KPMG LLP has become the first among the Big Four accounting firms to publicly support swapping the extra 30-hour academic requirements with work experience or work-study programs as an alternative to reduce the burden of 150-hour credits needed to become a CPA and address the shortage of accountants.
This comes as fewer students have been studying accounting in the past few years. Without addressing the problem, it will be harder and harder to hire and retain accountants and auditors.
The Bureau of Labor Statistics found that more than 300,000 accountants and auditors quit their jobs between 2019 and 2021. And students getting a bachelor’s degree in accounting decreased 7.8% from 2021 to 2022 following a steady decline of 1% to 3% a year since 2015 to 2016.
“While we can recruit the talent we need today, we have a brewing crisis that will impact accounting firms and corporations. We need to absolutely address it in the very near term,” said KPMG US Chair and Chief Executive Officer Paul Knopp in an emailed statement on October 9, 2024.
And research by MIT and the (CAQ) found that the 150-hour rule, which effectively adds a fifth year of study, is a barrier, especially among students of color.
In particular, there was a 13% greater entry decline following the implementation of the 150-hour requirement for minority than non-minority CPA candidates, according to a December 2023 academic paper by MIT professor Andrew Sutherland.
“Our analyses of parental income and financial aid availability point to a socio-economic status channel explaining the differential entry declines,” the paper states. “Studying exam passing patterns, professional misconduct, and job postings we find a deterioration, or at best, no change in CPA quality following enactment.”
The CAQ also found that the 150-hour requirement is a top barrier across the board, though it is even more pronounced for Black and Latino students.
“The cost of becoming a CPA has become too high, including both the cost of the extra education and the opportunity cost of spending an extra year in school,” KPMG CEO Knopp said. “We can accelerate the development of talent by having people working with us earlier, especially as data and technology fundamentally change the nature of the profession. Hands-on experience with data and technology at the cutting edge is incredibly valuable.”
For example, KPMG equipped its 10,000 tax professionals with a tax generative artificial intelligence (AI) tool and the enterprise version of Copilot. And the firm estimates the burden spent on this type of work was reduced by 10% to 20% in one year.
The Big Four firm uses more than four times the number of advanced technology for audit work compared to three years ago.
In the meantime, some states have already taken action. Oklahoma passed legislation lowering the hour credits needed to 120, for example.
The AICPA and the National Association of State Boards of Accountancy (NASBA) in September issued a proposal—CPA Competency-Based Experience Pathway—that would provide flexibility.
CPA candidates would be allowed to meet initial licensing requirements by exhibiting competency in specific professional and technical areas; for example, ethical behavior, critical thinking skills, and communication. Technical competencies include audit and assurance services, tax engagements, and financial reporting. Candidates would still be required to get a bachelor’s degree, complete one year of general experience, and pass the CPA exam, which would be equivalent to 150 hours.
“KPMG supports alternative pathways to CPA licensure that emphasize experience after one earns a bachelor’s degree,” said a spokesperson. “Conversations across the country are a step in the right direction in that they recognize the consensus for change, but the details matter. Importantly, any change needs to create a simpler approach to both licensure and automobility.”
While the 150-hour requirement has been a key barrier, there are other reasons, including relatively low starting salaries compared to other professions, especially in finance and data technology. And KPMG said that it has raised starting salaries by about 25% in three years, which is nearly double the rate of inflation.
Its CPA Kickstart program pays new hires to prepare for the CPA exam. The firm said that last year 266 opted into the two-month, 40-hours-per-week program to study for the exam.
In addition, the firm has been changing the so-called busy season experience. Compared to 2020, the average weekly hours worked on audit engagements from early January to early March declined by 18%. Further, the percentage of staff working no hours on the weekend increased from 20% to 40% of the firm’s practice.
This article originally appeared in the October 15, 2024, edition of Accounting & Compliance Alert, available on Checkpoint.
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