Is there still a mandate for change in accounting education: an examination of the needs of local and regional accounting firms.

ABSTRACT

This paper is a follow up to the Albrecht and Sack study (2000) that called for significant changes in accounting education to respond to practitioners' needs. Have practitioners' needs changed since the AS survey was administered which was before the audit failures of Enron and WorldCom, the demise of Arthur Anderson and the passage of the Sarbanes-Oxley Act of 2002? This paper follows up the AS study to assess whether practitioners' opinions on accounting education have changed. In particular, we ask local and regional practitioners about their perceptions of the accounting profession, the amount of classroom time that should be allocated to different topics, and whether accounting programs should attempt to develop professional skills. In contrast to the AS study we did not find support for combining accounting with finance or with information systems. In addition, compared to the AS study we found more support for allocating class time to traditional accounting topics such as taxes and auditing and less support for allocating class time to information systems and finance. Similar to the AS study we found high levels of support for developing analytical thinking, written and oral communication, and decision-making skills. Interestingly, we did not find support for recommendations based on the AS study (Russell et al., 2000). The differences in responses we found compared to AS could be the result of changes in the business environment or to differences in services provided by national versus regional and local firms. Our findings should be useful to schools considering changes in their accounting programs particularly those that serve local and regional accounting firms.

1. INTRODUCTION

Accounting education has been attacked as narrow and unresponsive to the needs of the business community. It has been condemned as outdated, broken and in need of significant change. Studies over the past two decades have warned about the poor state of accounting education (e.g., AAA, 1986, 1998; AICPA, 1994, 1997, 1998; the White Paper, 1989). The most recent and comprehensive report, Accounting Education Charting the Course through a Perilous Future (2000) by Albrecht and Sack (hereafter AS) warns that quick and definitive action must be taken so that accounting education continues to be relevant. In particular, AS warn that if accounting education does not change it will not survive and that "there can be no further delays without serious consequences." The AS study included input from national, regional and local firms and was jointly sponsored by national professional and academic organizations, and the Big 5 public accounting firms (Arthur Andersen, Deloitte and Touche, Ernst and Young, KPMG, and PriceWaterhouseCoopers)

Could accounting education actually be as bad as stated? The business environment and perceptions of accountants have dramatically changed since the calls for changes in accounting education were made in 2000. In the decades prior to the AS survey there had been a shift in the services the Big 5 accounting firms provided. The Big 5 had evolved from being traditional accounting firms primarily providing auditing and tax services to professional services firms offering extensive consulting services. The increased focus of the Big 5 on consulting services versus traditional accounting services is apparent in the fees paid to them for non-audit services. During 2000 fees paid to the Big 5 for non-audit fees were 71% of the total fees while audit fees were only 29% of the total fees. In comparison, during 2000, the non-Big 5 firms continued to derive the majority of their revenue (58%) from audit work (Frankel et al., 2002). Because the Big 5 were generating most of their revenue from non-auditing services during 2000 presumably they would want accounting education to focus on preparing students to be consultants

Given the reliance of accounting firms, especially the Big 5, on consulting revenue in 2000, it is not surprising that radical proposals for changing accounting programs were made then. These changes included:

(1) Redesigning the curriculum so that graduates are consultant accountants, drawing heavily from information systems, finance, economics and strategy.

(2) Focusing the introductory accounting much more on analysis than on financial statement preparation.

(3) Having the second introductory course creatively capture managerial topics that focus on information necessary to make decisions.

(4) Collapsing the two intermediate accounting courses into one course that focuses more on analysis and research than on specific standards.

(5) Collapsing the two tax courses into one course that focuses on corporate taxes.

(6) Eliminating separate cost and advanced accounting courses.

