With technology playing a greater role by the day, the nature of the CPA profession is constantly changing. Therefore, CPAs have to grow and adapt. Such is the reason behind the CPA Evolution Project, an undertaking of the AICPA and the National Association of State Boards of Accountancy. In this podcast, Julia Woislaw, AICPA’s lead manager of CPA Evolution, walks us through the origination of the CPA Evolution Project, including why it was necessary, its current status, and developments that will be monitored in the future.
By: Bill Hayes, Pennsylvania CPA Journal Managing Editor
The nature of the CPA role is evolving, with technology becoming a larger aspect of the profession by the day. Therefore, the qualifications for becoming a CPA must grow along with it. It is with this idea in mind that the AICPA and the National Association of State Boards of Accountancy embarked upon the CPA Evolution Project, an effort to transform the CPA licensure model to reflect the changing demands of the profession. To discuss the latest developments, today we are talking to Julia Woislaw, AICPA's lead manager, CPA Evolution.
Can you tell us a little bit about the CPA Evolution Project, the steps we have gone through so far, and why a transformed licensure model became necessary?
[Woislaw] With AICPA and NASBA, this has been a joint project between our two organizations from the beginning. When we first started talking about this a few years ago – two or three years ago – we really saw a few things disrupting the CPA profession. We saw a lot of technological innovations coming in that were really changing the way that CPAs practice and that were changing how we do business and who CPAs do business with. There was a lot of new marketplace demands that we hadn't necessarily seen before. Then, we also saw some changes in firm hiring. So, the AICPA publishes something called the AICPA Trends Report, which shows us trends year-to-year on public accounting firm hiring. And in our last Trends Report, we saw that in 2018, there were 29% fewer accounting graduate firm hires than in 2014.
I think the really interesting part of those numbers is that overall firm hiring has stayed relatively flat. It wasn't that firms were hiring fewer people; they were hiring the same number of people but fewer of them were accounting graduates. Another way to look at that is we also saw in 2018 that non-accounting graduates were making up 31% of all new graduate hires, and that is up from 22% in 2014. This is some pretty significant shifts in firm hiring. That really means that CPAs need new skills to be able to continue to serve organizations in the public. We saw all of that and we got together with NASBA and created CPA Evolution. Our goal was to evolve CPA licensure to really reflect those changing skills that we see that CPAs increasingly need.
Just a brief overview of how we got from there in 2018 to here in 2020: We drafted a first initial licensure model in 2018, and then we brought together a working group of people from all over the profession and asked them to work on it and think about it, and that group drafted guiding principles. Those were intended to just state overall what the goals of this project were. We exposed those guiding principles and got feedback, and then we used all that feedback to evolve the licensure model into the model that we have landed on today. We got a ton of great feedback, but I'd say the biggest thing we heard is that this should be about more than just technology. I would say that is the biggest piece of feedback that informed us moving forward; that tech is not really the only thing disrupting our profession and that we really need to think bigger. Throughout this process, we heard from over 3,000 different stakeholders, which is pretty amazing. Had a great response. And then we landed on the model that we have today, which is our finalized model.
You talk about the finalized model. As we record this podcast, it's July 30th. What's the most up-to-date status of the CPA Evolution Project?
[Woislaw] We just had a couple really exciting things happen this summer. First, I'll explain the model and then explain where we are with it right now. The model that we ended up landing on is what we call a core plus disciplines model. It starts with the robust core in accounting, auditing, tax, and technology. Based on a lot of the feedback that we got, we heard that strong common core is really essential for CPAs, that all CPAs need to have a robust, common knowledge and those four areas are the pillars of the profession. Then we had also heard, though, from a lot of CPA firms and people hiring that CPAs need a deeper level of knowledge. With a lot of the technological innovations that we see happening, CPAs are doing more advanced work earlier on in their career. So, that on-ramp to becoming a newly licensed CPA is shorter. They're being asked to have deeper knowledge in areas earlier on in their career.
With the robust core of the model, you then also have three disciplines. When you sit for the exam, you would choose a discipline. The three disciplines that we landed on were business reporting and analysis, information systems and controls, and tax compliance and planning. The important part of this model is everyone becomes a CPA. You sit for the court and then a discipline exam, but regardless what discipline exam you sit for, you become a CPA. That's the model we landed on. I mentioned we gathered all this feedback. The AICPA Council had their spring meeting, and council voted yes on a resolution to support the model. Then just last week on Friday, the NASBA board of directors voted on similar resolution to support the model. We have the green light from both organizations to move ahead. That's where we are right now. We are jumping into that implementation phase.
You just gave a pretty good explanation there of the model. Accounting, auditing, tax, and technology. Now, three of those, they're self explanatory. Why is it so important for CPAs at this point to be fluent in technology?
[Woislaw] I mentioned at the beginning that we've seen all these tech innovations that are disrupting the profession and tech is really becoming an integral part of the way CPAs do business. Just a couple of examples: there are tools that can process confirmations for you, tools that can read contracts for you, all sorts of emerging tech. I would say that data analytics is an especially big area. I mentioned the AICPA Trends Report earlier, and that report shows that the accounting profession needs new skill sets, especially in data science and analytics. That's probably the biggest area that I hear about.
Can you tell us a bit about the process that resulted in this model? What sort of feedback did you get from stakeholders?
