A comparative analysis of practitioner and educator preferences regarding accounting curriculum meeting the 150 hour requirement

... School of the University of North Dakota, and is hereby approved )G&2 a^ 2 '•Mat Deai of the Graduate School in PERMISSION Title A Comparative Analysis of Practitioner and Educator Preferences Regarding. .. CPAs A considerable amount has been written about the 150- hour requirement but there is little comparative analysis of practitioner and educator preferences since actual adoption and implementation... education and research (American Accounting Association, n.d.) This is the primary accounting educator organization American Assembly of Collegiate Schools of Business (AACSB): An international accrediting

A COMPARATIVE ANALYSIS OF PRACTITIONER AND EDUCATOR PREFERENCES REGARDING ACCOUNTING CURRICULUM MEETING

THE 150-HOUR REQUIREMENT

by

David L Crawford Bachelor of Science, South Dakota State University, 1976

Master of Professional Accountancy, University of South Dakota, 1986

A Dissertation Submitted to the Graduate Faculty

of the University of North Dakota

in partial fulfillment of the requirements

for the degree of Doctor of Philosophy

Grand Forks, North Dakota

May

2008

UMI Number: 3324264

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This dissertation meets the standards for appearance, conforms to the style and

format requirements of the Graduate School of the University of North Dakota, and is

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Deai of the Graduate School

PERMISSION Title A Comparative Analysis of Practitioner and Educator Preferences

Regarding Accounting Curriculum Meeting the 150-Hour Requirement Department Teaching and Learning

Degree Doctor of Philosophy

In presenting this dissertation in partial fulfillment of the requirements for a graduate degree from the University of North Dakota, I agree that the library of this University shall make it freely available for inspection I further agree that permission for extensive copying for scholarly purposes may be granted by the professor who supervised

my dissertation work or, in his absence, by the chairperson of the department or the dean

of the Graduate School It is understood that any copying or publication or other use of this dissertation or part thereof for financial gain shall not be allowed without my written permission It is also understood that due recognition shall be given to me and to the University of North Dakota in any scholarly use which may be made of any material in

my dissertation

Signature

Date 3/411>J62

TABLE OF CONTENTS LIST OF TABLES ix ACKNOWLEDGMENTS xi

ABSTRACT - xii

CHAPTER

I INTRODUCTION 1

Theoretical Underpinnings 4 Justification or Rationale 6 Need for the Study 8 Significance of the Study 10

Research Questions 11 Delimitations of the Study 12 Terminology 13

II REVIEW OF THE LITERATURE 15

A Need for Accounting Education 15

Apprenticeships 15 Industrial Demand for the CPA 16

Collegiate Education for the CPA 19 Conceptual Framework for Accounting Education 21

1950s-An Emerging Curriculum 21

1960s - A Common Body of Knowledge 26 1970s - Educator versus Practitioner Split 29 1980s - The 150-Hour Requirement 35 1990s - The Accounting Education Change Commission 39

The 21st Century Vision 41 Experience Requirements 42

Accounting Models Meeting the 150-Hour Requirement 44

Recent Criticism of Accounting Education 50

Current State of Accounting and the Future of

Accounting Education 52

Chapter Summary 55 METHODOLOGY 59

Purpose of the Study 59

Survey Instrumentation 59

Part I - Time Commitments and Program Structure 61 Part II - Type and Amount of Specialization 61 Part III - Experience Requirements 61 Part IV - Accounting Subjects and Courses 62

Part V - Authority to Prescribe Curriculum 62 Demographic and Background Information 62 Pilot Study 63 Target Population and Data Collection 63

Data Analysis 65

RECOMMENDATIONS 86

Summary of the Study 86

Purpose of the Study 87 Review of the Literature—Brief Summary 87

Methodology—Brief Summary 90 Summary of Questions and Related Findings 91

Conclusions and Discussion 94

Conclusions 94

Discussion 95

Limitations of the Study 107

Recommendations for Further Study 107

Concluding Comments 108 APPENDICES 110 REFERENCES 128

LIST OF TABLES Table Page

1 Response Rates of Practitioner and Educator Groups 68

2 Demographic Information—Job Title/Rank, Gender, Age, and Education 69

3 Demographic Information—Years Experience, Specialization, and

Employment Status 71

4 Demographic Information—Number of Professionals in Firm or

Department, People Supervised/Students Advised 72

5 Preferences When There is no 150-Hour Requirement 73

6 Preferences When There is a 150-Hour Requirement 73

7 Preferences for Type of Specialization Area 75

8 Preferences as to Time Commitment for Specialization 76

9 Preferences for Amount of Experience Prior to Licensure 78

10 Preferences for Type of Experience Prior to Licensure 78

11 Chi-Square (X 2 ) Values With Degrees of Freedom (df) and

Significance Levels (p) for Research Questions 1-3 79

12 Means (M), Standard Deviations (SD), F Ratios, and Significance

Levels (p) for Undergraduate Courses 81

13 Means (M), Standard Deviations (SD), F Ratios, and Significance

Levels (p) for Graduate Courses 83

14 Means (M), Standard Deviations (SD), F Ratios, and Significance

Levels (p) for Stakeholders 85

15 Rankings of Undergraduate Courses With Mean (M) Ratings of

4.00 or Higher 102

16 Rankings of Graduate Courses With Mean (M) Ratings of 4.00 or Higher 102

ACKNOWLEDGMENTS

I wish to thank a number of people who have offered their time and support throughout my educational experience at the University of North Dakota

