12

Accounting Education • Disclosures • September/October

 Class
Notes:
accounting
education
in 2010 By Philip H. Umansky, CPA, Ph.D.
and Gabriele Lingenfelter, CPA, MBA

s accounting students head back to school

this month and recent graduates search for and begin
new jobs, they will face several important issues:
changes to the CPA Exam in 2011, the continuing
internationalization of the accounting curriculum and
practice, codification of Generally Accepted
Accounting Principles (GAAP) and the
general health of the accounting
profession. w

Accounting Education • Disclosures • September/October 13

A CPA Exam evolution
The shift from the paper-and-pencil
CPA Exam to the computerized Exam oc-
curred in 2004, but the first major change
since then will begin January 2011. The
American Society of CPAs (AICPA) calls
the change an evolution and refers to it as
CBT-e (Computer Based Test evolution).
The evolution is based upon the change
in accounting practice in which research
skills and real practice application skills
can be better tested through simulations
and through easier access to technical
standards vis-à-vis the Financial Account-
ing Standards Board (FASB) Codification
of U.S. Generally Accepted Accounting
Principles (GAAP). In a second major
change, International Financial Reporting
Standards (IFRS) will be covered in the
Exam. A third change should interest those
concerned about ethics.
And in one final development for
2011, pilot testing of the CPA Exam in
other countries will begin for interna-
tional students, though they must currently
register through a U.S. state board of ac-
countancy.
Simulations and writing
Simulations are currently 20 percent
each of the Financial Accounting and
Reporting (FAR), Auditing (AUD) and
Regulation (REG) sections, with written
communication of the simulation task an
additional 10 percent. Simulations will be
increased to 40 percent for each of these
three sections with no written communi-
cation tasks.
While the current Exam has only two
simulations per each of these sections,
the new Exam will have seven task-based
simulations each for FAR and AUD and
six for REG. For all of these sections, the
simulations will involve a new research
format, with FAR based upon FASB
Codification.
All writing components of the current
Exam that are currently in FAR, AUD and
REG and associated with the simulations
are being moved to the Business Environ-
ment and Concepts (BEC) section, with
writing now 15 percent of this section. To
make room for the increased emphasis on
simulations in FAR, AUD and REG, and
to make room for the writing in BEC, the
multiple-choice questions will be a lesser
14 Accounting Education • Disclosures • September/October
percentage of each section.
To accommodate these shifts, times
allotted to complete each section will
change. AUD will go from four hours
and 30 minutes to four hours, and BEC
will go from two hours and 30 minutes
to three hours. FAR and REG will stay
at the current length of four hours and
three hours, respectively, with the total
time for all sections combined remaining
at 14 hours.
IFRS
As mentioned above, IFRS will be
introduced for the first time in the 2011
Exam. As IFRS become more integrated
into the field of accounting, the CPA Exam
will place more emphasis on testing IFRS,
according to Joe Maslott, CPA, AICPA
simulations technical manager. For the
2011 Exam, IFRS in particular, or global-
ization in general, will be part of all Exam
sections except for REG as specified in the
new content specification outlines.
For example, questions that test knowl-
edge of the differences between U.S.
Generally Accepted Auditing Standards
and International Standards of Auditing
or the role of the International Auditing
and Assurance Standards Board could be
in the AUD section. Similarly, a greater
understanding of the affect of globaliza-
tion on the business environment could
be part of the BEC section. FAR could
include questions that test the difference
between financial statements under U.S.
GAAP and IFRS.
According to Maslott, 5 to 10 percent
of the content of these sections could
include material related to international
standards, with expanding coverage each
year as convergence occurs. CPAs need
to be “bilingual” for several years in the
future, according to Maslott.
Ethics
In the past, questions about profes-
sional and legal responsibilities, including
ethics, made up 15 to 20 percent of the
REG portion. While REG will continue
to test legal liability, only responsibilities
and ethical rules covering taxation will
be tested.
With the new Exam, professional
responsibilities, including ethics and
independence, will comprise 16 to 20
percent of the AUD section. The new
