the present state of the business law education of accounting students: the business law...
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The Present State of the Business LawEducation of Accounting Students:The Business Law Professor’sPerspectiveMehmet C. Kocakulah,n A. David Austill,nn and Brett Longnnn
I. INTRODUCTION
There is a reason why law relevant to business is part of the curricula
of most colleges of business and also part of the content tested on the
Certified Public Accountant Uniform Examination (CPA Exam). Knowl-
edge of the law is important to those who conduct business and especially
to those professionals who conduct business in the form of a public ac-
counting practice. Accountants are similar to other business professionals
in that they must be able to identify important legal issues as they arise so as
to reduce their exposure to legal liability. While human resource depart-
ments and legal counsel may attempt to keep businesses current with their
legal compliance responsibilities, individual business professionals need to
have an awareness of legal issues.1 They need to be familiar with legal
concepts like defamation, invasion of privacy, misrepresentation, fraud,
negligence, criminal intent, administrative sanctions, and breach of con-
r 2009, Copyright the AuthorsJournal compilation r Academy of Legal Studies in Business 2009
137
Journal of Legal Studies EducationVolume 26, Issue 1, 137–183, Winter/Spring 2009
nProfessor of Accounting, Department of Accounting and Business Law, University ofSouthern Indiana.
nnProfessor of Legal Studies & Accounting, McAfee School of Business, Union University.
nnnAssociate Professor of Business Law, Department of Accounting and Business Law,University of Southern Indiana.
1Claire A. King, Liability Exposures and Ethical Responsibilities for CPAs in Industry, 2001 OHIO
CPA J. 15, 20 (Oct.) (the director of risk management for the AICPA Professional and PersonalLiability Insurance Program discussing ways for CPAs to minimize legal liability when servingas officers and directors); Norman P. Arnoff & Sue C. Jacobs, Accountant’s Malpractice: A CurrentReview Part I, N.Y. L.J., Dec. 27, 2005, at 3 (two practicing attorneys discussing loss preventionin accounting malpractice cases).
tract to manage risk.2 In addition, accountants need specific legal knowl-
edge to provide their services to the public. Accountants practicing in
public accounting identify and distinguish various types of assets, liabilities,
debt, equity, and income in diverse and sometimes very complex transac-
tions. These accounting concepts require at least a basic understanding of
the law of property, negotiable instruments, contracts, securities, secured
transactions, sales, and business entities.3 Whether certified public accoun-
tant (CPA) candidates possess the necessary legal knowledge to begin their
careers as public accountants is dependent upon an educational process
that includes the candidates, business law professors, accounting profes-
sors, state boards of accountancy, professional organizations, and educa-
tional accreditation bodies. Each of these groups contributes to the
educational process that ultimately produces a new CPA. Business law fac-
ulty design and present legal courses to accounting students while ac-
counting faculty influence the design and implementation of accounting
and business curricula. State boards of accountancy administer and
enforce the regulations that must be met for the certification and licens-
ing of CPAs while the American Institute of Certified Public Accountants
(AICPA) determines CPA Exam content. Accreditation bodies like the
Association to Advance Collegiate Schools of Business International
(AACSB) set standards that influence curricular decisions made by busi-
ness faculty members. Mistakes in judgment by these groups and/or failure
to communicate may result in an unnecessary number of CPA candidates
being inadequately prepared for the CPA Exam and, more importantly,
their subsequent careers.4
This article first describes various factors, including the positions
taken by the fifty-four state boards of accountancy, the NASBA, the AICPA,
and the AACSB concerning the business law education of accounting
graduates that have impacted business law curricula, and it reviews the
literature as to the most appropriate business law education for accoun-
2Robert A. Prentice, The Case for Education Legally-Aware Accountants, 38 AM. BUS. L.J. 597,597–600 (2001).
3Id.
4While CPA Exam pass rates have recently been improving, the majority of sections still re-main below 50 percent. NATIONAL ASSOCIATION OF STATE BOARDS OF ACCOUNTANCY (NASBA),NASBA CANDIDATE PERFORMANCE ON THE UNIFORM CPA EXAMINATION 6 (2006). See Anthony R.Pustorino, Some Thoughts on the Uniform CPA Examination, CPA J., Aug. 1996, at 36 (discussingwhy there are low CPA Exam pass rates).
138 Vol. 26 / The Journal of Legal Studies Education
tants. It then compares the findings of a 1993 survey and a 2005 survey of
business law professors concerning their perceptions of the legal training
of accounting students, examining how those perceptions have changed
over the twelve-year period.5 The surveys included questions concerning
the respondent’s perceptions of curricular content, importance of substan-
tive law topics, integration of business law into accounting programs, and
the quality of legal training accounting students receive. Finally, the article
compares the perceptions and actions of business law professors with those
of the major accounting organizations, finding that the major accounting
organizations treat business law as a field of general business knowledge
with decreasing relative importance to accounting graduates. The article is
intended to provide CPA candidates, accounting faculty, the AICPA, and
the state boards of accountancy with an insight into the business law pro-
fessor’s perspective concerning the legal education of accountants. It re-
veals to business law professors inconsistencies between the business law
curriculum they believe they should be providing their accounting stu-
dents and the business law curriculum they are in fact delivering to those
students, finding that a large majority of business law professors feel a re-
sponsibility to prepare their accounting students for their careers in public
accounting but have adopted business curricula more consistent with the
goals and objectives of the AACSB. The article recommends that business
law professors join together with accounting professors in teaching and in
scholarship to make the relevance of business law more transparent to both
accounting graduates and practicing accountants.
II. STATE ACCOUNTANCY ACTS
There are fifty-five jurisdictions that have passed laws that provide for the
certification and licensing of CPAs.6 These jurisdictions include all fifty
U.S. states, the District of Columbia, the U.S. territories of Guam, Puerto
Rico, and the Virgin Islands, and the Commonwealth of the Northern
5This article is based on a study funded by a grant from the Lilly Foundation. This article ispart of a broader study of the business law education of accounting students that will alsoinclude the measurement of the perceptions of accounting chairs and executive directors ofstate boards of accountancy.
6See NASBA, http://www.nasba.org/nasbaweb/NASBAWeb.nsf/WPECUSM (last visited Dec.29, 2008).
2009 / Business Law Education of Accounting Students 139
Mariana Islands.7 In most of these jurisdictions, the laws are referred to as
accountancy acts, and they set the legal requirements for the certification
and licensing of CPAs in that state or territory.8 These accountancy acts
typically include sections that create boards of accountancy and give them
the authority and responsibility to administer and enforce the acts. Under
the provisions of these accountancy acts and their corresponding regula-
tions, individuals are generally allowed to practice public accounting if they
meet certain requirements. They must possess good moral character,
satisfy minimum educational requirements, pass the CPA Exam and
demonstrate that they have met the state-prescribed work experience re-
quirement.9 Examples of these requirements are found in the Uniform
Accountancy Act (UAA)10 and the Uniform Accountancy Act Model
Rules (UAA Rules).11 The NASBA and the AICPA drafted the UAA as a
uniform law for the states and territories to adopt. The UAA provides
that the certificate of CPA will be granted to those persons of good moral
character who have obtained a baccalaureate degree with 150 semester
hours and a concentration in accounting or its equivalent.12 In addition,
the UAA requires that CPA candidates demonstrate that they have
completed at least one year of work experience.13 The UAA provides
that the state boards of accountancy may adopt rules that specify the
educational and experience qualifications required for the issuance of
7Id.
8State license requirements can be found at state board of accountancy Web sites. There areseveral online compilations of state board of accountancy Web sites. See The Web Site of theNew York Society of CPAs, http://www.nysscpa.org/useful_links/state_boards.htm (last visitedDec. 29, 2008); Welcome to the Accountancy Board of Ohio, http://acc.ohio.gov/stateweb.htm(last visited Dec. 29, 2008).
9See N.Y. EDUC. LAW § 7404 (2007), available at http://www.op.nysed.gov/article149.htm; CAL.BUS. & PROF. CODE §5 090 (2007), available at http://www.leginfo.ca.gov/cgi-bin/displaycode?section=bpc&group=05001-06000&file=5080-5095.
10UNIFORM ACCOUNTANCY ACT § 5 (4th ed. 2005), available at http://www.aicpa.org/download/states/UAA_2005_Fourth_Edition.doc.
11UNIFORM ACCOUNTANCY ACT MODEL RULES 5–2 (2008), available at http://www.nasba.org/862571B900737CED/7BBB4727858B4EE48625743B006448BD/$file/UAA%20Model%20Rules%20Revised%20April%202008.pdf.
12The 150-hour requirement takes effect five years from enactment of the Uniform Accoun-tancy Act. UNIFORM ACCOUNTANCY ACT supra note 10.
13Id.
140 Vol. 26 / The Journal of Legal Studies Education
CPA certificates.14 Under UAA Rule 5-2, candidates are required to have
completed twenty-four semester hours of upper-level accounting courses
that must include the subjects of financial accounting, auditing, taxation, and
management accounting.15 In addition, they are required to have completed
twenty-four semesters of nonaccounting business courses.16 In 2005, the
NASBA proposed an increase in educational requirements under UAA Rule
5-2. That proposed amendment increased the number of accounting and
business hours, and added specific course requirements in both accounting
and business hours.17 Among the specific course requirements of this pro-
posal was a three-semester-hour business law requirement.18 This amend-
ment to the UAA Rules was rejected by the NASBA,19 and the current UAA
Rules do not require a course in business law.20 Whether a requirement of
three semester hours of business law will eventually become part of the UAA
Rules is not currently predictable, but it appears unlikely that the NASBA will
adopt a six-hour business law requirement any time soon. For any change to
the UAA Rules to be effective in a state or territory, it would have to be
adopted by that specific board of accountancy. To understand the business
law education requirements to become a CPA, one must look to the specific
laws and regulations of each jurisdiction.
III. STATE EDUCATION REQUIREMENTS
Sixteen out of the fifty-five jurisdictions that provide for CPA certification
currently require a candidate to have completed an undergraduate or
14Id. § 4(h)(3).
15UNIFORM ACCOUNTANCY ACT MODEL RULES supra note 11.
16Id.
17 Glen Van Wyhe, A History of U.S. Higher Education in Accounting, Part II: Reforming Accountingwithin the Academy, 22 ISSUES ACCT. EDUC. 481, 496 (2007).
18NASBA, NASBA EXPOSURE DRAFT OF UNIFORM ACCOUNTANCY RULE 5–2(c) (2005), available athttp://www.nasba.org/nasbaweb/NASBAWeb.nsf/PS/264D55C613B9747D862571B900755C7F/$file/UAA%20Education%20Rules%20Exposure%20Draft.pdf (discussing a new education re-quirement that, would require three hours of business law).
19Van Wyhe, supra note 17, at 496.
20UNIFORM ACCOUNTANCY ACT MODEL RULES supra note 11.
