The CPA Evolution Project, formed as a working group by the AICPA and the National Association of State Boards of Accountancy (NASBA) in 2018, aims to transform the CPA licensure model. Driven largely by advancements in technology and data analytics,
the group is exploring changes in licensure requirements that will better ensure future CPAs possess the skills and competencies required in accounting practice and business. The CPA Evolution Project’s approach to licensure not only strives
to embrace marketplace changes but also to maintain the profession’s mandate to protect the public interest.
Also influencing the group’s work is a movement to deregulate numerous professions. The sentiment that unreasonable regulations create a drag on economic growth and stifle competition struck a favorable chord with many. It is important to be aware
of the national campaign to restrict or eliminate professional licensing at this time when the AICPA and NASBA, as part of the CPA Evolution Project, are proposing a plan that would fundamentally change the model for CPA licensure, particularly since
the implementation of that plan would require the cooperation and support of licensing boards around the country.
Five Guiding Principles
The CPA Evolution working group issued a request for input in June 2019 from various stakeholders on five guiding principles they had developed as a foundation for a new licensing model. Given the impact of automation, data analytics, and artificial intelligence,
the stated purpose was to alter the model for initial CPA licensure to support the new skills needed for CPAs to perform their core services. Specifically, the group indicated that skills are needed in business intelligence, data management, analysis,
and reporting; predictive analytics; cybersecurity risk management; information technology risks, controls, and assurance; and information security governance. The five guiding principles the group established are as follows:
- The CPA profession must adapt quickly due to the technological disruptions in areas such as data analytics, robotics, AI, and more. As such, the competencies, services, and attitudes of CPAs must evolve to protect the public interest.
- The CPA profession and state boards of accountancy recognize that technological and analytical expertise is essential to performing assurance work and other services that are currently, or will be in the future, core to professional accounting.
- The CPA profession and state boards of accountancy acknowledge that sustaining the profession and continued public protection require rethinking initial licensure requirements.
- Entry into the profession must be redesigned to attract individuals with technological and analytical expertise. This includes non-CPA professionals whose technological and analytical skills are critical to the performance of assurance and other core
services, as well as nonaccounting majors. All, however, must demonstrate minimum required competencies necessary to perform professional accounting services as a CPA.
- The changes must be rapid, transformational, and substantive without negatively affecting candidates currently in the pipeline.1
Since the CPA Evolution model focuses on rising CPAs, the content of the CPA Exam may require significant alteration (discussed later). The working group proposes that all CPA candidates would be required to have education in accounting and technology,
as well as elective coursework that aligns with the work they are interested in initially performing as a CPA. In other words, there would be a common core of accounting and technology while allowing candidates to demonstrate knowledge in their chosen
area of interest. One exam would serve all candidates, with variations within exam sections that would correspond to areas of interest. The group indicated that educational requirements on certain existing concepts may need to be reduced while others
may need to be added to meet CPA candidates’ need for understanding of both accounting and technology.
Proposed CPA Licensure Model
More than 2,000 stakeholders – including firms and individuals from all facets of the accounting profession, academics, and even students – responded to the request for input. Many of the comments shaped the working group’s proposed
model. A common comment was that a greater emphasis on technology skills and knowledge is needed to position the profession for future success and to protect the public interest. Many respondents also expressed the belief that all newly licensed CPAs
should demonstrate strong core competencies in the areas of accounting, auditing, tax, and technology.
The impact of technology was the original driver of the CPA Evolution Project, but feedback identified other factors disrupting the profession. The body of knowledge required of newly licensed CPAs has been growing at a tremendous rate, while the tasks
that newly licensed CPAs had historically performed are being automated. Consequently, entry-level accountants are now performing tasks that require deeper critical thinking, problem-solving, and professional judgment. To meet practice needs and to
protect the public interest, the CPA licensure model must reflect these realities.
The proposed model requires all candidates to develop strong core skills and then choose a discipline in which deeper knowledge will need to be demonstrated. The core competencies are accounting, auditing, tax, and technology; the three disciplines are
business reporting and analysis, tax compliance and planning, and information systems and controls. Regardless of a chosen discipline, the model would continue to result in one CPA license.
The AICPA and NASBA are gathering more feedback from stakeholders in the first half of 2020, and plan to finalize an approach to the CPA Licensure Model in the summer of 2020. Once approved, implementation will be a multiyear effort.
