Experiential Learning: An Evolution in How Knowledge Is Obtained by Prospective CPAs

The following article originally appeared in The Statement, the member magazine of the Maryland Association of CPAs. It is reprinted with permission.

By Joseph Petito, Esq. 

No policy issue has dominated the accounting profession over the past several decades as much as accountant education – specifically, the 150-hour education requirement. 

As the AICPA and NASBA consider new ways to enhance the attractiveness of the profession to counter a drop in accounting student enrollments and retain them while they proceed through to the CPA Exam (the "pipeline" to becoming a CPA), the 150-hour education requirement is both on and off the table for discussion – off the table as a discussion topic for the AICPA and NASBA as they develop a new Pipeline Acceleration Plan, yet on the table for numerous state CPA societies, large CPA firms, minority organizations, and others.

All the parties have as their objective increasing the number of students becoming CPAs, but to some degree they are arguing past each other over the 150 hours of education requirement since neither side wants to eliminate it as the standard for becoming a CPA.

Many of those who want to have the 150-hour requirement included in the pipeline reformation discussion want to explore enabling prospective CPAs to be able to utilize substantive work experience to satisfy part of the 150-hour educational requirement.

Proponents for such experiential learning believe the ability to learn while earning a full-time salary, presumably at a CPA firm, will especially assist financially vulnerable minorities and others for whom the "fifth year" of education is too expensive. They believe, combined with the other elements of the pipeline program, such an approach would greatly enhance the number of CPAs.

Opponents to allowing work experience to count as part of a CPA's education, including the AICPA and NASBA, believe substituting experience for academic credit hours will reduce the education required to become a CPA at a time when less education is a bad idea, both politically and practically. Instead, they have proposed a program that enables college academic credit to be earned online, outside of a classroom setting, allowing an individual to work part-time and earn while learning, though no credit is given for the work experience obtained.

Finding a Compromise

If neither side wants to eliminate 150 hours of education as a criteria for becoming a CPA, it should be possible to find a compromise between these positions that allows both options. Prospective CPAs could substitute substantive work experience for semester credit hours and/or could obtain credit hours online while gaining part-time work experience and being paid for doing so. Any solution that is adopted would need to be scaled up quickly, be practical to implement, and not destroy current CPA mobility, as many in the profession are concerned will happen with experiential learning.

The objective would be to craft work experience programs that would be "substantially equivalent" to academic semester hours of learning. If work experience could be made to be "substantially equivalent" to certain numbers of credit hours, then the overall educational program should be the same, as would the total amount of knowledge gained. The only thing that would change would be how the knowledge was delivered – for example, via online Zoom classes or through experiential learning vs. traditional in-school academic classes.

Presumably, the mobility of a licensee who obtained their 150 hours of education via online classes or experiential learning would not be affected since the total sum of their education would remain the same; only its composition would vary.

The idea of online learning got a boost as a result of the impact of the pandemic on in-class learning and the need to continue providing education in some manner to students. No one in the accounting profession has so far questioned the quality of the online education provided to students, including those who obtained their 150 hours of education through some or a majority of online classes.

No doubt, further research will be undertaken (including as part of the AICPA Pipeline Acceleration Plan) about the effectiveness and efficiency of such learning, which should be done.

The profession is also no stranger to experiential learning. Work experience to become a licensed CPA has been an important part of the "three Es" (education, exam, and experience) since the profession's start. Prior to adoption of the 150-hour educational requirement as part of the third edition of the Uniform Accountancy Act (UAA), states typically required a baccalaureate degree in accounting and two years of experience in order to become licensed as a CPA.

The Uniform Accountancy Act eliminated the second year of experience with adoption of the 150-hour education requirement, partly because of the fear that adding an additional year of education on top of two years of experience would significantly deter students from the profession.

