The 150: Virginia's "150-Hour" Accounting Profession

September 1, 2006

By Bradley M. Roof, CPA, CMA, Ph.D.
M. Loretta Manktelow, CPA
Irana Scott, CPA

The Virginia 150-credit hour education requirement to take the CPA Exam began July 1, 2006, but its impact across the profession began months earlier.

To check out how colleges and universities are responding to the 150-hour requirement (the "150"), we at James Madison University surveyed accounting programs across Virginia and in nearby areas. We also asked colleges and universities how their students and those recruiting their graduates are adjusting to this new educational landscape.

Our survey reached the universities and colleges that grant the vast majority of Virginia master's and bachelor's accounting degrees. We did, however, have some non-responding schools. Here are the major trends we discovered.

How are Colleges & Universities Responding?

Most accounting educators are telling students they would be wise to pursue a master's degree — either a master's in accounting or an M.B.A. with an accounting concentration. This was true even from faculty at schools not offering master's degrees.

The next most common faculty recommendation is to complete a second major, which faculty at schools not having graduate programs more commonly advocate. And, faculty at almost all schools found this an attractive option if the student could complete those requirements in four years. This really is possible because so many students already come to college with as many as six to 12 college credits earned through high school Advanced Placement courses.

How each school is adjusting its accounting program to the 150 largely depends on the size of the school and its accounting program.

Large & Medium Universities

Many large and medium universities are implementing new accounting master's programs or expanding existing graduate accounting programs. Others are returning to graduate accounting education discontinued in the past. Most of this graduate accounting education is designed for full-time students going directly into graduate study from undergraduate life. These universities have integrated the undergraduate and graduate program design with an option of still graduating with a four-year accounting major, but without being qualified to take the CPA Exam. Almost all graduates will receive both bachelor's and master's degrees upon completing the master's program.

Small Universities & Colleges

Creating a classroom-based accounting master's to address the 150 is not a viable option for smaller universities and colleges. The number of potential students is too few. These schools are commonly responding to the 150 in the following ways:

• Some are directing students to their own M.B.A. programs, with a few schools adding some initial or additional M.B.A. accounting electives.
• Others are forming alliances with larger institutions. These alliances give limited preferential or guaranteed admission to larger universities' master's programs for students from smaller schools that meet certain GMAT scores or GPA averages, or both. This appears to be an attractive option for schools with rigorous undergraduate accounting programs or those intending to have their top students smoothly enter graduate accounting education.
• Other smaller schools making only modest adjustments to the 150 are encouraging students to simply complete a second business major, often finance or information technology.
• • A few smaller schools are making no changes at all, expecting their accounting graduates to go elsewhere for graduate business or accounting education after their undergraduate education.

Administrative Support Matters

Some accounting programs report being unable to marshal the administrative support or resources, or both, to respond to the 150 by adding more accounting education. This has occurred at schools of all sizes. Some schools report having supportive administrations but inadequate resources. Other schools say the resources are there, but administrators give new resources to other business programs, frequently their M.B.A. programs.

If accounting accreditation is nearby or on the doorstep, programs can respond quite differently. Some schools reported that business deans and university administrators were reluctant to re-engineer accounting programs when facing imminent accreditation reviews. However, we found another school that used an upcoming accreditation review to create administrative inertia and get resources to redesign their accounting program to more effectively meet the 150.

Accounting programs facing serious resource limitations are still adjusting to the 150. These programs are offering courses in nontraditional schedules or locations and are using more part-time faculty to teach lower division classes, enabling regular faculty to teach more upper-level courses. Still other schools are offering online programs with lower operating costs.

These innovations not only reduce operating costs and leverage scarce faculty resources but make more accounting education available for professional staff that are short of the 150 credit hours. A few schools are offering specific transition programs targeted at this group. For example, one school's new program offers a 30-credit master's degree based on four courses during the one summer, then one course each in the fall and spring semesters, and four again in the following summer.