I wish to express my gratitude to Dr David Yearwood, Chairperson of my

Doctoral Committee, who has been steadfast in offering insightful help on matters related

to my educational journey at the University I offer my thanks to him not only for his knowledge and patience but also for his forthright and thoughtful opinions as a teacher and advisor

I offer my thanks to Dr Myrna Olson, Dr Lars Helgeson, Dr Harold Wilde, and the late Dr Jacob Wambsganss, who all played a unique and vital role while serving on this Committee by making recommendations that invariably improved the quality of this study Additionally, I wish to thank Dr Richard Landry for his expertise and guidance during the data collection and analysis phase of this undertaking

Finally, to my wife Trudy, and children Matthew and Rachel, I offer my sincere appreciation for your support during the past several years Without your understanding and cooperation, this achievement would not have been possible

ABSTRACT Accounting education has been controversial for several decades because of diverse interests among stakeholders regarding content, structure, competencies, and experience needed by entry-level accountants Elevating debate was the introduction and adoption of a 150-hour requirement among most of the 55 jurisdictions that regulate public accounting Although the 150-hour requirement stipulates the minimum number of credit hours and a baccalaureate or higher degree, considerable flexibility exists for accounting programs as to coursework and level of education Additionally, little

uniformity exists regarding the amount and type of experience required for certification

or licensure Such diverse conditions, along with widespread implementation of the hour requirement, prompted this study to focus on curricular components of content, program structure, and experiential requirements that are ongoing academic questions in accounting

150-Given the prominent influence on accounting education by practitioners and educators, this study surveyed both groups in an eleven state Midwest region of the United States that had adopted the 150-hour requirement Questions related to curricular issues in accountancy guided the development of survey questionnaires administered to a random sample consisting of 1,000 Managing Partners at CPA firms, and concurrently, to

187 Accounting Chairpersons from baccalaureate and higher institutions

This study found that the 150-hour requirement influences the time commitment and kind of educational structure preferred by practitioners and educators The study also revealed that neither practitioners nor educators support specialization during the formal educational experience Majorities from both accounting groups prefer two years of work experience prior to licensure for entry-level accountants with practitioners clearly

choosing public accounting over other experience There were significant differences between practitioners and educators as to appropriate subject/course offerings at both the undergraduate and graduate level However, while specific differences were identified at the undergraduate level of education, findings are more ambiguous at the graduate level Finally, both practitioners and educators ranked their own group highest among certain other stakeholder groups regarding the level of authority to prescribe curriculum

To Dr Larry W Huus, 1947-2007

CHAPTER I INTRODUCTION Formal education of accountants has long been controversial because of diverse interests among various stakeholders In addition to the question of how much education

is sufficient, the structure, coursework, topics, and competencies comprising the

curriculum have not been firmly established or uniformly accepted Curriculum as

defined by Stark and Lattuca (1997) is "an academic plan promoting purposeful learning

of knowledge, skills, and attitudes, in addition to content, sequence, instructional

processes, evaluation, and adjustments for improvement" (pp 325-330) Eisner (1979) expands this further by indicating that there are really three curricula: the explicit, the implicit and the null curricula The explicit curriculum includes the content, structure and learning objectives of the discipline and is usually stated in writing The implicit

curriculum is more nebulous and may include skills, competencies, social, and cultural values that are usually unwritten yet imparted to the student through disciplinary study or related experience The null curriculum might stem from a conscious and political

decision about what not to teach at all (de Lacey, n.d.) Therefore, while curriculum is considered a cohesive framework that integrates many features of teaching and learning, one aspect of that structure advanced by McNeil (2006) includes content found in course offerings This particular concept of the curriculum can be viewed as a subset of courses representing how a discipline will organize core and supporting program requirements

Curriculum as a concept originated with the creation of formal schooling

(McNeil, 2003) and continues to drive the structure of modern academic programs in higher education such as accountancy The ongoing quest for an appropriate explicit structural framework in accounting curriculum has elicited as much if not more debate than implicit themes related to competencies, skills, and behaviors desirable in

accounting graduates (American Institute of Certified Public Accountants, n.d.) While the popularity of implicit curriculum topics signaled a shift away from knowledge-based course content and focused attention on what Boschee & Baron (1993) describe as

outcome-based education, the more explicit curricular issues of content and program structure have not been clearly addressed by accounting educators or practitioners

Recently, this lack of clarity, together with more varied and unique program structures, prompted a proposal to prescribe specific curriculum content by the National Association

of State Boards of Accountancy (2005)

