US accounting qualification reforms spark industry clash

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A plan to reform the rules for qualifying as an accountant in the United States could expose firms to discrimination lawsuits and add barriers to joining the profession, according to the organization that represents the nation’s largest auditing firms.

In a private comment letter seen by the Financial Times, the Center for Audit Quality – which represents the Big Four and other large firms – slammed the proposed reforms as “unnecessarily complex” and said they could “introduce unconscious bias” into the qualification process.

The CAQ’s intervention puts large audit firms at odds with the two organizations that set rules on how to hire a certified public accountant — the American Institute of CPAs and the National Association of State Boards of Accountancy — to prevent attrition.

The AICPA and NASBA proposed in September to drop a requirement that accountants have the equivalent of five years of university education, rather than a traditional bachelor’s degree, a rule that has been blamed for dissuading young people from entering the profession.

Both organizations have proposed an alternative path to qualification: replace the fifth year of education with a one-year on-the-job training requirement by firms, which must prove that a recruit has acquired dozens of specific technical and professional skills.

The CAQ’s vice-president, Liz Barentzen, wrote in a comment letter submitted last month that the “extensive list of infrastructure efficiency, performance indicators and assessment requirements creates an unnecessarily complex system that may be difficult to apply consistently across jurisdictions”.

And he added: “Qualitative assessment frameworks can introduce subjectivity and unconscious bias into assessment processes, potentially creating employment-related problems (such as claims of discrimination) that would not otherwise exist.”

The shortage of accountants has begun to be characterized as a risk factor for some companies’ financial disclosures, and some small accounting firms have withdrawn from specialized businesses such as auditing for local governments. Industry leaders have warned that large firms could face hiring problems if the trend is not reversed quickly.

The number of people taking the CPA exam fell from a peak of 100,000 in 2016 to a 17-year low of just over 67,000 in 2022, and after a slight increase last year, the AICPA projects they will resume their decline. In the short term, the pipeline of young people taking accounting courses at university has thinned in recent years, as they gravitate towards higher-paying entry-level jobs in finance or technology.

CAQ has argued that the application of accounting to students from diverse backgrounds needs to be widened to tackle the shortage, for whom the cost of fifth year university can be particularly problematic.

The AICPA and NASBA have committed to open comment on their proposals by early 2025.

Su Coffey, the AICPA’s chief executive of public accounting, said it was “getting a supportive, diverse response” to its proposal.

“It is important that licensure pathways are clear and compelling to students. Working with NASBA and various stakeholders, we will know more in the coming months what that looks like,” he said.