[Woislaw] We got feedback in two stages. The first was after we had drafted the guiding principles and exposed those for public comment, and we had over 2,000 people write in and got comments in different ways in discussion groups and talking to all our different stakeholders. At that point, we'd heard from about 2,000 people. Then we used that feedback to develop the new model and put that out there at our AICPA council meeting, at the NASBA annual meeting, and heard from around a thousand more people. That includes accounting educators, state CPA societies, and state boards of accountancy members. It includes people in all different parts of the profession like B&I and not-for-profit and CPAs that work in technology. We talked to the young CPAs, we talked to students, we talked to the CPA firms. We really heard from a wide range of people.
Overall, the feedback we've gotten on this revised model has been really incredibly positive. I would say four big things that we hear repeated over and over about what people like about the model is that it's more flexible than the current model. We have these discipline exams and as, over the years, the profession continues to evolve, it will be much easier to evolve the exam than it is with our current model. We also heard that it protects the core, which was really important in all the feedback we've heard; that we maintain that robust common core. We really heard that people liked that it would still result in one CPA license. At one point in this process, we had talked about a CPA-dash kind of thing. You could be a CPA-audit or CPA-tax. Really, what we've heard from people is that would splinter the credential and it wasn't going to work out well because what makes the CPA profession so strong is that robust common core of knowledge. We got a lot of positive feedback on maintaining the one CPA license. Then we got a lot of positive feedback about the deeper knowledge component, that candidates would come out of the exam having deeper knowledge in one of these primary disciplines.
What do you hope will be the ultimate result of the establishment of this model? How's it going to benefit CPAs and the profession?
[Woislaw] We have three big goals during this. We wanted to have a CPA exam and education that are fit for purpose and flexible. We wanted to assure continued public protection and we wanted to evolve the license for those entering the profession. We believe that this model will produce the kind of CPA that can continue to serve organizations and protect the public far into the future. I mentioned flexibility and I think personally, for me, the great part of this model is that it is so flexible. As the profession continues to change and evolve, we'll be able to change and evolve right along with it, and really help maintain that public trust in the CPA.
What effect do you think the new model is going to have on the CPA exam? And what would the plan be for implementing those changes? What sort of timeline are we looking at?
[Woislaw] I'll just preface by saying that all changes to the exam are done through a CPA exam practice analysis, which the exam team of AICPA does. All of this is just what we might expect the exam to look like, but all of these changes will ultimately be determined through that practice analysis. But what we expect is it would stay the same. We still think that exam will be designed for a one- to two-year level. It's an entry-level licensure exam. That won't change. We don't think it will be more than a 16-hour exam. It would stay about the same length. No new experience requirements to sit for the exams. Candidates would still pass four sections, just like today. The exam sections can be taken in any order, just like today. There wouldn't be any separate time limits to pass the core and the discipline, so you still have one block of time to get it all done, just like today.
But obviously some stuff is going to have to change to implement this model. So, what we expect is that candidates would pass the three core sections and one discipline section, so there's four sections. Candidates do not have the option to pass additional disciplines. All sections would cover discrete content and range of skills. That was a question we would get a lot. Those would still be included in all sections. But, really importantly, the discipline task would not differentiate the license granted. Everyone still gets their CPA license.
One of the things in the lead-up to this, we were going a little bit back and forth, and you said you were getting a decent amount of questions from colleges, universities, accounting educators. Can you tell us what this will mean for those groups?
[Woislaw] We knew that this would mean a lot for accounting education and we wanted to make sure we included them in the conversation to really understand how this would impact their schools and what we could do to help. We did a survey of accounting educators first. We got about 150 responses from accounting educators on that. We formed a joint AICPA/NASBA advisory group. We had a small-school discussion group to talk to historically black colleges and universities. Both NASBA and AICPA have volunteer education committees, and we talk to them. We also talked to the leadership of both AAA and AACSB to really get an understanding of how this would affect accounting education.
What we really heard is that predominantly they saw this as an opportunity. They saw this as a way that they could increase their course offerings in tech. A lot of the larger schools told us that this would improve the value proposition for their master's of accountancy programs, that they could see covering the core in their undergraduate program and then students could use those additional 30 hours required for licensure to learn about their discipline. We heard that larger schools may launch learning tracks that align with the disciplines. We definitely heard a little more anxiety from smaller schools, because they don't have as many faculty or as many resources as the larger schools. What they told us is that they could see themselves focusing on maybe just one or two of the disciplines or partnering with other schools in their areas to really increase their course offerings for their students.
I would say the biggest thing we heard from all schools, large and small, is that what they really need is resources to help them get this done. We are going to provide three different things over the course of this process. The first is an education resource center for accounting educators that will include a lot of technology resources. Resources on emerging tech that they could integrate into their courses now, and that's going to launch this fall. Then, as the CPA exam practice analysis goes along and we start to learn more about what will be in the exam, we're going to develop model curricula that would really help schools see how they could implement this core plus discipline model into their program. Then, we also heard a lot about internships, about being able to increase the amount of credit hours students get for internships. We're also going to develop a model internship program with feedback from firms and from educators that would help them be able to offer more credit hours for internships.
Knowing the status of where we're at now, what are the next steps and developments to be monitored?
[Woislaw] I would say the next thing to watch out for is the CPA exam practice analysis, and that's where we gather information about the current state of the profession and the work of newly licensed CPAs, and those really help us maintain the validity and reliability of the exam. As part of that, there will be an exposure draft made available for public comment in mid-2022. Then, we hope to have the new exam launched in January 2024.
So the developments with COVID, they're not having any effect on this, correct?
[Woislaw] No. We got that question a lot, and both AICPA and NASBA felt this initiative was just too important to delay.