The effect of the 150 hour requirement on the national number of bachelor of accounting degrees awarded

... permission of the copyright owner Further reproduction prohibited without permission THE EFFECT OF THE 150- HOUR REQUIREMENT ON THE NATIONAL NUMBER OF BACHELOR OF ACCOUNTING DEGREES AWARDED Troy... the 150- hour requirement has had no affect on the number of accounting graduates before the adoption of the 150 credit -hour requirement compared to after the adoption of the 150 credit -hour requirement. .. copyright owner Further reproduction prohibited without permission THE EFFECT OF THE 150- HOUR REQUIREMENT ON THE NATIONAL NUMBER OF BACHELOR OF ACCOUNTING DEGREES AWARDED Troy Luh, B.B.A., M.Acc.,

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NATIONAL NUMBER OF BACHELOR OF ACCOUNTING DEGREES AWARDED

Troy Luh, B.B.A., M.Acc., M.S.V.S

A Dissertation Presented to the Faculty of the Graduate School o f Saint Louis University in Partial Fulfillment o f the Requirements for the Degree o f Doctor o f Philosophy

2003

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Copyright 2003 by Luh, Troy Vaun All rights reserved.

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2003

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NATIONAL NUMBER OF BACHELOR OF ACCOUNTING DEGREES AWARDED

Troy Luh, B.B.A., M.Acc., M.S.V.S

A Digest Presented to the Faculty of the Graduate School of Saint Louis University in Partial Fulfillment o f the Requirements for the Degree of Doctor o f Philosophy

2003

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The purpose of this paper was to determine the effect of the 150-hour requirement on the number of accounting graduates Research indicates that there has been a decline in the number o f accounting graduates over the past 10 years Some accounting practitioners and educators believe that adoption o f the 150- hour requirement, which amounts to an additional year o f coursework, has had a substantial negative impact on the number of accounting graduates This research analyzed graduation data from accounting programs in states that had adopted the 150-hour requirement where three years of graduation data was available before and after the adoption of the requirement.

This research also analyzed data from institutions that have not adopted any legislation relating to the 150-hour requirement to determine if there is any correlation between institutions in adopting and non-adopting states

This research indicated, based on a two-tailed t-test, that there was a significant difference in the three-year average number o f accounting graduates before and after the adoption o f the 150-hour requirement However, further analysis indicates that there was already a downward trend in adopting institutions before the adoption o f the 150-hour requirement The research also showed that the percentage of accounting graduates remained at a relatively constant

percentage o f total business graduates over the eight-year period analyzed

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There was also a significant correlation between the trend in the number o f accounting graduates from institutions in adopting states and institutions in non­adopting states In fact, in some cases the decline in accounting graduates was more significant in institutions in non-adopting states The total number of accounting graduates from all reporting institutions nationwide (totaling more than 1,500 institutions) also showed significant decline.

Other studies have indicated that the decline in interest in accounting programs is related more to the students’ perception o f accounting programs more than the 150-hour requirement More research needs to be done to determine what factors affect a student's choice to enter the accounting profession

There are already programs such as the American Institute o f Certified Public Accounting’s Champion Program (AICPA), which encourages a student membership and participation in AICPA sponsored events

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Professor Richard Breslin

Chairperson and AdvisorAssociate Professor Gerard A Fowler

Associate Professor Dorothy D Miles

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This dissertation is dedicated to my late mother Maureen J Luh, whose great sense o f humor and indomitable spirit will be with me always, and to my father, Elbert G Luh, Jr., for his honesty, integrity, and acceptance o f whatever path I chose With love, to my wife, Katherine, my best friend and the most beautiful person I know Thank you for your patience, kindness, understanding, and love To my “guys,” Ryan, Matthew, and Keith, I love you to the end o f the universe, and back.

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There have been many people that have influenced me during my professional and academic career I have had many excellent teachers that have helped shape my thoughts, ideas and teaching style I would like to recognize a few of them individually.

David Williams, a fellow graduate student that encouraged the idea of completing a Ph.D Professor Richard Hammar at Evangel University who encouraged his students to view learning as “Sutter’s Mill”, worth great riches Phillip Harsha, Ph.D., at Southwest Missouri State University for his leadership, friendship and jump shot Harvey Wallace, partner at Brown Smith Wallace, L.L.C., for his great flexibility and understanding Donna Beck Smith for her encouragement and insightful edits My father, Elbert G Luh, Jr and late Mother, Maureen J Luh, for encouraging me to do my best and accepting whatever outcome

Dorothy Miles, Ph.D., a member o f my dissertation committee, whose help included valuable technical expertise Gerard Fowler, Ph.D., also on my committee, for helping and counseling me during a large part o f this program A special thanks to Richard Breslin, Ph.D., the chair o f my dissertation committee at

St Louis University, who took an extra interest in my career and provided to me extraordinary leadership and friendship

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energize me after a hard day o f work and school with many hugs and kisses My wife, Katherine, for her countless hours editing my paper, listening to my ideas, and supporting my dream.

