The Public Company Accounting Oversight Board (PCAOB) recently declared that the US faces a crisis with a reported shortage of 340,000 accountants. This deficit has a ripple effect on corporations, leading to delays in financial reporting and a concerning rise in errors. Audit Analytics reported a 289% increase in public company restatements in 2021 alone.
Joshua Khavis, assistant professor of accounting and law at the University of Buffalo, connects these issues to overworked and understaffed accounting teams experiencing high turnover. Evidenced by a 30% increase (since 2019) in companies citing insufficient accounting staff as a primary reason for potential errors in 2022.
Addressing this critical shortage is essential to ensure confidence in financial reporting, compliance with regulations and ultimately, continued economic growth.
Causes of the CPA shortage
According to the Bureau of Labor Statistics, more than 300,000 accountants and auditors quit their jobs in the last two years, representing a staggering 17% drop in the field’s workforce. Arguably the most significant factors contributing to this exodus and the subsequent shortage are:
- Retiring baby boomers. A large portion of accountants exiting the profession are Baby Boomers. However, it’s not just older professionals leaving; data shows that CPAs in both the 25-to-34 and 45-to-54 age ranges are also leaving the industry.
- Declining number of college graduates. The overall decline in the number of college-age students has affected many professions, but the impact on accounting is particularly severe. The number of US accounting graduates fell 7.4% to 65,305 in the 2021-2022 academic year, marking the largest single-year decline since 1994-1995.
- Decrease in CPA exam candidates. The number of CPA exam candidates has also sharply declined. According to the Association of International Certified Professional Accountants (AICPA) 2022 annual report, just over 67,000 people took the CPA exam in 2022, the lowest in 17 years, down from 72,000 in 2021. Although 2023 saw an increase in exam takers, this was largely due to upcoming changes to the exam.
Lara Abrash, chief executive of Deloitte’s US audit business warns – “with declining numbers of new entrants and a ‘cliff’ of baby-boomer retirements, a crunch could come within a decade.”
Addressing the accountant shortage
As the accounting profession continues to face a significant talent shortage, the 150-credit hour requirement for CPA certification, implemented by the American Institute of Certified Public Accountants (AICPA) in 1988, has come under scrutiny. In practice, increasing the prerequisite college hours from 120, adds a fifth year of college education. But the mandate, originally intended to ensure a strong foundation of knowledge for aspiring CPAs, is not required by other professions including law and engineering. With a continued decline in interest in accounting careers, many students, practitioners and industry experts, question whether these extra 30 hours are contributing to the shortage.
A quicker path to CPA licensure
Recent research published in the Journal of Accounting Research supports this perspective. John Barrios (2022) found that increasing the prerequisite college hours from 120 to 150 reduced the number of first-time CPA exam candidates by 15%, without any discernible improvement in their written communication skills or retention within public accounting. He concluded, “the best way to help mitigate the accounting crisis would be to eliminate the 150-hour requirement.”
Additionally, research by Andrew Sutherland, Matthias Uckert and Felix Vetter (2024) found that the 150-hour rule led to a 14% decline in non-minorities obtaining their CPA licenses and a significantly greater 26% decline among minorities. This disparity is attributed to the financial burden of an extra year of college, which impacts minority students more due to differences in family income and financial aid availability.
Accounting groups in Minnesota are among those lobbying for change to state law to reduce educational requirements. Further, an informal poll of managing partners at the 2023 BDO Alliance conference showed only 20% of managing partners support the 150-hour requirement, with the remaining 80% favoring its reduction or removal.
AICPA’s stance
The AICPA has recently dropped its opposition to reducing the university education requirements for CPAs. Its latest advisory group recommended addressing the cost and time of education to tackle the shortage, advocating for a “competency-based licensure model not tied to university credit hours.” The AICPA has expressed “directional support” for these recommendations, recognizing the need to modernize the licensure process to align with changing market conditions.
However, social media forums and job boards often highlight complaints from early-career accountants regarding long hours and low pay. To address the shortage effectively, the advisory group has also called upon accounting firms to raise starting salaries and improve work-life balance for CPA professionals.
Paul Munter, chief accountant at the SEC, has also stressed the importance of tackling stagnant wages to attract more individuals to accounting. In 2021, median salaries for full-time entry-level accounting positions rose to approximately $62,500 from $50,000 in 2020. In contrast, entry-level roles in management consulting and financial analysis offered median pay of $70,000 and $75,000, respectively, while software engineers earned a median entry-level salary of $93,000.
Clearly, starting salaries and work-life balance can vary significantly between firms. As public accounting recruiters, we acknowledge that while work-life balance can be a challenge within the industry, we collaborate with many CPA firms that support manageable hour caps during and beyond the busy season.
The future of the CPA profession
To effectively tackle the CPA shortage, multiple factors need to be explored and addressed. The AICPA’s plan to propose alternative requirements to the 150-hour college education prerequisite by 2025 is a significant step forward. While state adoption may take time, the AICPA’s commitment signals an exciting period for the accounting profession.
If you’re a CPA evaluating your career path or interested in market trends, our public accounting recruitment specialists offer a free, candidate-focused service. Contact us today to explore opportunities with firms offering competitive partner tracks or roles promoting work-life balance.