After adoption of 150 hours, experience has continued to be relevant to the profession, particularly for foreign accountants seeking to practice in the United States. Through a series of "mutual recognition agreements," the AICPA and NASBA have enabled foreign CPA equivalents to practice in the U.S. Most of them have only a baccalaureate degree of education, though in some cases up to five years of practical experience as a condition to obtaining their certification. NASBA has evaluated the experience to determine if it is "substantially equivalent" to the education required to become a CPA.

Professional bodies in which this is the case include the South African Institute of Chartered Accountants, CPA Australia, Chartered Accountants Australia and New Zealand, CPA Canada, Chartered Accountants Ireland, the Institute of Certified Public Accountants in Ireland, Instituto Mexicano de Contadores Publicos, and the Institute of Chartered Accountants of Scotland.

The UAA and most states very broadly define the type of experience necessary to qualify for CPA license. UAA Rule 6-2(a) states that experience may consist of providing “any type of services or advice using accounting, attest, compilation, management advisory, financial advisory, tax, or consulting skills."

It allows the experience to be gained while employed in “industry, government, academia, or public practice." The experience can be obtained from between one to three years and must be verified by a licensee.

Given that the terms for experience are typically fairly broad, there has been criticism over the years that the quality and quantity of candidate CPAs' experience have varied widely. As a result, creating a new experiential learning option provides the opportunity to both tighten up and improve the quality of work experience obtained by CPAs today. 

No ‘One Model Fits All'

It is clear the profession has the competence and capability to determine what type of experience, and how much of it, may be substantially equivalent to academic hours of learning. Given the flexibility of the academic composition of the 150-hour education requirement, the rules to implement it, and the current experience requirement, varying types of experience programs could be developed.

The experience would not always have to be accounting or auditing specific, given the current education and experience rules, but could focus more broadly on general business and soft skills.

The key point is there could be a variety of experiential work/learning programs that vary with the educational background of the student and the timeframe the student seeks to use to gain the experience. There may be a one-year intensive accounting-focused program for some, or a three-year broad-based business/consulting program for others.

Not only would such an approach reach students where they are with their in-class education, but it would also benefit different-sized and types of accounting firms which would offer the experience. Any experiential work/learning program must include the small and smaller-sized CPA firms to which especially minority students are drawn due to their mostly non-urban locations.

Academia could play an important role in helping craft specific experience programs, perhaps in tandem with their existing academic programs. But in order to be successful, the experiential work/learning programs must be offered outside of the schools themselves, so that students do not have to pay tuition as part of their experience.

Not only would paying tuition make the program unavailable to many financially challenged students, but it would also disadvantage CPA firms that are unable to both pay students for their work and help with their tuition expenses.

As with the current experience requirement to become a CPA, in order to satisfy regulators, CPAs and firms would need to meet and certify to exacting experience programs that had been pre-approved by the state accountancy board. Presumably, 
NASBA could play a role, as it does with foreign CPA certification, in evaluating experience programs.

Not unlike CPE, audits could be performed to assure CPA firm and student compliance.

Rather than be considered a step back, the use of experiential learning to satisfy some portion of what had previously been in-classroom learning should be considered an evolution in how knowledge is obtained by prospective CPAs, not unlike online learning.

The stakes are certainly worth the effort as students, and especially minorities, are failing to see the profession as worth the increasingly expensive entry costs.

Allowing extensive online and experiential learning, and the ability to work while gaining that knowledge, may go a long way to offsetting those costs, making the profession a much more worthwhile investment. 

Joseph Petito, Esq. has been at the epicenter of change within the accounting profession for nearly 30 years and involved with many of its major public policy issues, from federal RICO and security litigation reform legislation to state-level issues such as LLP and LLC laws, legal liability reform, and CPA mobility – first as a legislative manager with the AICPA, then as a principal at Coopers & Lybrand and then PwC, and now – post retirement – serving on the Maryland Board of Accountancy.

During his entire time working on public policy issues impacting the profession, one issue was continually discussed – accounting education and the 150-hour education requirement.