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LIST OF TABLES ix

LIST OF FIGURES xi

CHAPTER 1: HISTORY OF THE 150-HOUR REQUIREMENT 1

Introduction 1

Legislation 4

R ules 5

The AICPA’s Desired Result 7

Decline in Accounting Graduates 9

Statement o f Hypothesis 14

Research Questions 14

CHAPTER 2: REVIEW OF RELATED LITERATURE 18

The 150-Hour Background 18

Background 20

Other Developments 22

Accounting Enrollment Trends 24

Specific Desired Attributes 30

Professional Demeanor 31

Problem Solving and Decision Making 32

Interaction 33

Leadership 34

Communication 34

Project Management 35

Leverage Technology to Develop and Enhance Personal Competencies 36 Implementation o f Desired Skills Into Curriculum 37

CHAPTER 3: RESEARCH METHODOLOGY 39

Operational Definitions 40

Participants 41

Instruments 42

Design 44

Procedure 47

Data Analysis 48

Summary 49

CHAPTER 4: RESEARCH FINDINGS AND ANALYSIS 51

Data Gathering 51

Research Question 1 51

Adopting Institutions 52

Research Qestion 2 54

Non-Adopting Institutions 54

Research Question 3 54

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Research Question 4 66

Total Bachelor’s Degrees Trend 66

Research Question 5 75

Bachelor’s o f Business Degrees Trend 77

Bachelor’s o f Business Degrees by State 83

Research Question 6 87

Percentage Trend in Accounting Degrees to Total Degrees 87

Research Question 7 92

Percentage Trend in Accounting Degrees to Total Business Degrees 93

Research Question 8 98

Comparison of Three-Year Average Before and After 150 98

Two-Tailed t-test 99

Research Question 9 110

Comparison of 3-Year Percentage of Total Graduates Before and After 150 I l l The Wilcoxon Signed Ranks Test 111

Research Question 1 0 120

Comparison o f Three-Year Percentage of Total Business Graduates Before and After 150 121

SPSS Tables 122

Research Question 1 1 130

Overall Trend in Accounting Graduates Over the Eight-Year Period 130

Research Question 1 2 136

Total Undergraduate Degrees Trend 136

Research Question 1 3 138

Percentage o f Accounting Graduates to Total Graduates in Non-Adopting States 144

Research Question 1 4 144

Business Degrees Trend in Non-Adopting States 149

Research Question 1 5 155

Percentage of Accounting Degrees to Business Degrees in Non-Adopting States 155

Research Question 1 6 160

Correlation o f Accounting Graduates in Adopting and Non-Adopting States 161

Research Question 1 7 165

Correlation o f Business Graduates in Adopting and Non-Adopting States 167

Research Question 1 8 167

National Accounting Graduates Trend Over the Eight-Year Period 167

CHAPTER 5: SUMMARY AND CONCLUSIONS 171

Summary 171

Recommendations 178

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VITA AUCTORIS 187

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Table 1: States That Have Adopted the 150-Hour Requirement from June

1994 through April 1997 53Table 2: States That Have Not Enacted Any Legislation for the 150-Hour

Requirement 55Table 3: Total Accounting Bachelor’s Degrees from Adopting

Institutions 1991-92 to 1998-99 57Table 4: Total Number of Bachelor’s o f Accounting Degrees Conferred by

State in Alabama, Louisiana, Mississippi and Utah from 1992

to 1999 64Table 5: Total Bachelor’s Degrees for Adopting Institutions, 1991-92

To 1998-99 68

Table 6: Total Number o f Bachelor’s Degrees Conferred in Alabama,

Louisiana, Mississippi and Utah from 1992 to 1999 74Table 7: Total Business Degrees for Adopting Institutions, 1991-92

to 1998-99 78Table 8: Total Number of Bachelor's o f Business Degrees Conferred in

Alabama, Louisiana, Mississippi and Utah from 1992 to 1999 85Table 9: Percentage of Bachelor o f Accounting Degrees for Adopting

Universities as a Percentage o f Total Institutional Degrees 1991-92 to 1998-99 88Table 10: Percentage o f Accounting Degrees as a Percentage o f Total

Business Degrees for Adopting Institutions, 1991-92

to 1998-99 94Table 11: Three-Year Average Number o f Bachelor’s o f Accounting Degrees

Before and After Adoption o f 150-Hour Requirement for Adopting States 100Table 12: Comparison o f Three-Year Average Number o f Accounting

