class notes -- accounting education in 2010

8/8/2019 Class Notes -- Accounting Education in 2010

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14 Accounting Education Disclosures September/October

A CPA ExAm Evolution

The shi t rom the paper-and-pencilCPA Exam to the computerized Exam oc-curred in 2004, but the frst major changesince then will begin January 2011. TheAmerican Society o CPAs (AICPA) callsthe change an evolution and re ers to it as

CBT-e (Computer Based Test evolution).The evolution is based upon the changein accounting practice in which researchskills and real practice application skillscan be better tested through simulationsand through easier access to technicalstandards vis--vis the Financial Account-ing Standards Board (FASB) Codifcationo U.S. Generally Accepted AccountingPrinciples (GAAP). In a second majorchange, International Financial ReportingStandards (IFRS) will be covered in theExam. A third change should interest thoseconcerned about ethics.

And in one inal development or2011, pilot testing o the CPA Exam inother countries will begin or interna-tional students, though they must currentlyregister through a U.S. state board o ac-countancy.

Simulations and writing Simulations are currently 20 percent

each o the Financial Accounting andReporting (FAR), Auditing (AUD) and

Regulation (REG) sections, with writtencommunication o the simulation task anadditional 10 percent. Simulations will beincreased to 40 percent or each o thesethree sections with no written communi-cation tasks.

While the current Exam has only twosimulations per each o these sections,the new Exam will have seven task-basedsimulations each or FAR and AUD andsix or REG. For all o these sections, thesimulations will involve a new research

ormat, with FAR based upon FASBCodi cation.

All writing components o the currentExam that are currently in FAR, AUD andREG and associated with the simulationsare being moved to the Business Environ-ment and Concepts (BEC) section, withwriting now 15 percent o this section. Tomake room or the increased emphasis onsimulations in FAR, AUD and REG, andto make room or the writing in BEC, themultiple-choice questions will be a lesser

percentage o each section.To accommodate these shi ts, times

allotted to complete each section willchange. AUD will go rom our hoursand 30 minutes to our hours, and BECwill go rom two hours and 30 minutesto three hours. FAR and REG will stayat the current length o our hours and

three hours, respectively, with the totaltime or all sections combined remainingat 14 hours.

IFRSAs mentioned above, IFRS will be

introduced or the rst time in the 2011Exam. As IFRS become more integratedinto the eld o accounting, the CPA Examwill place more emphasis on testing IFRS,according to Joe Maslott, CPA, AICPAsimulations technical manager. For the2011 Exam, IFRS in particular, or global-ization in general, will be part o all Examsections except or REG as speci ed in thenew content speci cation outlines.

For example, questions that test knowl-edge o the di erences between U.S.Generally Accepted Auditing Standardsand International Standards o Auditingor the role o the International Auditingand Assurance Standards Board could bein the AUD section. Similarly, a greaterunderstanding o the a ect o globaliza-tion on the business environment could

be part o the BEC section. FAR couldinclude questions that test the di erence between nancial statements under U.S.GAAP and IFRS.

According to Maslott, 5 to 10 percento the content o these sections couldinclude material related to internationalstandards, with expanding coverage eachyear as convergence occurs. CPAs needto be bilingual or several years in the

uture, according to Maslott.

Ethics

In the past, questions about pro es-sional and legal responsibilities, includingethics, made up 15 to 20 percent o theREG portion. While REG will continueto test legal liability, only responsibilitiesand ethical rules covering taxation will be tested.

With the new Exam, pro essionalresponsibilities, including ethics andindependence, will comprise 16 to 20percent o the AUD section. The new

AUD section reminds the uture CPA (anaccounting educators) o the pro essioresponsibilities to the general public anthe need to incorporate ethics and pro esional responsibilities in the accountincurriculum.

To correctly answer the questions inthis section, the CPA candidate must b

knowledgeable with the ethics and independence rules o the:AICPA Code o Pro essional Condu

Department o Labor

Government Accountability Ofce

Public Company Accounting Over-sight Board

Sarbanes-Oxley Act o 2002

Securities and Exchange Commissio

It will be interesting to see how thnew Exam a ects national pass rates each section, which continued to hovearound mid 40 percent to low 50 percenin 2009.

Hitting tHE iFRS BookS

IFRS is clearly a continuing issue the education o accountants. In Februa2010, the SEC published itsWork Plan fothe Consideration of Incorporating Intetional Financial Reporting Standards intoFinancial Reporting System for U.S. IssThe report devoted an entire section tohuman capital readiness and speci caaddressed education and training at coleges and universities. The report alscited eedback rom commenters whad addressed concerns to the SEC abothis issue.

Concerns about IFRS educationA major concern was whether the U.S

educational system is moving quickenough to incorporate IFRS into curricu because colleges and universities currentteach U.S. GAAP as the primary basis accounting.

