Academic journal article Issues in Accounting Education

The 150-Hour Requirement and Changes in the Supply of Accounting Undergraduates: Evidence from a Quasi-Experiment

Academic journal article Issues in Accounting Education

The 150-Hour Requirement and Changes in the Supply of Accounting Undergraduates: Evidence from a Quasi-Experiment

Article excerpt

ABSTRACT

The number of accounting graduates has declined sharply following the near universal adoption of the 150-hour requirement for licensing and as a condition for membership in the American Institute of Certified Public Accountants (AICPA). This decline has led many observers to conclude that the 150-hour requirement was a mistake. Our study investigates the extent to which the 150-hour requirement (rather than other causes) is responsible for the decline in the number of accounting graduates during the 1990s. We document that approximately 38 percent of the decline can be attributed to the requirement. The other 62 percent of the decline remains unexplained. Our study underscores the importance of considering other factors such as noncompetitive compensation, unattractive working conditions, inappropriate student counseling, and inadequate curriculum among others when trying to understand the decline in accounting enrollments.

INTRODUCTION

The number of accounting graduates declined precipitously during the last half of the 1990s, and the 150-hour requirement is alleged to be an important--if not the primary--cause of the decline (Albrecht and Sack 2000, 30). This belief has caused many leaders in accounting education, practice, and journalism to characterize the 150-hour requirement as a mistake with some even suggesting outright repeal of the requirement, which the State of Colorado did recently (Colbert and Murray 2001,189). Others, particularly the leadership of the American Institute of Certified Public Accountants (AICPA) and the National Association of State Boards of Public Accountancy (NASBA), fervently reject the idea that the 150-hour requirement is responsible for the declining number of accounting graduates. Unfortunately, this debate is often based on prior beliefs and anecdotes because there exists no evidence (of which we are aware) obtained from quasi-experimental studies investigating the impact of the 150-hour requirement on the supply of accounting graduates. Our paper reports results obtained by testing the association between implementation of the 150-hour requirement and changes in the supply of accounting graduates.

Test results suggest that the decline in the number of accounting graduates associated with implementation of the 150-hour requirement--while statistically and economically significant--is much less important in explaining the steep decline in accounting enrollments than the combined effect of other exogenous factors. In particular, we estimate that the 150-hour requirement explains only about 38 percent of the decline in accounting graduates that occurred in 150-hour jurisdictions during the 1990s. Our findings are important because they provide potentially useful insights to educators, professionals, and policymakers interested in better understanding the impact of the 150-hour requirement.

The remainder of the paper is organized as follows. The second section discusses the history and current status of the 150-hour education requirement. The third section discusses our empirical method and results. The fourth section provides synthesis and concluding comments.

HISTORY AND CURRENT STATUS OF THE 150-HOUR REQUIREMENT

History behind the Requirement

The AICPA has advocated education beyond the 120-hour undergraduate degree as a requirement for CPA certification since 1959 (Nelson 2000). There was little progress toward this goal until 1988 when 30 hours of college credit beyond the 120-hour undergraduate degree became a prerequisite for those seeking membership in the AICPA beginning in the year 2000. This is commonly known as the "150-hour requirement." This action by the accounting profession was a catalytic event prompting many U.S. jurisdictions to adopt the 150-hour education requirement as a condition of CPA licensure. By January 2001, 45 of the 50 states plus the District of Columbia, Guam, and Puerto Rico had enacted the 150-hour requirement. …

Search by... Author
Show... All Results Primary Sources Peer-reviewed

Oops!

An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.