Arkansas Proposes Changes to CPA Licensing Requirements to Address Industry Demands

Karen Garrett, managing partner, HCJ CPAs & Advisors (Steve Lewis)

New rules may be on the horizon, but for now, an aspiring certified public accountant in Arkansas needs 150 hours of college credit.

That’s five years of schooling at the normal rate.

And the topic of many of those additional courses is unrestricted.

“I heard one student in a panel discussion literally say he took an online aerobics class and it counted as course hours,” said Marsha Moffitt, executive director of the Arkansas Society of CPAs.

The extra year of college is costly in money and time, and is one of several factors that have crimped the pipeline of CPAs coming into the profession, Moffitt said.

Students are choosing business careers with quicker payoffs, and as entry salaries lag in accounting, a national CPA shortage is growing.

So industry leaders like Karen Garrett of HCJ CPAs & Advisors of Little Rock are pulling for a proposal the Arkansas Board of Public Accountancy could offer as an alternative to the 150-hour path.

“I think it’s a great idea,” said Garrett, HCJ’s managing partner. “We as a firm support everything that we can to encourage high school and college students to enter the accounting profession.”

Garrett, who got her CPA before the 150-hour rule was applied in Arkansas, called the proposed path “a win-win for the student to get some work experience while they’re finishing up their college degree, and have the opportunity to earn some money.”

To become licensed in Arkansas, an applicant must “pass the CPA exam, obtain 150 semester credit hours that includes a bachelor’s degree, 30 hours of upper-level accounting courses, and obtain one year of experience that is verified by a CPA,” the accountancy board’s executive director, Tim Montgomery, told Arkansas Business. “This is often referred to as the 150+1 pathway.”

Montgomery said the rule change wouldn’t eliminate that path.

“On the contrary, it would provide a second pathway typically known as the 120+2 pathway.”

That pipeline would require a bachelor’s degree, the other business-hour requisites and two years of experience verified by a CPA, Montgomery said

“One of the main reasons the board is discussing the addition of this second pathway is because … there may be many residents that would like to pursue CPA licensure but cannot afford an additional 30 hours of higher education,” as well as forgoing a year’s salary, Montgomery said.

The board regulates the state’s 5,633 CPAs and 820 CPAs on retired status, and it oversees licensing.

Mobility Is a Concern

Moffitt said the Arkansas Society of Certified Public Accountants is staying neutral on changing the rules.

“Our board of directors recognizes that change needs to happen,” she said, but some society members are worried about mobility between states. “We’re not in opposition to anything that the state board is doing.”

The AICPA, the industry’s biggest professional organization, has offered “directional support” for helping licensure evolve. But it, too, is eager to keep enough uniformity in place to allow CPAs to continue practicing in more than one state without getting new licenses.

Licensing hurdles aren’t the only factor in the CPA shortage, which The Wall Street Journal cited in reporting Nov. 25 on Macy’s having to delay its quarterly earnings report. The retail chain had discovered that an accounting employee hid more than $132 million since 2021, becoming “the latest company to report issues in financial statements amid a deepening shortage of qualified accountants.”

Moffitt predicted the shortage will worsen. “The time we’re in now is retirement time for the baby boomers. We don’t have enough candidates in the pipeline to replace the baby boomers. That’s why it’s so important to increase the number of students coming up.”

More Compelling Stories

She said the AICPA’s National Pipeline Advisory Group conducted a yearlong study and found that “CPAs need to be telling a more compelling story” about what drew them into the profession. Students also need to learn the many career paths that spring from accounting.

“It’s not just about tax returns; it’s so much more,” Moffitt said. “The profession is the trusted adviser to the public. The CPA is the first person a client turns to, whether the issue is accounting-related or not.”

The accounting profession also needs to enhance the work experience for employees, Moffitt said. “That includes not working the number of hours that our parents used to work. The generation today doesn’t want to work like that. They want to have meaning to life. And yes, salaries have not kept up. So those are the conversations firms are having.”

Bachelor’s degree completions in accounting dropped 7.8% in 2021-22 after a steady decline of 1% to 3% a year since 2015-16, according to the AICPA’s 2023 trends report.

But Garrett, who hires 10 to 15 accountants per year, said she’s had little trouble finding qualified candidates in Arkansas.

“We are fortunate here in Arkansas with lots of great universities and colleges that are still producing accountants,” Garrett said. “We still maintain a strong recruiting base for new graduates, but where we do see shortages in talent is at the more experienced levels.”

The University of Arkansas and Arkansas State University have been adding accounting students recently, but Moffitt said the same can’t be said for smaller programs. “Enrollment at smaller schools is down, and nationwide accounting department enrollment is down,” she said, “because students are choosing different career paths, such as finance and technology.”

Opening Eyes

UA Professor and CPA exam adviser Barry Bryan dramatically changed his teaching style years ago to engage better with students. “I asked my students what they would really like to do with their careers. If they say they want to own a publishing company, we’ll talk about how accounting will be used there, and how these skills will help you pursue that.”

Once students see varied opportunities “beside being the stereotypical practicing CPA, which is a great career in and of itself, I think it really opens their eyes.”

Just before Thanksgiving, Bryan presented a slide show on what his former students are doing today. “They became entrepreneurs, they became sole practitioners, they became proprietors of their own businesses,” he said. “They went into upper-level management.”

Walmart CEO Doug McMillon, chief of the world’s largest company, started with an accounting degree from UA, Bryan pointed out.

One key to pulling students into accounting is having skilled professors teach introductory classes, Bryan said. As enthusiasm spreads, enrollment in accounting can grow.

“We’re well over 100 students,” he said, “probably 140 or 150.” UA offers a four-year accounting degree and a five-year master’s program, with the last two years being graduate school. About half of Bryan’s students choose the first path, the other half the second, Bryan said.

The National Association of State Boards of Accountancy 2023 performance report ranked UA 11th in first-time section pass rates on the CPA exam for schools with more than 200 candidates taking the test. “Our success rate was 68.6%, which, of course, is higher than the national average … which I believe puts us in a very strong position with the CPA pipeline initiative.”