Education for individuals entering accountancy has traditionally consisted of a four-year baccalaureate degree However, for many years there have been ongoing discussions within the profession regarding the need for additional education beyond the four-year degree, which culminated in most states requiring at least five years of study in order to take the Uniform Certified Public Accountant (CPA) examination Interestingly, the issue of post-baccalaureate education for accountants has been a policy formally embraced by the predominant national practitioner group, the American Institute of Certified Public Accountants (AICPA) since 1959 (Van Wyhe, 1994) In 1988, nearly thirty years after the 1959 acknowledgement, general membership of the AICPA voted requiring all new members to have 150 semester hours of college education including a

minimum of a baccalaureate degree (American Institute of Certified Public Accountants, n.d.) Although this requirement did not take effect until after the year 2000, ostensibly, such a mandate should have ended much of the educational controversy However, many stakeholders remain unconvinced as to the value of the 150-hour requirement (Albrecht

& Sack, 2000) and are uncertain about what course content should be included in the additional year of study

There are essentially two stakeholder groups most influential in curriculum development and reform (Flaherty, 1979; Novin, Fetyo & Tucker, 1997; Rumble, 1998): public accounting practitioners and accounting educators Therefore, regardless of how one views the curriculum, it is clear that educators and practitioners play a vital role in shaping, defining, and implementing the curriculum—the stated (explicit), implied and null curriculum The fact that the stated curriculum includes a sequence of courses (American Accounting Association, 1954; American Accounting Association, 1956; American Institute of Certified Public Accountants, 1988; Needles & Powers, 1990) with

a specific number of course credits (American Institute of Certified Public Accountants, 1988; Commission on Professional Accounting Education, 1983; Covaleski, 2000; Heffernan, 1973; Russel & Smith, 2003) suggests that both educators and practitioners can and should be able to arrive at some common understanding about what constitutes a core of course work within an accounting program of study The dynamic nature of curriculum suggests a need for scholarship that examines preferred course content at the undergraduate and the post-baccalaureate graduate level while considering the 150-hour requirement that pervades the current status of accounting education

Theoretical Underpinnings Sterling (1973) asserts that harmony exists between education and practice in accounting due to educators' inclination to prepare students for employment This

mutually beneficial relationship is based largely on the notion that while practitioners may, over time, add to accepted practice, "the educator must observe, codify and teach these additional accepted practices" (p 169) This form of education aligns with the pragmatist philosophy which recognizes that shared human experiences can result in ideas for solving problems and ultimately asks whether an idea works (Gutek, 2004) However, to merely exclaim that accounting is based upon what works is also an over simplification of what practice really is, for unless practice can stand up to theoretical scrutiny, it is bound to fail Justifiably, practice must be subjected to rigorous critical inquiry that is largely the responsibility of the academic community via related research

An additional consideration oft debated among accounting professionals is the need for relevant experience following formal education (American Accounting

Association, 1972; American Institute of Certified Public Accountants, 1969;

Graves, 2004; Perry, 1955) While it may seem obvious that experience is desirable for the professional development of an accountant, the required amount and type of

experience has never been clear or uniformly accepted Early in the 20th century, partly due to the limited educational requirements that could be imposed at the time, accounting practitioners concluded that no single criteria was sufficient to assure competence and thus formal education followed by success on the Uniform CPA examination and a relevant experience requirement became the accepted practice

This combination of requirements is in accord with the pragmatic thinking of many educators influenced by John Dewey at the time (Previts & Merino, 1998) While some misinterpreted Dewey's brand of progressive education to mean narrow vocational skills, Dewey really advocated experience that builds on previous education as the

connectedness that promotes growth of the individual (Dewey, 1938) Dewey's idea of systematically solving problems coincides with how most accountants view their work role and appears to be a major force driving the framework of accounting education to this day Tanner and Tanner (1995) point out that what Dewey referred to as the scientific method was a form of systematic inquiry that he often alluded to as reflective thinking free from rigid or sequential constraints According to Dewey (1916), meaningful

experience requires an element of thought or reflection and is far superior to mere trial and error Such experience expands one's conceptual framework and promotes the

application of learning to a multitude of situations that vary from the initial experience (Dewey)

Essentially, linking scholarly activity with practical experience that builds on formal learning has permeated professional accounting education for decades and has been a pragmatic conduit for imparting theory into practice In essence, experience

coupled with life-long learning has become part of the implicit accounting curriculum

