Accounting Education: Charting The Course Through A Perilous Future Presentation to the Northeast Region, The American Accounting Association May 4, 2001.

Accounting Education: Charting The Course Through A Perilous Future

Presentation to the Northeast Region, The American Accounting Association May 4, 2001 - Portland, Maine

Basis for Presentation: Monograph by Steve Albrecht & Robert Sack

A Study Sponsored by: IMA, AICPA, AAA and “Big 5”

Our Charge

“Write a high-level thought piece, supportedby evidence where possible, about the future of accounting education.”

Timetable: 6 months

Sponsor’s Task Force

Steve and I greatly appreciate the help of Bud Kulesza and Keith Russell (IMA), Bea Sanders and Karen Pincus (AICPA), Michael Diamond and Jan Williams (AAA), and Ellen Glazerman and Brent Inman (Big 5).

But we are the authors of the Report

Research Methodology

Read everything possible, especially past reports about accounting education

Interviewed key accounting leaders Held focus group meetings Conducted surveys

Practitioner Survey Educator Survey Department Chair Survey

Previous Warnings about the need to Change

IMA Studies (Counting More, Counting Less, etc.)

AICPA Vision Study AAA Committee Reports

Bedford Report (1986!) Changing Environment Committee Report

AECC Monographs “Big 8” White Paper

Our Conclusion

While we have been long-time supporters of accounting education, if we were starting a new business school today, we would not have separate accounting programs, at least not structured the way they are today.

Our Conclusion

Fundamentally,

the Accounting Education Community

is in trouble

Our Rational

1. The number and quality of accounting students is down.

2. Previous majors would elect other majors if starting over again today.

3. Our constituents tell us that our educational model is broken and needs to be fixed.

The fact that these issues arise at the same time does not necessarily point to a cause and effect relationship. But…

Our Rationale

The number and quality of accounting students is down.

Previous majors would elect other majors if starting over again today.

Our constituents tell us that our educational model is broken and needs to be fixed.

1

2

3

Decreases in Enrollments

A few schools report stable enrollments but most are down by 20% or more.

On a per-school basis, those schools with an AACSB or an ACBSP accreditation saw their enrollments drop by 38%. Other schools saw their enrollments rise by 10%

We don’t have comparably quantified data, but the consensus is that quality is down too

Why Enrollments are Down!

1. Accounting salaries haven’t kept up.

2. More attractive career alternatives .

3. Profession has lost some of its gloss

4. Increased willingness to choose risky majors and career tracks.

5. Lack of information and considerable misinformation about accounting profession.

6. 150-hour program rule has increased opportunity costs to become an accountant.

Accounting Salaries Haven’t Kept Up

In 1989, salaries to accounting grads averaged $25,223, second only to their MIS peers – and only $1,500 behind

By 1999, salaries to accounting grads averaged $34300, but ranked fourth in the business school, and $7,000 behind their MIS peers

Data summarized from annual reports issued by

the National Association of Colleges and Employers

Enrollments Are Down

Message from the Profession is Confused All indications are that the audit business is good -

but consulting gets all the attention ‘We desperately want accountants, but the fact is,

we will pay more for IS people’ Accounting grads hired by All CPA firms has

slipped only slightly in the past 5 years But the major firms hired 20% less (tax??), While the smaller firms hired 4% more

The major firms are hiring more experienced hires and more paraprofessionals (tax??)

Enrollments are Down

If the decline in enrollments (and the loss of our quality edge) concern you, you would be well advised to read and study: The AICPA Supply/Demand Study - 2000 The Taylor Report commissioned by the

AICPA And, of course, our Report which cites other

data

150-hour rule isn’t problem--graduate school is preferred

Practitioners who would recommend graduate school 85.7%

Educators who would recommend graduate school 95.7%

High school students who plan on graduate degree 76%

College students who plan on graduate degree (57% in 1990) 80%

Additional year would deter studying accounting

High school students 22%

College students 15%

Requirements to be CPA seem fair General 150-hour

High school students 71% 74%

College students 81% 95%

Switchers away from accounting 80% 91%

Eliminating the 5th-year Requirement

The Problem isn’t the extra 30 hours, it’s the nature of the 30 hours we

have offered

There may also be a timing issue

Our Rationale

The number and quality of accounting students is down.