Graduates Before Adoption o f the 150-Hour Requirement to Three-Year After the 150-Hour Requirement 106Table 13: Three-Year Average Percentage o f Bachelor’s o f Accounting

Degrees to Total Undergraduate Degrees Conferred Before and After Adoption o f the 150-Hour Rule for Adopting Institutions 112

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Table 15:

Table 16:

150-Hour Requirement to the Three-Year Average Percentage After the Adoption o f the 150-Hour Requirement Based on Wilcoxon Signed Ranks Test 117Three-Year Average Percentage o f Bachelor’s o f Accounting Degrees to Total Undergraduate Business Degrees Before and After Adoption of 150-Hour Requirement 122Comparison of the Three-Year Average Percentage of Accounting Graduates to Total Business Undergraduates Before the Adoption

of the 150-Hour Requirement to the Three-Year Average After the Adoption of the 150-Hour Requirement Based on Wilcoxon Signed Ranks Test 127Table 17: Bachelor’s o f Accounting Degrees in Non-Adopting States,

1991-92 to 1998-99 132Table 18: Total Institutional Bachelor’s Degrees in Non-Adopting States,

1991-92 to 1998-99 140Table 19: Percentage o f Bachelor’s o f Accounting Degrees as a Percentage

of Total Institutional Degrees for Non-Adopting States,1991-92 to 1998-99 145Table 20: Total Bachelor’s o f Business Degrees in Non-Adopting States,

1991-92 to 1998-99 151

Table 21: Percentage o f Bachelor’s o f Accounting Degrees as a Percentage

o f Total Business Degrees for Non-Adopting States,1991-92 to 1998-99 156

Table 22: Comparison of Trend in Accounting Graduates in Adopting States

and Non-Adopting States for the Eight Academic Year Period 1991-92 through 1998-99 164Table 23: Comparison of Trend in Business Undergraduates in Adopting

and Non-Adopting States for the Eight Academic Year Period 1991-92 through 1998-99 .166Table 24: Total Number o f Accounting Degrees Conferred for All Reporting

Colleges and Universities from Academic Years Ending

1992 to 1999 170

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Figure 1: Total Accounting Degrees in Adopting States 67Figure 2: Total Bachelor's Degrees in Adopting States 76Figure 3: Total Bachelor’s of Business Degrees

in Adopting States 84

in Non-Adopting States 137Figure 5: Total Number o f Bachelor’s Degrees

in Non-Adopting States 139Figure 6: Total Number o f Business Degrees

in Non-Adopting States 150Figure 7: Comparison o f Accounting Degrees Awarded

in Adopting and Non-Adopting Institutions 163

Figure 8: Comparison o f Undergraduate Business Degrees Awarded

In Adopting and Non-Adopting Institutions 168

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As businesses become more and more complex, the need for reliable record keeping and disclosure becomes vital It is especially important for the information to be accurate when a company’s financial information will be used and relied upon by third parties Much of the financial information o f a company

is communicated in the form o f financial statements Financial statements are the principal means through which financial information is communicated to those inside and outside of a company (Kieso, Weygandt, and Warfield, 2001)

Individuals with an accounting degree or an accounting background typically prepare the financial statements and are referred to as accountants In addition to the preparation of financial statements, accountants perform a variety of activities for businesses

According to the U.S Department of Labor, public accountants perform a wide range o f accounting, auditing, tax, and consulting activities for their clients, who may be corporations, governments, nonprofit organizations, or individuals (Bureau of Labor Statistics, 2002-03) For example, some public accountants specialize in tax matters, such as advising companies o f the tax advantages and disadvantages o f certain business decisions and preparing individual income tax returns Others offer advice in areas such as compensation or employee healthcare benefits, the design o f accounting and data-processing systems, and the selection

o f controls to safeguard assets These types of work are considered consulting

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services Some of these services require the accountant to issue an independent report Some specialize in forensic accounting—investigating possible

wrongdoing and fraud Still others audit clients' financial statements and report to investors and authorities that the statements have been correctly prepared and reported Public accountants, many of whom are CPAs, generally have their own businesses or work for public accounting firms (Bureau o f Labor Statistics, 2002- 03) There has been much negative publicity recently over public accounting firms offering auditing and consulting services to the same clients Critics claim that the monetary reliance on other services hinders independence, which is magnified when accounting irregularities are uncovered

A specific set of skills is required in order to be successful in the accounting profession These skills are acquired though advanced training, college education, and experience in the field Most colleges and universities have, in their business curriculum, an accounting degree program The traditional bachelor o f accounting program requires approximately 120 to 12S college credit hours, which includes roughly 30 credit hours in accounting (College, 2000).Most accounting graduates take the Uniform Certified Public Accountant (CPA) Exam soon after graduation When all four sections o f the exam are passed with a minimum score o f 75%, candidates are awarded a certificate designating them as a certified public accountant (How, 2002) The next step taken by most CPAs is to obtain a license to practice public accounting from the AICPA In order to receive

a license to practice public accounting after the exam has been passed, most states require two years of apprenticeship under the direction o f a licensed CPA

