A new model proposed by the National Association of State Boards of Accountancy (NASBA) and the AICPA is designed with an eye on the future for newly licensed CPAs. Carl Mayes, CPA, AICPA associate director–CPA Quality & Evolution, provides background on the project and a look ahead to 2020.
What you’ll learn from this episode:
- An update on the CPA Evolution project.
- The feedback CPAs and other profession stakeholders gave NASBA and the AICPA about the project.
- Key points of the model that NASBA and the AICPA have proposed.
- Next steps for the project in 2020.
Play the episode below:
To comment on this podcast or to suggest an idea for another podcast, contact Neil Amato, a JofA senior editor, at Neil.Amato@aicpa-cima.com.
Neil Amato: Carl, thank you for being here.
Carl Mayes: Thanks for having me.
Amato: I guess welcome back. You’re a repeat speaker on the podcast. So, on CPA Evolution, first of all, for those who may not know, what is it?
Mayes: CPA Evolution is all about licensure. It’s all about the CPA license and looking at whether our current licensure approach is consistent with the needs of the marketplace and whether it’s the best way to protect the public.
Amato: What has happened with CPA Evolution thus far? How long has it been going on and where are we as we have this discussion in early December 2019?
Mayes: We started back in 2017. We started having conversations with the National Association of State Boards of Accountancy (NASBA) about our licensure approach and whether there were opportunities for us to explore evolving that approach. It’s really been quite a road since then. We exposed an initial set of thoughts, an initial model, back in January of 2018 to certain stakeholders and got feedback on that.
In 2019, we came up with five guiding principles for the development of a new model and got a ton of feedback on those guiding principles. We heard from over 2,000 stakeholders, including AICPA Council, state boards of accountancy. We heard from over 100 folks in academia including the American Accounting Association and the Association to Advance Collegiate Schools of Business, 30 state societies. So, we got a lot of feedback. Now we’re kind of at the point where we’re taking that feedback, analyzing it, and we’ve developed what we believe is a responsive model.
Amato: You talked about all the different all the different stakeholders you heard from. How would you sum up what you heard from them?
Mayes: Yeah, so there were certain themes that were consistent regardless of the stakeholder group that was represented. We heard from them — I should have mentioned — in a variety of different ways. Some wrote in, we had discussion groups with 20 different stakeholder groups. Some of the things we heard were these.
We heard that there was support for building more technology into the CPA licensure approach. That was kind of the initial premise. That was one of the main premises of our principles when we rolled those out is that technology is disrupting the profession and we need to evolve accordingly.
We also heard support for the idea of changing how licensure works. But maybe the biggest thing — at least in my mind — was this idea that while technology is very important and it is a disruptor, there are other disruptors in the profession. It’s not the only thing that’s impacting us and we needed to take a broader view if we were going to set up a licensure model that addresses the trends out there in the market.
Amato: So, as a result of that feedback, what did NASBA and the AICPA do next?
Mayes: We considered that feedback and we considered a whole bunch of different possible approaches to our licensure model. One of the suggestions that we got in was to add more content to our current curriculum and to add more content to our current exam. But what that does is it stretches out the existing content to the point where it waters it down.
The impact of that is at the end of the day folks don’t know as much as they need about the things that are most important. So we felt like that wasn’t the right approach. We looked at “Should we expand the exam or expand the curriculum?” Some folks suggested that we add a fifth section to the exam or that the 30 credit hours that today folks will take all kinds of different things within our existing curriculum, maybe those should be specified. We should specify, “OK, those have to be about technology or about some other topic.”
What happens then when you’re expanding the exam, expanding the curriculum is that over time, it’s not a long-term solution to the challenge. If you assume that the body of knowledge that we have as CPAs is growing — which it is and it’s growing dramatically, and I’ll talk about that in just a sec — as that body of knowledge grows, you’ve got more to test, you’ve got more to learn. You can’t just continue to grow the size of the exam; it creates barriers to entry such that nobody would ever want to become a CPA.
Thinking about that body of knowledge, you know, that’s one of the things that we heard. You think about 1980 vs. today, we have three times as many pages in the Internal Revenue Code. There’s four times as many accounting standards, five times as many auditing standards. When that’s the case, that means your body of knowledge is so much larger than it was before. Take also into account the fact that technology is changing, the types of things that we need to know. We need to understand data analytics; we need to understand systems and controls.
Also, we’re hearing from firms that procedures that I performed as a staff are now being automated or they’re being offshored, they’re being performed by paraprofessionals and that’s pushing higher-level work down to the newly licensed CPA. So, you’ve got more requirements, you’ve got more responsibilities, and you’ve got technology impacting what you need to know. That means you’ve got a drastically larger body of knowledge; you need a different licensure approach to address that.
So, you know, we looked at the stretching option. We looked at the expanding option. We felt like those weren’t the right approaches. We looked at medical and legal. We had seen internationally accountancy models that were comparable to the medical and legal models here in the U.S. with more education required, more experience required. What we found when we dug into those is lower enrollment rates, higher dropout rates. We felt like that wasn’t right for us.