Potential Impact on the Exam and Academia
Since 1917, the CPA Exam has been essential in the CPA licensing process. Its goal has always been to ensure that newly licensed CPAs possess the knowledge and professional qualifications to protect the public interest. The Board of Examiners (BOE), on
an ongoing basis, takes steps to ensure the exam is up to date and relevant to accomplish its objectives. In recent years, this has largely been accomplished by periodic practice analyses (PAs). PAs are research projects that closely examine the work
expected of newly licensed CPAs to ensure the exam is testing for the right knowledge and skill sets.
In December 2019, the BOE released its most recent PA. Reflecting many of the recommendations of the CPA Evolution working group, the PA explores the impact of technology on the profession and the work of newly licensed CPAs in today’s environment.
Here are some of the identified skill sets:
- Understanding business processes, including automated aspects, risk identification, and internal control mapping
- The need for a digital and data-driven mindset, and the use of data analytics
- Increased reliance on Systems and Organization Controls for Service Organizations: Internal Control Over Financial Reporting (SOC 1) reports
The 2019 PA also considered areas where the CPA Exam may have become too broad and not sufficiently focused on the critical requirements of newly licensed CPAs. Changes resulting from the 2019 PA are targeted to be operational in the CPA Exam sometime
The PA conducted by AICPA’s Examination Team certainly overlaps with the current discussions around the CPA Evolution Project, but the 2019 PA was conducted “in the normal course of business” and is based on the structure of the current
four-part CPA Exam (auditing and attestation, regulation, financial accounting and reporting, and business environment and concepts). The ultimate conclusions and recommendations coming out of the CPA Evolution Project are likely to further impact
the exam. This is expected to require a larger and very different PA exercise in the future.2
It is possible that a change in both form and content of the CPA Exam may be in store. Recall that the fourth guiding principle of the working group indicates the desire to attract to the accounting profession those with technological and analytical expertise,
including non-CPA professionals and nonaccounting majors. This alternative path to becoming a CPA, especially its potential impact on the CPA Exam, was explored recently. The researchers surveyed accounting practitioners and found that respondents,
regardless of practice area, did not support removing any of the four parts of the existing exam. Moreover, these practitioners overwhelmingly disagreed with the notion that an individual could become a CPA without taking a formal examination. The
respondents were relatively neutral on whether additional competencies (technology and data analytics) should be tested on the CPA Exam.3
The CPA Evolution working group’s proposed model – with core competencies in accounting, auditing, tax, and technology – keeps three parts of the current exam (financial accounting and reporting, auditing, and regulation/tax). It will
be interesting to see how technology and data analytics will be tested. They may keep it in the business environment and concepts section but expand coverage; it may become a separate part of the exam; or it could be tested in all parts of the exam.
Fears that an alternative path to becoming a CPA without taking an exam or taking one with no resemblance to the current exam appear to be unfounded.
Colleges, which play a vital role in preparing future CPAs, need to be alert and open to adjusting their curriculum and classroom techniques to embrace the coming changes. For an example based on robotic process automation, see our fellow Editorial Board
member Cory Ng’s Education column in the spring 2020 Pennsylvania CPA Journal.4 Academics are not immune to the changes affecting the profession, and they too face the risk of becoming irrelevant if they don’t keep pace
with change. One practical step academics can take is to maintain a regular dialogue with practitioners to understand how technology and other developments are impacting their work. Regularly engaging with the university’s accounting advisory
board can be very helpful in staying abreast of the issues in the marketplace affecting CPAs.
Deregulation Threats to Licensure
A national campaign to restrict or eliminate professional licensing could run into conflict with CPA Evolution Project efforts. As the AICPA and NASBA propose a plan that would require the cooperation and support of CPA licensing boards around the country,
certain groups, such as the American Legislative Exchange Council (ALEC), are advocating for a reduction or elimination of occupational licensing requirements. According to ALEC’s website, “Throughout the country, onerous licensing requirements
restrict individuals from establishing legitimate businesses.” However, under the broad banner of “deregulation,” ALEC and others are pushing a “Right to Earn a Living” agenda that dangerously imperils the CPA licensure
model that has been established over a period of decades to protect the public interest. These groups may not necessarily target the CPA profession specifically, but consumers of CPA services are at risk of being negatively impacted by unintended
consequences of their model legislation. Some proposals, in fact, call for the elimination of professional and occupational licensing boards.