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(MSCPA, 1999) Accountants are not allowed to present themselves to the public

as a CPA unless they have a current license to practice in their resident state The CPA license is considered one of the most prestigious credentials in the

accounting field (Morrow, 2001), (Helton, 2002) In fact, all companies that sell their stock to the public must have their financial statements audited by a licensed CPA (Kieso et al., 2001) Most CPAs are members o f state or national

organizations o f CPAs

There are many prominent accounting organizations in the United States The most influential accounting organization in the United States is considered the American Institute of Certified Public Accountants (AICPA) (Peck, 1999).The AICPA is a national organization of CPAs from every state in the union.Most CPAs are members of the AICPA The members o f the AICPA elect the members o f the Financial Accounting Standards Board (FASB) The FASB consists o f seven members and is responsible for the development o f public accounting principles and is considered the most influential accounting body in the world (Stice, Stice, and Diamond, 2002) The FASB is considered the

“Supreme Court” of accounting (Levy, 2001)

To become a member of the AICPA, one must be a CPA Over the past 10 years, the AICPA has changed the requirements that qualify a candidate to take the CPA exam In the past, only a four-year bachelor’s degree in accounting, which consists of approximately 120 to 125 credit hours, was required to qualify

to take the CPA exam The AICPA has since mandated approximately 25 to 30 additional credit hours to qualify to take the CPA exam and become a member o f

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the AICPA Because of the AICPA's overreaching influence, most states have adopted this policy and subsequently passed legislation requiring 150 credit hours The AICPA does not specify what particular courses comprise the additional hours (Donelan Philipich, 2001), (Frequently 1999) They do, however, give some guidance as to the specific desired skills with the ultimate goal o f creating a well-rounded professional (Byrd, 1996) (Albin and Crockett, 1991).

The AICPA stipulates that the 150 hours of course work must include at least 60 semester hours in business, with no less than 27 hours in accounting beyond the introductory course or courses (FSA, 1996) Those accounting courses must also include at least one auditing course, and at least 18 semester hours must

be upper division courses (MSCPA, 1999)

Legislation

Because accounting is a constantly changing profession, statutes requiring

150 semester hours of education to become a Certified Public Accountant must be flexible enough to allow variety in the content o f accounting programs The

statutes must indicate that eligibility to apply for the CPA Examination includes a condition for completion o f 150 hours o f course work, with at least a

baccalaureate degree and a concentration in accounting The following language is recommended for the statute:

The education requirement for a certificate, which must be met before an applicant is eligible to apply for the examination prescribed in, shall be as follows: After the expiration o f the year period immediately following the effective date of this Act, at least 150 semester hours of college education

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including a baccalaureate or higher degree conferred by a college or university acceptable to the Board, the total educational program to include an accounting concentration or equivalent as determined by Board rule to be appropriate (AICPA/NASBA, 1999).

Rules

A candidate will be deemed to have met the education requirement if, as part of the 150 semester hours o f education, he or she has met any one o f the following four conditions (AICPA/NASBA, 1999)

1 Earned a graduate degree with a concentration in accounting from an accounting program or department that is accredited (level three accreditation)

by an accrediting agency recognized by the Board

2 Earned a graduate degree from a business school or college o f business that is accredited (level two accreditation) by an accrediting agency recognized by the Board and completed at least 24 semester hours in accounting at the undergraduate level or 15 semester hours at the graduate level, or an equivalent combination thereof, including courses covering the subjects o f financial accounting, auditing, taxation, and management accounting

3 Earned a baccalaureate degree from a business school or college o f business that is accredited (level two accreditation) by an accrediting agency recognized

by the Board and completed 24 semester hours in accounting at the undergraduate or graduate level, including courses covering the subjects o f financial accounting, auditing, taxation, and management accounting; and

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completed at least 24 semester hours in business courses (other than accounting courses) at the undergraduate or graduate level.

