The Financial Times reported that head of KPMG US Paul Knopp stated that the industry needs to make it simpler and less expensive to become an accountant to avert a “brewing crisis” in the profession, which he says is ”systemically important to the functioning of the capital markets.”
Knopp is the first head of a Big Four firm—KPMG, Deloitte, EY and PwC— to publicly support eliminating the requirement for a fifth year of higher education in addition to the four-year undergraduate degree.
In an interview, Knopp told the Financial Times that he is backing an “apprenticeship” model to take the place of the fifth year of education. “We have a brewing crisis right now, with the number of students going to college and the number going into accounting, and we need to absolutely address it in the very near term,” he noted. “I can’t over-emphasize, it’s not just the Big Four. We need more accountants in corporations and outside of the Big Four. The industry that we are in is systemically important to the functioning of the capital markets.”
According to the Financial Times, KPMG will also advocate for states to adopt a less complex version of the current prerequisites to the CPA exam. This version only requires two years of supervised work, quoting a spokesperson as saying, “Conversations across the country are a step in the right direction in that they recognize the consensus for change, but the details matter.”
Financial Times reported that the accounting profession is currently grappling with attracting students pursuing careers in other fields with less strict educational requirements and where starting salaries have been rising, such as financial services or technology.
Some firms have begun reporting an accountant shortage as a risk in their financial disclosures. At the same time, local governments and small businesses nationwide have grumbled about finding firms open to taking on low-cost audit work.
Knopp noted that while the Big Four still have the luxury of choosing from current graduates, demographic shifts would only worsen the problems.
He also recognizes that other factors have stopped students from pursuing accountancy. He stated that KPMG has increased salaries and lessened the number of late nights and weekends required of audit employees by distributing work across the financial year.
According to government data, US accounting undergraduates have dropped to the lowest level in 15 years, decreasing the pipeline of possible new CPAs when 75 % of existing CPAs are at or near retirement age, Financial Times reported. Moreover, the number of individuals taking the CPA exam fell from 2016’s peak of over 100,000 to a 17-year low of just over 67,000 in 2022. The AICPA said that the rise in 2023 exam takers was due to students hurrying to take the exam before a new curriculum was introduced, and these were bound to dip again.
Knopp laments that the cost of becoming a CPA is too high, given the extra education and the opportunity cost of an additional school year.
He believes talent development can be accelerated by having them “start their apprenticeship with us earlier—really starting work, not unpaid internships.”
To qualify to become a US accountant, students must have the equivalent of five years of education and one year of work experience and pass the CPA exam. These rules are set at the state level, which means any initiative to change the rules has to be approved by 50 different state legislatures. Initially, the AICPA opposed the change, stating that the piece by piece approach was chaotic, given that someone who has a CPA license in one state could not work in another, Financial Times reported.
However, the AICPA is now working toward alternative ways to fulfill initial licensure requirements. The AICPA and the National Association of State Boards of Accountancy (NASBA) recently announced that they are soliciting comments on a proposed initiative called the CPA Competency-Based Experience Pathway to help CPA candidates meet initial licensure requirements.
In conjunction with this move, the AICPA and NASBA have also proposed changes to the profession’s model law. The proposed Uniform Accountancy Act would allow states to adopt the competency-based pathway.