rule changes are not comprehensive, but merely cover minimum changes to the curriculum tied to the BOE practice analysis process, the introduction of ethics requirements, and the updates on accreditation. A partnership with academia, along with a practice analysis from the AICPA, should form the basis of further guidance to state boards in a cooperative atmosphere.

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