Other concerns included a potentiallincreased education cost i a dual reportisystem were used in the U.S. (i.e., one opublic companies using IFRS and one private companies), in addition to the athat education would need to ocus n just on the knowledge o IFRS, but al


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training in judgment and understandingthe economic substance o transactions based upon less prescriptive standards.

While learning to use a more principals- based accounting system will be necessary,others commented that the educationsystem would adapt quite quickly when a

rm date is set or U.S. GAAP and IFRS

convergence.Teaching IFRS

The continuing incorporation o IFRSand globalization into the accounting cur-riculum has had help rom the public ac-counting pro ession itsel , particularly theBig Four rms. In the September/Oc-tober 2009 issue o Disclosures, an articledetailed the materials and resources thatthese rms have provided in the orm o case studies, searchable databases o IFRSstandards, grants, con erences presenta-tions, webcasts, etc., and this in ormationis ever expanding and continuing.

But the real drivers o IFRS in theaccounting curriculum, other than in-corporation into the CPA Exam and thematerials identi ed above, will be thetextbooks that students use in their classes(particularly intermediate accounting) andtheir pro essors knowledge o IFRS.

In previous years, intermediate ac-counting textbooks primarily presentedU.S. GAAP with IFRS as a sidebar to

compare di erences. This year marks therst time that an intermediate account-ing textbook is really an IFRS textbook.While Intermediate Accounting, 13thedition, by Kieso, Weygandt and War-

eld, is primarily about U.S. GAAP withIFRS sidebars, there is an IFRS edition o the book that will tap a uture market asconvergence occurs. In addition, the moretraditional versions o 2010 intermediateaccounting textbooks have more ully inte-grated IFRS with expanded coverage.

In a similar vein, there are real op-portunities or additional materials to beincorporated in auditing textbooks relatedto International Standards on Auditing,the role o the International Auditingand Assurance Standards Board and theInternational Ethics Standards Board orAccountants, etc., all o which will becontent in the AUD section o the 2011CPA Exam.

In addition, users o accounting in or-mation need to know about IFRS, and

there are real opportunities or this to be brought into introductory accountingcourses or all business majors and even -nance or investment classes in which thereis analysis o nancial in ormation.

Pro essor knowledge is the otherkey component to getting IFRS into thecurriculum. The American Accounting

Association is taking a real lead in this e -ort as exempli ed in its annual meetingheld this past August. There were sevenCPE sessions devoted to some aspect o IFRS, with several detailing very speci ctechnical knowledge and several presented by representatives o the Big Four. Thetrend now is moving beyond the basicso teaching IFRS and getting into the nutsand bolts o the standards.

Some students who have graduatedwithin the past our years may need todo some work to get IFRS literate, butthere are a plethora o commercial sel -study courses, AICPA and state societyseminars, and beginning shortly, CPAreview courses that can help get studentsup-to-speed on IFRS.

gAAP CodiFiCAtion

On July 1, 2009, FASB unveiled itGAAP codi cation as a one-stop source non-governmental GAAP (except or SEreleases). Students and aculty at collegand universities can access this in ormatin the pro essional view at no cost i th

accounting departments pay an annuinstitutional ee o $150 (access is throuthe American Accounting Association)

This is one o the most important recent developments in accounting education. Now accounting students can havthe same research experience as actupreparers and auditors o nancial inmation.

Intermediate accounting textbookhave ully integrated the GAAP codcation into their contents, with manyend-o -chapter problems requiring research and re erral to the GAAP codi ction.

As mentioned, re erral to GAAP codication will be a key part o the CPA Exain 2011. w

Accounting Education Disclosures September/October 15


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16 Accounting Education Disclosures September/October

ACCounting: A

WoRtHWHilE CHoiCE

With all o these issues, a potentialaccounting student or graduate may wellask Is it worth it? The answer is a re-sounding yes i the student can meet thechallenges. There are great opportunities

waiting.According to the National Associationo Colleges and Employers (NACE), ac-counting services employers provided thelargest number o o ers to 2010 bachelorsdegree graduates, ollowed by engineering

rms and wholesale trade employers. Thisis in line with past years. According toNACE, the average o er to undergraduateaccounting majors or 2010 was $48,575,up 0.4 percent rom 2009.

Based upon in ormation rom RobertHal and Associates, entry-level public ac-counting positions in audit and assuranceservices with large rms (annual revenueso greater than $250 million) averaged$51,419 in salary in Central Virginia or2010. This does not re ect overtime or

bonuses. For Northern Virginia, the aver-age is $70,363.

In terms o general trends in the em-ployment o accountants, the U.S. Bureauo Labor Statistics Occupational OutlookHandbook or 2010 to 2011 projects thatemployment o accountants and auditorswill grow 22 percent rom 2008 to 2018,

with the movement towards IFRS a majorreason or the increase.