So, ultimately, we got to the engineer model. We took a look at the engineer model here in the U.S. and we felt like there was a lot of promise there.
Amato: So, obviously a lot of research. You looked all over the world, different fields, you thought about how the accountant’s role is changing. Based on that, what model are NASBA and the AICPA proposing?
Mayes: So, the model that we’re proposing has a strong core of accounting, audit, tax, and technology. I think that’s consistent with what we heard. I think it’s responsive to what we heard, which was, “It can’t just be about technology.” We have to continue to be who we are, and who we are is people who understand accounting, who understand tax, who understand audit.
So, you’ve got that strong core. But then above and beyond the core we envisioned three disciplines. Every candidate would take the core through their education experience and then through their exam and then they would select a discipline. The three disciplines that we envision were in tax compliance and planning, in information systems and controls, and then business reporting and analysis. So those were three different areas where we felt there was a lot of advanced content in the existing exam, there’s more content that needs to be added, and they really represent pillars of the profession. So, the idea is you take that core, then you take a discipline, and then you become a CPA.
Amato: You’ve kind of started to answer it, but I’m going to ask a little more, why this model? Why did it make sense?
Mayes: I think there’s a number of different benefits with this model. I think one, one of the things we heard from all that feedback is we actually need deeper knowledge of accounting. We need deeper knowledge not just of technology but of accounting, of tax. We need deeper knowledge of data analytics from newly licensed CPAs. If you’re going to do that, trying to find a one-size-fits-all approach to licensure where one person has all those different sets of skills, it’s like hunting for a unicorn. It’s a real challenge.
At least in my mind, what this does is it ensures on a macro level that you have the depth of knowledge that you need — that the profession needs — from a tax perspective, from an information systems perspective, from a business reporting perspective. At the end of the day, we meet those needs.
I think it’s responsive. Like I mentioned before, we’ve got that strong core of accounting, audit, tax, and technology. I think it’s flexible. For me personally, that’s the most important thing. We’re trying to think about how to set up CPA licensure so that we don’t have to do this again in, you know, five years or 10 years or whatever. The benefit of this model is as CPAs as a profession evolve, so too can the licensure model evolve. So can the disciplines evolve and so on. So, I think those are some of the benefits.
Amato: With this model, is everyone a fully licensed CPA regardless of which discipline they choose?
Mayes: They are. That’s a good question. It’s a question we get a lot of times. One of the suggestions that we heard was that we should create a CPA-Audit or a CPA-Tax. We heard a lot of pushback to that idea. The pushback was around the idea that everybody should take a common core in accounting, in audit, in tax, in technology. But also, the idea that if do a CPA-Audit, a CPA-Tax license, it splinters the credential and we’ve seen other professions go down that route without a whole lot of success.
We felt like going a route where the CPA ultimately is splintered and you have to just focus on one discipline isn’t the right approach for us as CPAs. Instead, what we did is we looked at professional engineers. The way professional engineers work, you take that core exam, you take fundamentals exams, then you take a discipline exam, but everybody becomes a professional engineer. Whether you can stamp a plan or whether you can sign a plan is dependent on whether you’re competent to do so under their code of ethics, just like we have a code of ethics.
We felt like that was a better model for us. At the end of the day, this model would produce fully licensed CPAs who have all the authorities and responsibilities that come with being a CPA. Folks ask, “Could they sign attest reports?” and things like that. If they were competent to do so, yes, they could sign attest reports. But they’ll have deeper knowledge in one of those three areas than a candidate might have today.
Amato: You’ve talked some about where we’ve been, starting in 2017, to where we are now. We’re about to hit 2020. What’s happening next?
Mayes: Yep, so we have a busy 2020 planned. We will continue to seek out feedback. We’re in that process right now. We’ve already met with several of the groups that we met with last year and we’ll continue that outreach. We have Regional Council coming up. From an AICPA perspective, we’ll discuss with Council some of the details that we envision around this model and some of the answers to questions like the one we just talked about with the exam. How would the exam be structured and how do we envision curricula being structured? How would it change the Uniform Accountancy Act?
So, we’ll have those conversations at Regional Council. We’ll continue our discussions at May Council, and NASBA will talk with state boards at their regional meetings. Ultimately, the goal over the next several months is to finalize the model that we plan to move forward with by the summer of 2020. So that’s the game plan.
Amato: Where can people go if they want to learn more about CPA Evolution?
Mayes: So, we have a website. It’s EvolutionofCPA.org that has FAQs, lots of different articles, and other information on there. I encourage everybody to go there. If you have questions or you’d like to provide us with some feedback, we’re always accepting feedback; very happy to receive that. I personally read every email that comes in. It comes in to Feedback@EvolutionOfCPA.org.
Amato: Carl, thank you so much. This has been excellent.
Mayes: Thanks for having me.