4 Earned a baccalaureate or higher degree from an accredited educational institution (level one accreditation) including:

a At least 24 semester hours of accounting at the upper division or graduate level, including courses covering the subjects o f financial accounting, auditing, taxation, and management accounting (an upper division course

is normally defined as a course taken at the junior or senior level In accounting, this would normally be all courses taken beyond the elementary level.); and

b At least 24 semester hours in business courses (other than accounting courses) at the undergraduate or graduate level (AICPA/NASBA, 1999).The requirement does not apply to CPAs who received their certification

in advance of the effective date o f the change in the education requirement in their state For AICPA membership, the requirement is applicable to any candidate that takes the CPA exam and applies for membership after the year 2000 (AICPA, 1999), (Dennis, 2000) The AICPA education proposal does not require that the candidate complete a master's degree to meet the requirement It can be met in a variety of ways, including extra hours at the graduate level without a m aster's degree None o f the states that have passed the 150-hour rule demand a master’s degree (AICPA, 1999), (College o f Business Administration, 2000)

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The AlCPA’s Desired Result

The AICPA expects entrants who complete the requirement to be more knowledgeable, efficient and work with less supervision (AICPA, 2002) (AICPA mission 2000) They also anticipate that both time and staff size will be reduced

to offset increases in client expenditures

They are also hopeful that the requirement will attract a higher caliber student to accounting because it brings CPAs in line with other professions, such

as medicine and law, which require additional education Studies indicate that the top high school students are increasingly selecting careers that require graduate training Also, the contention is that students completing the requirement will be able to advance more rapidly in their firms due to an increased education base

College educators and professional practitioners began realizing several years ago that accounting graduates needed a new set o f skills In fact, in 1997 a committee was formed called the Education Research Committee, which issued a report detailing the necessary skills for the new graduate entering the field of accounting (Baril, Chain, Cunningham, Fordham, Gardner, Pierre, Wolcott,1997) The Committee was made up of college professors and accounting practitioners from all over the country The Committee conducted interviews with

31 accounting practitioners with extensive experience evaluating entry-level accountants They concluded that one o f the major weaknesses o f accounting graduates is that they often lack the ability to think critically (AICPA Education Research Committee, 1997) The Committee specifically listed the following nine

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desired attributes related to critical thinking that should be the goal of an accounting program (Baril et al., 1997):

1 Ability to recognize problem areas,

2 Ability to recognize when additional information is needed

3 Ability to fit details in the overall work environment,

4 Ability to transfer knowledge from one situation to another,

5 To exhibit initiative,

6 To exhibit curiosity,

7 To anticipate, think ahead and plan,

8 To exhibit confidence,

9 To communicate clearly and eloquently

While these were the Committee’s desired skills for accounting graduates, they concluded that it might not be possible to teach these skills within a college accounting program Still, they recognized a need for additional accounting education

Accounting firms are going to need to increase starting salaries in order to attract top students into the profession This is true even in the absence o f an increased education requirement Most states have a phase-in period, which should allow firms to absorb the increased cost over a period o f years

The ultimate goal o f the AICPA’s push o f the additional education requirement is to develop and hone the skills o f the accounting professional (AICPA, 2002) However, some argue that if the best candidates are choosing to

go into other professions because o f the rule, the additional hours will not produce

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a more highly skilled professional, but produce the best available from a limited pool The current shortage of accounting graduates will almost undoubtedly drive

up starting salaries While this is good news for the current graduates, in the long run the quality o f the accounting graduate will almost certainly decline Someday, when salaries are high enough, some of the best and brightest might come back

There is currently a serious shortage of accounting graduates Many professionals in the accounting field blame this shortage on the new 150-hour requirement (Klein, 2001), (Carroll, 1997) They contend that potential students are discouraged from majoring in accounting due to the additional hours involved (Scott, 2000) Michael A Diamond, past president of the American Accounting Association, warned the profession was "not attracting a sufficient number of students," that the "accounting education environment cries out for action" and the 150-hour rule is an "unyielding straightjacket" (Kelcher, 2000)

In 1983, Florida became the first state to pass legislation requiring 150 credit hours It adopted the 150-hour requirement independent of the AICPA’s influence as it was legislated 17 years before the AICPA’s directive

Decline in Accounting Graduates

Many claim that as a result of the 150-hour requirement, so long sought after by the accounting profession, enrollment in accounting programs in higher education has been on a sharp decline, resulting in a dramatic decrease in the number o f students graduating from accounting programs (Donelan, Reed, 2000), (Shafer, 2001) Some of the decline has been attributed to the increase in the

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popularity of programs in computer science and technology However, many critics of the 150-hour requirement believe that there is a direct correlation between the decline in accounting graduates and the enforcement of the new policy (Cumming and Rankin, 1999).

A study by W Steve Albrecht and Robert J Sack, titled “Accounting Education: Charting the Course Through a Perilous Future " (2000), indicates

that the number and quality o f accounting majors is rapidly decreasing They found that students do not believe that accounting degrees are as valuable as other business degrees, as evidenced by the decline in accounting majors Even more startling, they found that most accounting professionals would not major in accounting if they had to do it all over again

The Albrecht and Sack report indicated a number of developments that were major factors in the decline o f accounting majors Specifically, there has been a dramatic change in the business environment over the past several years First, technology changes have made the preparation of accounting information easier and less expensive Computer software and hardware advances have radically increased the efficiency o f communicating financial information

Secondly, globalization has changed the business environment into one giant marketplace Consumers now have the ability to buy goods anywhere in the world at any time Finally, there has been a major change in the concentration o f market investors With the rise in 401(k)s, the power of mutual funds in the marketplace is enormous The report indicates that the availability o f all o f this

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financial information made the work o f the accounting preparer less expensive, and, thus, less valuable (Albrecht and Sack, 2000).