AUD section reminds the future CPA (and
accounting educators) of the profession’s
responsibilities to the general public and
the need to incorporate ethics and profes-
sional responsibilities in the accounting
curriculum.
To correctly answer the questions in
this section, the CPA candidate must be
knowledgeable with the ethics and inde-
pendence rules of the:
•• AICPA Code of Professional Conduct
•• Department of Labor
•• Government Accountability Office
•• Public Company Accounting Over-
sight Board
•• Sarbanes-Oxley Act of 2002
•• Securities and Exchange Commission
It will be interesting to see how the
new Exam affects national pass rates in
each section, which continued to hover
around mid 40 percent to low 50 percent
in 2009.
Hitting the IFRS Books
IFRS is clearly a continuing issue in
the education of accountants. In February
2010, the SEC published its Work Plan for
the Consideration of Incorporating Interna-
tional Financial Reporting Standards into the
Financial Reporting System for U.S. Issuers.
The report devoted an entire section to
human capital readiness and specifically
addressed education and training at col-
leges and universities. The report also
cited feedback from commenters who
had addressed concerns to the SEC about
this issue.
Concerns about IFRS education
A major concern was whether the U.S.
educational system is moving quickly
enough to incorporate IFRS into curricula
because colleges and universities currently
teach U.S. GAAP as the primary basis of
accounting.
Other concerns included a potentially
increased education cost if a dual reporting
system were used in the U.S. (i.e., one for
public companies using IFRS and one for
private companies), in addition to the fact
that education would need to focus not
just on the knowledge of IFRS, but also
training in judgment and understanding
the economic substance of transactions
based upon less prescriptive standards.
While learning to use a more principals-
based accounting system will be necessary,
others commented that the education
system would adapt quite quickly when a
firm date is set for U.S. GAAP and IFRS
convergence.
Teaching IFRS
The continuing incorporation of IFRS
and globalization into the accounting cur-
riculum has had help from the public ac-
counting profession itself, particularly the
“Big Four” firms. In the September/Oc-
tober 2009 issue of Disclosures, an article
detailed the materials and resources that
these firms have provided in the form of
case studies, searchable databases of IFRS
standards, grants, conferences presenta-
tions, webcasts, etc., and this information
is ever expanding and continuing.
But the real drivers of IFRS in the
accounting curriculum, other than in-
corporation into the CPA Exam and the
materials identified above, will be the
textbooks that students use in their classes
(particularly intermediate accounting) and
there are real opportunities for this to
be brought into introductory accounting
courses for all business majors and even fi-
nance or investment classes in which there
is analysis of financial information.
Professor knowledge is the other
key component to getting IFRS into the
curriculum. The American Accounting
Association is taking a real lead in this ef-
fort as exemplified in its annual meeting
held this past August. There were seven
CPE sessions devoted to some aspect of
IFRS, with several detailing very specific
technical knowledge and several presented
by representatives of the “Big Four.” The
trend now is “moving beyond the basics”
of teaching IFRS and getting into the nuts
and bolts of the standards.
Some students who have graduated
within the past four years may need to
do some work to get IFRS literate, but
there are a plethora of commercial self-
study courses, AICPA and state society
seminars, and beginning shortly, CPA
review courses that can help get students
up-to-speed on IFRS.
GAAP Codification
On July 1, 2009, FASB unveiled its
GAAP codification as a one-stop source for
non-governmental GAAP (except for SEC
releases). Students and faculty at colleges
and universities can access this information
in the professional view at no cost if their
accounting departments pay an annual
institutional fee of $150 (access is through
the American Accounting Association).
This is one of the most important re-
cent developments in accounting educa-
tion. Now accounting students can have
the same research experience as actual
preparers and auditors of financial infor-
mation.
Intermediate accounting textbooks
have fully integrated the GAAP codifi-
cation into their contents, with many
end-of-chapter problems requiring re-
search and referral to the GAAP codifica-
tion.
As mentioned, referral to GAAP codifi-
cation will be a key part of the CPA Exam
in 2011. 

