By Colin Nelson
I recently performed a state-by-state analysis of the Board of Accountancy licensing requirements for Certified Public Accountants in the U.S., to see whether, and where, AACSB business school and/or accounting program accreditation impact the educational (or experiential) requirements. The short answer is: it depends on the state/territory.
Figure 1. Types of CPA Differential Licensing Requirements by State Board of Accountancy
Source: http://monarch.tamu.edu/~smrs/. Note: By July 1, 2015, only Indiana, Michigan, Puerto Rico and the Virgin Islands will remain Blue. All other states currently shown in Blue will have become Brown. By January 1, 2012, Wyoming will change from Green to Yellow. No other Yellow or Green states are currently scheduled to change their status.
As you can see from the map in Figure 1, of the 55 state and territorial Boards studied, 28 (approximately 51%) have no basis for differential requirements of any kind (shown in Brown on the map). And that number is set to grow: by mid-2015, there will be 34 Boards out of the 55 (approximately 62%) that have no differential requirements.
10 other Boards (approximately 18%) have differential requirements based on the level of qualifications (educational and experiential) held by an individual CPA candidate (shown in Blue on the map). Except for Michigan, each of these Boards reduces or eliminates the requirements for work experience in direct proportion to greater educational attainment on the part of the candidate. In Michigan’s case, the experiential requirement is unchanged, but the majority of the normal educational requirements are presumed to have been met by a candidate with a more advanced degree.
Only 17 Boards (approximately 31%) have differential educational and/or experiential requirements for CPA candidates based on business or accounting accreditation of the schools from which they graduate (shown in Yellow or Green on the map). In most of these states, there is a pattern to how the Boards consider the accounting and business components of the educational requirements to be met, in which a degree from a school with accounting accreditation is considered to cover all educational CPA licensing requirements, while business accreditation only covers the business component of the educational requirements, but not the accounting component. 12 of the 17 that have differential requirements based on accreditation also have qualification-based differential requirements (shown in Green on the map).
Figure 2. State Boards of Accountancy with Differential CPA Licensing Requirements by Percentage of Accounting Accredited Schools
What I found interesting is that the schools with AACSB accounting accreditation are, by and large, not where you would expect them to be (i.e., in the states whose Boards have differential requirements that favor accreditation.) 9 out of 17 Boards with requirements that favor accounting accreditation are in states where less than 25% of AACSB-accredited schools have accounting accreditation.
Given the potential benefits, it is not clear why the percentage of accredited accounting programs in these states is so low. It may be the case that accounting program directors have anticipated the trend towards no differential requirements, although that trend does not affect those states whose differential requirements favor accreditation, but only differential requirements based on qualification levels. Program directors may simply be unaware of the nature of their state Boards' preferential treatment of graduates from accredited accounting programs. I think it would be wise for any business school with strong accounting programs to take a close look at the CPA licensing requirements in their state or territory, and make sure they aren’t missing out on the chance to add value to the education of students who are looking to become CPAs.
Update June 13, 2011: For those with further interest in this topic, I will be presenting more detailed information regarding this study at the annual conference of the American Accounting Association in Denver, Colorado, along with my colleague Violetta Urba (Senior Accreditation Manager).