A speech by Hensler (1990) to an accounting symposium regarding the

background and recommendations for accounting education included: "The common thread that weaves through twenty years of commissions and committee reports is the need to hire and retain professional accountants with broad liberal-arts backgrounds " (p 63) Indeed, this theme appears in the literature almost from the beginning of

discussions concerning accounting as a profession (Previts & Merino, 1998) and has continued to carry forward to the present Early authors on accounting education such as Kester (1936) and Carey (1937) stressed the need for a liberal education followed by specialized training in accounting as the ideal education for accountants Later studies adhered to this concept and established a general model with liberal education consisting

of approximately 50% of the coursework and an equal split between business and

accounting courses for the other 50% (American Accounting Association, 1954) This concept of a broad based education is significant because it purports to distinguish

accountancy from a technical trade, thus influencing the structural makeup of accounting programs In addition, a liberal-arts background is complicit with other disciplines

worthy of collegiate level study and presents evidence supporting the conceptual nature

of knowledge in the field

Given the 150-hour mandate that most states are now required to follow, the issue

of educational breadth versus specialization becomes more urgent While four-year accounting programs have generally provided little if any option for specialized studies within the curriculum, the concept of using the additional credit hours for more focused and in-depth study in accounting is worthy of consideration

Justification or Rationale The actual certification and licensing of public accountants takes place at the state level The AICPA mandate for membership prompted most state regulatory jurisdictions

to pass legislation requiring 150-hours of education for those taking the CPA exam In response to this requirement, colleges and universities with accounting programs

attempted to address the issue through appropriate changes but have not done so

uniformly Essentially, there is a fair amount of flexibility as to how institutions of higher education may choose to deal with the 150-hour issue (Williams, 1990) Some accounting programs treated the extra 30 hours as undergraduate credits while others have opted for graduate credits Currently, many accounting programs (Covaleski, 2001; Ethridge & Hemmingway, 1993) continue to offer the traditional baccalaureate degree of

approximately 120 hours and recommend that students consider additional study in a second major as fulfilling credit requirements Others (Donelan & Reed, 2000;

Rumble, 1998; Shafer & Kunkel, 2001) have implemented 150-hour baccalaureate

programs or have modified and created masters level graduate programs that provide for both the bachelor's and master's degrees in accounting While flexibility that affords differences in accounting programs has merit, the resulting unique programmatic and curriculum variations have created additional controversy among stakeholders and

licensing j urisdictions

Many accounting educators have been unsupportive of the 150-hour requirement while questioning the necessity and cost of advanced and graduate education for entry level accountants (Albrecht & Sack, 2000; Anderson & Griffin, 1963) and have often advocated for a well planned and reasonably rigorous four-year program to educate entry level professionals (Mautz, 1974) Practitioners have generally been supportive of

additional education requirements whereas accounting educators have often been opposed

to the practice point of view concerning the amount, type, and level of education that is best suited for accountants (Colson, 2002; Kerrigan, 1959; Miller & Bahnson, 2003; Rimmerman & Daroca, 1990) Academics have historically viewed accounting education from a broader disciplinary perspective that favors a balanced approach in financial and

managerial topics whereas public accounting deals primarily with financial and audit services that elicit different emphases in a curriculum Regarding curricular content and structure, it is unclear as to where practitioners or educators stand in relation to each other given the mandated changes for increased education meeting the 150-hour requirement

Need for the Study For decades, there have been calls for more research related to the structure of accounting programs (Rebele, 2002) Referring to the common body of knowledge disseminated in the 1967 Horizons study, Mautz (1974) stated: "we have not yet had the kind of consideration that is needed to determine how that common body of knowledge might best be put together in an educational program" (p 359) Williams, Tiller, Herring

& Scheiner (1988) noted that work concerning the structure of accounting curriculum remains to be done and that "a related question of how the dual characteristics of

accounting programs—professional education at the undergraduate and master's

levels is related to academic structure" (p 136) An indication that these questions have yet to be answered can be confirmed by considering the recent American Accounting Association (2006) call for a study to examine the common body of knowledge at both the undergraduate and graduate levels, or from Allen and Woodland (2006) who indicate that an issue still remaining is "what academic content should be required in the 150 hours?" (p 174) Should the additional education be geared towards specialization, or should it increase the breadth of the education? Together, these questions are central to the curriculum and elicit a pressing need for additional research into the form, content, and structure of accounting programs

Closely related to the time commitment, content, and make-up of formal

education is the matter of amount and type of experience needed for the practice of public accountancy prior to licensure Experience and formal education are issues not easily divorced if reasons for the requirements—protection of the public from incompetent practitioners—is to be considered Indeed, it was this notion of complementing what formal education could not do (Merino, 1977) that prompted licensing jurisdictions to mandate experience Over the years, this requirement has been debated (Commission on Standards of Education and Experience, 1956) and jurisdictions, while generally

requiring some form of experience, are by no means uniform (American Institute of Certified Public Accountants and National Association of State Boards of Accountancy, 2000) Consequently, there is a need for more information regarding accounting

curriculum as it relates to the preferred amount and type of experience necessary prior to licensure

Recent action by the National Association of State Boards of Accountancy

(NASBA) in an attempt at prescribing curriculum content is an indication that curricular choices are in need of attention by interested stakeholders involved in the educational process There appears to be a need for information that helps explain what is wrong in accounting education and how to go about improving it Systematic research in the area

of accounting education should help to answer critical questions by providing data that will guide future policy making in the area (Reckers, 2006) Absent such research,

concerned stakeholders (i.e., practitioners, educators, and others) will continue to be at odds with politically motivated special interest whims having little concern regarding the appropriate academic preparation of CPAs