Previous majors would elect other majors if starting over again today.

Our constituents tell us that our educational model is broken and needs to be fixed.

1

2

3

Type of Degree% of

Educators Who Would

% of Practitioners Who Would

Earn a bachelors degree in something other than accounting and then stop 0.0 7.9

Earn a bachelors degree in accounting, then stop 4.3 6.4

Earn an MBA Degree 37.7 36.4

Earn a Masters of Accountancy Degree 31.5 5.9

Earn a Masters of Information Systems Degree 17.9 21.3

Earn a Masters Degree in Something Else 5.4 6.4

Earn a Ph.D. 1.6 4.4

Earn a J.D. (Law Degree) 1.6 11.4

Accounting MajorsWouldn’t Major Again!

“Accounting” Careersare Less Attractive

Less attractive financially Starting salaries Wealth accumulation

Less psychic income True of all professions? Much of what we did is no longer valued

Technology has replaced much of what we do

“Accounting” careers are less attractive

Our friends in industry are leading the way NACA=NAA=IMA= ?? Management Accounting=Strategic Finance

The “Accounting” Function is either insourced or outsourced either way it’s a dead end job

Technology has isolated accounting in favor of information

“Accounting” Careers are less attractive

The scratching sound you hear is the sound the bright people are making, as they scramble to avoid the “Accounting” trap

Instead, I’m a “finance professional” or an “information provider”

Our Rationale

The number and quality of accounting students is down.

Previous majors would elect other majors if starting over again today.

Our constituents tell us that our educational model is broken and needs to be fixed.

1

2

3

Accounting Educationis Broken

We teach accounting as if information were still costly.

$10/hour $30/hour $100/hour $300/hour $1,000/hour

Teach too much here! Teach too little here!

Introductory AccountingIntermediate AccountingCost AccountingOther Specialized courses

1

Turning information

into knowledge

Convertingdata into

information

Summarizingrecorded

events

Recordingbusinessevents

Makingvalue-added

decisions

2 Major culprits

Changes in Business

Increased Competition — Inexpensive Information

Fundamentals are assumed — But life is much more complex, and more demanding

The people who can deal with that complexity will have all the fun, and the rewards

e.g. Delta’s fuel inventory – LIFO, FIFO, LCM Vs. measuring risk of fuel inventories and futures, in various

currencies, with planned revenues from various countries

Globalization—Technology—Concentration of Market Power

What Change Means For Us

Increased Competition — Inexpensive Information

Globalization—Technology—Concentration of Market Power

Too many of us teach Accounting as it was practiced in the good old days.

•Recording, Processing, Reporting as the end all, be all•Debits & Credits, Standard Cost, Financial Reporting

But Its Different Than It Was - - and we risk becoming an anachronism

A Helpful Analogy

Accounting is like Dentistry

Practitioners Can’t Live by “Filling Teeth”/ “Preparing Financials”

Technology has changed the market place forever

We can train people to become “Hygienists” / “Processors” or

We can raise our sights and educate people to become“Orthodontists” / “Analysts”

36.425.0Accounting is integrated enough

PractitionersEducators

Percent of

Accounting…

47.362.3Business majors are too isolated

and

58.641.2and finance should be combined

52.057.5and I/S should be combined

31.122.8is more attractive than I/S

49.538.6is more attractive than Finance

who agreed withthe statement

Perceptions AboutAccounting Programs

Type of Pedagogy Percentage who use

Too much

Too little

Assignments with companies 40.8 4.3 52.7

Case analysis 69.3 8.5 37.5

Quizzes (feedback exercises) 75.6 10.5 11.7

Lecture 90.6 41.4 1.5

Oral presentations 62.4 8.4 34.3

Reading textbooks 84.0 12.1 7.8

Role playing 15.3 5.1 34.1

Group work 74.6 20.4 27.8

Team teaching 11.1 4.3 48.5

Technology assignments 77.0 5.1 53.0

Videos 37.6 5.4 12.9

Writing assignments 78.4 2.4 45.8

Perceptions of Pedagogies

Representative Quotes

The tremendous benefit that comes from an accounting education is the organization and the structure and the discipline and the understanding you gain from looking at the business from an accountant’s eyes. But then, the course goes off into a study of paragraph 114 of SFAS 131, and all that perspective is lost.