Consider the ramifications: without a licensing board, a CPA certificate would not be required to perform certain services. Let’s say, for example, regardless of education or experience, anyone could perform an independent audit? The risk of unqualified
“auditors” signing opinions relied on by creditors, lenders, and other third parties would increase greatly. Over time, this could also increase the risk of fraud, resulting in harm to the public.
Legislative proposals aimed at licensing reform are being closely monitored by the AICPA, the PICPA, and other state CPA societies. In Pennsylvania, Gov. Tom Wolf signed Act 41 of 2019, which requires licensing boards and commissions under the Pennsylvania
Bureau of Professional and Occupational Affairs to provide licensure by endorsement to applicants who hold similar license in other states. PICPA’s government relations team remains vigilant for similar legislation that may arise that goes one
step too far, is overly broad, or will negatively impact the public interest. According to Peter Calcara, PICPA’s vice president of government relations, “While the underlying goal of these proposals is certainly laudable from a public
policy standpoint, the expertise CPAs achieve through licensure – education, examination, and experience – is the very thing that makes it possible for the public to rely on them. We need to protect that system at all costs.”
Evaluation and Conclusion
The AICPA and NASBA should be applauded for embarking on this project that intends to ensure the CPA profession remains relevant. The fact that CPAs have been around for over 100 years and continue to be viewed as trusted and competent professional service
providers by businesspeople everywhere and the public at large is not a “guarantee” that the services we provide will continue to be relevant or valued. The pace of change is rapid, and our profession must evolve to keep pace with that
change or we run the risk of becoming redundant and replaceable.
Countless companies that were once part of the Fortune 500 either no longer exist or no longer enjoy market-leading positions. A failure to innovate and adapt to change will jeopardize the CPA profession. Having said that, change should be rapid but deliberate.
To date, the CPA Evolution working group has shown a propensity to seek, consider, and incorporate the comments of stakeholders. One concern to keep an eye on is that the working group’s proposals are primarily directed to newly licensed CPAs.
What about experienced CPAs who may need to retool their skills to meet future challenges? Will this endeavor have implications for continuing professional education requirements for CPA license renewals?
The CPA Evolution Project’s focus on the model for CPA licensure is necessary and appropriate, but the profession as a whole needs to do more to future-proof itself. CPAs need to “stay close to customers” and understand their needs,
expectations, and desires. How is technology impacting their business and the way in which CPAs provide services to them? What changes would they recommend? Are there other entities that have approached them with new or different solutions that could
potentially replace some or all of the work CPAs do for them?
CPAs need to be open to alliances and collaborations to enhance their capabilities. The world is moving too quickly to internally develop every new technology or service. This is what the Big Four accounting firms have done over the past decade as they
have acquired hundreds of businesses, many providing emerging technology or consulting services. Smaller firms must embrace a similar mindset even if they can’t match the scale.
A failure to stay close to our clients and evolve to their needs will result in lost market share, particularly as new competitors emerge. Without action, extinction would follow.
The CPA Evolution Project should not be a “once and done” exercise. Rather, it needs to be embraced by firms and practicing CPAs as an ongoing initiative, with the goals of staying relevant, continuing to meet the needs of clients, and protecting
the public interest.
1 Ken Tysiac, “NASBA and AICPA Seek Input on Evolving Licensure Model,” Journal of Accountancy (June 12, 2019). www.journalofaccountancy.com/news/2019/jun/cpa-licensure-model-input-201921411.html
2 “Maintaining the Relevance of the Uniform CPA Examination: An Exposure Draft and Invitation to Comment,” AICPA (December 2019).
3 Robert Marley, Steven M. Platau, and Jacob Christian Plesner Rossing, “Modifying the Pathway to Becoming a Licensed CPA,” The CPA Journal (December 2019).
4 Cory Ng, CPA, DBA, CGMA, “Robotic Process Automation and the Accounting Curriculum,” Pennsylvania
CPA Journal (spring 2020).
Jerry J. Maginnis, CPA, served as KPMG’s Philadelphia office managing partner prior to his retirement. He currently serves as an executive in residence at Rowan University in Glassboro, N.J., is chair of the Pennsylvania CPA Foundation, and is on the
CPA Journal Editorial Board. He can be reached at email@example.com.
David D. Wagaman, CPA, is an associate professor and coordinator of the accounting program at Kutztown University of Pennsylvania in Kutztown, and is on the Pennsylvania CPA Journal Editorial Board. He can be reached at firstname.lastname@example.org.