A considerable amount has been written about the 150-hour requirement but there

is little comparative analysis of practitioner and educator preferences since actual

adoption and implementation of the mandate This shortage of information has

contributed to a lack of clarity with respect to preferred program structure, the amount of specialization, and the level at which specific accounting coursework should be offered Consequently, a fundamental question posed by Tyler (1950) regarding effective

organization of educational experiences is in need of attention

Both the educator and public practitioner groups are, and should be, instrumental

in the formulation of accounting curriculum While the educator is often considered an expert on curriculum issues, there appears to be support for new paradigms to begin at the grassroots level Tanner and Tanner (1995) note: "Paradigms are not concocted out of hat, but from the world of practice" (p 229) Apparently, there is sufficient precedent to include both the practitioner and educator as legitimate contributors when it comes to curricular change

Significance of the Study Controversy over the 150-hour requirement continues While it is unlikely the requirement will be reversed, there is a need to increase the knowledge base in

accounting education and lend focus to potential changes in curricular components that constitute accounting programs of study Williams, et al (1988) noted a trend toward longer education requirements for accounting students before entering practice and observed: "work on the content and alternative structures for five-year programs will contribute to knowledge of accounting education in general and will be of great value to those schools that have not yet made the transition" (p 136) This comment seems even

more timely now that nearly all jurisdictions have passed the 150-hour requirement leaving accounting programs searching for curricular guidance

The recent proposal by NASBA in an attempt to provide clear guidance has led many to wonder who really has authority to make prescriptive curriculum changes Given the nature of this debate, the issue might be too important to leave in the hands of any one group Educators alone cannot be left with the burden of implementing requisite change, nor can practitioners afford to endure vicarious accounting failures leading to mandated regulatory changes in order to protect the public Indeed, a starting point might be to clearly define where these groups agree and disagree with respect to accounting

education

A study examining preferences of the academic and public practitioner emerged

as appropriate given the historical and current controversy regarding accounting

curriculum and experience requirements This investigation imparts insight into what educators and practitioners believe regarding program form, structure, and content that meets the 150-hour requirement and at which level—undergraduate versus graduate— core accounting courses should be offered This analysis also contributes to an

understanding of where different perspectives are most acute by lending clarity to issues affecting policy makers wishing to focus the experiential debate

Research Questions The investigation was designed to consider curricular preferences of those CPAs

in the practice of public accounting and those educators that are preparing students for entry into practice The following research questions served as a guide in conducting this study:

1 To what extent do public practitioner and educator preferences differ

regarding time commitments and program structures when (a) there is no 150-hour educational requirement for certification and licensure, and (b) there

is a 150-hour educational requirement for certification and licensure?

2 To what extent do public practitioner and educator preferences differ

regarding the type and amount of curricular specialization within the formal educational structure?

3 To what extent do public practitioner and educator preferences differ

regarding the amount and type of work experience that should precede a license to practice public accounting?

4 To what extent do public practitioner and educator preferences differ as to (a) accounting subjects or courses most appropriate in comprising a common core for all accounting students at the undergraduate level of study and

(b) accounting subjects or courses most appropriate to graduate level

accounting students following an undergraduate common core?

5 To what extent do public practitioner and educator preferences differ as to the level of authority that certain stakeholders should have in prescribing

Michigan, and Minnesota These states have passed some form of legislation requiring

150 credit hours of education on or before July 1, 2006 These eleven states were also chosen because they make up the Midwest Region of the American Accounting

Association (AAA) and constitute a manageable geographical area for the study

Terminology The following terms are provided for the reader to add uniformity of

understanding in the study Where the definitions are not cited, the researcher has

developed the definition as it relates to this study

150-hour requirement: A legal requirement that any candidate for the CPA exam

must have completed 150 semester hours of collegiate education including a

baccalaureate degree Most jurisdictions require 150 hours to take the exam while a few have enacted legislation allowing candidates to take the exam with 120 hours but require

150 hours prior to licensure

Accounting educators: Accounting instructors and professors working in higher

education

Accounting practitioners: For purposes of this study, CPAs presumed to be

working in the profession of public accounting

American Accounting Association (AAA): A voluntary, national organization of

persons interested in accounting education and research (American Accounting

Association, n.d.) This is the primary accounting educator organization

American Assembly of Collegiate Schools of Business (AACSB): An international

accrediting agency founded in 1916 with adoption of accreditation standards in 1919 for business schools and programs (Association to Advance Collegiate Schools of

Business—International, n.d.) The name was later changed and currently the acronym stands for Association to Advance Collegiate Schools of Business—International

American Institute of Certified Public Accountants (AICPA): A voluntary,

national, professional organization of Certified Public Accountants (American Institute of Certified Public Accountants, n.d.) This is the predominant professional organization for practicing accountants