What are Firms & Students Doing?

Dwindling available entry-level staff has been the most dramatic effect of the 150 for employers. Many accounting majors who would have graduated during the 2005–2006 academic year are staying in school to meet the 150. This has meant significantly fewer graduates coming into the job market, particularly in the second and third quarters of 2006.

Just as the supply of new graduates started shrinking, the demand for grads skyrocketed as some firms began to face huge Sarbanes-Oxley workloads. These two factors has have created the perfect storm of the most dismal staff recruiting market in recent memory.

Prospects for the supply of accounting graduates qualified to take the CPA Exam will be brighter with the fall 2006 graduates, and will improve even more with the spring 2007 graduating class. But, the supply will probably not recover to its 2004–2005 levels right away.

The 150 means a more costly education for would-be accountants. If staff compensation does not change accordingly, many potential accounting graduates will flock to attractive competing fields like finance and information technology where students see job compensation more clearly matching educational requirements. Staff salaries are already creeping upward and additional perks like signing bonuses, clothing allowances and moving subsidies are appearing more frequently.

Every firm is taking all the attractive graduates they can get who already meet the 150. But, survey respondents tell us there are not enough of those graduates to satisfy everybody's needs. In this new staff market, firms are using one of three general strategies to fill their staff ranks.

First, most of the national firms have been able to meet their minimum recruiting objectives by hiring graduates with master's degrees and second majors that meet the 150. That second major is most often finance or information technology. High salaries and those front-end perks have enabled this recruiting success.

Second, regional and local firms, and a few national firms, are adding some new staff who are 10–15 credits short of the 150. Firms hiring these graduates are promising tuition reimbursement or "slow-season" time off, or both. Even with this support, the staff member could easily take one and a half years to complete that course work — and, that would be taking courses year-round. Then, the staff member would begin the CPA Exam process.

This strategy places constraints for the firm on staff scheduling and travel, and there is increased risk the staff member will not complete the CPA Exam before reaching a promotion threshold that requires holding the certificate. This increased human resource risk is partially offset by being able to recruit the staff member, and probably doing so at a lower salary than a 150-qualified staff recruit.

Third, some local and regional firms are hiring graduates who lack approximately 30 additional credit hours to meet the 150. These recruits are the traditional four-year bachelor's graduates with an undergraduate accounting major, and they definitely command lower starting salaries.

Firms are offering the same financial and release-time support. But the risks of getting this staff member through the CPA Exam are even higher. This process could take as much as two and a half years to complete through year-round course work before getting to the CPA Exam. And, if a staff member like this is completing an MBA or a second major, his or her accounting course work may be almost three years old before taking the Exam. That situation would certainly warrant a CPA review course, which would add even more time to completing the Exam.

What is the 150-Hour Requirement Doing for the Profession?

The short-term implication of the 150 is the reduction of new recruits who are eligible to sit for the CPA Exam, which is driving up salaries and recruiting costs. That makes the 150 seem like it's doing something "to" the accounting profession rather than "for" it. But things look brighter further ahead.

Survey respondents indicate that the real benefit to the profession is in the increased skills of graduates. And, they tell us that firms recruiting on their campuses also see that benefit. In graduates with accounting master's degrees, they see more technical knowledge and dexterity in using it. In graduates with M.B.A.s or second undergraduate majors in finance or information technology, employers are finding skills sets that complement non-accounting services like personal financial planning and business consulting.

For the future, this benefit will only increase as growing accounting master's programs will develop specializations in taxation, accounting systems and audit-related fields like internal auditing and forensics.

What can firms do?

Those surveyed told us that accounting firms hoping to increase their recruiting effectiveness in this new 150 environment can pursue two related but different efforts.

First, accounting firms can hone their own recruiting efforts.

