Accounting Education: Charting The Course Through A Perilous Future

Presentation to the NASBA Sixth Annual CPE Conference – March 18-20, 2001 San Diego, California

Basis for Presentation: Monograph by Steve Albrecht & Robert Sack

A Study Sponsored by: IMA, AICPA, AAA and “Big 5”

Our Charge

“Write a high-level thought piece, supportedby evidence where possible, about the future of accounting education.”

Timetable: 6 months

Sponsor’s Task Force

Steve and I greatly appreciate the help of Bud Kulesza and Keith Russell (IMA), Bea Sanders and Karen Pincus (AICPA), Michael Diamond and Jan Williams (AAA), and Ellen Glazerman and Brent Inman (Big 5).

But we are the authors of the Report

Research Methodology

Read everything possible, especially past reports about accounting education

Interviewed key accounting leaders Held focus group meetings Conducted surveys

Practitioner Survey Educator Survey Department Chair Survey

Previous Warnings about the need to Change

IMA Studies (Counting More, Counting Less, etc.)

AICPA Vision Study AAA Committee Reports

Bedford Report (1986!) Changing Environment Committee Report

AECC Monographs “Big 8” White Paper

Our Conclusion

While we have been long-time supporters of accounting education, if we were starting a new business school today, we would not have separate accounting programs, at least not structured the way they are today.

Our Rationale

The number and quality of accounting students is down.

Previous majors would elect other majors if starting over again today.

Our constituents tell us that our educational model is broken and needs to be fixed.

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Our Conclusion

Fundamentally,

the Accounting Education Community

is in trouble

Our Conclusion

Our Research was directed to the future of University-based Accounting Education

However, it seems to me that our findings have serious implications

for the future of

Continuing Professional Education

Our Rationale

The number and quality of accounting students is down.

Previous majors would elect other majors if starting over again today.

Our constituents tell us that our educational model is broken and needs to be fixed.

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Decreases in Enrollments

A few schools have reported stable enrollments but most are down by 20% or more. You would be well advised to read and study: The AICPA Supply/Demand Study - 2000 The Taylor Report commissioned by the

AICPA And, of course, our Report which cites other

data

Why Enrollments are Down!

1. Accounting salaries haven’t kept up.

2. More attractive career alternatives .

3. Profession has lost some of its gloss

4. Increased willingness to choose risky majors and career tracks.

5. Lack of information and considerable misinformation about accounting profession.

6. 150-hour program rule has increased opportunity costs to become an accountant.

Accounting Salaries Haven’t Kept Up

In 1989, salaries to accounting grads averaged $25,223, second only to their MIS peers – and only $1,500 behind

By 1999, salaries to accounting grads ranked fourth in the business school, and $7,000 behind their MIS peers

Data summarized from annual reports issued bythe National Association of Colleges and Employers

The Profession has lost some of its gloss

Profession has lost some of its Gloss

This add offers On-line Learning Coaching to pass the CPA examCPE to maintain your standingMBA for your next job

the ad is from the April issue of the

Journal of Accountancy!

150-hour rule isn’t problem--graduate school is preferred

Practitioners who would recommend graduate school 85.7%

Educators who would recommend graduate school 95.7%

High school students who plan on graduate degree 76%

College students who plan on graduate degree (57% in 1990) 80%

Additional year would deter studying accounting

High school students 22%

College students 15%

Requirements to be CPA seem fair General 150-hour

High school students 71% 74%

College students 81% 95%

Switchers away from accounting 80% 91%

Eliminating the 5th-year Requirement

Eliminating the 150-hour requirementwould result in “dummying down”

the profession It would be absolutely the wrong thing to do!

The Problem isn’t the extra 30 hours, it’s the nature of the 30 hours we

have offered

Our Rationale

The number and quality of accounting students is down.

Previous majors would elect other majors if starting over again today.

Our constituents tell us that our educational model is broken and needs to be fixed.