Data from the 2000 edition o f The Supply o f Accounting Graduates and the Demand fo r Public Accounting Recruits (Sanders, 2001) indicate that the total

number o f accounting bachelor’s and master’s degrees declined by 20% over the four-year academic year from 1995-96 to 1998-99 (Sanders, 2001) The study also revealed that the percentage o f bachelor’s of accounting graduates accepting jobs

in the industry dropped relative to the decrease in the number o f accounting graduates (Sanders, 2001) CPA firms, on the other hand, hired only slightly fewer bachelor of accounting graduates in 1999 compared to 1998, while they hired more master's graduates (Sanders, 2001)

Accounting education programs have been under attack from corporate critics for some time They constantly charge that accounting graduates lack required communication skills and the ability to think critically The profession can no longer afford to hire the stereotypical unsocial “number cruncher.” With the rise in electronic communication through e-mail, today’s accountant must be public in every sense o f the word The new expanded curriculum attempts to address this problem with an emphasis on courses that develop specific skills such

as business communications (AICPA, 2002)

The accounting profession has also been hurt by the recent scandals at Enron Corporation and WorldCom (Blackburn, 2002) The profession has taken the brunt o f criticism for the events at Enron in what amounts to the second largest bankruptcy in the history o f the United States (Zeune, 2002) Arthur

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Andersen, one of the largest accounting firms in the world, was convicted in June

2002 o f obstruction o f justice when they admitted to shredding thousands of documents related to their audit work As a result o f the Enron scandal, there is

an outcry for accounting reforms

Even more recently, the collapse at WorldCom has shaken the confidence

in the profession of an already leery public (Maney and Backover, 2002)

WorldCom represents the largest bankruptcy in U.S history and comes on the heals o f the Enron scandal Through its well know brand MCI, WorldCom is the second largest long-distance phone company In August 2002, WorldCom filed for bankruptcy with a reported $ 107 billion in assets Reports indicate that WorldCom may have inflated its income by over $3.9 billion over the past five quarters Instead o f charging certain cost against current income they capitalized the costs and were charging the costs over a long period of time (Maney and Backover, 2002), which in effect, overstated current income The events at WorldCom have rocked an already hurting accounting profession In fact, the Security and Exchange Commission (SEC) and the FASB are considering drastic reforms to financial reporting (SEC, 2002) In a recent poll conducted by NFO WorldGroup, a New York financial-services marking firm, companies using outside auditors gave the accounting profession a grade of “D” on its overall performance (Whitman, 2002)

Some o f the suggested reforms will radically change the role o f the accountant, especially in the auditing function (Claypool and Tackett, 2002).After Enron and WorldCom, much attention has been given to the fact that Arthur

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Andersen did not detect occurrences of material fraud that existed at both Companies However, auditing standards require the auditor to design an audit program to give only a reasonable probability o f detecting the existence o f fraud (Claypool and Tackett, 2002) The problem with fraud is that if collusion exists

in an organization, it is difficult, if not impossible, to detect fraud under normal auditing procedures If auditors now have a higher responsibility to detect fraud,

it will require substantial training and cost and will significantly change the curriculum taught in accounting programs (Claypool and Tackett, 2002)

The effects of these scandals have already been seen in college classrooms Professors all over the country are having heated debates about accounting ethics, spurred on by the Enron publicity (Shannon, 2002) Courses such as Forensic Accounting and Fraud Examination are beginning to be offered at part o f the accounting curriculum (Shannon, 2002) Perhaps these new courses will help stimulate student’s interest in becoming accounting majors

The decline in accounting graduates is alarming to the academic community With fewer and fewer students entering the profession, a major shortage of accounting professionals is on the horizon Even today, there is noticeable competition for accounting graduates among public accounting firms (Goldstein, 2000)

The accounting profession has longed for the prestige given to the professions of medicine and law, each o f which requires extensive higher educational achievement The establishment o f the 150-hour requirement is an attempt by the accounting profession to put accounting on the same level

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However, the revenue generated from practitioners o f medicine and law far exceeds that of accountants (Salary.com, 2002) Accordingly, if the student must choose between and among these professions, and earnings potential is a major motivation factor, the number o f accounting graduates will continue to decline Accounting educators must address the issue of fewer accounting majors in order

to bring their programs back into balance

Statement Of Hypothesis

The hypothesis for this study is that the 150-hour requirement has had no affect on the number of accounting graduates before the adoption o f the 150 credit-hour requirement compared to after the adoption of the 150 credit-hour requirement in those states in which three years of graduation data are available before and after the adoption o f the requirement

2 What institutions, if any, have not enacted any legislation for the 150-hour requirement?

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3 Did the number o f accounting graduates increase or decrease for the majority o f adopting institutions over the eight years beginning the 1991-

92 academic year through the 1998-99 academic year?