The future of accounting:Supply and demand

In terms o general trends o the em-ployment o entry-level accountants withpublic accounting rms, each year theAICPA publishesTrends in the Supply of

Accounting Graduates and Demand for Public Accounting Recruits.The most recent publi-cation, 2009, re ects in ormation throughthe 2008 academic year and captures someo the impact o the economic downturnthat began around that time.

The highest number o new hires bypublic accounting rms o both new bach-elors or masters degree recipients was

in 2007, with 36,112 hires the highesnumber since the rst reporting period o1971. Hiring declined in 2008 to 25,488due to the economic downturn.

There have been two macro-trends related to hiring o new graduates by pubaccounting rms in the last 26 years. Firs2002 was the lowest level o new gradua

hires by CPA rms (15,295) since 1982Since then, the hiring o new graduates hincreased steadily except or the curredownturn noted above.

Second, in general the supply o acounting students has kept pace witdemand. As measured by accountingraduates (bachelors or masters degreecombined), 2008 was the highest yea(66,459 degrees: 48,968 bachelors and17,491 masters) since the rst reportinperiod o 1971. The lowest supply o acounting graduates since 1975 was in 200(44,695 graduates), which matched thlow year in terms o new graduate hir by CPA rms.

The data show that the number omasters degrees awarded represents a

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Phil Umansky, CPA, Ph.D. , is associate professor of business at the Sydney Lewis School of Business at VirginiaUnion University and chairman of the Accounting and Finance Department.He is a CPA Ambassador, a regular contributor to the WTVR Virginia

This Morning TV Show on money management topics, and a member of the VSCPA Editorial Task Force. Contact him at [email protected].

Gabriele Lingenfelter, CPA , teachesaccounting and auditing for the Luter College of Business and Leadershipat Christopher Newport University in Newport News. She is actively involved on the American Instituteof CPAs (AICPA) Audit & AttestationSubcommittee and the development of

future CPA Exams. She is also a member of the VSCPA Editorial Task Force.Contact her at [email protected].

Accounting Education Disclosures September/October 17

higher proportion o total new degreesdue to the 150-hour requirement. Thenumber o bachelors degrees in account-ing in 2008 was actually less than thoseawarded per year rom 1988 to 1996. Incontrast, the number o masters degreesin accounting awarded in 2008 was morethan double the number o masters de-

grees awarded in 2001.As measured by enrollment, ac-counting is clearly a popular major. In20072008, 212,834 students were inan accounting degree program, up rom152,885 in 20002001.

Boosting accounting Ph.D.sIn one area o accounting degree at-

tainment, the Ph.D. degree, there arechallenges, signs o success and oppor-tunities.

There is still a long-term imbalance between the number o Ph.D. degreesgranted and the Ph.D. needs o collegesand universities, which will continueas long as existing Ph.D.s retire. Thischallenge was highlighted in an article inthe September/October 2008 issue o Disclosures.The trend has moderated inthe short term, on the demand side, dueto the economic downturn o the lastseveral years, as existing senior account-ing Ph.D.s have delayed retirement to build up retirement savings to pre-2008

levels.On a positive note, there has been asteady increase in Ph.D. enrollment in thelast six years as reported in the AICPAsSupply and Demand report, with Ph.D.enrollment or 20072008 at 1,224 stu-dents, up rom 800 in 2001.

Also, the pro ession is actively engagedin creating new accounting Ph.D.s in theaudit and tax areas through the Account-ing Doctoral Scholars Program, unded byCPA frms, 45 state societies, includingthe VSCPA, and the AICPA Foundation.

Recruits or this program come romexperienced pro essionals. The frst classo 27 students enrolled in all 2009 atdi erent universities, with each recipi-ent slated to receive $30,000 a year or

our years. A new class o 30 students isstarting this all.

Still, to make up or the short all,many CPAs who do not have Ph.D.s aremaking it into the classroom as ull-timeor adjunct pro essional aculty members

and are bringing excellent real-worldexperience to their students.

Clearly there are avorable trends in both supply and demand over the last 10years related to accounting students andgraduates at all levels, but many chal-lenges remain, including the need ormany new accounting Ph.D.s.

ACCounting EduCAtion10 yEARS FRom 2000

Ten years ago, there were no com-puterized CPA Exam, no InternationalAccounting Standards Board (much lessIFRS), no Sarbanes-Oxley Act and PublicCompanies Accounting Oversight Board,and relatively ew accounting students,graduates or new hires at CPA frms.

Accounting education is much di er-ent than 10 years ago, as issues a ectingaccounting practice are much di erent.What students experience in the class-room will a ect their pro essional lives, but also the new developments in thepro ession will also fnd their way backinto the classroom.

class notes -- accounting education in 2010

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