2009 / Business Law Education of Accounting Students 141
graduate business law course.21 Those jurisdictions include: Alabama,
Alaska, District of Columbia, Florida, Guam, Kansas, Louisiana, Massa-
chusetts, Nebraska, Nevada, New Jersey, New York, Rhode Island,
Utah, Vermont, and West Virginia.22 A large majority of jurisdictions (71
percent) place the decision of whether to take a college business law
course entirely within the judgment of the CPA candidate.23 Under the
UAA and most state regulations, business law is treated as general business
knowledge.24 For example, the rules and regulations of the Tennessee
State Board of Accountancy require CPA candidates to complete twenty-
four semester hours (or thirty-six quarter hours) in ‘‘general business
education in one (1) or more of the following: (i) Algebra, Calculus,
Statistics, Probability, (ii) Business Communication, (iii) Business Law,
(iv) Economics, (v) Ethics, (vi) Finance, (vii) Management, (viii) Technol-
ogy/Information Systems, (ix) Marketing.’’25 Under this regulation,
21ALA. ADMIN. CODE r. 30-X-4.02 (2007); ALASKA ADMIN. CODE tit. 12, § 04.185 (2007); D.C.MUN. REGS. 17 § 2053 (2007); FLA. ADMIN. CODE ANN. r. 61H1-27.002 (2007); 25 GUAM ADMIN.R. & REGS. § 2104(b) (2007); KAN. ADMIN. REGS. § 74-2-7 (2007); LA. ADMIN. CODE tit. 46, § 503(2007); 252 MASS. CODE REGS. 2.07 (2004); 288 NEB. ADMIN. CODE § 9-003.02B (1998); NEV.ADMIN. CODE § 628.055 (2007); N.J. ADMIN. CODE § 13:29-1A.3 (2005); N.Y. COMP. CODES R.REGS. tit. 8, § 52.03 (2007); 02-020 R. I. CODE R. § 003 (Weil 2007); UTAH ADMIN. CODE r. 156-26a-302a (2007); 04-030-010 VT. CODE R. § 5.3 (2007); W. VA. CODE R. § 1-1-4 (2007).
22See supra note 21.
23ARIZ. REV. STAT. § 32–723 (2003); 019-00-03 ARK. CODE R. § 002 (2003); CAL. CODE REGS. tit.16, § 9 (2005); 3 COLO. CODE REGS. § 705–2 (2007); CONN. AGENCIES REGS. § 20-280-22 (2007);24-100 DEL. CODE REGS. § 4.1.4.2 (2003); GA. COMP. R. & REGS. 20-3-.02 (2004); HAW. CODE R. §16-71-17 (2001); IDAHO ADMIN. CODE r. 01.01.01.300 (2004); ILL. ADMIN. CODE tit. 23, § 1400.90(2005); 872 INDIANA ADMIN. CODE r. 1-1-6.1 (2007); IOWA ADMIN. CODE r. 193A-3.3 (2001); 201KY ADMIN. REGS. 1:190 (2006); MD. CODE REGS. 09.24.05.03 (2007); 02-280 ME CODE R. § 003(Weil 2004); 2003 N. Mar. I. Pub. L. 13-52; MICH. ADMIN. CODE r. 338.5114 (2008); MINN. R.1105.1500 (2005); 73-33-1 MISS. CODE R. § 2.2.1 (2007); MO. CODE REGS. ANN. tit. 20 § 2010-2.041 (2006); MONT. ADMIN. R. 24.201.501 (2005); N.H. CODE ADMIN. R. ANN. ACCT. 302.02(2007); N.M. CODE R. § 16.60.2.9 (Weil 2008); 21 N.C. ADMIN. CODE 08A.0309 (2007); N.D.ADMIN. CODE 3-01-02-01 (2003); OHIO ADMIN. CODE 4701-3-03 (2008); OKLA. ADMIN. CODE §10:15-18-4 (2008); OR. ADMIN. R. 801-010-0050 (2007); 63 PA. STAT. § 9.4 (1996); S.C. CODE
ANN. § 40-2-35 (2007); S.D. ADMIN. R. 20:75:02:04 (2004); TENN. COMP. R. & REGS. 0020-2-.02(2006); 22 TEX. ADMIN. CODE § 511.28 (2008); 18 VA ADMIN. CODE § 5-21-30 (2003); V.I. CODE
ANN. tit. 27 § 5-232 (1983); WASH. ADMIN. CODE § 4-25-710 (2004); WIS. ADMIN. CODE ACCT
§7.035 (2004); 33-3-109 WYO. CODE R. § 2.2 (Weil 2007); PUERTO RICO CPA EXAM REQ-
UIREMENTS, http://www.beckercpa.com/puerto_rico/index.cfm (last visited Aug. 12, 2008).
24UNIFORM ACCOUNTANCY ACT MODEL RULES supra note 11.
25TENN. COMP. R. & REGS. 0020-2-.02 (2007).
142 Vol. 26 / The Journal of Legal Studies Education
like many other states’ regulations, college business law courses are
recognized as potentially beneficial but no more so than a course in
management, information technology, or any of the other prescribed
courses. Similarly, the Indiana Board of Accountancy’s regulations require
the candidate to complete ‘‘at least twenty-four (24) semester hours in
business administration and economics courses. . . . The business admin-
istration courses may include up to six (6) hours of business and tax
law courses.’’26 Indiana’s law is representative of those states that put an
upper limit on the amount of business law that will count toward the
state’s education requirement.27 Both Indiana’s and Tennessee’s laws
are typical in that they do not define what constitutes a business law
course, and they use language broad enough to make legal environment
of business courses and business law courses interchangeable. They can
be contrasted with states like Alabama and Louisiana, where CPA candi-
dates are required by law to take three semester hours of commercial
law before they sit for the CPA Exam.28 Those states not only require
that a business law course be taken, but they identify commercial law as
the appropriate type of course. Alternatively, states like Florida and West
Virginia require that six hours of business law be taken by those desiring
to become CPAs.29
The actual number and type of law courses taken by CPA candidates
depends on the educational requirements of the CPA candidates’ jurisdic-
tions and their academic program requirements. In the majority of states,
CPA candidates are only required to take business law courses if their
academic major requires it. CPA candidates are not required to major in
accounting; they must merely have completed sufficient accounting and
business hours to satisfy their accountancy act. These states leave the CPA
candidates’ educations up to the judgment of the candidates. They provide
no guidance to CPA candidates as to legal concepts necessary, if any, for the
practice of public accounting.30 They rely exclusively on testing to insure
26872 IND. ADMIN. CODE 1-1-6.1 (2007).
27Some states limit the number of hours that can be taken in any business knowledge area. See22 TEX. ADMIN. CODE § 511.58 (2007).
28ALA. ADMIN. CODE r. 30-X-4-.02 (2007); LA. ADMIN. CODE tit. 46, § 503 (2007).
29FLA. ADMIN. CODE ANN. r. 61H1-27.002 (2007); W. VA. CODE R. § 1-1-4 (2007).
30But see NASBA, supra note 18.
2009 / Business Law Education of Accounting Students 143
that CPA candidates have the business law knowledge they need to protect
the public interests, and they have chosen the CPA Exam for that pur-
pose.31 Under this approach, the business law content of the CPA Exam
becomes, for some, the de facto standard of business law knowledge and
skills needed by entry-level public accountants.
IV. CPA EXAM STRUCTURE
Business law has been a significant part of the CPA Exam for a very long
time. The first CPA Exam offered in New York in the year 1898 consisted
of four three-hour sessions.32 Those four sessions included theory of ac-
counts, practical accounting, auditing, and commercial law.33 The impor-
tance of business law knowledge to the practice of public accounting was
recognized early and, consequently, 25 percent of the content for the first
exam was allocated to law. Over the years, there have been many changes
involving the CPA Exam,34 but until recently business law remained an
important section of the CPA Exam. The last two restructurings of the CPA
Exam by the AICPA, however, have revealed a dramatic shift by the AICPA
in the importance it places on business law content. In 1994, the AICPA
Board of Examiners reduced the overall length of the CPA Exam from
19.5 hours to 15.5 hours. The business law section was renamed the Law
and Professional Responsibilities (LPR) section, and its length was reduced
from 3.5 hours to 3 hours.35 With almost 15 percent of this new section
31See, for example, TENN. CODE ANN. § 62-1-108(d)(1) (2007), which states:
A written examination for certified public accountant shall be conducted by the board [ofaccountancy] at least twice annually, and shall be adequate to demonstrate the applicant’scompetence and knowledge as a certified public accountant of accounting practice, au-diting, accounting theory, business law and such other subjects as established from timeto time by the board . . .. Each applicant must obtain a passing grade of not less thanseventy-five (75%) on each subject examined.
32Dale L. Flesher et al., Joseph Hardcastle: The First Person to Pass the CPA Exam, CPA J., Apr.1996, at 16.
33Id.
34See The Accountancy Board of Ohio, Accountancy Board History 1959 to Present, available athttp://acc.ohio.gov/abh1959.htm (last visited Dec. 29, 2008) for a chronological listing of CPAExam issues over the years.
35Neal R. VanZante, The New CPA Examination, CPA J., Apr. 1994, at 42.
144 Vol. 26 / The Journal of Legal Studies Education
allocated to professional responsibility content36 the business law portion
of the exam dropped to slightly more than 2.55 hours. Business law topics
went from being 17.9 percent of the total CPA Exam before the restruc-
turing to approximately 16.5 percent after the 1994 restructuring. Ten
years later, the AICPA Board of Examiners again reduced the overall
length of the CPA Exam. In 2004, exam length was reduced a more mod-
est 1.5 hours, from 15.5 hours to 14 hours.37 During the 2004 restructur-
ing, the LPR section was replaced, and the business law topics were divided
between two new sections, a 3-hour Regulation (REG) section and a 2.5-
hour Business Environment and Concepts (BEC) section.38 Business law
topics were allocated 20 percent to 25 percent of the REG section and 17
percent to 23 percent of the BEC section.39 Thus, under the current com-
puter-based CPA Exam, the business law portion has been reduced to its
lowest percent in the history of the CPA Exam, approximately 8.4 percent to
11 percent of the total 14 hour long exam.40 The AICPA did not signifi-
cantly reduce the number of topics to be learned; it simply made the learn-
ing of those topics less important. Another consequence of the 2004
restructuring, is that it is now more difficult to verify that CPA candidates
know sufficient business law concepts. CPA candidates who are strong in the
36Christine Neylon O’Brien & John G. Neylon, The Role of Business Law in the 150 Hour Ed-ucational Requirement for CPA Certification, 18 J. LEGAL STUD. EDUC. 1, 4 (2000) (discussing theCPA content specifications in 1994).
37AICPA, BOARD OF EXAMINERS, STRUCTURE, LENGTH, AND EXAMINATION CONTENT SPECIFICATIONS
FOR THE UNIFORM CPA EXAMINATION 4 (2002), available at http://www.cpa-exam.org/global/download/BOE%20Structure%20Length%20CSO%20Document.pdf.
38Id. at 17–22.
39Id.
40Id. (The current AICPA content specifications allocate 15 percent to 20 percent of the three-hour REG section to the area of Ethics and Professional and Legal Responsibilities. This areahas six groups of which two are law related: ‘‘Legal Responsibilities and Liabilities’’ and‘‘Privileged Communications and Confidentiality.’’ While it is impossible to determine theamount of time allocated to these two groups, for purposes of this calculation we assumedone third of the total time range allowed (.15 hours to .20 hours) as a reasonable estimate. TheBusiness Law area is allocated 20 percent to 25 percent of the three-hour REG section whilethe Business Structures area is allocated 17 percent to 23 percent of the 2.5-hour BEC section.The Business Law section would range from .6 hours to .75 hours and the Business Structureswould range from .43 hours to .58 hours. The total time for all nontax law-related contentwould be approximately 1.18 hours to 1.53 hours out of 14 hours. On a percentage basis thiswould be 8.4 percent to 11 percent of the CPA Exam.)
2009 / Business Law Education of Accounting Students 145
other topics tested in the REG and BEC sections may be able to pass those
sections without necessarily having a strong background in business law.
The decision to change the structure and content of the 2004 CPA
Exam was not made arbitrarily and developed over a period of years.