Do these radical changes still make sense given the change in the business environment? Since 2000 many business have gone into bankruptcy proceedings because of discovered accounting irregularities including Enron and WorldCom. The Big 5 is now the Big 4 after Arthur Anderson was indicted for criminal obstruction of justice. One response to the calls for accounting reform was the passage of the Sarbanes-Oxley Act of 2002. This Act greatly limits the services, especially consulting services, that accounting firms can offer their auditing clients. The services that can not be offered to audit clients include: bookkeeping, financial information system design and implementation, appraisal, valuation, actuarial, internal audit, management, human resources, investment advice, legal and expert. In light of the changes in services that accounting firms can provide we expect practitioners' views on accounting education to adjust to these changes.

We address whether practitioners' views have changed by asking them about their perceptions of the accounting profession, the importance of content knowledge, which professional skills are important, and whether they support the radical program changes recommended by the AS study.

Overall, we did not find support for radically altering accounting education. In particular, we did not find support for combining accounting with finance or with information systems. In addition, compared to the AS study we found more support for allocating class time to traditional accounting topics such as taxes and auditing and less support for allocating class time to information systems and finance. Similar to the AS study we found high levels of support for developing analytical thinking, written and oral communication, and decision-making skills. Interestingly, we did not find support for recommendations based on the AS study (Russell et al., 2000). The differences in responses we found compared to AS could be the result of changes in the business environment or to differences in services provided by national versus regional and local firms.

2. METHODOLOGY

Surveys were sent to practitioners at 213 accounting firms in our five county service area. The firms were gathered from the yellow pages from these counties. Of the 213 mailed, 11 were returned as undeliverable leaving a population of 202. Each firm received a cover letter explaining the purpose of the study and assuring their anonymity, two copies of a two- page survey questionnaire, and a postage-paid return envelope. We mailed two surveys to each firm to encourage multiple responses and in our cover letter we asked for professionals at more than one level to respond. Seventy-two firms responded and in total 80 responses were received for a response rate by firm of 36%. Seventy-six of the 80 respondents indicated their professional level: 4% were staff; 6% were seniors; 9% were managers; 64% were partners; and 17% were other.

Because the AS survey was very comprehensive and widely cited, we relied on it and recommendations drawn from it to design our survey. The survey had five sections relevant to this paper. The first section asked respondents to indicate their level of agreement with perceptions of the accounting profession

The second section asked about the importance of including different topics in coursework. Respondents were asked to indicate the importance of different topics by indicating "not important" for no courses to cover the topic, "somewhat important" for part of a course, "moderately important" for one college course, and "very important" for more than one course.

The third part asked about the level of priority that should be assigned to developing professional skills. The levels of priority were: "no priority" indicating it was not important; "low priority" indicating important but can be developed on the job, "middle priority" indicating moderately important (i.e., plan out-of class activities explicitly focused on development); "high priority" indicating very important (i.e., dedicate both in-class and out-of-class time to developing even if some content-learning has to be sacrificed); and, "top priority" indicating extremely important (i.e., dedicate entire classes to developing, even if some content cannot be taught at all). The fifth section asked about the support for recommendations to change accounting education based on results in the AS study.

3. RESULTS

Table 1 reports the level of agreement with six perceptions of the accounting profession. The second and fourth columns give the results for our sample and the third and fifth columns give the results for the AS sample. Compared to other majors there was not a consensus that accounting was more or was less attractive than finance and information systems majors. This response agrees with the AS study. In contrast, to the AS study, we did not find support for combining accounting with information systems or with finance. Fifty-five percent (55%) of the practitioners strongly disagreed or disagreed that accounting and information systems should be combined into one major compared to thirty-one percent (31%) of the practitioners in the AS study. Forty-four percent (44%) of the practitioners strongly disagreed or disagreed that accounting and finance should be combined into one major compared to twenty-eight percent (28%) of the practitioners in the AS study.

These findings suggest practitioners do not support combining accounting with finance or with information systems. The differences in practitioners' responses in our survey compared to those in AS's could be attributed to either differences in the services the Big 5 and the non-Big 5 offer or to a general shift in the services that accounting firms provide after 2000. When the AS survey was administered the Big 5 firms had large consulting divisions offering finance and information technology services. By 2002 all but one of the remaining Big 4 firms had spun off their consulting divisions. The Sarbanes-Oxley Act prohibits accounting firms from providing information consulting services to their audit clients.

