The Indiana Board of Accountancy made history July 15 when it approved competency-based education to count toward CPA license renewal, marking the first time in U.S. CPA profession history that competency-based, and not hours-based, education has been permanently approved. So what does it all mean?
Indiana CPA Society (INCPAS) President and CEO Gary Bolinger, CAE said that “while this is a significant first step in reforming the CPA license renewal process, we still have a lot to learn as we go forward to ensure relevant education options for CPAs and protection of the public. And make that education more useful, valuable and relevant not only for the CPAs themselves, but in serving their clients and employers.”
According to the INCPAS, the rule change adds two new options for obtaining the required ethics education that all CPAs licensed in Indiana must get every three years. The first new option is to take a competency-based course, with completion measured by participation, not the length of time it takes to complete.
The second new option is to earn credit for experience serving in a non-compensated ethics capacity for a professional or trade organization. The traditional, four-hour classroom course will remain as the third option.
Continuing professional education in the CPA profession nationwide has been hours-based since becoming required nearly 50 years ago, meaning that education is measured by the number of hours logged in a classroom or webinar.
Competency-based education, however, is a method in which participants must demonstrate mastery of subject material before advancing through or completing a course, said Jess Halverson Bowyer, strategist, for the INCPAS CPA Center of Excellence.
“Under an hours-based model, the inherent goal is to obtain the credit, or check off the boxes. With a competency-based approach, the focus is on learning and mastery of material. In competency-based courses, you must be engaged and participating, which is a higher order of skills than listening to an instructor,” Halverson Bowyer said.
A competency-based approach also enables other significant learning options, such as flexibility, the ability to work at one’s own pace, and personalization. It is a learner-focused approach to education, and it is regarded as being a much more effective means of skill development than the current hour-based method of education Halverson Bowyer said.
“Instead of selecting whatever live course fits into their schedule, CPAs will have more flexibility to learn what they need to know when they need to know it,” Halverson Bowyer said.
John Kane, CPA, CGMA, chair of the Indiana Board of Accountancy says using a competency-based approach to ethics education means CPAs will have to demonstrate that they have both acquired and applied the knowledge they have learned. “This is an important step to ensure that CPAs are prepared to meet the challenges of today and the future that exist due to complexity and specialization,” Kane said. “And it will enable CPAs to both better serve clients and employers while expanding their roles to help make Indiana businesses more successful.”
Kane says the Board is proud to be a leader in accepting competency-based education for CPA license renewal, and is optimistic the Indiana rule change will lay the foundation for what it hopes will become “a national movement in the profession.”
“The transformation to a competency-based approach is being seen more frequently at the secondary and higher education levels, and now is the time to introduce it to the professional level as well,” Kane said.
The CPA Center of Excellence, which is powered by the Indiana CPA Society, has been a leader in creating online competency-based courses for CPAs and other professionals since 2014. Previously, subject material has been focused on vital business skills. But in anticipation of this rule change for the ethics requirement, it has recently developed a competency-based, online interactive course on ethics. The course will soon be available to CPAs who want to take advantage of this new option for ethics education in Indiana.
The course will allow participants to work at their own pace, on any type of device. The course will emphasize and encourage collaborative learning and active participation.
The course also incorporates real-life stories of intentional or unintentional ethical lapses, as well as direct references to the AICPA Code of Professional Conduct. CPAs will have to demonstrate that they have absorbed the material before they achieve credit.
Under the second, new option, certain types of hands-on, ethics-related volunteer activities, such as serving in a non-compensated ethics volunteer role for a professional association, on-the-job training, and mentoring, will also enable CPAs to achieve the ethics requirement without necessitating that they take a course.
The experience will have to be verified. This is also the first time experience of this nature will count as credit toward license renewal in Indiana.
Bolinger believes transforming the outmoded hours-based CPE approach with newer, interactive and more responsive competency-based courses is nothing short of essential to the CPA profession if it hopes to thrive in an ever-evolving business world.
“Given how quickly today’s business and education environments are changing, everyone needs to be a lifelong learner. We need to offer more license renewal options for CPAs, whether it’s crediting the additional effort they’ve put in while serving their profession or taking courses that require true engagement,” Bolinger said. “The profession as a whole will benefit by in turn having CPAs who are more engaged and in control of their own development, which is the whole point of competency-based learning.”
Indiana's rule change was originally introduced as a Notice of Intent in August 2015. It was approved by the Indiana Board of Accountancy in November 2015. After going through the rule promulgation process, it was adopted at a July 15 Public Hearing. The final steps in the process are approval by the Attorney General's Office and signing by Gov. Mike Pence, which are likely to occur within the next month.
As ever, we welcome your thoughts and opinions on this historic event. Will other states go the same route?
About Deanna Arteaga
Deanna Arteaga is a professional freelance writer and public relations specialist who for the past six years has covered CPA industry trends for AccountingWEB. She also writes about CPA firm marketing, higher education and professional development for CPAs, and workplace trends in the accounting profession. She has more than 20 years of journalism and public relations experience, including her tenure as a former newspaper reporter in suburban Chicago where she covered breaking news, municipal politics, and state legislative issues.