According to the AICPA, it made its 2004 content specifications to the CPA
Exam based primarily on practice analyses, recommendations of the Con-
tent Oversight Task Force (COTF), and comments received from stake-
holders upon publication of their proposed changes.41 Over the years, the
AICPA had received some feedback from constituents that the amount of
business law content on the CPA Exam should be reduced. For example,
during the AICPA’s 1991 practice analysis, 2,000 newly licensed CPAs were
surveyed and they ranked business law, economics, marketing, and finan-
cial markets as relatively unimportant to their competence as CPAs.42 Sim-
ilarly, in 1996, the AICPA’s Board of Examiners appointed, what was then a
new task force, the COTF, and charged it with evaluating the content of the
CPA Exam.43 It distributed a comment paper on CPA Exam content spec-
ifications to various CPA Exam stakeholders in January 1997 and received
72 responses.44 Several practices that are currently implemented and
relied upon by the AICPA were generated or validated by the responses
to that comment paper. For example, most respondents felt that the CPA
Exam should continue to test the knowledge and skills needed for services
traditionally performed by CPAs, such as audits, reviews, compilations, and
taxation.45 Several respondents believed that the CPA Exam should test
the content areas of information technology, other assurance services, and
general business knowledge.46 Most respondents felt that the CPA Exam
should test only the skills and knowledge required of new CPAs and not
those required of experienced CPAs.47 Some respondents thought that the
amount of time allocated to testing business law on the CPA Exam should
41AICPA BOARD OF EXAMINERS, supra note 37, at 1–2.
42David B. Pearson & Bruce H. Biskin, AICPA Study of Public Practice, 172 J. ACCT. 38 (1991).
43Jacqueline Burke & Eugene T Maccarrone, The 21st Century Exam: Uniform CPA Examination:The only Constant Is Change, CPA J., Mar. 2000, at 40.
44Id. at 41–42.
45Id.
46Id.
47Id.
146 Vol. 26 / The Journal of Legal Studies Education
be reduced and reallocated to the other content areas of the CPA Exam.48
The COTF took those comments seriously and formed work groups to
explore implementation of the suggestions. For example, the COTF ap-
pointed a General Business Knowledge Work Group to examine how
general business knowledge content could be added to the CPA Exam.49
Over this same period, support was building within the AICPA and the
NASBA to adopt a computerized format for the CPA Exam.50 By the time
the AICPA was ready to conduct its 2000 practice analysis, the COTF had
already developed some structural changes it was ready to make to the
CPA Exam. In the 2000 practice analysis, the AICPA Practice Analysis
Oversight Group surveyed 5,000 entry-level CPAs concerning the tasks,
knowledge and skills necessary to practice as entry-level CPAs.51 It deter-
mined that the appropriate population to survey was CPAs who had held
their licenses to practice for no more than five years.52 It would be a mistake
to conclude that the 2004 structural changes to the CPA Exam were based
primarily on data from the 2000 practice analysis. The data collected from
this survey did not initiate the major changes to the CPA Exam, although the
findings may have been interpreted as consistent with earlier research of the
COTF. The 2000 practice analysis was just a single part of a larger process
that formed the opinions of the COTF. Ultimately, the content of the CPA
Exam is determined by the AICPA Board of Examiners and is based upon
the recommendations of the COTF. The AICPA’s technical report on the
2000 practice analysis survey data makes clear that the content specifications
are based on the ‘‘expert opinion’’ of the COTF and its other committees,
and not mechanically tied to the findings of any specific survey.53 The AICPA
views the process as a continuous one designed to keep the CPA Exam con-
48Id.
49AICPA, UNIFORM CPA EXAMINATION CONTENT SPECIFICATIONS UPDATE STUDY: GENERAL BUSINESS
KNOWLEDGE REQUIRED BY CPAS IN PUBLIC ACCOUNTING 7 (2000), available at http://www.cpa-exam.org/download/gbkfinal.doc.
50Louise Dratler Haberman, NASBA Annual Meeting: Association Calls for Computerized UniformCPA Exam, 179 J. ACCT. 18 (1995).
51AICPA, PRACTICE ANALYSIS OF CERTIFIED PUBLIC ACCOUNTANTS TECHNICAL REPORT 27 (2001),available at http://www.cpa-exam.org/global/download/parep.pdf.
52Id.
53Id. at 80.
2009 / Business Law Education of Accounting Students 147
tent current and practice based.54 The latest practice analysis was authorized
by the AICPA Board of Examiners at its meetings in June of 2006 and is
currently under way. 55 In this latest practice analysis, the AICPA is again
proposing a decrease in the percentage of business law content on the CPA
Exam. It proposes to decrease business law topics to 17 percent to 21 percent
of the REG section, while moving business structure content from the BEC
section to the business law area of the REG section.56
V. CPA CONTENT
Although the AICPA uses practice analyses as part of its periodic review of
the general structure of the CPA Exam, it also uses it for determining
specific exam content. Over the years, some business law topics are added
and others are removed from the CPA Exam.57 In the current CPA Exam,
content specifications are broken down into areas, groups and topics.58 For
example, the REG section is currently divided into six areas: ethics and
professional and legal responsibility, business law, federal tax procedures
and accounting issues, federal taxation of property transactions, federal
taxation of individuals, and federal taxation of entities.59 The area of ethics
and professional and legal responsibility is divided into six groups of which
two are law related.60 The area of business law is divided into six groups:
agency, contracts, debtor-creditor relationships, government regulation of
business, uniform commercial code, and real property (including insur-
ance).61 Each group is then divided into a number of specific legal topics.
54Pustorino, supra note 4, at 37.
55See Uniform CPA Examination Practice Analysis (Dec. 2, 2007), http://www.aicpa.org/Magazines+and+Newsletters/Newsletters/The+Practicing+CPA/September+2006/uniform.html.
56AICPA, EXPOSURE DRAFT PROPOSED CONTENT AND SKILL SPECIFICATIONS FOR THE UNIFORM
CPA EXAMINATION, 3 (2008) available at http://www.cpa-exam.org/download/ExposureDraft_proposed_CSO_SSO.pdf.
57See Editor’s Corner, 34 AM. BUS. L.J. (Summer 1997) (discussing the deletion of public lawtopics from the CPA Exam).
58AICPA BOARD OF EXAMINERS, supra note 37, at 7.
59Id. at 17–19.
60Id. at 17.
61Id.
148 Vol. 26 / The Journal of Legal Studies Education
Similarly, the BEC section is divided into five areas: business structure,
economic concepts, financial management, information technology (IT)
implications, and planning and measurement.62 The area of business
structure is divided into four groups. 63 The first group includes the ad-
vantages, implications, and constraints of legal structures used in business.
The second group covers the formation, operation, and termination of
businesses. The third group includes the financial structure, capitalization,
profit and loss allocation, and distributions from business structures. The
fourth group covers the rights, duties, legal obligations, and authority of
owners and management. 64 Some of these groups are then divided into
specific legal topics. Under the current content specifications, business
structure has taken on added importance on the CPA Exam. The business
law area on the REG section may be allocated between .6 and .75 hours on
any given CPA Exam, while the business structure area on the BEC section
may be allocated between .43 hours and .58 hours. If the area of business
structure was allocated its maximum time allowed and the business law
area was allocated its minimum they would almost be equal. That is a sig-
nificant increase for business structure topics when compared with the
1994 content specifications, and it is a significant decrease for other busi-
ness law topics.65 If the AICPA’s 2008 proposed content specifications are
adopted, and business structure topics are tested in the business law area of
the REG section, all other business law topics will receive even less cover-
age on future CPA Exams.
VI. ACCOUNTING LIABILITY AND ACCOUNTINGSCANDALS
Lawsuits against accountants have seemed at crisis proportions for some
time now. In the first half of the 1990s, the litigation crisis revolved pri-
62Id. at 21–22.
63AICPA, BUSINESS ENVIRONMENT AND CONCEPTS ADDITIONAL DETAIL CORRESPONDING TO CONTENT
SPECIFICATION OUTLINE 6 (2002), available at http://www.cpa-exam.org/download/BEC-Paper-final.pdf.
64Id.
65See Neal R. VanZante, The New CPA Examination, CPA J., Apr. 1994, at 42, 43 discussing ofthe 1994 CPA content specifications).
2009 / Business Law Education of Accounting Students 149
marily around the collapse of the savings and loan industry and the 1991–
1992 recession.66 The public accounting industry responded to this wave
of lawsuits by enhancing their peer and quality review efforts, seeking
federal and state tort reform, reviewing the language of professional stan-
dards, and adopting alternative dispute resolution techniques.67 Of course,
not all malpractice claims during that period arose out of audit engage-
ments. While audit claims are generally the most costly to settle, tax claims
can occur more frequently.68 During the period from 1987 to 1993, the
AICPA Professional Liability Insurance Plan received 3,295 new malprac-
tice claims, of which 48 percent were from tax engagements with only 17
percent from audit engagements.69 These claims arose from negligence in
tax planning as well as negligence in tax compliance. They involved failure
to document communications and engagements with clients, missed filing
and election deadlines, negligent investment and pension advice, and var-
ious other forms of malpractice.70 Legal troubles continued for the public
accounting profession within just a few years. By the late 1990s, the public
accounting profession entered into a period of high-profile accounting
scandals. The Baptist Foundation, Enron, MCI, Adelphia Communica-
tions, and other accounting scandals cost investors billions of dollars and
led to the creation of new criminal penalties and additional regulation of
the accounting profession at both the federal and state level.71 Corporate
officers involved in these scandals received lengthy jail sentences while
those bankers, auditors, and directors involved have been held liable for
billions of dollars.72 These corporate scandals have not generally been
viewed as a failure by those involved to understand the legal environment
or their legal responsibilities but have been viewed as intentional ethical
66Dan L. Goldwasser, Is the Storm Ending?, CPA J., Oct. 1995, at 16, 21.
67Id.
68William F. Yancey, Managing a Tax Ppractice to Avoid Malpractice Claims, CPA J., Feb. 1996, at12.
69Id.
70Id. at 13.
71Karen Gantt et al., Sarbanes-Oxley, Accounting Scandals, and State Accountancy Boards, CPA J.,Sept. 2007, at 18.
72Nikki Swartz, Corporate Criminals Strike Out in 2005, INFO. MGMT. J., Mar.–Apr. 2006, at 10,10–11.
150 Vol. 26 / The Journal of Legal Studies Education
breaches or violations.73 Correspondingly, they have generated an interest
in research concerning the need for additional ethics training or ethics
education for accountants and business students.74 Similarly, the account-
ing scandals are probably an important reason that thirty-four state boards
of accountancy have passed legislation requiring continuing education in
ethics for their licensed CPAs.75 The scandals have also motivated the
NASBA to propose amending the UAA to require ethics education for all
CPA candidates.76 Nothing similar happened concerning business law
training or business law education. The accounting scandals and the in-
creased regulation of accountants, brought about by the Sarbanes-Oxley
Act and similar state statutes, did not result in the AICPA or the NASBA
calling for a dramatic improvement or increase in the legal education of
accountants. Only a few published articles connected the accounting scan-
dals to the legal education of accountants.77 These articles, however, seem
to make a valid connection between the accounting scandals and the legal
environment, which has gone largely unnoticed. As one author stated:
A business may eventually fail due to unethical behavior, but no one goes toprison for unethical, but legal, actions. Knowledge, respect, and fear of the law,as well as of business ethics, are critical to every businessperson. The failure torecognize the importance of law and ethics in business decision making canend in catastrophe.78
This seems to aptly describe what happened to the public accounting
practice of Arthur Anderson LLP in regard to the Enron scandal. It is
doubtful that Arthur Anderson LLP’s professional accounting practice
73This is probably due to the fact that the accounting scandals involved experienced individ-uals with presumed access to advice from legal counsel.
74See Amy Haas, Now Is the Time for Ethics Education, CPA J., June 2005, at 66; Conor O’Leary& Gladies Pangemanan, The Effect of Groupwork on Ethical Decision-Making of Accountancy Stu-dents, J. BUS. ETHICS 215 (2007); Cindy Blanthorne et al., Accounting Educators’ Opinions aboutEthics in the Curriculum: An Extensive View, 22 ISSUES ACCT. EDUC. 355 (2007).