Table 2 gives the importance scores for including different topics in coursework. The second column indicates the mean score from the AS sample and the third, fourth and fifth columns give the mean score, the lower limit of the 95% confidence interval of the mean and the upper limit the 95% confidence interval of the mean, respectively. None of the topics had an average importance score of four indicating that it was very important that more than one course be dedicated to the topic. Nine of the 18 topics had a 95% confidence interval indicating that they were moderately important and that one college course should be allocated to them.

These topics were taxes, financial accounting, auditing/assurance services, business law, managerial accounting, information system, finance, economics and ethics. There are a few notable differences in the importance of topics for our practitioners compared to the practitioners in the AS study. Taxes, auditing/assurance, accounting research methods had higher importance scores in our study than in the AS study. A higher percentage of practitioners in our study are concerned with having traditional accounting content covered than in the AS study. This finding supports the results in the table 2 about perceptions.

Table 3 presents the importance scores for professional skills. The second column indicates the mean score from the AS sample and the third, fourth and fifth columns give the mean score, the lower limit of the 95% confidence interval of the mean and the upper limit the 95% confidence interval of the mean, respectively. The scores are similar to those reported in the AS study. This suggests that the skill set desired by all accounting firms is similar, but as results in tables 1 and 2 suggest these skills will be applied to providing different services.

Table 4 reports the level of support for recommendations based on the results of the AS study (Russell et al, 2000). Overall, our respondents did not moderately or strongly support these recommendations. On average respondents indicated that they did not support eliminating separate cost and advanced accounting courses. Nor did they support collapsing the intermediate courses into one that focused more on analysis and research than on specific standards.

4. Conclusion

We did not find Support from regional and local accounting practitioners for implementing radical changes in accounting education. One possible explanation for the lack of support is that the services that accounting firms provide changed since the AS study was published. Another possible explanation is that the service offerings of local and regional accounting firms differ from national firms.

The majority of our respondents still sees a need for a separate and distinct program in accounting and does not support combining accounting with other disciplines. We also did not find support for collapsing intermediate accounting into one course with a focus on research and analysis or for eliminating separate advanced and cost accounting courses. Both respondents to our survey and to the AS survey want graduates to have similar skills. They desire graduates with well-developed analytical, critical thinking, communication and decision-making skills. The significant differences in our results from the nationwide AS study suggest that it is imperative for each program to assess and respond to the needs of its constituents before radically changing its program.

Table 1: Perceptions of Accounting Profession

Perception                            Strongly    Strongly    Strongly
                                      disagreed   disagreed   agreed
                                      or          or          or
                                      disagreed   disagreed   agreed
                                                  (AS)

Accounting is a more attractive
college major than finance.           36%         30%         48%
Accounting is a more attractive
college major than information
systems.                              43          50          37
Accounting and information systems
should be combined into one
college major.                        55          35          28
Accounting and finance should be
combined into one college major.      44          28          43
The various business majors are
too isolated from each other.         35          30          47
Accounting education is integrated
sufficiently with other business
disciplines.                          41          39          42

Perception                            Strongly    N
                                      agreed
                                      or
                                      agreed
                                      (AS)

Accounting is a more attractive
college major than finance.           50%         79
Accounting is a more attractive
college major than information
systems.                              31          79
Accounting and information systems
should be combined into one
college major.                        52          80
Accounting and finance should be
combined into one college major.      59          80
The various business majors are
too isolated from each other.         47          79
Accounting education is integrated
sufficiently with other business
disciplines.                          36          77

Possible responses were: "Strongly disagree", "Somewhat disagree",
Neutral, "Somewhat agree", and "Strongly agree" and "Don't know".

