On July 10, 2008, Governor EdwardRendell signed into law Senate Bill 838,making Pennsylvania the 49th jurisdiction to pass the 150-Hour EducationRequirement for CPAs. Business methodsand tax laws continue to become more complex, and proponents of the law’s newrequirements contend that a five-year degreewill better prepare candidates for the CPAexam and for the expanded role they willplay once they enter the profession.
“The new legislation offers a very promising future for CPAs, employers and business,” says Elizabeth Kolar, MBA, CPA, chairperson, Business Administration Department, Delaware Valley College. “Previousstudies indicate that five-year candidatespass the CPA exam sooner, advance morequickly within the firm and earn significantlymore income over their careers than four-year candidates.”
Smart Business recently spoke to Kolarabout the new requirements and the impacton students, colleges and business.
What factors led to the new requirements?
First, CPAs are required to be knowledgeable of significant changes in accounting,auditing and tax regulations and businessmethods, and environments are becomingmore complex. Second, technologicaladvances continue to impact financial reporting systems and internal control structures,and CPA firms are developing and usingsophisticated IT audit techniques. CPAs arerequired to possess strong technical, communication and analytical skills.
What key changes instituted by Senate Bill838 will take effect Jan. 1, 2012?
The new legislation will require candidatesto possess a bachelor’s degree and at least150 credit hours, including 36 semester credits of accounting-related subjects, to becomecertified. The subjects include accounting,auditing, finance, taxation and business law;candidates can meet the 150-credit-hourrequirement with undergraduate and/orgraduate level coursework. Pennsylvania hasdecided to allow candidates to continue to sitfor the CPA exam with a 120-credit-hourbachelor’s degree. However, candidates will be required to obtain the additional minimum30 credits to be licensed. Candidates will alsobe required to complete 1,600 hours or oneyear of work experience within five years ofthe application date to be certified. In orderto be grandfathered under the old legislation,candidates must pass at least one part of theCPA exam before Dec. 31, 2011.
How will an additional year of trainingimpact colleges and accounting students?
Many colleges and universities have beenpreparing for the new legislation for years bydeveloping MS and MBA programs with concentrations in accounting. These new programs require more experienced faculty andadded costs. Now, colleges and universitiesare facing a significant decline in the numberof qualified Ph.D. candidates in accounting.They will need to consider how to attract andkeep qualified faculty to meet the growingdemands of these programs and also developflexible degree programs to accommodatean evolving student population.
Students can combine an undergraduateaccounting degree with an advanced degree at the same school or another institution orenroll in a combined five-year bachelor’s andmaster’s degree program. While the additional education will result in higher salaries forstudents, the education comes at a price. Notonly will students have to pay for the additional tuition at higher graduate rates, butthey also have to consider the opportunitycost of not going to work after four years.
What role will employers play in smoothingthe transition to the new rules?
Employers should encourage accountingstudents to complete their fifth year of education before starting a career in accounting.Students can partially finance their fifth yearof education through internship programs,where they can receive valuable work experience that will count toward the fulfillmentof work experience requirements to becomecertified. Firms will, in turn, be able to satisfytheir staffing needs during the demandingbusy season. Employers may be tempted tohire out of four-year programs, expectingtheir new hires to pursue the additional credits part-time, but many employees will findthe workload too demanding. Employersshould also expect to be offering higher starting salaries to students graduating from five-year programs.
What long-term benefits will the new rulesbring to CPAs, employers and businesses?
Employers can expect their five-yeardegree candidates to be able to focus ontheir careers sooner and perform better,both immediately and in the long term.Pennsylvania CPAs will qualify for substantial equivalency, giving them the ability topractice across jurisdictions easily.
We expect significant changes in the globalbusiness environment. The SEC is considering the adoption of global accounting standards — International Financial ReportingStandards (IFRS) — by U.S. companies by2014. This and recent developments in theglobal economy reinforce the need for moreeducation of our future professionals.
ELIZABETH KOLAR, MBA, CPA (NY), is chairperson, Business Administration Department, Delaware Valley College. Reach her at (215)489-2374 or email@example.com. She recently received the Pennsylvania Institute of Certified Public Accountants OutstandingEducator of the Year Award and the Distinguished Faculty Member of the Year Award from Delaware Valley College.