75Blanthorne, supra note 74, at 356.
76NASBA, supra note 18.
77See Sally Gunz & John McCutcheon, The AICPA in Crisis and How it Impacts the Business LawDispute, 20 J. LEGAL STUD. EDUC. 203, 207 (2002); John Tanner et al., A Survey of BusinessAlumni: Evidence of the Continuing Need for Law Courses in Business Curricula, 21 J. LEGAL STUD.EDUC. 203 (2004).
78Tanner, supra note 77.
2009 / Business Law Education of Accounting Students 151
would have been destroyed solely by an AICPA or state board of accoun-
tancy ethics investigation, but the criminal obstruction of justice allegations
brought about disaster for the firm. Yet the lesson learned from Arthur
Andersen LLP, as described in accounting literature, is predominantly one
of ethics, not law.
VII. ACCREDITATION STANDARDS
The accreditation standards of the AACSB have been another important
influence on the business law curricula.79 The AACSB’s current language,
as relevant to business law, calls for learning experiences in ‘‘Ethical and
legal responsibilities in organizations and society.’’80 The origins of this
language are nearly four decades old. In 1969, the AACSB eliminated
language from its standards that called for a business law course as a cur-
riculum requirement. It replaced it with language that required students
to be exposed to a common body of knowledge that included a back-
ground in the economic and legal environment of the business enter-
prise.81 This change in the language of the standard affected how
accredited business programs named and approached their required law
courses. In a survey conducted in 1982 of both AACSB accredited and
unaccredited institutions, three major approaches to providing legal con-
tent in the business curricula were identified.82 The first category, tradi-
tional, was defined as including contracts, sales agreements, and other
common law and commercial law topics. The second category, a public law
or regulatory approach, was defined as including administrative agencies
and their relationships and involvement with businesses. It included such
topics as consumer law, labor law, and antitrust legislation. The third cat-
egory, the liberal arts or introductory approach, was defined as focusing
upon the process and role of law in society. Its variety of topics included
79Tanner, supra note 77, at 204 (discussing of the history of business law curricula).
80AACSB, ELIGIBILITY PROCEDURES AND ACCREDITATION STANDARDS FOR BUSINESS ACCREDITATION
STANDARD 15 72 (2007), available at http://www.aacsb.edu/accreditation/process/documents/AACSB STANDARDS Revised_Jan07.pdf.
81Gary A. Moore & Stephen E. Gillen, Managerial Competence in Law and the Business Law Cur-riculum: The Corporate Counsel Perspective, 23 AM. BUS. L.J. 351, 352 (1985).
82Mark A. Buchanan, The Legal Environment Requirement: How is it Being Met?, 21 AM. BUS. L.J.237, 238–39 (1983).
152 Vol. 26 / The Journal of Legal Studies Education
jurisprudence and interdisciplinary aspects of the law. There were, of
course, programs where some aspects of these three approaches were
blended together. This research found that the majority of institutions, at
that time, both accredited and unaccredited, followed a traditional ap-
proach.83 The AACSB accredited programs were more likely to call their
required law course legal environment rather than business law, and they
were more likely to follow that regulatory or public law approach in the
course.84 Legal environment of business texts were developed to meet
AACSB standards and are now easily distinguished from business law texts
by their smaller size and fewer chapters.85 These differences are suffi-
ciently distinct that a course titled legal environment would be expected to
be taught with a legal environment of business text. In 1990, a survey
was conducted of a 117 deans of AACSB-accredited schools, and the
study found that there was an inconsistency between legal-environment-of-
business-type courses and the needs of accounting students.86 The study
found that business programs requiring two traditional courses in business
law had all but vanished.87 It also found that 25 percent of the respondent
institutions required a one-semester legal environment course for their
accounting majors, the same requirement as for all other undergraduate
business students.88 The author of the study recommended adoption of a
two-course requirement for accounting students with an introduction to all
relevant legal areas in the first course and the second course detailing
subjects critical to accountants and auditors. The author recommended an
integrated and transactional approach that would present the interrela-
tionships that exist in business law. 89
83Id. at 242.
84Id. at 246.
85The size and number of chapters in business law texts vary depending on the authors.Similarly, the size and number of chapters in legal environment of business texts also vary. Insome cases business law and legal environment of business texts have moved closer togetherbut generally legal environment of business texts have fewer chapters and fewer pages thanbusiness law texts.
86Eugene T. Maccarrone, Do College Law Curriculums Meet the Needs of Accounting Majors?, CPAJ. ONLINE (Apr. 1990), http://www.nysscpa.org/cpajournal/old/08415654.htm.
87Id.
88Id.
89Id.
2009 / Business Law Education of Accounting Students 153
Today’s AACSB accreditation process is mission-based with an em-
phasis on continuous improvement and direct assessment. In addition to
the AACSB accreditation standards for business, the AACSB has adopted
accreditation standards for accounting programs. There are two account-
ing accreditation standards that are relevant to this discussion. Standard 37
states that normally degree programs will include learning experiences in
the ‘‘ethical and regulatory environment for accountants.’’90 If there is a
substantive difference between the accounting standard’s ‘‘regulatory en-
vironment’’ language and the business standard’s ‘‘legal responsibility’’
language, it is not made clear in the annotations to the standards. Inter-
estingly, the regulatory environment language is consistent with the CPA
Exam’s inclusion of business law topics in the REG section. Standard 38 of
the accounting standards states that if a school’s mission is to prepare
graduates to enter an accounting profession, graduates should meet the
entry requirements for that profession.91 Academic units can document
compliance with the standard by referencing laws and regulations, com-
petency frameworks, and content lists provided by accounting professional
organizations. This standard may be the first step by the AACSB of con-
necting accounting curriculum requirements to state education require-
ments for CPAs.
VIII. THE 150-HOUR REQUIREMENT
A majority of states have passed the 150-hour requirement for CPAs, which
mandates that CPA candidates complete the equivalent of five years of
university education.92 The majority of the states, however, do not dictate
what the additional hours should cover in the way of content.93 For a pe-
riod of time, the AICPA and the NASBA published a 150-Hour Curriculum
90AACSB, ELIGIBILITY PROCEDURES AND STANDARDS FOR ACCOUNTING ACCREDITATION 35(2007), available at http://www.aacsb.edu/accreditation/process/documents/AACSB accountingSTANDARDS revised Apr07 annotated.pdf.
91Id. at 36.
92There are several online compilations of state CPA Exam requirements. See NASBA, http://www.nasba.org/nasbaweb/NASBAWeb.nsf/WPECUSM (last visited Aug. 12, 2008); State CPAExam RequirementsFBecker Review, http://www.beckercpa.com/state/index.cfm (last visitedDec. 29, 2008).
93See UNIFORM ACCOUNTANCY ACT, supra note 10.
154 Vol. 26 / The Journal of Legal Studies Education
Development Handbook.94 This handbook outlined a possible 150-hour cur-
riculum that included two law courses within the nonaccounting business
education hours. It listed a legal and social environment of business course
followed by a traditional business law course.95 References to this hand-
book are found as recent as the year 200096 and go back as far as the year
1990.97 Whether this sample curriculum was ever intended as more than
an illustration is questionable. The AICPA and the NASBA are oddly silent
about the best preparation for the CPA Exam. In the CPA Exam CandidateBulletin candidates are advised to read the AICPA content specification
outlines, review sample tests, and to take the online tutorial provided at
www.cpa.-exam.org.98 Today neither organization is giving specific curric-
ular advice to CPA candidates. The AICPA’s current assistance to educators
in developing accounting curricula is found in the form of the AICPA Core
Competency Framework.99 This framework identifies certain competen-
cies or skills needed by all accountants regardless of whether they work in
private industry, government, or public accounting.100 It includes a legal
competency that is included in the broad business perspectives section of
the framework. It states, ‘‘Individuals preparing to enter the accounting
profession need to be capable of describing the legal and regulatory en-
vironment and analyzing the impact of changes in relevant requirements,
constraints, and competitive practices.’’101 The AICPA Core Competency
Framework is only relevant to this discussion in that it illustrates that the
AICPA has chosen to identify the skills needed by all accountants but not
94O’Brien, supra note 36, at 2.
95Id.
96Id.
97Maccarrone, supra note 86.
98AICPA, NASBA & THOMSON PROMETRIC, THE UNIFORM CPA EXAMINATION CANDIDATE BULLE-
TIN INFORMATION FOR APPLICANTS 21 (2004), available at http://www.cpa-exam.org/cpa/bulle-tin.html.
99AICPA, Core Competency Framework & Educational Competency Assessment Web Site,http://ceae.aicpa.org/Resources/Education+and+Curriculum+Development/Core+Competency+Framework+and+Educational+Competency+Assessment+Web+Site/ (last visited Dec.29, 2008).
100Id.
101AICPA, Broad Business Perspective Competencies, http://www.aicpa.org/edu/bbfin.htm(last visited Dec. 29, 2008).
2009 / Business Law Education of Accounting Students 155
the knowledge base needed by entry-level CPAs. This reluctance of the
AICPA to give advice on accounting curricula needed by CPAs may be in
deference to its constituents who believe accounting curricula should
be decoupled from professional examinations. In 1991, the Accounting
Education Change Commission (AECC) issued a statement calling for the
decoupling of academic studies and preparation for professional account-
ing examinations.102 The AECC’s position was that accounting students
should complete their academic education prior to preparing for the CPA
Exam.103 Some accounting education reformers believe that the CPA
Exam has had a negative impact on accounting curricula over the years.104
They believe that passing the CPA Exam should not be the goal of an ac-
counting education.105 Some accounting practitioners and educators see
the purpose of the 150-hour requirement as one of broadening graduates’
business education and not a means of improving graduates’ CPA Exam
pass rates. In 2000, Albrecht and Sack in Accounting Education: Charting theCourse through a Perilous Future reported criticism of accounting programs
where the fifth year was used for additional accounting courses.106 They
suggested that this was the wrong approach and that the fifth year would
be better used to develop a broad business background.107 Their research,
however, identified business law as a broadening-type course, which was
ranked higher in importance by accounting practitioners than by account-
ing faculty. On a scale where four was very important, three was moder-
ately important and two was somewhat important, accounting faculty rated
business law as 2.84 and accounting practitioners ranked it as 2.95.108 This
research indicates that both groups found business law moderately im-
portant to the success of accountants.
102Accounting Education Change Commission, AECC Urges Decoupling of Academic Studies andProfessional Accounting Examination Preparation Issues Statement No. 2 (July 1991).
103Id.
104Irvin Nelson, What’s New about Accounting Education Change? An Historical Perspective on theChange Movement, 9 ACCT. HORIZONS 62, 63 (1995).
105Id. at 65.
106W. Steve Albrecht & Robert J. Sack, Accounting Education: Charting the Course through a Per-ilous Future, 16 ACCT. EDUC. SERIES 53 (2000).
107Id.
108Id. at 51–52.
156 Vol. 26 / The Journal of Legal Studies Education
IX. PROFESSOR JUDGMENT AND LOGICALCONCEPTUAL FRAMEWORKS
Over twenty years ago, Charles R. McGuire in his article in the winter 1986
American Business Law Journal109 proposed that business law professors de-
velop logical conceptual frameworks for determining the content of their
law courses. He emphasized the importance of business law professors not
abdicating or delegating their responsibilities in curriculum development
to others.110 He rejected the idea that business law professors should de-
sign an undergraduate law curriculum based on surveys of business peo-
ple, business school faculty, student interests or business law curricula at
other institutions.111 He proposed that the content of legal environment of
business courses be selected in the context of the relationships of a business
firm.112 He identified eight entities with relationships to the firm: custom-
ers, creditors, competitors, employees, government, the public, investors,
and suppliers. He identified three basic choices in selecting legal topics
using this framework.113 All topics relating to the eight relationships could
be presented in a survey or summary fashion in one semester. Alterna-
tively, all legal topics relating to the eight relationships could be presented
in more depth over two or more semesters. Finally, instructors could cover
all the relationships but select some relevant topics and ignore others so
that some in-depth coverage of the material could occur in one semester.