Students don’t have the luxury of learning about business on the job - They have to be productive from day one.

Minimum Changes Needed

1. More emphasis on skill development, less emphasis on content

2. Less emphasis on statement preparation, more emphasis on analysis, planing, interpretation and decision making

3. Change focus from rule based learning to conceptual understanding

4. Less specialization in accounting , more understanding of business

5. Breakdown the silos - teach accounting/information as an integral part of business - and of the market place

6. Emphasize the role of accounting and information in the management of a GLOBAL enterprise

7. Bring the best of the practice world into the classroom - and vice versa

Bluntly said, teach what students need, not what we want to teach - or are comfortable teaching

The prize will go to...

The team that can quickly teach the process

(this is a hammer, and you hold it by the

handle)

But move promptly to the use of the information

(here is how you build a house)

Minimum Changes Needed

1. Must develop school-specific mission playing to your strengths. Copycat mentality won’t work anymore (too much information available that exposes weaknesses).

2. Consider your environment.

3. Consider carefully every degree offered—maybe consolidate.

4. Consider carefully every course offered—is it still relevant or has technology, globalization, etc. rendered it obsolete?

5. Consider carefully the pedagogy of every course.

6. Invest in faculty development—we can only do what we know how to do.

What can your school and program do better than anyone else?

The “Problem” is Complex

Three things need to be said: Many schools have made significant change:

Some schools/some professors have not.

Even where dramatic change has been implemented, there is no time to catch a breath.

It may be that the same criticisms can be laid to Finance & IS programs. But we have to be better, because we are losing the competition for the bright people

Summary of our Problem

At best we are losing market share

At worst we are losing in absolute terms

Loss of students = loss of positions = loss of budget and resources

Loss of Quality = more effort and less satisfaction

Reactions to the Report

Little disagreement about the problem Lots of disagreement about the reasons

The 150 hour rule The greed of the big firms The emphasis on student evaluations The exam, the textbook, the regulators, etc. The Accounting Review, etc. The dean, the department head, etc

We have to work with the profession --But in he end we have to solve what is our problem

Reactions to the Report

Some argue that students will come back, when the economy returns to “normal”

But it seems clear to us that the technology genie is out of the bottle, and that we will be forced to re-define “normal”

The practice of Accounting will never look the same, like it or not

How Should a school Respond?

The report carefully avoided any attempt to tell a school what to do.

It seems clear that every school must think through its own response, after a careful analysis of its environment

Strengths and weaknesses of the department Expectations of the University and the

Community Present and potential student body

For Example…U Maryland,College Park

Majors dropped from 250 to 125, and the pipeline is similarly depressed

Strategic Planning Committee, with the Dean and the Advisory Board

Great Location in an unusual market Considering a “Diffusion Strategy”

Small Professional Program Intense MBA participation Service to the rest of the Business School

For Example... U VirginiaMcintire School

Majors dropped from 120 to 60 with similar pipeline problems

Major Info Systems Department - great reputation overall with the major firms

Dean aheming, about tax staff Is considering a “Redefinition Strategy”

Working in Risk Management Marketing Exec Ed Programs - to the big firms!

How Should a School Respond?

Other Strategies?? Define accounting-as-information, and

integrate IS and accounting (Arizona, BYU, Texas)

A Law School Model ?? A Re-intellectualized curriculum ?? For your school ??

We are Not Alone…..But

An Umbrella Group has been formed to deal with marketing to potential students

We have Leadership from the IMA, cooperation from the AICPA, and the interest of FEI

And in general, the big 5 The CPA exam is ready for revision We have the attention of NASBA AACSB???

How Should We Respond?

Important decisions face us as individuals:

As senior faculty

As prime-of-life faculty

As new young Doctoral candidates

Important decisions face us as individual members of the Association

How Should We Respond?

It will be difficult to predict where this is all going – but one thing is clear

Maintaining the Status Quo is

Not An Option