Recruit earlier. For many schools, most of the recruiting for fall employment is done almost a year earlier. Even if you are only looking for one or two new staff members from campuses, interview the preceding October. Surveyed schools reported firms calling after tax season to begin the search for new staff. The top three-fourths of upcoming graduates in many of those schools had positions in their pockets for months.

Hire interns. For firms with heavy tax practices this can be difficult. But, look at internships as an investment. Schools said that firms fill as many as 80 percent of their new positions with interns. And, they are more successful recruits because the firm and intern get a good look at each other during the internship.

Get familiar with the students. Almost all schools have student accounting organizations and welcome practicing accountants into the classroom. Taking the initiative to get familiar with the students by providing speakers for groups or classes can get firms some brand recognition with the students.

Face the bad news. The simple economics of the 150 reveal that we will not have an adequate supply of accounting graduates unless salaries increase. When the cost to create inputs increases, the price for those inputs goes up, too. Accounting educations are getting more expensive — 20 percent more, just based on the additional 30 credit hours alone. So, if the profession is collectively unwilling to pay more for the new staff, the supply will be inadequate. Students will simply choose other majors and survey respondents tell us it's already happening. If you cannot pass higher salaries along to your clients, look for increased efficiency through technology or using para-professional staff.

Second, accounting firms can support accounting programs. This benefits the firms and the profession in the long run by making accounting more important on college and university campuses. If you do not have one or more schools from which you regularly get new staff, choose such a school and develop a relationship with their accounting program chairperson. Volunteer to help the chairperson in promoting the accounting program to the college or school dean and to the school's administration. Suggest ideas for doing so like creating an accounting advisory board. Survey respondents related that this kind of support is valuable in getting additional faculty positions and operating resources.

More capable programs mean more and better accounting graduates.

Can We Create Our Future?

The Virginia accounting profession must continue to have excellent accounting graduates who are qualified to sit for the CPA Exam. Both accounting education and the profession must each do their part and work together to ensure Virginia's venerable heritage of qualified CPAs.

In the near term, both schools and firms must repeatedly innovate to adjust to this new accounting education landscape created by the regulatory and economic tremors of the 150.

Only an enduring commitment by all of us, educators and practicing professionals alike, will maintain the high educational quality of Virginia's CPA candidates. Most graduates from Virginia's schools will live and work in Virginia. Today, everyone in our accounting profession has a vested interest in preserving the high caliber of these Virginia accounting graduates, for they will lead our Virginia accounting profession tomorrow.

Surveyed Schools

The following colleges and universities participated in the survey conducted by James Madison University. We surveyed both Virginia and nearby schools from which firms in Virginia often attract new staff. Survey respondents are shown below.

The original sample included a representative group of smaller schools and nearly all medium and larger Virginia schools. Our response rate was 90 percent. We conducted our survey using personal telephone interviews to increase our response rate and to use protocol analysis in evaluating some responses. We sincerely thank each respondent for the time and thoughtful responses they shared with us.

American University
Bluefield College
Bridgewater College
Christopher Newport University
College of William and Mary
Eastern Mennonite University
Emory and Henry College
George Mason University
George Washington University
Hampton University
Howard University
James Madison University
Liberty University
Lynchburg College
Marymount University
Old Dominion University
Radford University
Randolph-Macon College
Roanoke College
Shenandoah University
Towson University
University of Maryland — ­College Park
University of Mary Washington
University of Richmond
University of Virginia
Virginia Commonwealth University
Virginia State University
Virginia Tech
Virginia Union University
Washington and Lee University

Bradley M. Roof, CPA, CMA, Ph.D.,  is associate dean at James Madison University's College of Business. He is also chair of the VSCPA.

M. Loretta Manktelow, CPA, is an instructor in the James Madison University School of Accounting.

Irana Scott, CPA, is an instructor in the James Madison University School of Accounting.

The authors would like to thank Adam Schonour. Adam helped perform the fieldwork for this article while he was an accounting graduate student at James Madison University.