Certified Public Accountant (CPA): A person licensed by a state (jurisdiction) to

practice public accounting as a profession, based on having passed the CPA examination and having met certain educational and experience requirements (Whittington & Pany,

2006, p 23) The individual may or may not be engaged in the practice of public

accounting

Entry level accountant: A recent college graduate who is looking for the first job

as an accountant or is in the first year of employment as an accountant (Gustafson, 2004, P- 7)

Financial accounting: Concerned with the production of information for external

parties such as stockholders, suppliers, banks, and government regulatory agencies (Warren, Reeve, & Fess, 2005, p 12)

Management accounting: Concerned with the production of information for

managers within an organization (Warren, Reeve, & Fess, 2005, p 12)

National Association of State Boards of Accountancy (NASBA): An organization

serving as a forum for the 55 U.S boards of accountancy (National Association of State Boards of Accountancy, n.d.) The state boards of accountancy are jurisdictions that regulate the certification and licensure of accountants working in public accounting

CHAPTER II REVIEW OF THE LITERATURE Reviewed in this chapter are literature and research related to the past and present state of accounting education in the United States including the 150-hour requirement for entry into the public accounting profession First, a brief historical account of the need for and progression of accounting education is presented Second, a chronological review of literature related to the evolution of a conceptual framework for accounting education is provided Third, ongoing debate regarding experience requirements in public accounting

is noted Fourth, structure and content of various accounting educational models meeting the 150-hour requirement is discussed Fifth, recent criticism of accounting education is conveyed for perspective Finally, the current state of accounting education is articulated with the anticipation of developing a coherent future outlook

A Need for Accounting Education

Apprenticeships

Although the profession of accountancy has been around for well over a century,

it is in a stage of infancy when compared to where education might ultimately lead and the extent to which it lags behind traditional learned professions of medicine, law, and

theology In an early article addressing accounting education, Kester (1936) pointed out

that each profession begins by providing, through self-taught practitioners, services needed by society Apprenticeships were first introduced to transmit one's experience and

as sufficient knowledge was accrued, professional schools were established that utilized scholarly activity to facilitate learning Later, as the body of knowledge increased and was documented, accounting education moved away from the apprentice type of training and into the classroom where work was based on one's academic initiative and reflection (Kester) Dewey (1916) noted that as society advances and complexity increases, learning via experiential means such as apprenticeships becomes increasingly difficult

Essentially, in complex disciplines, it is impossible to convey the requisite knowledge completely outside of a formal educational structure (Dewey)

According to Gustafson (2004), an apprentice type of system tends to develop practitioners by involving them in the very narrow, technical focus of entry-level

accountants Additionally, through the early part of the 20th century, most practitioners were held to the Scottish model of preliminary examination to determine the capabilities

of new entrants to accounting This examination was not an examination of accounting knowledge and skills, but rather, a general examination of competency in writing,

mathematics, the liberal arts and sciences (Previts & Merino, 1998) A requirement for grounding in the liberal arts was perceived as important at the end of the 19th century, because it was associated with "professional" status and, to a limited extent, this

perception has continued to the present

Industrial Demand for the CPA

After the Civil War, transformation from an agrarian economy to one based on industrialization rapidly emerged in the United States Along with industrialization came the need for individuals versed in the methods of modern business affairs including accounting and auditing While there was a certain amount of success teaching business

courses at commercial schools in the late 19th century, the first truly successful collegiate business school was the Wharton School at the University of Pennsylvania in 1881 (Van Wyhe, 1994) Over the next decade, business and accounting education was

introduced as legitimate university level study

The emergence of the CPA designation from passage of 1896 New York

legislation which protected the use of this title and required certified accountants to pass a qualifying examination was a huge step in the development of a professional image Other states promptly followed New York's lead in establishing a governmentally

protected and recognized profession (Langenderfer, 1987)

Gaining acceptance of business and accounting courses as legitimate subjects in higher education in the late 19 century was no small task The introduction of

accounting courses at universities took time, but progress was made in the early 1900s due to the need for educated individuals who could pass the CPA exam along with other governmental requirements that encouraged knowledge of the new corporate and

individual income taxes established in 1909 and 1913 respectively (Langenderfer, 1987) Whereas there were just 12 institutions of higher education offering accounting courses in

1900, by 1920 the majority of colleges and universities in the United States offered accounting programs of study (Langenderfer) with a curriculum that largely mirrored requirements for the CPA exam