According to McGuire, this approach would help students see the ‘‘big
picture,’’ and they would be able to see the law as ‘‘a harmonious and
vibrant whole, organized and structured for change and intricate in its
exceptions and incongruities.’’114 On a practical level, McGuire offered a
reasonable and logical approach to teaching a legal environment of busi-
ness course, one that is consistent with the design of many of today’s legal
environment of business textbooks. As an example, McGuire’s approach
109Charles R. McGuire, Logic and the Law Curriculum: A Proposed Conceptual Framework For ‘‘TheLegal Environment of Business,’’ 23 AM. BUS. L.J. 479 (1986).
110Id. at 480.
111Id.
112Id. at 493.
113Id. at 497.
114Id. at 507.
2009 / Business Law Education of Accounting Students 157
emphasized the responsibility of business law faculty to use their judgment
and creativity in the design of undergraduate business law courses.
X. RESEARCH QUESTIONS
The policies adopted and actions taken by the AICPA, the NASBA, and the
individual state boards of accountancy over the past fifteen years raise
many questions concerning the role of business law curricula in accounting
programs. The 1969 change in the AACSB standard language, the 150-
hour requirement, the accounting reform movement, accounting scandals,
and the current structure and content of the computer-based CPA Exam
all are important events or factors that may have influenced business law
faculty. These factors raise fundamental questions concerning the proper
role of the business law curriculum for accounting students. They raise
questions concerning curricular content, the importance of substantive law
topics, the degree of integration of business law into accounting programs,
and the quality of legal training accounting students receive.
It is the primary purpose of this article to report how business law
instructors or professors perceive these issues. In addition, the article com-
pares the perceptions of business law professors in 1993 to those of business
law professors in 2005. This is done to determine to what extent the per-
ceptions of business law faculty have changed over a period where AICPA
and NASBA policies have changed. Finally, the article compares the posi-
tions taken by accounting organizations in respect to business law education
with those beliefs and actions taken by business law faculty. A review of the
relevant literature showed no prior published work that has done this.
XI. THE 1993 RESEARCH SUBJECTS ANDMETHODOLOGY
In 1993, the authors surveyed business law professors to determine their
perceptions as to the status of the business law education of accounting
students.115 The findings are discussed in this article to contrast the per-
ceptions of business law professors in 1993 with those of business law
115Mehmet C. Kocakulah et al., The Business Law Education of Accounting Students: A Survey ofBusiness Law Educators 1 (1994) (unpublished manuscript obtainable from authors).
158 Vol. 26 / The Journal of Legal Studies Education
professors surveyed in October 2005. In the spring of 1993, the authors
distributed a survey to 434 chairpersons of business law departments or to
the chairpersons of those departments housing the business law curricu-
lum. In the latter case, instruction was given to the department chair to
forward the questionnaire to an appropriate senior business law professor.
The sample was obtained by using a stratified random sample of every
third college or university named in Prentice Hall’s 1992 Accounting FacultyDirectory, compiled by James R. Hasselback. Colleges and universities of
various size, geographic location, and level of accreditation were selected.
The authors included all large schools of accountancy in the sample be-
cause the authors wanted to obtain the greatest coverage of accounting
students with the limited sample size selected. Follow-up requests were
mailed approximately three weeks after the initial mailing of the ques-
tionnaires. A Likert scale was used to measure perceptions or opinions.
Results were obtained from ninety-eight business law professors out of a
survey population of 434, a 22 percent response rate.116
A. Respondents’ Programs
The respondents were asked for demographical data concerning the size
of their institutions and accounting programs.117 The respondents indi-
cated they were from medium-sized universities having an average num-
ber of students of 9,277. The average number of undergraduate
accounting students in the respondents’ accounting programs was 298.
The respondents were then asked several questions concerning the
type of business law courses offered at their institution.118 The responses
show 56 percent of those surveyed had accounting programs where ac-
counting students were required to complete a course in legal environment
of business, while 62 percent required either a business law or a business law
I course.119 Twenty-three percent of the respondents indicated that their
programs required a second business law course (business law II).
116Id. at 4.
117Id.
118Id. at 5–6.
119These percentages indicate that some programs, obviously, required both types of coursescreating percentages above 50 percent for both types of courses.
2009 / Business Law Education of Accounting Students 159
B. Curricular Content
When respondents were asked whether all accounting students should be
required to take a legal environment of business course, only 14.2 percent
answered they either agreed or strongly agreed with this premise.120 In
contrast 75.2 percent disagreed or strongly disagreed with the proposition
that all accounting students should be required to take a legal environment
of business course.121 Respondents were asked how many semester hours
of law-related instruction (excluding taxation) should be required for an
accounting student planning to enter the public accounting profession. In
total, 74 percent of respondents believed that six or more hours should be
required of accounting students pursuing a career in public accounting.
Twenty-six percent felt three semester hours should be required, 61 per-
cent felt six semester hours and 13 percent indicated nine or more hours
should be required.122 Respondents were then asked if there were only
one required law course for accounting students, whether it should be a
business law or a legal environment course. 123 Seventy percent of the re-
spondents felt it should be a business law course.
C. Substantive Law Topics
Business law educators were then asked to rank the importance of
the topics tested on the CPA Exam at that time. They used a rating scheme
where 1 was very important, 2 was moderately important, 3 was not
very important, and 4 should not be tested. The results are contained in
Table 1.
As shown by Table 1, all the topics on the CPA Exam were viewed as at
least moderately important to accounting students interested in a career in
public accounting. The highest rankings included a combination of ac-
countant’s liability, business structure, and Uniform Commercial Code
topics.124
120Id. at 7.
121Id.
122Id. at 4–5.
123Id. at 6.
124Id. at 8.
160 Vol. 26 / The Journal of Legal Studies Education
D. Integration of Business Law into Accounting Programs
Respondents were asked whether they were members of their institutions’
accounting departments to determine how closely the respondents were
associated with the goals of accounting faculty. Fifty-one percent of the
respondents were members of accounting departments; the remaining
respondents were members of other departments.125 The respondents
were then asked how often accounting faculty made suggestions concern-
ing content in their business law courses.126 Only 28.1 percent of respon-
dents indicated that accounting faculty always or regularly gave input.
Conversely, 71.9 percent indicated that accounting faculty only sometimes,
seldom, or never made suggestions concerning course content. When
respondents were asked whether it was their responsibility to prepare
accounting students for the CPA Exam, 68.4 percent felt that it was while
26.5 percent felt that it was not.127
Table 1: Rating of Substantive Law Topics
Topic Rank Average Rating
Accountant’s liability 1 1.27Contracts 2 1.27Corporations 3 1.43Sales 4 1.40Partnerships 5 1.53Commercial Paper 6 1.57Secured Transactions 7 1.66Securities Regulations 8 1.70Bankruptcy 9 1.75Agency 9 1.75Real Property 11 2.05Estates and Trusts 12 2.10Personal Property 13 2.22Employment 14 2.28Insurance 15 2.35Suretyship 16 2.40Antitrust 17 2.68
125Id.
126Id. at 10–11.
127Id. at 12.
2009 / Business Law Education of Accounting Students 161
E. Perception of Quality in Legal Education
When respondents were asked how well prepared their accounting stu-
dents were for the CPA Exam, 62 percent of the respondents indicated that
their students were well or very well prepared for the business law portion
of the CPA Exam. Overall, the respondents felt that the accounting stu-
dents that were going into other fields of accounting were even better
prepared. A total of 96.8 percent of respondents felt that those students
were receiving a good or excellent business law education.128
XII. THE 2005 RESEARCH SUBJECTS ANDMETHODOLOGY
In October 2005, a questionnaire entitled Survey on Business Law Educationwas distributed via e-mail to 205 business law professors at colleges and
universities of varying sizes, levels of accreditation, and location across the
United States. When it was possible to identify them, chairs of business law
departments or senior business law professors were solicited for the survey.
The universities were selected from Prentice-Hall’s 2005 Accounting FacultyDirectory, compiled by James R. Hasselback. Information on business law
faculty was obtained from Hasselback’s directory when business law and
accounting were housed in the same department and when business law was
housed outside the accounting department; the authors obtain information
on business law professors from alternate sources, such as the business
schools’ Web sites, phone conversations, or the AACSB Web site www.aacs-
b.edu). The sampling method used was stratified random sampling. All
large schools of accountancy were included in the sample because the au-
thors wanted to obtain the greatest possible coverage of accounting students
with the limited sample-size selected. Both accredited and nonaccredited
schools were selected for the study because the survey included questions
leading to a determination of what accounting students on the whole were
being taught and what their professors thought that they should be taught
with respect to business law topics. Follow-up requests were e-mailed to all
nonrespondents two and four weeks after the initial e-mail. A total of thirty-
five complete responses were received from the survey population of 205
business law professors for a response rate of 17 percent. For perceptions or
opinion questions, a Likert scale was used for measurement.
128Id. at 14.
162 Vol. 26 / The Journal of Legal Studies Education
A. Respondents’ Program
The respondents of the 2005 survey represented medium-sized universi-
ties with the institutions having an average of 6,524 students, including 213
accounting students. As shown in Table 2 the median number of university
students was 5,200 and undergraduate accounting students 200.
The first set of questions posed to respondents focused on the law-
related courses offered to accounting students in their business programs.
Respondents were asked to list the titles of each of their law-related
courses, whether those courses were required or elective, the mean num-
ber of credit hours for those courses, the mean number of accounting
students enrolled in those classes per year, and the mean number of un-
dergraduate students enrolled in those courses per year. The findings, as
shown in Table 3, reveal that the majority of the respondents’ programs
only required one law-related course and, in the majority of programs,
that required course was a legal environment of business course.
As shown in Table 3, legal environment of business was a required law
course at 62.9 percent of respondents’ institutions. The data shows that of
the twenty-two programs, where legal environment of business was re-
quired, in seven of the those programs a traditional second course such as
business law, business law I, commercial or business law CPA review was
also required. Thus, seven or 20 percent of the respondents required two
law courses, consisting of one course from each approach. The data also
revealed that five other programs required a course in business law or
business law I followed by a second required course in business law I or
business law II. These five programs represent a minority of respondents’
programs (14.3 percent) where two traditional courses were required.
Thus, only twelve or 34.3 percent of the respondents’ programs required
two law-related courses. The other twenty-three or 65.7 percent of the
respondents’ programs required one course or less. Fifteen required legal
environment of business, two required business law, five required business
law I, and one program did not require any law-related courses. As these
findings show, fifteen out of thirty-five programs or 42.9 percent of the
Table 2: Summary Statistics of the Surveyed Departments
Institution Demographics Mean Median
University size (students enrolled) 6,524 5,200Number of undergraduate accounting students 213 200
2009 / Business Law Education of Accounting Students 163
respondents relied on legal environment of business as the sole required
law course for their accounting students. Only seven or 20 percent of the
respondents relied on a single required traditional business law course.