4 Did the overall number of bachelor’s degrees awarded increase or decrease for reporting institutions in adopting states over the eight academic years beginning the 1991-92 academic year through the 1998-99 academic year?

5 Did the overall number of bachelor’s of business degrees awarded increase

or decrease for reporting institutions in adopting states over the eight academic years beginning the 1991-92 academic year through the 1998-99 academic year?

6 Did the percentage of bachelor’s of accounting graduates as a percentage

o f total undergraduate degrees awarded increase or decrease in adopting states over the eight academic years beginning with the 1991-92 academic year through the 1998-99 academic year for those institutions that have adopted the 150-hour requirement between June 1994 to April 1997?

7 Did the percentage of bachelor’s o f accounting graduates as a percentage

o f total business graduates increase or decrease over the eight academic years beginning the 1991-92 academic year through the 1998-99 academic year, for those institutions that have adopted the 150-hour requirement between June 1994 to April 1997?

8 Was there a significant difference in the three-year average number o f accounting graduates before the adoption o f the 150-hour requirement

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compared the three-year average after the adoption o f the requirement for institutions in adopting states?

9 Was there a significant difference in the three-year average percentage of accounting graduates compared to total undergraduates before the

adoption of the 150-hour requirement compared the three-year average after the adoption o f the requirement for institutions in adopting states?

10 Was there a significant difference in the three-year average percentage of accounting graduates compared to total business undergraduates before the adoption of the 150-hour requirement compared the three-year average after the adoption o f the 150-hour requirement for institutions in adopting states?

11 Did the overall number of accounting graduates increase or decrease in non-adopting institutions over the eight years beginning the 1991 -92 academic year through the 1998-99 academic year?

12 Did the number o f undergraduate degrees awarded increase or decrease in non-adopting institutions over the eight years beginning the 1991-92 academic year through the 1998-99 academic year?

13 Did the percentage of bachelors o f accounting graduates as a percentage

o f total undergraduate degrees awarded increase or decrease over the eight academic years beginning the 1991-92 academic year through the 1998-99 academic year for non-adopting institutions?

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14 Did the overall number of undergraduate business degrees awarded increase or decrease in non-adopting institutions over the eight years beginning the 1991 -92 academic year through the 1998-99 academic year?

15 Did the percentage o f bachelor’s o f accounting graduates as a percentage

o f total business graduates increase or decrease over the eight academic years beginning the 1991 -92 academic year through the 1998-99 academic year, for non-adopting institutions?

16 Was there any correlation in the trend of the number o f accounting graduates for institutions in adopting states compared to institutions in non-adopting states, over the eight academic years beginning the 1991-92 academic year through the 1998-99 academic year?

17 Was there any correlation in the trend in the number o f business undergraduates for institutions in adopting states compared to institutions

in non-adopting states, over the eight academic years beginning the 1991-

92 academic year through the 1998-99 academic year?

18 Did the overall number o f undergraduate accounting degrees awarded increase or decrease for all reporting universities over the eight years beginning the 1991-92 academic year through the 1998-99 academic year?

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Many people in the accounting profession believe that the 150-hour requirement, so long sought after, has already had a major impact on accounting education and the accounting industry (Carroll, 1997) There is evidence that the number of students in college accounting programs in higher education has been

on a sharp decline According to an article in Accounting Today (Covaleski,

2000), there has been a steady decline, since 1995, in the number of candidates taking the CPA exam for the first time Nationwide, from 1992 to 1998, the number of those taking the CPA exam for the first time declined by 40% There was, however, a significant increase in 1997 due to an influx o f students trying to qualify for the exam before the 150-hour requirement became mandatory in many states Some o f the decline can be attributed to the increase in the popularity o f programs in computer science and technology However, many in the profession claim there is a direct correlation between the decline in accounting graduates and enforcement o f the new policy (Sparkmon, 2000) The lack o f supply o f

accounting graduates will continue to drive up salary costs Following is a discussion of the history and background o f the 150-hour requirement

The 150-Hour Background

In January 1988, the general membership o f the AICPA voted to require all new members, after the year 2000, to have completed 150 semester hours o f

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college education The inclusion o f this requirement in the bylaws o f the AICPA has helped to bring the accounting profession closer to their ultimate goal of establishing 150 semester hours as the minimum education required to sit for the CPA examination (AICPA, 1999).

