US accounting qualification reforms spark industry clash

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A plan to reform the rules for becoming an accountant in the United States could expose firms to discrimination lawsuits and create barriers to joining the profession, according to the body that represents the country’s largest audit firms.

In an exclusive comment letter seen by the Financial Times, the Center for Audit Quality, which represents the Big Four firms and other major firms, condemned the proposed reforms as “unnecessarily complex” and said they could “introduce unconscious bias” into the qualification process.

The CAQ’s intervention puts major auditing firms at odds with two bodies that set rules for how to qualify as certified public accountants — the American Institute of Certified Public Accountants and the National Association of State Boards of Accountancy — over how to stem the decline in new hires.

The AICPA and Nasba in September proposed eliminating the requirement that accountants complete the equivalent of five years of college, one more than the traditional bachelor’s degree; This rule has been accused of deterring young people from entering the profession.

The two organizations proposed an alternative route to qualification: replacing the fifth year of training with a one-year requirement for on-the-job training, with firms required to certify that the hire has possessed dozens of specific technical and professional skills.

“The framework’s extensive list of competencies, performance indicators and assessment requirements creates an unnecessarily complex system that may be difficult to implement consistently across jurisdictions,” wrote Liz Barentzen, deputy chair of the CAQ, in a comment letter sent last month.

And he added: “Qualitative assessment frameworks can introduce subjectivity and unconscious bias into assessment processes, potentially creating employment-related issues (e.g. discrimination claims) that would not otherwise exist.”

The shortage of accountants has begun to emerge as a risk factor in some companies’ financial disclosures, and some smaller accounting firms have withdrawn from niche work such as auditing local governments. Leaders in the profession have warned that large firms could face hiring problems if trends are not reversed quickly.

The number of people taking the CPA exam has fallen from a peak of more than 100,000 in 2016 to a 17-year low of just over 67,000 in 2022, and after a small increase last year, declines are predicted to continue by the AICPA. short term. The number of young people taking accounting courses in college has declined in recent years as they turn to higher-paying entry-level jobs in finance or technology.

The CAQ argued that tackling the shortage should include broadening the appeal of accounting among students from diverse backgrounds, for whom the expense of a fifth year of university may be particularly problematic.

The AICPA and Nasba have committed to publicly comment on their proposals in early 2025.

Sue Coffey, the AICPA’s chief public accounting officer, said she “received helpful, diverse feedback” about her proposals.

“It is critical that licensing pathways are clear and engaging for students. “Working with Nasba and various stakeholders, we will have more information about what this looks like next month,” he said.