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Type of Degree% of

Educators Who Would

% of Practitioners Who Would

Earn a bachelors degree in something other than accounting and then stop 0.0 7.9

Earn a bachelors degree in accounting, then stop 4.3 6.4

Earn an MBA Degree 37.7 36.4

Earn a Masters of Accountancy Degree 31.5 5.9

Earn a Masters of Information Systems Degree 17.9 21.3

Earn a Masters Degree in Something Else 5.4 6.4

Earn a Ph.D. 1.6 4.4

Earn a J.D. (Law Degree) 1.6 11.4

Accounting MajorsWouldn’t Major Again!

Representative Quotes

I would not recommend a MAcc degree. The degree better be broad. Students should be studying other courses and not just taking as many accounting courses as possible. If you’re going to do that, you should plan to work for the SEC as one of their generals—as an enforcer.

I always felt like accounting people were part of the central role of the company. Now I see us moving away from that. The information systems department was smaller than ours when I started. Now their department is way bigger than ours, and they’re the trainers. My mentor wants me to get a CMA, but I want to learn about information systems.

“Accounting” Careersare Less Attractive

Less attractive financially Starting salaries Wealth accumulation

Less psychic income True of all professions? Much of what we did is no longer valued

Technology has replaced much of what we do

“Accounting” careers are less attractive

Our friends in industry are leading the way NACA=NAA=IMA= ?? Management Accounting=Strategic Finance

The “Accounting” Function is either insourced or outsourced either way it’s a dead end job

Technology has isolated accounting in favor of information

“Accounting” Careers are less attractive

The scratching sound you hear is the sound the bright people are making, as they scramble to avoid the “Accounting” trap

Instead, I’m a “finance professional” or an “information provider”

Our Rationale

The number and quality of accounting students is down.

Previous majors would elect other majors if starting over again today.

Our constituents tell us that our educational model is broken and needs to be fixed.

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Accounting Educationis Broken

We teach accounting as if information were still costly.

$10/hour $30/hour $100/hour $300/hour $1,000/hour

Teach too much here! Teach too little here!

Introductory AccountingIntermediate AccountingCost AccountingOther Specialized courses

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Turning information

into knowledge

Convertingdata into

information

Summarizingrecorded

events

Recordingbusinessevents

Makingvalue-added

decisions

2 Major culprits

Changes in Business

Increased Competition — Inexpensive Information

1. Transition to data base systems2. Shorter product life cycles and competitive advantages3. Demand for better information , to make better decisions4. Emergence of new companies and industries5. Outsourcing of non-value added services 6. Renewed recognition of risk, and the importance of managing

it7. Increasingly complex business transactions8. Relentless restructuring of rewards (lower rewards for services

replaced by technology, same rewards for non-value added services, higher rewards for leveraging technology and globalization)

Globalization—Technology—Concentration of Market Power

What Change Means For Us

Increased Competition — Inexpensive Information

Globalization—Technology—Concentration of Market Power

Too many of us teach Accounting as it was practiced in the good old days.

•Recording, Processing, Reporting as the end all, be all•Debits & Credits, Standard Cost, Financial Reporting

But Its Different Than It Was - - and we risk becoming an anachronism

A Helpful Analogy

Accounting is like Dentistry

Practitioners Can’t Live by “Filling Teeth”/ “Preparing Financials”

Technology has changed the market place forever

We can train people to become “Hygienists” / “Processors” or

We can raise our sights and educate people to become“Orthodontists” / “Analysts”

36.425.0Accounting is integrated enough

PractitionersEducators

Percent of

Accounting…

47.362.3Business majors are too isolated

and

58.641.2and finance should be combined

52.057.5and I/S should be combined

31.122.8is more attractive than I/S

49.538.6is more attractive than Finance

who agreed withthe statement

Perceptions AboutAccounting Programs

Type of Pedagogy Percentage who use

Too much

Too little

Assignments with companies 40.8 4.3 52.7

Case analysis 69.3 8.5 37.5

Quizzes (feedback exercises) 75.6 10.5 11.7

Lecture 90.6 41.4 1.5

Oral presentations 62.4 8.4 34.3

Reading textbooks 84.0 12.1 7.8

Role playing 15.3 5.1 34.1

Group work 74.6 20.4 27.8

Team teaching 11.1 4.3 48.5

Technology assignments 77.0 5.1 53.0

Videos 37.6 5.4 12.9

Writing assignments 78.4 2.4 45.8

Perceptions of Pedagogies

Representative Quotes

The tremendous benefit that comes from an accounting education is the organization and the structure and the discipline and the understanding you gain from looking at the business from an accountant’s eyes. But then, the course goes off into a study of paragraph 114 of SFAS 131, and all that perspective is lost.