In addition to the work of accountants in promoting the need for a post secondary education to match the industrial demands, there were much broader developments during those years that would leave an indelible mark on collegiate education while opening the door for more practical subjects like accounting Prior to the Civil War,

collegiate study was largely a prescribed classical type of curriculum taken

predominantly by the upper class as a right of social passage versus an academic pursuit (Rudolph, 1962) Noting the necessity to motivate youth, while also bringing science and more modern subjects into equality with the classical and traditional, President Charles Eliot, of Harvard, introduced an elective system that usurped much of the traditional prescriptive education (Rudolph) and which ultimately became universally recognized around the country as the new form of "liberal" education Additionally, the passage of the Morrill Acts in 1862 and 1890 opened the door for much more comprehensive

education in this country than just utilitarian agriculture That seminal legislation, to a great extent, allowed for democratization of higher education by expanding opportunities for educational access to many beyond the privileged classes Mumford (1940) saw the emergence of land grant colleges as representing, more than most, the gradual shift from traditional scholasticism to humanism Many of those institutions served well in helping

to temper an elitist movement in higher education by providing useful knowledge and education for many people that have contributed greatly to the country's economic infrastructure

While there was significant success in the early 1900s with respect to accounting education, the prolonged debate about the type and amount of education was emerging Some stakeholders felt that education of accountants should be narrow and practice oriented following a technical path allowing for success on the CPA exam, and others, including many practitioners, believed that educating accountants should be broad and allow for a better theoretical and conceptual base This argument of conceptual versus technical knowledge continues to a certain degree through the present Regardless of the

debate, by 1921 all states had CPA laws that generally required only a high school

education and some experience to take the CPA exam in order to become licensed Most students, however, found that a collegiate education was necessary to successfully enter the profession (Van Wyhe, 1994)

After the 1929 stock market collapse, the United States government stepped in with legislation in the form of the Securities Act of 1933 and the Securities Exchange Act

of 1934, which created the Securities Exchange Commission (SEC) and, among other things, required audits by CPAs of publicly traded corporations whose shares were traded

in interstate commerce (Rees & Rees, 2004) Effectively, such legislation greatly changed the auditor's responsibility from the corporation to predominantly the investing public Although it was still the corporate client that would hire and pay the accountant for auditing services and from whom there would be considerable input, the ultimate

responsibility of the CPA was to the investor (Starkey, 1934)

Collegiate Education for the CPA

While some authors advocated for a five-year course of study beyond high school for the professional accountant (Kester, 1936; McCrea & Kester, 1936), few states had any collegiate educational requirements in the early 20th century New York was the first state to require a college degree for CPAs, having passed legislation in 1929 that

mandated a college education for anyone taking the exam after January 1, 1938 (McCrea

& Kester, 1936) It was apparent that higher education created more status for

accountants, but it was New York's prominence in the financial world which prompted other states to follow (Van Wyhe, 1994) States slowly adopted requirements of

collegiate education for accountants and universities responded by providing

predominantly undergraduate education in accounting to meet the demand For many years, the standard education of accountants was a four-year baccalaureate degree with a major, or emphasis, in accounting

Largely, the need for college-educated accountants came about because of the state CPA law requirements While the CPA exam has long been a national uniform test

of competency in accounting, the states have the legal right to regulate accountants in public practice in order to protect citizens from receiving inadequate or incompetent accounting services Many states have long prescribed rigid requirements including a college degree, whereas others have only recently increased educational requirements, previously substituting significant experience in lieu of a college education In short, there has been wide disparity of education and experience requirements among the states

According to Pierson (1959), an evaluation of typical accounting programs in the 1950s identified required courses from three areas which included a certain amount of liberal or general studies, general business studies, and accounting studies Most four-year degree programs required 120 to 128 total semester credit hours with accounting courses constituting from 24 to 30 hours, including accounting principles, intermediate accounting, advanced accounting, cost accounting, auditing, and income tax Later, a course in accounting information systems was added to the mix of courses (Van Whye, 1994)

In a recent study of 18 four-year institutions in Nebraska, Garvin (2006) noted that curriculum development should focus on common competency development for both management and public accounting students in the first four years The 18 institutions:

have eight courses in common; these are Accounting I, Accounting II,

Intermediate Accounting I, Intermediate Accounting II, Cost Accounting,

Accounting Information Systems, Auditing, and Federal Income Tax

Accounting The Accounting I and II courses are often taken by students

in the second year, the Auditing and Federal Tax Accounting often taken

in the fourth year, and all other courses often taken in the third year of a

conceptual framework that articulated the exact structure of how an appropriate

knowledge base could be advanced It might be fair to say that such a framework is ongoing and what currently exists can be discovered only through careful examination of the present state of education and how its acceptance has evolved over time

Conceptual Framework for Accounting Education

1950s-An Emerging Curriculum

Typical titles of courses found in most college accounting programs were

common by 1950, but Perry (1955) and other accounting leaders believed there was a need for more uniformity in order to facilitate progress and raise standards in states with low entry requirements Over the next fifty years, numerous studies and commissions were charged with determining the type of academic and experiential training most needed by accountants This evolution of a common body of knowledge for entry-level

accountants has, more than most developments, been the underpinnings of a conceptual framework for accounting education

In 1954, the American Accounting Association published a Report of Standards

Rating Committee which was a culmination of five years of work by the committee This

committee recommended three general classifications of academic courses for an

accounting curriculum (American Accounting Association, 1954):