B. Curricular Content
The respondents were then asked questions concerning their perceptions
of business law curricula. They were asked how many semester hours of
law-related instruction (excluding taxation) should be required for an
accounting student planning to enter the public accounting profession. A
total of 71.4 percent of the respondents believed that accounting students,
pursuing careers in public accounting, should be required to take six or
more semester hours of law instruction. Their responses showed 5.7 per-
cent listed three hours, 20.0 percent listed three to six hours, 40 percent
listed six hours, 25.7 percent listed six to nine hours, and 5.7 percent listed
nine hours. Respondents were asked, if only one law course was required
for accounting students in their baccalaureate degree program, which
Table 3: All Law-Related Courses Offered
Course
Required ElectiveMeanCreditHours
MeanUndergradAccounting
Students
MeanUnder-
graduateStudentsFrequency Percent Frequency Percent
Legal Environment ofBusiness
22 62.9 5 5.7 3.11 89 445
Business Law 5 14.3 5 14.3 3.33 118 235Business Law I 11 31.4 2 5.7 3.00 67 167Business Law II 4 11.4 12 34.3 2.93 28 32Commercial Law 2 5.7 6 17.1 3.17 52 74Estate Administration/Estate Planning
0 0 3 8.6 3.00 15 23
Consumer Law 0 0 2 5.7Labor Law 0 0 8 22.9 3.00 3 44Real Estate Law 0 0 4 11.4 3.00 0 28E-Commerce Law/Cyber Law
0 0 7 20.0 3.00 7 45
Business Law CPAExam Review129
2 5.7 2 5.7 3.00
129In addition to those courses listed in Table 3, other courses offered by respondents’ pro-grams included entertainment law, international business, health care law, tax law and humanresource law.
164 Vol. 26 / The Journal of Legal Studies Education
course should it be. By a nearly three-to-one margin business law profes-
sors chose business law (71.4 percent) over a course in legal environment
of business (25.7 percent).
Professors were asked whether or not all business law topics covered
on the CPA Exam should be covered in a university’s required under-
graduate courses. There was no general consensus, as 48.6 percent
responded yes, 48.6 percent responded no, with 2.8 percent not answer-
ing the question. The respondents were also asked whether or not all top-
ics covered on the CPA Exam should be covered in the university’s
required courses plus elective courses. Roughly 66 percent of the respon-
dents responded positively while over one-fourth believed all CPA topics
did not have to be covered in their curriculum.
C. Substantive Law Topics
The second set of questions asked the business law professors what substantive
law topics covered on the current CPA Exam were very important to accoun-
tants in performing the accounting, tax and auditing functions. Table 4 ranks
the topics by the percentage of respondents finding the areas very important.
Table 4: Rating of Substantive Law Topics
Topic Rank Percent
Accountant’s liability 1 80.0Corporations 2 74.3Contracts 3 65.7LLCs and LLPs 4 62.9Privileged communication and confidentiality 4 62.9Sole proprietorships and partnerships 4 62.9Liability for payroll and social security taxes 7 51.4Debtor-creditor relationships 8 45.7Secured transactions 8 45.7Agency 10 42.9Negotiable instruments 10 42.9Union and employee relations 12 40.0Sales 13 34.3Bankruptcy 14 31.4Pension and retirement plans 14 31.4Securities regulation 14 31.4Documents of title and title transfer 17 28.6Insurance 18 22.9Real Property 18 22.9Antitrust 20 8.6
2009 / Business Law Education of Accounting Students 165
The top six categories are divided between the business law topics of
accountant’s liability and contracts, and business structure topics of cor-
porations, limited liability companies (LLCs), limited liability partnerships
(LLPs), sole proprietorships, and partnerships. Respondents were then
asked, to indicate those substantive law topics that should be added to the
CPA Exam. Again, respondents were asked to rank whether the topics
were very important or moderately important. Table 5 shows the rankings
of those topics that were ranked as very important.
The top five topics not currently covered by the CPA Exam but
thought very important by business law professors included topics that
may appear more relevant in light of the recent accounting scandals. It
includes the liability of other professionals, business ethics, business crime,
administrative law, and torts. More respondents found these additional
topics very important than the actual CPA Exam topics of insurance, real
property, and antitrust. Given the importance of the various substantive
law topics on the CPA Exam, where in the curriculum are the business
law professors covering those topics? The business law professors were
Table 5: Rating of Law Topics Not Currently on the New CPA Exam
Law Topic Rank Percent
Liability of professionals 1 68.6Business ethics and social responsibility 2 62.9Business crimes 3 37.1Administrative law 4 28.6Torts 4 28.6Wills and trusts 6 25.7Employment discrimination 7 22.9Alternative dispute resolution 8 20.0Intellectual property 8 20.0Alternate dispute resolution 8 20.0Personal property and bailments 11 17.1Constitutional authority to regulate business 12 14.3Consumer protection 12 14.3International and comparative law 12 14.3Internet law or cyber law 12 14.3Landlord-tenant relationships 12 14.3Privacy 12 14.3The court system 12 14.3Court procedures 19 11.4Environment law 19 11.4Franchise law 19 11.4Functions, classifications, and sources of the law 19 11.4
166 Vol. 26 / The Journal of Legal Studies Education
asked in which type of course were these topics being covered (required,
elective, or not covered) at their respective schools. Table 6 shows the ex-
tent to which each legal topic on the CPA Exam is covered in the respon-
dents’ programs.
These findings indicate that a majority of the respondents covered
contracts (91.4 percent), agency (68.6 percent), corporations (60 percent),
LLCs and LLPs (57 percent), and sole proprietorships (57 percent) in their
required courses. The highest ranked topic for importance, accounting
liability, was covered in only 51.4 percent of respondents’ required law-
related courses. This data shows that business law instructors are not
selecting the content of their required courses based solely on CPA Exam
content. It appears that accounting students are being given the opportu-
nity to cover most substantive law topics on the CPA Exam if those students
elect to take both the required and elective courses offered. CPA Exam
topics that were less likely to be covered in the legal curriculum included
Table 6: Required and Elective Substantive Law Topics Covered
Topic
Required ElectiveNotCovered
Don’tKnow
NoResponse
Percent Percent Percent Percent Percent
Accountant’s liability 51.4 22.9 14.3 8.6 2.9Privileged communication andconfidentiality
40.0 11.4 28.6 14.3 5.7
Agency 68.6 22.9 2.9 0.0 5.7Contracts 91.4 5.7 0.0 0.0 2.9Debtor-creditor relationships 40.0 48.6 8.6 0.0 2.9Bankruptcy 42.9 45.7 8.6 0.0 2.9Securities regulation 42.9 31.4 14.3 8.6 2.9Antitrust 28.6 28.6 37.1 2.9 2.9Pension and retirement plans 17.1 20.0 48.6 11.4 2.9Union and employee relations 28.6 22.9 40.0 5.7 2.9Liability for payroll and socialsecurity tax
34.3 17.1 31.4 14.3 2.9
Negotiable instruments 37.1 54.3 0.0 2.9 5.7Sales 57.1 37.1 0.0 2.9 2.9Secured transactions 37.1 48.6 5.7 2.9 5.7Docs. of title and title transfer 37.1 45.7 8.6 5.7 2.9Real property 37.1 48.6 11.4 0.0 2.9Insurance 22.9 42.9 20.0 8.6 5.7Sole proprietorships andpartnerships
57.1 37.1 0.0 0.0 5.7
LLCs and LLPs 57.1 31.4 2.9 2.9 5.7Corporations 60.0 34.3 0.0 0.0 5.7
2009 / Business Law Education of Accounting Students 167
privileged communication and confidentiality, liability for payroll and
social security taxes, pension and retirement plans, and union and em-
ployee relations. These four CPA Exam topics were the topics most often
listed as not covered in the business curriculum even though business law
professors ranked them as 4, 7, 12, and 14, respectively, for their impor-
tance to accountants. Furthermore, the percentages of respondents who
did not know if these topics were covered in their program’s required legal
courses were 14.3, 14.3, 11.4, and 5.7 percent, respectively.
D. Integration of Business Law in Accounting Programs
Respondents were asked whether they were members of their institutions’
accounting departments to determine how closely the respondents were
associated with the goals of accounting faculty. The responses to the survey,
as shown in Table 7, indicated that 60 percent of respondents were mem-
bers of departments other than the accounting department.
The respondents were asked several questions designed to reveal
how business law professors view their role in educating accounting stu-
dents. Table 8 presents the results for those questions that followed a com-
mon answer format.
When asked if it was the responsibility of business law faculty to pre-
pare accounting students for the business law topics on the CPA Exam or
other professional accounting certification, 91.4 percent of the respon-
dents indicated that they either strongly agreed or agreed it was their
responsibility. Respondents were then asked a question concerning how
content should be determined in business law courses. A majority of the
business law professors (68.5 percent) either strongly agreed or agreed
that business law and accounting faculty should make a joint determination
of the legal topics covered in business law courses. Respondents were also
asked the frequency of input by accounting faculty on course content
in business law courses. Over 50 percent of respondents believed that
accounting faculty members seldom or never make suggestions over
course content and coverage. Their responses indicated 20 percent always
made suggestions, 5.7 percent regularly made suggestions, and 17 percent
Table 7: Is Business Law Located Within the Accounting Department?
Response Frequency Percent
Yes 14 40.0No 21 60.0
168 Vol. 26 / The Journal of Legal Studies Education
sometimes made suggestions. Accountant’s liability was ranked as the most
important topic by the business law professors, but it is a very broad topic.
It has traditionally been taught by auditing professors for auditing and
accounting issues, tax professors for tax penalties and tax preparer’s neg-
ligence, and business law professors for negligence and securities regula-
tions. Respondents were asked, who should be the principal instructor of
accountant’s liabilityFan accounting professor or a business law profes-
sor? By almost a 4.5 to 1 margin, business law professors believe they
should teach accountant’s liability rather than nonlawyer accounting pro-
fessors. Unfortunately, 22.9 percent of the respondents had no opinion on
the issue. When asked, in what course accountant’s liability should be
taught, most respondents thought it should be taught in a law course.
Roughly 12 percent of the law professors believed that the proper course
to teach accountant’s liability was in an accounting course, 17.1 percent
stated it should be taught in auditing, over 40 percent stated it should be
taught in business law, while 22.9 percent stated that the course in which
the topic was taught was irrelevant.
When the AICPA restructured the CPA Exam to its new computer-
based format, business law was reduced in significance for CPA Exam can-
didates. This reduction in the content coverage of business law topics was
Table 8: Business Law Professors’ Perception of Curriculum
StronglyAgree Agree Disagree
StronglyDisagree
NoOpinion
NoResponse
It is the responsibility of the businesslaw faculty to prepare accountingstudents for the business law topicson the CPA examination (or otherprofessional accounting certification).
37.1 54.3 2.9 2.9 2.9 0.0
Business law and accounting facultyshould make a joint determination ofthe legal topics covered in businesslaw courses.
31.4 37.1 22.9 5.7 0.0 2.9
Accountant’s liability should betaught principally by business lawfaculty as opposed to nonlawyeraccounting faculty.
31.4 31.4 8.6 5.7 22.9 0.0
The AICPA was correct in reducingthe business law topics (Regulationand BEC) of the CPA examinationfrom 2.5 hours to approximately1.625 to 1.775 hours in total.
2.9 14.3 20.0 37.1 22.9 2.9
2009 / Business Law Education of Accounting Students 169
implemented during a period when the worlds of CPAs, investors, and
publicly traded companies had been rocked by scandals. Business law pro-
fessors were asked to give their opinions as to whether or not the AICPA
was correct in reducing the business law topics included in the REG and
BEC sections of the CPA Exam from 2.5 hours to approximately 1.625 to
1.775 hours in total.130 Not surprisingly respondents were three times
more likely to disagree with the AICPA’s reduction (57.1 percent) than
agree with the AICPA decision (17.2 percent).
Respondents were asked to evaluate their knowledge of the areas
of accounting practice. This question was asked to determine the extent
to which business law professors understood content and issues relevant
to the public accounting profession. The findings are presented in Table 9.
Business law professors felt they possessed a good or excellent knowl-
edge of negligence (71.4 percent) and taxation (60.0 percent). The data in-
dicates that business law professors felt less knowledgeable in auditing,
private accounting, and accounting for publicly traded companies. In those
three areas the respondents indicated that they had poor or very poor
knowledge by 48.6 percent, 38.5 percent, and 42.8 percent, respectively.