New graduates don’t know anything about business. They don’t understand manufacturing. They don’t understand distribution. They don’t understand banking. They don’t see the business’ reason for being.

Students don’t have the luxury of learning about business on the job - They have to be productive from day one.

Minimum Changes Needed

1. More emphasis on skill development, less emphasis on content

2. Less emphasis on statement preparation, more emphasis on analysis, planing, interpretation and decision making

3. Change focus from rule based learning to conceptual understanding

4. Less specialization in accounting , more understanding of business

5. Breakdown the silos - teach accounting/information as an integral part of business - and of the market place

6. Emphasize the role of accounting and information in the management of a GLOBAL enterprise

7. Bring the best of the practice world into the classroom - and vice versa

Bluntly said, teach what students need, not what we want to teach - or are comfortable teaching

The prize will go to...

The team that can quickly teach the process

(this is a hammer, and you hold it by the

handle)

But move promptly to the use of the information

(here is how you build a house)

Minimum Changes Needed

1. Must develop school-specific mission playing to your strengths. Copycat mentality won’t work anymore (too much information available that exposes weaknesses).

2. Consider your environment.

3. Consider carefully every degree offered—maybe consolidate.

4. Consider carefully every course offered—is it still relevant or has technology, globalization, etc. rendered it obsolete?

5. Consider carefully the pedagogy of every course.

6. Invest in faculty development—we can only do what we know how to do.

What can your school and program do better than anyone else?

Summary of our Problem

At best we are losing market share

At worst we are losing in absolute terms

Loss of students = loss of positions = loss of budget and resources

Reactions to the Report

Little disagreement about the problem Lots of disagreement about the reasons

The 150 hour rule The greed of the big firms The emphasis on student evaluations The exam, the textbook, the regulators, etc. The Accounting Review, etc. The dean, the department head, etc

But it is - in the end – the educators’ problem

Reactions to the Report

Some argue that students will come back, when the economy returns to “normal”

But it seems clear to us that the technology genie is out of the bottle, and that we will be forced to re-define “normal”

The practice of Accounting will never look the same, like it or not

How Should a school Respond?

The report carefully avoided any attempt to tell a school what to do.

It seems clear that every school must think through its own response, after a careful analysis of its environment

Strengths and weaknesses of the department Expectations of the University and the

Community Present and potential student body

For Example…U Maryland,College Park

Majors dropped from 250 to 125, and the pipeline is similarly depressed

Strategic Planning Committee, with the Dean and the Advisory Board

Great Location in an unusual market Considering a “Diffusion Strategy”

Small Professional Program Intense MBA participation Service to the rest of the Business School

For Example... U VirginiaMcintire School

Majors dropped from 120 to 60 with similar pipeline problems

Major Info Systems Department - great reputation overall with the major firms

Dean aheming, about tax staff Is considering a “Redefinition Strategy”

Working in Risk Management Marketing Exec Ed Programs - to the big firms!

How Should a School Respond?

Some evidence of a growing demand for accounting courses from non-majors

Some evidence of a need to fill the (somewhat reduced) demand for 150 hour education

Some evidence of a demand for courses that combine accounting and info systems

Some evidence of a demand for executive education, as people try to enhance their careers with a CPA/CMA degree

Implications for CPE??

What’s sauce for Academia is surely sauce for CPE Providers?? Help the practice world increase their value-

adding skills More focus on skills, less on content Business instead of silo-isolated accounting Doing business globally Technology as a transformer

Room in the regulations/Change the regulations?

Implications for CPE?

What happens if we migrate toward a Law school model?

What happens if the schools move toward CPE as a vehicle to use their resources?

Implications for CPE??

If we succeed, you will see a more broadly educated practitioner who will need technical reinforcement expect broadly scale CPE programs

If we don’t succeed, you will see a more broadly educated practitioner who will need technical reinforcement expect broadly scale CPE programs