CFOs and finance department recruiters have faced a workforce problem for years now, labor experts say: a shrinking pool of U.S. accounting professionals needed to close the books every quarter, complete audits, and make sure the company’s financials comply with GAAP and other regulations.
The hits that have chipped away at accounting labor health are myriad and the statistics stark. While the number of practicing accountants and auditors in the U.S. spiked in 2019, across the past decade since 2013 the total declined by about 10% to 1.62 million last year, with roughly 190,000 jobs disappearing from the work rolls, according to the Bureau of Labor Statistics. Meanwhile, the total number of test takers who passed the CPA Exam fell to 18,847 in 2022 from 19,544 the year earlier, and the lowest level since 2007, according to the latest numbers available from the Association of International Certified Professional Accountants.
Studies and those analyzing the trend point to a variety of likely culprits: the onerous 150 hours of course credit — equivalent to a fifth year of college — students typically need to become a CPA, generally lower starting salaries compared to other areas of finance, and the demanding hours and rising regulations that lead some practicing accountants to look for the exits once they’re in the field. At the same time, the launch of the generative AI tool ChatGPT in late 2022 led to a new wave of questions about the industry’s future.
Tom Hood, executive vice president of business engagement and growth at the AICPA, is in the optimistic camp of those who believe the pipeline decline is poised to turn around, noting that he has seen other cycles when disruptive shocks such as Microsoft’s Excel in the 1980s damped interest and sparked doomsday talk around the possible “end of accounting.”
“We’ve had ebbs and flows, we’ve had these shortages before and every time that’s happened we as a profession have rallied together,” said Hood, a CPA, adding that AI will automate certain tasks in accounting but will not replace accountants. “We’ve moved this needle before and I think we’re already starting to see it move now.”
In 2024 professional associations and lawmakers are working on numerous initiatives as well as legislation to close the cracks that have leaked talent from the field. In the meantime, companies have found ways to get the staff needed to get their finance work done. CFO Dive talked to experts about some notable tactics that are likely to shape the accounting workforce this year.
States, CPAs and the 150-hour credit question Currently state regulatory bodies that set the rules require those who want to to become a Certified Public Accountant to have 150 credit hours of education in accounting or related subjects to become a licensed CPA. But amid the growing shortage, there has been a controversial push by states to create another pathway to licensure which include cutting the college credit hour requirement back to 120 hours.
For example, this year Minnesota lawmakers are expected to consider new legislation introduced in the state’s Senate and House in 2023 that would allow candidates to earn a CPA certificate with only 120 hours of college credit, along with passing the CPA exam and some additional work experience or professional education. This alternative would be in addition to the current system that requires 150 hours and one year of work experience, plus passing the CPA exam.
Geno Fragnito, director of government relations for the Minnesota Society of CPAs that supports the change, notes that the current national shift to the 150 rule gained steam in the 1980s after Florida made the change amid a surplus of accountants due to many wanting to move to the state. Florida started the ball rolling by increasing the credit hour requirement to 150 hours in 1983, according to a Journal of Accountancy report.
But in recent years, the MNCPA’s members have consistently pinpointed the credit requirement as one of the main contributors to the drop in CPAs.
“I don’t think there was a meeting that either our CEO or I attended where it was not brought up organically. It was never on our agenda to discuss but it always came up,” Fragnito said. Looking ahead, Fragnito said that other states that are seeking to tweak the credit hour formula include South Carolina and Washington state.
A “volatile year” for CPA exam takers Two exam-related changes are impacting accounting candidates this year in very different ways. “It’s an exciting time but I think 2024 will be a very volatile year,” Mike Decker, vice president of the CPA Examination & Pipeline Extension for AICPA, said in a recent interview. One of the changes is student-friendly: it’s designed to ease deadline pressures and address pandemic-related delays that might have affected some test takers. In a move announced last spring, the National Association of State Boards of Accountancy extended the window that a candidate has to complete the exam once they pass the first section from 18 months to 30 months. The move grew out of the AICPA’s effort to address the accounting shortage, known as its pipeline acceleration plan.
Meanwhile, this month marked the launch of a revamped CPA Exam called the CPA Evolution. The test has both new content and structure and a greater focus on technology in an effort to combat research that found that accounting firms were hiring fewer accountants in favor of non-accountants with tech backgrounds, according to a Nov. 7 report by Michael Potenza of Becker. “It's not that CPA Evolution is meant to be harder than the previous version of the exam, it's simply meant to better prepare you for the skills and competencies needed in modern accounting,” Potenza, a CPA, wrote.
Raises and remote work Tactics that CFOs themselves are using to meet their staff needs include sweetened offers and going offshore or considering remote workers to gain talent. With most small and medium-size CPA firms unable to find enough qualified U.S. accountants, this summer a study found that over half of firms planned to hike starting salaries by 14%, CFO Dive previously reported. Lisa Simpson, vice president of firm services at AICPA, is hearing about similar approaches taken by firm leaders she’s spoken with. In the past few years, she said, firm leaders indicated they were providing several high percentage salary increases for new hires and existing employees. Last year firms gave raises at rates above inflation as well as continuing bonuses, and business leaders said they expect to continue raises into 2024.
Meanwhile, many firms are outsourcing U.S. accounting work to professionals in India, the Philippines, and Eastern European countries like Poland, according to Matt Wood, head of global FAO Services at Austin, Texas-based Personiv, a global outsourcing provider which serves those needs. While outsourcing to other companies was previously the domain of larger firms, the pandemic has led to more companies being comfortable with remote accounting staff, he said.
The shift to hiring accounting staff outside the U.S. “has been happening for a while now, but it really accelerated in 2020. The accounting talent pool was already shrinking, and businesses were feeling the impact of that pre-pandemic. Then, all of these other pieces fell into place; teams were working remotely and protecting cashflow took priority,” Wood said in an emailed response to questions from CFO Dive.