Liberal (general) education making up approximately 50% of the total

curriculum General business studies constituting approximately 25% of

the curriculum Accounting studies representing approximately 25% of the

curriculum, (p 43)

The percentage breakdown among general studies, business courses, and

accounting courses of 50/25/25 had strong intuitive appeal and has remained fairly representative of most four-year undergraduate accounting programs to the present day Programs meeting the 150-hour requirement have tended to vary from this allocation by requiring approximately the same amount of credits in general education as the four-year programs

A report published by the AAA Task Committee on Standards of Accounting Instruction which was a successor to the Standards Rating Committee used a

questionnaire to gather information regarding undergraduate courses taken by accounting majors in the mid 1950s The questionnaire was mailed to most schools in the United States that offered a major in accounting and had a usable response from 100 institutions Those findings were published and included a table of "Typical Curriculum for

Accounting Majors" (American Accounting Association, 1956, p 41) that illustrated the

breakdown of non-business courses, general business courses, and accounting courses Interestingly, the table conformed exactly to the 50/25/25 ratio as advocated in the

Standards Rating Committee Total average credit hours numbered 126 with accounting and general business courses each composing 31 of the total while the remaining 64 credits were general or non-business education

A Commission on CPA Standards was formed in 1954 and represented a number

of interested stakeholder groups charged with formulating standards of education and experience The study, known as the Perry Commission, issued its report in 1956 titled

Standards of Education and Experience for Certified Public Accountants This landmark

study supported the mix of courses as promoted in the 1954 AAA report and added substance with respect to formal education and experience The Perry Commission is often cited as the first major study to call for collegiate education beyond the traditional four-year degree Most notably, the study referred to the fact that the breadth of

knowledge needed by the CPA is beyond what can be accomplished in a typical

undergraduate program and favored academic study beyond the bachelor's degree The Commission also recommended an elimination of any formal experience requirement for entry into the accounting profession while qualifying this recommendation with the likelihood that it would be unrealistic for a CPA to practice without first gaining

experience (Commission on Standards, 1956)

The Perry Commission recommendations were quite controversial to most

practicing CPA's who had come to rely upon both education and experience as important components of training for new accountants While the additional education was widely accepted by many stakeholders, the idea of promoting certification and licensure of a new

college graduate without requisite experience was near heresy to the practitioners

Van Whye (1994) notes the idea of dropping an experience requirement was discrediting

to the point of crippling the Commission's credibility

Shortly thereafter, both the AICPA and the AAA formed committees to study the Perry Commission's report The AAA Committee on Professional Education in

Accounting agreed with the integration of the liberal non-business areas with the general business and technical accounting studies while also recommending some form of

advisory accreditation for accounting programs This Committee (AAA) also envisioned

an over-all program of study to range from four to six years with an "evolution" of most four-year programs to five years (American Accounting Association, 1959)

The AICPA committee (referred to as the Bailey Committee) rejected the Perry Commission's recommendations of an accreditation body and of not requiring

experience, but did agree that students should take the CPA exam upon graduation while deferring actual certification until the experience requirement was met This Committee recommended that additional education was desirable and noted "as soon as it is feasible postgraduate study devoted principally to accountancy and business administration should become a requirement for the CPA certificate"(American Institute of Certified

Public Accountants, 1959, p 66) Consequently, the AICPA approved the

recommendation of the Bailey Committee as official policy in 1959

Two other reports that surfaced at about the same time were critical of accounting

education in general One study, titled Higher Education for Business financed by the

Ford Foundation reported that there was too much specialization in accounting programs for a four-year degree resulting in business schools that "inevitably act as trade

schools"(Gordon & Howell, 1959, p 132) The report noted that such narrow training did not belong in collegiate education A two year graduate degree such as a Master of

Business Administration (MBA) emphasizing analytical and behavior skills built on a four year liberal arts degree was the preferred education for business people including industrial accountants, while public accountants should take an undergraduate degree with a limited number of accounting courses followed by a fifth year of accounting and business courses

Another foundation study sponsored by the Carnegie Foundation and chaired by

Frank Pierson was also published in 1959 titled, The Education of American

Businessmen: A Study of University-College Programs in Business Administration This

book assesses the different approaches to academic preparation for business careers by advocating a liberal arts undergraduate background The Pierson report, as well as others (Kerrigan, 1959) were critical of the domination of public accounting because of the CPA requirements and called for programs to develop curriculum on sound academic

principles rather than on the CPA examination requirements The Pierson report

recommended that postgraduate accounting programs "should be developed within the framework of high-quality master's programs, thus making it possible for 'professional accounting' to draw upon the courses in Policy Making, Decision Making, Concepts of Administration, and other management courses forming the core of the master's

program" (Pierson, 1959, p 388) Such language seemed a clarion call for degrees along the lines of Master of Accountancy programs that are closely linked to the MBA core

In a follow up to both of the foundation reports, the AAA sponsored a study to comment on the reports and indicated that over the years, the breakdown from various