TABLE 2: CONTENT KNOWLEDGE

                                       Mean     Mean     Lower Limit
                                       score    score    of 95% CI of
                                       (AS)              mean

Taxes                                  3.28     3.63     3.50
Financial accounting                   3.57     3.61     3.48
Auditing/Assurance services            3.06     3.42     3.25
Business law                           2.85     3.20     3.06
Managerial accounting                  3.05     3.14     2.98
Information systems                    3.56     3.11     2.98
Finance                                3.28     3.05     2.91
Economics                              2.81     2.96     2.80
Ethics                                 2.89     2.96     2.77
Accounting research methods            2.50     2.78     2.59
Business strategy                      3.15     2.73     2.57
Technology topics                      3.01     2.68     2.52
Organizational behavior/Human
resource management                    2.46     2.65     2.49
Electronic commerce                    3.00     2.49     2.34
Operations/Supply-chain management     2.48     2.45     2.28
Marketing                              2.45     2.35     2.19
Global/International business          2.92     2.31     2.14
Statistics/Quantitative methods        2.73     2.09     1.94

                                       Upper         N
                                       Limit of
                                       95% CI of
                                       mean

Taxes                                  3.75          80
Financial accounting                   3.75          80
Auditing/Assurance services            3.58          79
Business law                           3.34          80
Managerial accounting                  3.29          80
Information systems                    3.24          80
Finance                                3.20          78
Economics                              3.13          79
Ethics                                 3.15          79
Accounting research methods            2.97          78
Business strategy                      2.90          79
Technology topics                      2.85          79
Organizational behavior/Human
resource management                    2.81          80
Electronic commerce                    2.65          77
Operations/Supply-chain management     2.62          80
Marketing                              2.51          80
Global/International business          2.48          78
Statistics/Quantitative methods        2.24          80

Possible responses: 1 = Not important (no courses),
2 = Somewhat important (part of a course),
3 = Moderately important (one collage course) and
4 = Very important (more than one course).

Table 3: Professional Skills

                                Mean score    Mean     Lower Limit
                                (AS)          score    of 95% CI of
                                                       mean

Analytical/Critical thinking    4.29          4.43     4.27
Written communication           4.32          4.29     4.14
Oral communication              4.27          4.09     3.92
Decision-making                 3.96          3.85     3.66
Computing technology            4.07          3.68     3.49
Research                        3.26          3.65     3.46
Business Decision Modeling      3.65          3.57     3.38
Teamwork                        4.02          3.57     3.37
Continuous learning             3.70          3.52     3.27
Professional demeanor           3.66          3.51     3.29
Project-management              3.66          3.41     3.20
Leadership                      3.83          3.29     3.09
Risk analysis                   3.39          3.25     3.04
Interpersonal                   3.39          3.20     2.99
Resource-management             3.32          3.14     2.97
Measurement                     3.12          3.08     2.83
Customer orientation            3.34          3.01     2.79
Negotiation                     3.35          3.00     2.77
Entrepreneurship                3.24          2.95     2.73
Change-management               3.36          2.81     2.59
Salesmanship                    2.79          2.58     2.35
Foreign language                2.56          2.04     1.80

                                Upper Limit   N
                                of 95% CI
                                of mean

Analytical/Critical thinking    4.60          76
Written communication           4.44          76
Oral communication              4.26          77
Decision-making                 4.05          75
Computing technology            3.88          76
Research                        3.84          77
Business Decision Modeling      3.76          77
Teamwork                        3.76          76
Continuous learning             3.77          75
Professional demeanor           3.73          77
Project-management              3.62          76
Leadership                      3.49          76
Risk analysis                   3.46          76
Interpersonal                   3.41          75
Resource-management             3.32          76
Measurement                     3.33          75
Customer orientation            3.24          76
Negotiation                     3.23          77
Entrepreneurship                3.16          76
Change-management               3.02          72
Salesmanship                    2.81          76
Foreign language                2.28          77

Possible responses: 1 = No priority (Not important); 2 = Low
priority (Important but can be developed on the job);
3 = Middle priority (Moderately important: plan out-of-class
activities explicitly focused on development);
4 = High priority (Very important: dedicate both in-class and
out-of-class time to developing, even if some content learning
has be sacrificed); 5= Top Priority (Extremely important:
dedicate entire classes to developing, even if some content
cannot be taught at all)

