Accounting firms in the United States, facing a critical shortage of new talent, are being urged to overhaul their business models in order to attract more young people. The number of candidates taking exams to enter the accounting profession has dropped to its lowest level in at least 17 years, according to new figures from the American Institute of Certified Public Accountants (AICPA).
The AICPA’s data highlights the worsening shortage of Certified Public Accountant (CPA) candidates, a trend that has recently become more alarming in recent years and has been further exacerbated in 2022, dealing a blow to hopes of a swift recovery from the setbacks caused by the pandemic.
The decline in new entrants coincides with a wave of retirements among baby boomers. This situation poses a significant threat to accounting firms, as it weakens their capacity to carry out crucial accounting, tax, and auditing work that is relied upon by companies and individual clients.
The AICPA and CIMA 2022 Integrated Report annual report reveals that the number of individuals taking CPA exams in 2022 was slightly over 67,000, a decline from the 72,000 recorded in 2021. This figure falls short of the institute’s initial forecast of 74,000 candidates and marks the lowest level since records began for the modern exam in 2006.
Additional information shared among the AICPA’s governing council indicates that even this figure was boosted by candidates from overseas. The number of US candidates taking CPA exam modules experienced a year-on-year decrease of over 10%.
The shortage of candidates is not exclusive to the CPA certification. For examples, the Institute of Management Accountants (IMA), which offers an alternative certification for individuals entering corporate finance departments, has also observed a decline in candidates in the US, amounting to 5% last year.
Dennis Whitney, the senior vice president at the IMA, voiced his concerns, stating, “It is becoming a crisis, and not just for accounting firms but for companies as well. Accountants are not only vital for financial reporting purposes but also play a crucial role in aiding companies in their decision-making processes.”
While the AICPA has seen a slight increase in new candidates during the early months of 2023, they predict an overall 10% rise this year, partly driven by upcoming changes to the exam. However, even with this projected increase, the numbers would still be running 20% lower than the average of the past decade.
Recognizing the urgency of the situation, Wayne Berson, CEO of BDO USA, revealed plans to double the firm’s overseas staff and relocate more work offshore due to the talent shortage.
One contributing factor to the decline in new candidates is the waning popularity of university accounting courses in the US. In addition, graduates are enticed by higher starting salaries in finance or technology, which can be at least one-fifth higher than those in accounting. Moreover, careers in these sectors may not require the expensive professional qualification that the CPA entails.
Alan Whitman, the former CEO of Baker Tilly, stressed the need for firms to enhance the profession’s appeal by reimagining their operational models and career progression opportunities. He emphasized, “Firms need to concentrate on improving the profession’s attractiveness through various means, with the most critical being a thorough rethink of the operational model and career advancement.”
In response to the shortage, the AICPA plans to expand scholarships to support aspiring candidates and urges firms to offer competitive salaries. Mike Decker, the vice president of the AICPA, acknowledges the preferences of the younger generation, stating, “We are dealing with a generation that seeks a shorter return on investment.”
As the AICPA works towards addressing the shortage and supporting the future of the accounting profession, it emphasizes the importance of membership in the institute, which provides a wealth of resources, networking opportunities, and professional development to CPAs. A strong AICPA membership base will be crucial in ensuring the resilience and continued success of the accounting industry in the United States.