Impress the Big Dogs

their professors’ knowledge of IFRS.
In previous years, intermediate ac-
counting textbooks primarily presented
U.S. GAAP with IFRS as a sidebar to
compare differences. This year marks the Nothing impresses management or clients like
first time that an intermediate account- finding anomalies not previously detected.
ing textbook is really an IFRS textbook.
While “Intermediate Accounting,” 13th
edition, by Kieso, Weygandt and War- Identify control and transaction issues
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Accounting Education • Disclosures • September/October 15

Accounting: A bonuses. For Northern Virginia, the aver- in 2007, with 36,112 hires — the highest
Worthwhile Choice age is $70,363. number since the first reporting period of
In terms of general trends in the em- 1971. Hiring declined in 2008 to 25,488
With all of these issues, a potential ployment of accountants, the U.S. Bureau due to the economic downturn.
accounting student or graduate may well of Labor Statistics’ Occupational Outlook There have been two macro-trends re-
ask “Is it worth it?” The answer is a re- Handbook for 2010 to 2011 projects that lated to hiring of new graduates by public
sounding “yes” if the student can meet the employment of accountants and auditors accounting firms in the last 26 years. First,
challenges. There are great opportunities will grow 22 percent from 2008 to 2018, 2002 was the lowest level of new graduate
waiting. with the movement towards IFRS a major hires by CPA firms (15,295) since 1982.
According to the National Association reason for the increase. Since then, the hiring of new graduates has
of Colleges and Employers (NACE), ac- increased steadily except for the current
counting services employers provided the The future of accounting: downturn noted above.
largest number of offers to 2010 bachelor’s Supply and demand Second, in general the supply of ac-
degree graduates, followed by engineering In terms of general trends of the em- counting students has kept pace with
firms and wholesale trade employers. This ployment of entry-level accountants with demand. As measured by accounting
is in line with past years. According to public accounting firms, each year the graduates (bachelor’s or master’s degrees
NACE, the average offer to undergraduate AICPA publishes Trends in the Supply of combined), 2008 was the highest year
accounting majors for 2010 was $48,575, Accounting Graduates and Demand for Public (66,459 degrees: 48,968 bachelor’s and
up 0.4 percent from 2009. Accounting Recruits.The most recent publi- 17,491 master’s) since the first reporting
Based upon information from Robert cation, 2009, reflects information through period of 1971. The lowest supply of ac-
Half and Associates, entry-level public ac- the 2008 academic year and captures some counting graduates since 1975 was in 2002
counting positions in audit and assurance of the impact of the economic downturn (44,695 graduates), which matched the
services with large firms (annual revenues that began around that time. low year in terms of new graduate hires
of greater than $250 million) averaged The highest number of new hires by by CPA firms.
$51,419 in salary in Central Virginia for public accounting firms of both new bach- The data show that the number of
2010. This does not reflect overtime or elor’s or master’s degree recipients was master’s degrees awarded represents a
E-5929-0910 VA_E-5929-0510 VA 7/26/10 11:23 AM Page 1

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16 Accounting Education • Disclosures • September/October

higher proportion of total new degrees and are bringing excellent real-world
due to the 150-hour requirement. The experience to their students. Phil Umansky, CPA, Ph.D., is associate
number of bachelor’s degrees in account- Clearly there are favorable trends in professor of business at the Sydney
ing in 2008 was actually less than those both supply and demand over the last 10 Lewis School of Business at Virginia
awarded per year from 1988 to 1996. In years related to accounting students and Union University and chairman of the
contrast, the number of master’s degrees graduates at all levels, but many chal- Accounting and Finance Department.
in accounting awarded in 2008 was more lenges remain, including the need for He is a CPA Ambassador, a regular
than double the number of master’s de- many new accounting Ph.D.s. contributor to the WTVR Virginia
grees awarded in 2001. This Morning TV Show on money
As measured by enrollment, ac- Accounting education management topics, and a member of
counting is clearly a popular major. In 10 years from 2000 the VSCPA Editorial Task Force. Contact
2007–2008, 212,834 students were in him at pumansky@vuu.edu.
an accounting degree program, up from Ten years ago, there were no com-
152,885 in 2000–2001. puterized CPA Exam, no International Gabriele Lingenfelter, CPA, teaches
Accounting Standards Board (much less accounting and auditing for the Luter
Boosting accounting Ph.D.s IFRS), no Sarbanes-Oxley Act and Public College of Business and Leadership
In one area of accounting degree at- Companies Accounting Oversight Board, at Christopher Newport University
tainment, the Ph.D. degree, there are and relatively few accounting students, in Newport News. She is actively
challenges, signs of success and oppor- graduates or new hires at CPA firms. involved on the American Institute
tunities. Accounting education is much differ- of CPAs (AICPA) Audit & Attestation
There is still a long-term imbalance ent than 10 years ago, as issues affecting Subcommittee and the development of
between the number of Ph.D. degrees accounting practice are much different. future CPA Exams. She is also a member
granted and the Ph.D. needs of colleges What students experience in the class- of the VSCPA Editorial Task Force.
and universities, which will continue room will affect their professional lives, Contact her at gabriele@cnu.edu.
as long as existing Ph.D.s retire. This but also the new developments in the
challenge was highlighted in an article in profession will also find their way back
the September/October 2008 issue of into the classroom. 
Disclosures. The trend has moderated in
the short term, on the demand side, due
to the economic downturn of the last
several years, as existing senior account-
ing Ph.D.s have delayed retirement to
build up retirement savings to pre-2008
levels.
On a positive note, there has been a
steady increase in Ph.D. enrollment in the
last six years as reported in the AICPA’s
Supply and Demand report, with Ph.D.
enrollment for 2007–2008 at 1,224 stu-
dents, up from 800 in 2001.
Also, the profession is actively engaged
in creating new accounting Ph.D.s in the
audit and tax areas through the Account-
ing Doctoral Scholars Program, funded by
CPA firms, 45 state societies, including
the VSCPA, and the AICPA Foundation.
Recruits for this program come from
experienced professionals. The first class
of 27 students enrolled in fall 2009 at
different universities, with each recipi-
ent slated to receive $30,000 a year for
four years. A new class of 30 students is
starting this fall.
Still, to make up for the shortfall,
many CPAs who do not have Ph.D.s are
making it into the classroom as full-time
or adjunct professional faculty members

Accounting Education • Disclosures • September/October 17