This lack of knowledge in three important areas of accounting practice in-
dicates that accounting and business law faculty should work more closely
together in developing the business law curricula for accounting students.
E. Perception of Quality in Legal Education
When asked to rate their accounting students’ level of preparedness in
accountant’s liability, as shown on Table 10, 62.9 percent indicated their
Table 9: Business Law Professors’ Knowledge of Accounting Practice Areas
Excellent Good Fair Poor Very Poor
Accountant’s negligence 45.7 25.7 20.0 2.9 5.7Auditing 2.9 11.4 37.1 28.6 20.0Private accounting 0.0 28.6 22.9 31.4 17.1Taxation 37.1 22.9 17.1 8.6 14.3S.E.C. accounting 2.9 22.9 28.6 25.7 17.1Accounting profession 5.7 40.0 25.7 14.3 14.3
130See supra note 40. This question actually overstated the time of nontax law topics on currentCPA Exam. The business law section was reduced even more than we thought when we de-veloped the survey.
170 Vol. 26 / The Journal of Legal Studies Education
students had an excellent or good level of preparedness, 17.1 percent
stated their students had a fair level of preparedness, and only 2.9 percent
indicated a poor or very poor level of preparedness.
The business law professors were also asked to rate how well
their accounting graduates were prepared for the business law portions
on the CPA Exam and how well prepared their students were for any law
questions that they might face in a nonpublic accounting career. As shown
on Table 11, almost 75 percent of the respondents believed their ac-
counting students going into public accounting were well or very well
prepared.
As indicated on Table 12, these business law professors also believed
their accounting students who were not interested in a career in public
accounting, had an excellent or good level of preparedness in business law
(82.9 percent) or a fair level of preparedness (14.3 percent). Thus, business
law faculty felt very confident in the success of their work.
XIII. COMPARING 2005 RESPONSES WITH 1993RESPONSES
A comparison of the findings of the two surveys shows differences in
the actual business law curricula offered to accounting students, but
there are many consistencies in the perceptions of business law professors
Table 10: Training Accounting Students Receive in Accountants’ Liability
Preparedness Level Percent Responding
Excellent/Good 62.9Fair 17.1Poor/Very Poor 2.9
Table 11: How Well Prepared Are Your Accounting Graduates for Business
Law Portions of the CPA Exam?
Preparedness Level Percent Responding
Very well/well 74.3Fair/poor 22.9No response 2.9
2009 / Business Law Education of Accounting Students 171
as to what accounting students need to prepare them for their careers in
public accounting.
A. Respondents’ Programs
As indicated on Table 13, the 2005 respondents were from institutions that
were smaller in both university student population and accounting pro-
gram size. On average, though, both populations represent what could be
described as medium-sized programs. The 2005 survey population had a
high percentage of respondents with either business or accounting AACSB
accreditation.
Studies in the 1980s and early 1990s found that AACSB accredited
schools were moving away from an accounting curriculum that required
accounting students to take two traditional business law courses. Those
studies identified a trend where AACSB accredited business programs
were becoming more likely to call their first law course legal environment
of business and to teach it using a regulatory approach. This study’s find-
ings, shown on Table 14, are consistent with the prior research showing
those types of changes in the business law curricula. The legal environment
of business course in 2005 was the most often required nontax law course
for accounting students. A larger majority of respondents required legal
environment of business courses in 2005 than in 1993. Similarly, in 2005, a
larger minority of respondents required a second course using a tradi-
tional business law approach. Some respondents required the traditional
business law course after a legal environment of business course and some
Table 13: Institutional Demographics Comparison
Survey Population 2005 1993
Average number of students 6,524 9277Average number of undergraduate accounting students 213 298
Table 12: For Accounting Students Not Interested in a Career in Public
Accounting, How Would You Rate Their Business Law Education?
Preparedness Level Percent Responding
Excellent/Good 82.9Fair 14.3Poor/Very Poor 0.0
172 Vol. 26 / The Journal of Legal Studies Education
after a first traditional business law course. These findings suggest that the
majority of the respondents’ programs are requiring a legal environment
of business course for all business students and then a business law elective
for accounting students.
B. Curriculum Content
Business law professors remained consistent in their belief that a business
law course is preferable to a legal environment course where only one
course is required. This may simply reflect the fact that the business law
topics included on the CPA Exam are more thoroughly covered in business
law texts. Business law professors may recognize that a legal environment
of business course is a broad course typically designed to meet the needs
of all business majors. In their view, a business law course is better suited
to accounting students’ academic needs. Business law professors also
remained consistent in their belief that accounting students going into
public accounting need six or more hours of nontax law courses. This
finding probably reflects the sheer number of business law topics listed in
the CPA content specifications in both 1993 and in 2005. While the AICPA
in 2004 decreased the percentage of the CPA Exam devoted to legal topics,
it did not significantly reduce the number of potential topics that may be
tested. It is very difficult to teach seventeen to twenty substantive law topics
in any depth and still engage students in skill building activities. Finally, as
shown on Table 15, the 1993 and 2005 surveys show a dramatic difference
in the way the two groups perceived whether all accounting students
should be required to take a legal environment of business course. In
contrast with the 1993 respondents, a majority of the 2005 respondents
were in agreement with accounting students taking a legal environment of
business course. It appears that a majority of the respondents in 2005 were
in agreement with the AACSB approach.
Table 14: Respondent Program Comparison
Respondents’ Programs 2005 1993
What percentage of respondents has a program where a course in legalenvironment of business is required?
62.9% 56%
What percentage of respondents has a program where a business law orbusiness law I course is required?
46% 62%
What percentage of respondents has a program where a second coursein business law is required?
34.29% 23%
2009 / Business Law Education of Accounting Students 173
C. Substantive Content
Business law professors’ perceptions of which CPA Exam topics are very
important topics have remained fairly consistent over the period between
the two studies. While the 1993 survey and the 2005 survey do not have
identical categories, some comparisons are possible, and these are shown
in Table 16. Accountant’s liability and contracts were ranked very highly in
both 1993 and 2005 as were business structure topics related to choice of
Table 15: Curriculum Content Comparison
Curriculum Content 2005 1993
What percentage of respondents agreed that if only one course wasrequired it should be a course in business law?
71.4% 70.1%
What percentage of respondents agreed that six or more hours of lawshould be required?
71.4% 74%
What percentage of respondents agreed that all accounting studentsshould be required to take a course in legal environment of business?
68.5% 14.2%
Table 16: Rating of Substantive Law Topics Comparison
Topics 1993Rank1993 Topics 2005
Rank2005
Accountant’s liability 1 Accountant’s liability 1Contracts 2 Corporations 2Corporations 3 Contracts 3Sales 4 LLCs and LLPs 4Partnerships 5 Privileged Communications and Confidentiality 4Commercial Paper 6 Sole Proprietorships and Partnerships 4Secured Transactions 7 Liability For Payroll and Social Security Taxes 7Securities Regulations 8 Debtor-Creditor Relationships 8Bankruptcy 9 Secured Transactions 8Agency 9 Agency 10Real Property 11 Negotiable Instruments 10Estates and Trusts 12 Union and Employee Relations 12Personal Property 13 Sales 13Employment 14 Bankruptcy 14Insurance 15 Pension and Retirement Plans 14Suretyship 16 Securities Regulation 14Antitrust 17 Documents of Title and Title Transfer 17
Insurance 18Real Property 18Antitrust 20
174 Vol. 26 / The Journal of Legal Studies Education
business entity. LLCs, LLPs, and sole proprietorships were included on the
2005 survey and joined corporations and partnerships as very important
topics on the CPA Exam. Uniform Commercial Code topics such as sales
and secured transactions were ranked lower in relative importance in
2005, but that may have reflected the way commercial paper topics were
listed in the 2005 survey. Bankruptcy and real property were ranked lower
in importance in 2005, but that may have also been related to the differ-
ences in the categories on the two surveys. The respondents’ perception
that business structure topics are very important parallels the current
treatment on the CPA Exam.
D. Integration of Business Law in Accounting Programs
In both 2005 and 1993, respondents reported that significant percentages
of them were from departments other than accounting. Despite this fact, a
majority of respondents in both surveys felt a responsibility to prepare
their accounting students for the CPA Exam, as shown on Table 17. In
2005, a majority of respondents indicated that business law faculty and
accounting faculty should make a joint determination of business law
course content. In actuality, however, course content decisions in both
2005 and 1993 were made primarily by business law faculty members with
accounting faculty giving advice on content infrequently. Accounting fac-
Table 17: Business Law Integration Comparison
Integration of Business Law in Accounting Programs 2005 1993
What percentage of respondents were not members of their institution’saccounting department?
60% 49%
What percentage of respondents agreed it is the responsibility of thebusiness law faculty to prepare accounting students for the businesslaw topics on the CPA examination (or other professional accountingcertification)?
91.4% 68.4%
What percentage of respondents agreed that business law and accountingfaculty should make a joint determination of the legal topics covered inbusiness law courses?
68.5 N/A
What percentage of respondents agreed that accounting faculty alwaysor regularly gave input on course content in business law or legalenvironment courses?
25.7% 28.1%
What percentage of respondents agreed that accounting liability should betaught by business law faculty?
62.8 19.4%
What percentage of respondents agreed that accounting liability should betaught be taught in a business law course rather than an accounting course?
40% 37.8%
2009 / Business Law Education of Accounting Students 175
ulty members are perceived as giving content suggestions only a little less
than they did in 1993. There was a dramatic increase in the number of
respondents who felt that accounting liability should be taught by business
law faculty rather than nonlawyer accounting faculty. The percentage of
2005 respondents that believed it should be taught in business law courses
was only slightly more than the percentage of respondents in 1993. It ap-
pears the majority of respondents felt they were the best qualified faculty
members to teach the accountant’s liability topic, but less than a majority
felt the topic had to be taught in a business law course. A significant per-
centage of respondents indicated that the class where it was covered was
irrelevant. Overall, the findings indicate that the respondents felt it was
their responsibility to help prepare accounting students for careers in
public accounting, and they were willing to coordinate and cooperate with
accounting faculty to achieve that objective.
E. Perception of Quality in Legal Education
As shown on Table 18, over the twelve-year period, the percentage of re-
spondents who responded that their accounting students were well or very
well prepared for the business law portion of the CPA Exam increased. The
percentage of respondents that felt their nonpublic accounting students
were well prepared or very well prepared decreased. In both 1993
and 2005, a greater percentage of business law faculty members felt that
their accounting students pursuing careers outside of public accounting
were better prepared than those pursuing careers in public accounting.
Nevertheless, the majority of business law professors felt they were doing a
good job preparing all accounting students for their careers.
One cannot be certain if the positive perception that business law
educators had about their success with accounting students is warranted. It
is true that business law has historically had a slightly higher CPA Exam
Table 18: Perception of Quality Comparison
Perception of Quality in Legal Education 2005 1993
What percentage of respondents agreed that accounting students,planning a career in public accounting, were well or very well preparedfor the business law portion of the CPA Exam?
74.3% 61.5%
What percentage of respondents agreed that accounting students, notplanning a career in public accounting were well or very well preparedfor the business law portion of the CPA Exam?