TABLE 4: SUPPORT FOR AS (2000) RECOMMENDATIONS

                                                              Lower
                                                              Limit of
                                                  Mean        95% CI
                                                  score       of mean
One tax course should be developed with
a focus on corporate taxes                        2.49        2.22
The second introductory accounting course
should creatively capture managerial topics
that focus on information necessary
to make decisions                                 2.47        2.26
Redesign the curriculum so that graduates are
consultant accountants, drawing heavily from      2.09        1.86
information systems, finance, economics and
strategy
The introductory accounting course should
focus less on financial statement preparation
and much more on analysis                         1.84        1.59
Intermediate accounting should be collapsed
into one course, focusing more on analysis
and research than on specific standards           1.68        1.46
Separate cost and advanced accounting
courses should be eliminated.                     1.42        1.23

                                                  Upper       N
                                                  Limit of
                                                  95% CI
                                                  of mean
One tax course should be developed with
a focus on corporate taxes                        2.77        79
The second introductory accounting course
should creatively capture managerial topics
that focus on information necessary
to make decisions                                 2.68        79
Redesign the curriculum so that graduates are
consultant accountants, drawing heavily from      2.32        78
information systems, finance, economics and
strategy
The introductory accounting course should
focus less on financial statement preparation
and much more on analysis                         2.08        79
Intermediate accounting should be collapsed
into one course, focusing more on analysis
and research than on specific standards           1.91        79
Separate cost and advanced accounting
courses should be eliminated.                     1.62        78

Possible responses: 1 = Do Not Support; 2 = Somewhat support; 3 =
Moderately Support; and 4 = Strongly Support.

REFERENCES

Accounting Education Change Commission (AECC), "Objectives of Education for Accountants: Position Statement Number One", Issues in Accounting Education (fall), 1990, 307-312.

Albrecht, S. and R. Sack. 2000, "Accounting Education: Charting the Course through a Perilous Future", Accounting Education Series. Vol. 16 (August), 2000, 1-72.

American Accounting Association (AAA), Committee on the Future Structure, Content, and Scope of Accounting Education (The Bedford Committee). "Future Accounting Education: Preparing for the Expanding Profession", Issues in Accounting Education (spring), 1986, 168-195.

--. Report of the Changing Environment Committee. The Future Viability of Accounting Education, American Accounting Association, Sarasota, FL, 1998.

American Institute of Certified Public Accountants (AICPA), the AICPA Special Committee on Financial Reporting. Improving Business Reporting--A Customer Focus: Meeting the Information Needs of Investors and Creditors, AICPA, New York, 1994.

--. 1997. Supply of Accounting Graduates and the Demand for Public Accounting Recruits. New York, NY: AICPA

--. CPA Vision Project: Focus on the Horizon. Executive Summary and CPA Vision Project Focus Groups: Public Practice, Industry, and Government CPAs, AICPA, New York, 1998.

Frankel, R., M. Johnson and K. Nelson. "The Relation between Auditors' Fees for Non-Audit Services and Earnings Quality", The Accounting Review, Special Issue on Quality of Earnings, January. 2002.

Perspectives on Education: Capabilities for Success in the Accounting Profession (The White Paper). 1989. Arthur Anderson & Co., Arthur Young, Coopers & Lybrand, Deloitte Hakins & Sells, Ernst & Whinney, Peat Marwick Main & Co., Price Waterhouse, and Touche Ross. New York, NY

Russell, K., C. Kulesza, S. Albrecht, and R. Sack. 2000. Accounting Education: Charting the Course Through a Perilous Future. Management Accounting Quarterly (Fall): 4-14.

Professor Sherri Anderson is a CPA and she earned her MBA at San Francisco State University in 1983. She is a professor of accounting at Sonoma State University.

Professor Elizabeth Stanny is a CPA and she earned her Ph.D. at the University of Chicago in 1996. She is a professor of accounting at Sonoma State University.