Established in 1876, the Certified Public Accountant (CPA) certification is one of America’s oldest and most respected accounting certifications. Yet, its heyday may have come and gone, because the CPA candidate cohort size is not what it used to be.
While no one can predict the future, we can investigate reasons for the current state of candidate numbers. With this information, we can speculate if the certification’s glory days are indeed behind us or if the CPA’s influence in accounting can make a resurgence.
In the first article of this series, I will examine the CPA cohort’s reduced size and three factors affecting it.
The Overall Decline in CPA Cohort Numbers
NASBA has been gathering CPA Exam candidate data since 1982 and publishing performance reports since 1985.
From 1983-1993, the number of candidates averaged 140,479. In 1994, when the exam experienced its first major restructure, the population dropped from 140,232 to 130,801.
Then, in 1996, the exam became non-disclosed. Initially, candidate numbers experienced a minor dip, dropping from 126,433 in 1995 to 121,933 in 1996. However, they fell regularly for the next six years, only rising twice until they plummeted in 2004.
In 2003, the candidate population was 109,872. The next year, it was 44,513. The cause of this unprecedented landslide? The launch of the computerized CPA Exam.
Since then, candidate numbers have been modest at best. Over six years, they slowly climbed back to six digits, peaking at 103,609 in 2010. Then, they fell again, though less severely: The population averaged 92,543 until 2016, when it bumped up to 102,323. But after major exam changes in 2017, the total slipped to 95,654.
Factors Affecting the Reduced Popularity of the CPA
Clearly, exam changes bring candidate numbers down. However, even these don’t explain the non-existent recovery to the averages of the 80s and 90s. So, for further insight into this phenomenon, we must consider other developments in the CPA certification industry to see if they account for the loss of candidates.
In the last 20 years, the following events have occurred:
1.The state boards implemented stricter education requirements
In 1983, Florida became the first state to require 150 credit hours of higher education for the CPA license. Then, in 1989, the AICPA recommended other states follow suit. Many did in the late 90s, and by 2015, 54 of the 55 jurisdictions had adopted the 150-hour rule.
The 150-hour rule seems to increase pass rates: For example, Florida’s doubled after implementation. However, the number of first-time candidates sitting in the Sunshine State also fell to almost nothing before creeping back to a fraction of past highs.
The number of Florida candidates has rebounded, but as the 150-hour rule became the standard, the candidate population of many states suffered the same fate. Specifically, studies show that the CPA candidate population has decreased by 15 percent as a result of the rule. The numbers of the late 2000s demonstrate this regulation had a permanent impact.
The switch from the paper-based to the computer-based test improved pass rates while thinning out the candidate population. The demand for more education came at the same cost.
2. The state boards have also enforced more stringent experience requirements.
The CPA experience requirement has changed in the last decade. Thanks to the Uniform Accountancy Act (UAA), most state boards no longer require two years of public accounting experience. Instead, they accept just one year of any work involving accounting or business skills. As a result, in some ways, fulfilling the experience requirement is a bit easier.
In other ways, though, it is now harder. In the last five years, most state boards have specified that an active CPA must verify a candidate’s work experience. While a few jurisdictions allow a “CPA equivalent,” most require a fully certified professional accountant. Some even stipulate the verifier must be a direct supervisor.
For international candidates and those who didn’t work in public accounting, securing a CPA supervisor is a challenge. So, in 2016, NASBA launched its CPA Verification Service, which allows candidates to meet the requirement more easily. However, only 11 jurisdictions currently offer this service, and the cost is steep: $500 for domestic experience verification and $700 for international.
Therefore, the demand for a CPA verifier overshadows the reduced length of the experience requirement and still leaves many individuals out of the candidate cohort.
3. Exam fees have increased
When the CPA Exam was paper-based, the state boards charged candidates $200 to sit for all four sections the first time. Then, depending on how many sections you failed, you paid less for retakes.
However, from 1998-2001, the AICPA was operating at a deficit, so fees rose. In 2001, candidates applying to a state board using NASBA’s CPA Exam Services (CPAES) had to start paying a fixed fee for each section no matter the number of retakes. Initially, the fee varied based on section length. But eventually, the length and cost of each were the same. Consequently, the exam fee increased over the last two decades in the following way:
Now, candidates must pay over four times more to sit for each exam section the first time than they did in 2000 and before. As $200 in 2000 is $292.73 today with inflation, the CPA Exam price spike seems high enough to keep candidates away.
First Impressions and Additional Factors
The appearance of harsher requirements and higher fees corresponds with decreases in the CPA candidate population. And while reverting back to more lenient requirements and lower fees is theoretically possible, it is highly unlikely.
What’s more, some of the other factors affecting the numbers are not adjustable. We will discuss these other factors in this series’s second article and get a better sense of just how long term these lowered CPA candidate numbers are.