82.9% 96.8%
176 Vol. 26 / The Journal of Legal Studies Education
pass rate when compared to the other sections of the CPA Exam.131 This
may be one explanation why business law professors feel they are doing
well preparing accounting students. The NASBA has been collecting sta-
tistical data on CPA candidate performance on the CPA Exam for a number
of years. For the period 1994–2001, 31.7 percent of the first-time candi-
dates for the CPA Exam passed the LPR component of the exam, slightly
better than any of the other three exam components. For the year 2003,
the pass rate for first-time candidates was 38.5 percent on the LPR section,
which was approximately 5 percent better than for the other three com-
ponents.132 Because the CPA Exam format changed in 2004, it is more
difficult to measure performance on the business law topics because those
topics are included in two of the CPA Exam sections. For the year 2005,
NASBA reported 44.1 percent of first time candidates passed the REG
component and 53.5 percent passed the BEC component.133 These per-
centages include all candidates regardless of major or academic back-
ground. The NASBA records pass rates by various subgroups. It does not
appear from the NASBA data that nonaccounting majors are bringing
down the total pass rates of accounting graduates. 134 The 2005 national
pass rates totals by accounting programs were 40.7 percent for REG and
44.2 percent for the BEC section.135 These pass rate totals for accounting
programs were slightly less than those for all CPA candidates. When over
50 percent of CPA candidates fail the business law section of the CPA
Exam, it is difficult to explain why business law professors perceive their
accounting students are well prepared. While the CPA Exam may be
designed to be a challenging exam, a well-designed and executed business
law curricula should be sufficient to overcome that challenge for most
accounting graduates.
131See NASBA, 2004 CANDIDATE PERFORMANCE ON THE UNIFORM CPA EXAMINATION 6 (2005)(describing the CPA Exam and provides data on who takes the exam and the results during2003).
132Id. at 6–7.
133NASBA, CANDIDATE PERFORMANCE ON THE UNIFORM CPA EXAMINATION 6 (2006) (reportingdata on those candidates taking the CPA Exam during the year 2005).
134Id. at 152.
135Id. at 142.
2009 / Business Law Education of Accounting Students 177
XIV. CONCLUSION
A. Curricular Content
Business law professors believe that accounting graduates going into pub-
lic accounting need an academic education in business law to prepare them
for their careers. The findings of this study concerning curricular content
show that business law professors believe that six or more semester hours
of business law should be required of accounting students pursuing a
career in public accounting. This was the belief of a large majority of the
business law professors surveyed in 1993 and it was true of an equally large
majority of those surveyed in 2005. This perception can be contrasted with
the fact that the majority of states and territories do not require any
academic education in business law by CPA candidates. These jurisdictions
treat business law as an optional course in the general business knowledge
category under their state accountancy acts. It is especially revealing that
the UAA specifically requires education in income tax while it makes busi-
ness law education discretionary. This difference in treatment suggests that
the NASBA and the AICPA understand how tax law is used in accounting
practice but do not recognize how business law concepts are used by CPAs
in tax and audit functions.
B. Substantive Law Topics
Business law professors believe that there are several very important topics
currently missing from the content of the CPA Exam and they would add
those topics to the CPA Exam. The findings of this study concerning sub-
stantive law topics show that business law professors in 2005 identified
nineteen legal topics that are not currently on the CPA Exam but are per-
ceived as very important by at least some of the respondents. The highest
ranked of these topics included liability of other professionals, business
ethics, business crime, administrative law, and torts. The first two topics
were found to be very important by a majority of the respondents, 68.6
and 62.9 percent, respectively. The remaining three topics were found to
be very important by respondents at percentages as high as those of topics
currently on the CPA Exam, 37.1, 28.6 and 28.6 percent, respectively. The
identification of these five topics by the respondents in 2005 seems logical
in the aftermath of the accounting scandals. With the increased regulation
of the public accounting profession by federal and state administrative
agencies, it is only prudent that entry-level CPAs have some knowledge of
178 Vol. 26 / The Journal of Legal Studies Education
administrative law. Given the significant criminal penalties and civil liabil-
ities imposed on those business professionals involved in the accounting
scandals; ethics, professional liability, business crime, and torts all seem
relevant and important educational topics for CPAs from the perspective of
business law professors. Whether these topics will be identified as impor-
tant by the AICPA’s Board of Examiners and added to the CPA Exam
content specification is not at all clear. The AICPA’s COTF determines the
importance of CPA content primarily through surveys of relatively inex-
perienced CPAs during its practice analyses. Should those entry-level CPAs
not understand the legal concepts they need to use in practice, the im-
portance of those concepts will be underreported in the current practice
analysis. For many accountants, in both practice and academia, the lesson
learned from Baptist Foundation, Enron, MCI, Adelphia Communica-
tions, and other accounting scandals is primarily one of ethics. From their
viewpoint the individuals involved in those scandals needed an educational
process that would have prepared them to make the correct ethical deci-
sions. Even if one assumes that good moral character can be taught, this
viewpoint ignores the close relationship between law and ethics in our so-
ciety. It does not acknowledge the criminal and civil aspects of the scandals
and the role academic legal education could play in avoiding this type of
legal risk. This failure by CPAs to consider academic training in business
law as relevant to minimizing legal exposure is not new. It is reminiscent of
the litigation crisis for CPAs in the early 1990s that arose from the collapse
of the savings and loan industry. That surge in litigation did not cause
accountants to nationally mandate more academic legal education under
state law or increase the coverage of business law on the CPA Exam. On
the contrary, in 1994, the AICPA reduced the time allocated to business
law content on the CPA Exam. The accounting industry instead looked
to other solutions to its legal problems. It increased its peer and quality
review efforts, sought federal and state tort reform, reviewed the language
of existing accounting standards, and adopted alternative dispute resolu-
tion techniques. Similarly, in the aftermath of the accounting scandals,
accountants looked for other solutions. Additional ethics education was
proposed by NASBA at the undergraduate level, and states adopted
additional continuing education requirements in ethics for licensed CPAs.
A clear contrast can be drawn between the perceptions of business law
professors and the positions taken by the NASBA and AICPA. While busi-
ness law professors surveyed in 2005 would have added legal topics to the
CPA Exam, the AICPA in 2004 eliminated the LPR section of the CPA
2009 / Business Law Education of Accounting Students 179
Exam and drastically reduced the time allocated to business law content.
This difference suggests that the NASBA and the AICPA do not believe
that more or better academic education in business law will decrease the
risk of legal liability for practicing CPAs.
C. Intergration of Business Law
Business law professors feel it is their responsibility to prepare accounting
graduates going into public accounting for the CPA Exam, and they are
willing to work with accounting faculty members in selection of course
content to achieve that end. The findings of this study, concerning inte-
gration of business law, reveal that a majority of the 1993 respondents felt
it was their responsibility to prepare accounting students for the CPA
Exam, and an even larger majority of the respondents felt it was their
responsibility in the 2005 survey. These findings are not surprising given
the fact that the respondents are educators with an academic background
in law. As both educators and lawyers they would be expected to want to
prepare their students for their chosen careers through academic prepa-
ration. The law school experience is one of intense academic preparation.
After law students are admitted to law school, they are typically exposed to
ninety semester hours or more of legal curriculum. That curriculum is
designed to develop in the law graduates a set of skills and a body of
knowledge that will prepare them for their careers as practicing attorneys.
In most legal programs the students’ ability to pass a state bar exam is
expected as a natural consequence of their law curriculum, and passing the
bar exam is consistent with the goals of their legal education. While the
legal curriculum is designed to prepare them for the practice of law, it is
typically sufficient to prepare them for their state’s bar exam after a rea-
sonable amount of review by the law graduate. It is therefore predictable
that the majority of business law professors would see their role as one of
preparing those accounting students interested in becoming CPAs. It is
also not surprising that business law professors who have completed a
baccalaureate degree and an additional ninety semester hours of legal
courses would believe that CPAs as business professionals should have
adequate academic training in relevant law. From a business law profes-
sor’s perspective six or nine hours of business law courses are not excessive
given the broad and varied work activities of a typical CPA. What is some-
what more surprising is that a majority of business law professors indicated
a willingness to cooperate with accounting faculty in the content decisions
180 Vol. 26 / The Journal of Legal Studies Education
for their business law courses. One might expect that business law profes-
sors would see their business law curriculum as uniquely their responsi-
bility and entirely a matter of their judgment. The 2005 survey did not
show this to be the case. In fact the majority of business law professors
indicated they thought business law content should be a joint decision with
accounting faculty, and this was true even though the majority of respon-
dents were not members of the accounting departments of their institu-
tions. This clarity of purpose possessed by business law professors is oddly
absent from both the AICPA and the NASBA. The AICPA determines the
content for the CPA Exam but does not recommend an academic curric-
ulum to prepare CPA candidates for the CPA Exam. The NASBA requires
CPA candidates to pass the CPA Exam and complete 150 semester hours of
academic education in the provisions of the UAA and then does not require
CPA candidates to complete an undergraduate or graduate curriculum
that would prepare CPA candidates for the business law topics on the CPA
Exam. The decision is left to accounting and business law faculties to
decide whether accounting graduates should be required to take a business
law curriculum that is not recommended by the AICPA and that is not
required by the NASBA.
D. Respondents’ Business Law Curricula
The findings of this study, concerning the respondents’ programs, reveal
that legal environment of business courses have become the most fre-
quently required nontax law course in the respondents’ business curricula.
The 2005 survey findings revealed that a small minority of respondents’
programs required two traditional business law courses, and a slightly
larger minority of respondents’ programs required a legal environment
of business course followed by a traditional business law course. Over
40 percent of respondents reported that their accounting students are
only required to take one legal environment of business course. The 2005
survey findings indicated that in the majority of respondents’ programs,
all CPA business law topics are not covered in the respondents’
required business law courses. An accounting student would have to
take a combination of required and elective courses to be exposed to a
majority of the CPA law topics. This makes preparation for the CPA
Exam at the majority of respondents’ institutions largely optional. The
policies of the AICPA and the NASBA have treated the academic study
of business law as optional for CPA candidates and the respondents’
2009 / Business Law Education of Accounting Students 181
programs follow that general approach. Accounting graduates must
purposely take elective business law courses to be exposed to CPA busi-
ness law content.
E. The Need For Future Research
Because of the changes made to the CPA Exam in 2004, business law
and accounting professors have lost an important justification for their
required courses in business law. They can no longer say that account-
ing students need those courses to pass the business law section of the
CPA Exam. That section no longer exists, and CPA candidate performance
on business law topics is more difficult to determine. This could
cause additional changes to the business law curricula. Accounting
students have less motivation to take elective business law courses in their
undergraduate education because of the reduced weight that content
now has on the CPA Exam. If elective business law courses do not attract
sufficient accounting students, those courses may be closed at some
institutions. This may eventually result in less elective business law courses
being offered in many business school programs. Future research
could measure whether these changes in the business law curricula
actually occur.
Other relevant research topics include the future actions of the
AICPA, the NASBA, and the AACSB and how they impact the business
law curricula. The AICPA is currently conducting another practice
analysis. The NASBA is proposing amendments to the UAA Rules. The
AACSB accounting accreditation standards are being applied at many
institutions for the first time. These are all topics that may stimulate further
research.
Business law professors should engage in scholarship that makes the
relationship between law and accounting more transparent. If knowledge
of legal concepts is necessary for CPAs to perform tax and audit work, that
needs to be demonstrated by scholarship. If practicing CPAs can reduce
their legal risks through education, it needs to be demonstrated. Business
law professors should join with accounting faculty to create cases and other
pedagogy that illustrates the connections between business law concepts
and accounting practice. Those projects could be used in class to increase
accounting students’ awareness of the importance of business law concepts.
Business law and accounting professors should share their research find-
ings with the NASBA, as it considers amendment of its UAA Rules and with
182 Vol. 26 / The Journal of Legal Studies Education
the AICPA, as it completes its practice analyses. Business law professors
should give input to the AACSB as it applies and amends its accounting
standards. These organizations need to know what business law professors
believe about educating accountants and the basis for those perceptions. In
this way, business law professors may do their part in improving the ed-
ucational process that produces CPAs.
2009 / Business Law Education of Accounting Students 183