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Accounting: A Profession or an Industry?

Mary-Jo Kranacher, MBA, CPA, CFE

CPAs and others have alternately referred to accounting as a profession and as an industry. Some take offense at the notion that accounting is an “industry,” believing that term to be a slap in the face to those who have worked so hard to bring respect and prestige to accounting as a “profession.” What's all the commotion about, and what's the difference between a profession and an industry?

In an attempt to gain clarification, I consulted my Merriam-Webster dictionary. Here is what I found:

  • Profession: a calling requiring specialized knowledge and often long and intensive academic preparation; a principal calling, vocation, or employment; the whole body of persons engaged in a calling.

  • Industry: systematic labor especially for some useful purpose or the creation of something of value; a distinct group of productive or profit-making enterprises; work devoted to the study of a particular subject or author.

Accounting certainly possesses a body of specialized knowledge—Generally Accepted Accounting Principles (GAAP). And with regard to “long and intensive academic preparation,” in New York, the number of academic credits necessary to qualify for the CPA license increased by 30 additional credit hours beyond the traditional baccalaureate degree, effective August 1, 2009. New York State Senator Toby Ann Stavisky recently proposed legislation that would require that the additional credits culminate in a master's degree. Furthermore, after licensure, CPAs are required to complete 120 continuing professional education (CPE) credit hours every three years. Based on the requirements of this academic preparation, it would be reasonable to conclude that accounting is a profession.

Split Personality

These standards, however, apply only to those accountants who are licensed CPAs. Even though the recently enacted accounting reform law broadened the scope of what constitutes accounting services in New York, many non-CPAs can and do provide tax, financial planning, management, and other services also traditionally provided by CPAs. Under the new law, non-CPAs may still provide these nonattest services, but licensed CPAs are held to higher licensing and educational standards. Returning to Merriam-Webster's definitions, this non-CPA cohort might fall under the definition of “industry” as a “distinct group of productive or profit-making enterprises.” So is it any wonder that accounting seems to have a split personality?

Most other established professions restrict the practice of their trade to those who have met the requirements for licensure. These professions, such as law and medicine, enjoy a high social status and a correspondingly high compensation structure. For example, the Association for Legal Career Professionals (NALP) asserts that the average starting salary for last year's law school graduates was approximately $92,000, with starting salaries at large firms at about $160,000. According to Robert Half's 2009 Salary Guide, accountants with up to one year of experience can expect to earn between $41,000 and $60,000, depending on the size of the firm. Could it be that the salaries of those who are not licensed are dragging down the average compensation for accounting as a whole? Could they also be affecting accounting's prestige, or lack thereof?

Restricting the Practice of Accounting

Exclusivity, which is customary among most professions, limits entry to those who have met the three “E”s—education, experience, and examination. This practice would enhance the status of the technical, specialized, and highly skilled work that is accounting. I can't imagine the legal profession permitting the practice of law to anyone who has not passed the bar exam or the medical profession allowing anyone who has not passed the medical boards to practice medicine.

Regulating CPAs yet allowing others to engage in the practice of accounting unfettered by the standards and regulations by which CPAs must comply stymies our efforts to be recognized as a respected profession. Without legal restrictions and controls, maintaining standards of practice and enforcing those standards is virtually impossible.

I suppose the answer to the question I posed at the beginning of this piece is that—depending upon whether we're referring to CPAs or non-CPAs—accounting is currently both a profession and an industry.

While thinking about this issue during a conference hosted by West Virginia University, I read a poster that said “Accounting: a profession with tradition, a profession in transition, a profession of opportunity.” Let's do everything we can to live up to that billing.

As always, I welcome your comments.

Mary-Jo Kranacher, MBA, CPA, CFE. Editor-in-Chief.

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