One objective of an increased education is to improve the overall quality

o f work performed by CPAs, who are met with changing technology, an increasingly complex business environment, and society’s constant insistence for accountability (Reinstein, Bayou, Lander, 2000) The AICPA believes that expanding the education requirement to 150 hours will provide the opportunity for

a broader education, and will enable CPAs to acquire the basic accounting and business knowledge plus develop the skills needed to support lifelong

professional careers The law calls only for 150-semester hours o f college education, including a bachelors or higher degree, with the total program to include an accounting concentration (Renner, Tanner, 2001) The rules identify four possible conditions for evaluating the education o f CPA candidates, which allows for different educational paths The rules only specify a minimum of 24-

semester hours each o f accounting and business so that colleges and universities have the flexibility to design their own curriculum or offerings (AICPA/NASBA,1999)

To become a certified public accountant, most state accountancy statutes originally required a baccalaureate degree consisting o f approximately 120 credit hours, with a concentration in accounting To encourage standardization among

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the states as they change their rules to increase the education requirement, the AICPA and the National Association o f State Boards of Accountancy (NASBA)

published the AICPA/NASBA Guide for the Implementation o f the 150-Hour Education Requirement (AICPA/NASBA, 1999) which provides guidance to

college and universities for developing curriculum This same guidance appears in

the AICPA/NASBA Uniform Accountancy Act and Uniform Accountancy Rules

(AICPA/NASBA, 1999), which is shown on page 4 o f this study titled “Rules” (AICPA/NASBA, 1999)

Background

The issue o f additional education for accountants had been sought after by

the AICPA since 1959 (AICPA, 1999) In 1959, the Special Coordinating Committee to Study the Report o f the AICPA Commission on Standards o f Education and Experience fo r CPAs recommended that an advanced degree, in

addition to the traditional four-year degree, was important and should be adopted

as a requirement to become a CPA This recommendation was adopted by the AICPA very soon thereafter Since that time, similar resolutions have been reaffirmed

In 1969, the proposals by the 1959 Coordinating Committee were expanded to state that the CPA certificate is confirmation o f basic skills in the discipline of accounting and that the possessor has acquired the body o f knowledge common to all members o f the occupation (This knowledge is defined

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in Horizons o f a Profession published by the AICPA in 1967) It was also stated

that in order to obtain this body o f knowledge, five years o f college study are required and should be the education prerequisite for obtaining a CPA credential Without this five-year requirement, there must be at least one year of qualifying experience (AICPA 1999)

During the 1970s, the AICPA continued to work to achieve not only this five-year requirement, but also to improve accounting programs in all colleges and universities In 1978, AICPA Council reaffirmed its support for the earlier

recommendations of expanded education with the publication of Education Requirements fo r Entry into the Accounting Profession In this report, the Council

again endorsed 150-semester hours as the minimum education needed to sit for the CPA exam The report recommended that the curriculum described therein should lead to a post graduate degree, and that the specific course content should

be left to the academic community The curriculum recommendations contained in

the report were updated in 1992 under the title Academic Preparation to Become a CPA (AICPA, 1999).

In September 1981, the Board of Directors approved the selection of an independent study group to gather evidence and devise an approach to aid in the transition from a four-year baccalaureate requirement to a five-year requirement The Commission on Professional Accounting Education was established and co­sponsored by the AICPA, the American Accounting Association, the Federation

of Schools o f Accountancy and the National Association o f State Boards of

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Accountancy Their report declared that the AICPA should take a prominent role and persuade states to adopt 150 hours of education as a condition for certification (AICPA, 1999).

In May 1987, the AICPA established the Plan to Restructure Professional Standards This plan included the stipulation that all new members, following the

year 2000, have 150-semester hours of college instruction The AICPA agreed to submit this plan for a membership vote In January 1988, the general membership passed the resolution with 83% of the vote cast in favor o f adding to the bylaws the 150-hour precondition for membership to the AICPA (AICPA, 1999)

The 150-semester hour requirement is one o f three important initiatives by the AICPA to ensure the quality of future audits The other two are mandatory Continuing Professional Education (CPE) and peer review for accounting firms

Other Developments

During the 1980s, the American Accounting Associations appointed the

Special Committee on the Future Structure Content and Scope o f Accounting Education (AICPA, 1999) The committee finished its study in the spring o f 1986

with twenty-five recommendations for increasing the effectiveness o f accounting education In summary, the committee indicated that the current state of

accounting education is inadequate to meet the needs o f a dynamically changing profession and a major overhaul is needed by the year 2000 In addition, a change

of focus is needed from teaching accounting as a narrow methodological subject

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