MAKING ACCOUNTING relevant & attractive.

With enrollments down and even practicing accountants and educators saying that if given the choice again, they'd chose another profession, people in accounting are talking about changing the approach not only to get better but to survive.

There's a crisis in accounting education in the United States. After hearing warnings for years, educators are aware that the environment must change in order to be relevant, valuable and continue to attract students to the profession. Indeed, there has been significant change -- but apparently, not enough.

A recently published report documents findings from a study commissioned by four major groups with a common desire to improve accounting education. The report, Accounting Education: Charting the Course Through a Perilous Future, authored by professors W. Steve Albrecht of Brigham Young University and Robert J. Sack of the University of Virginia, makes bold and sweeping recommendations for an environ ment that the authors say "cries out for action." The four groups are the American Accounting Association, American Institute of Certified Public Accountants, Institute of Management Accountants, and representatives from the Big Five (Arthur Andersen, Deloitte & Touche, Ernst & Young, KPMG and PricewaterhouseCoopers).

The American Accounting Association's president, Mary Stone, offered her perspectives on the problems and the recommendation in the report. Stone, a CPA and the Ernst & Young Professor of Accounting at the University of Alabama, spoke with Financial Executive's Managing Editor Ellen M. Heffes.

Q. The title of the study is provocative, and the list of supporting organizations impressive. What prompted the study at this point in time?

A. The study was prompted by a sense of frustration on the parts of accounting educators and employers -- [based on] a suspicion that accounting education, and perhaps business education overall, wasn't keeping pace with economic change, and a recognition that there were not enough high-quality accounting graduates. Technology has freed accountants from the tedium of traditional bookkeeping and set the stage for them to provide higher value services, yet employers questioned whether students were developing the knowledge, skills and attitudes needed to provide such services.

Refered to as the "Perilous Future Project," the study provides evidence that education has indeed fallen behind, and calls for accounting educators to change what and how they teach. It's my hope that the Perilous Future project will not be viewed simply as "an accounting study," as I'm convinced many of the problems identified and the recommendations provided are as relevant to other university and college business majors as they are to accounting.

It's notable that this project was undertaken because representatives of the firms and corporations who hire accounting talent and the educators who develop that talent thought there were problems in the supply chain. I think that the type of collaboration between business customers and educational suppliers that this study represents will become more prevalent as the information economy continues to evolve.

Q. What were the primary objectives of the study?

A. The objectives were to answer five fundamental questions: 1) How have business and accounting practices changed?; 2) How has accounting education responded to these changes?; 3) Why are fewer students majoring in accounting?; 4) What can be done to improve accounting education?; and 5) What are the impediments to improving education?

Q. What are some of the major findings?

A. The study documents a decline in accounting enrollments, identifies causes for the decline and recommends changes to reverse the decline.

Data from the 2000 edition of the AICPA's annual study of the supply and demand for public accounting recruits indicates that the number of accounting bachelor's and master's degrees awarded in 1998-99 was 20 percent lower than the number awarded in 1995-1996. During that same period, accounting enrollments dropped 22 percent.

The five most frequently cited reasons for decreased accounting enrollments are:

1. Lower starting salaries. While average starting salaries for accounting and finance undergraduates are around $35,000, for undergraduate information systems majors it's more than $41,000. For those with graduate degrees, the gap in average starting salaries is even greater -- $60,000 for IS and only $41,800 for masters of accountancy graduates. In short, a graduate with a masters degree in accounting averages only a slightly higher starting salary than a graduate with a bachelors degree in IS.

2. Changes in student attitudes. Students today are more concerned with "getting rich" quickly rather than with career security, as stability has come to be viewed by some as stultifying rather than reassuring. Careers in consulting, IS, e-business and international business are viewed by many as being far more exciting and potentially enriching than accounting.

3. Widespread misinformation about what accounting is and what accountants do. The stereotype of accountants held by many high school guidance counselors, teachers and students is that accountants do boring, tedious and monotonous number-crunching, and that the primary reason for the high demand for accountants is because no one wants to do it.

4. The 150-hour Rule. The rule, which recently became effective in many states, means that it will take students a minimum of five rather than four years of education to sit for the Certified Public Accountant exam, thus increasing the opportunity cost to be a CPA. This rule, according to some, has made it increasingly difficult for medium and small employers to hire

sufficient staff.

The original idea of requiring an additional 30 hours of education was to broaden students' educational exposure -- to force them to take more courses outside accounting and the business school. Too frequently, the reality has been too many additional hours in accounting.

5. Accounting education has not kept pace with changes in business and practice.

Q. What did you learn about the "branding" or "perception" of accounting and accountants?

A. I've spent much of my career trying to convince students that the efficiency of the U.S. stock markets and, in turn, the success of the U.S. economy, depends largely on there being a steady supply of relevant and reliable financial information. It's difficult for me to understand how any one who believes in the importance of markets could think of accounting as "mere bookkeeping" and a boring, trivial profession.

Q. Any surprises with the results? A. Yes, I was surprised that more participants in the study didn't describe some of the positive changes that are occurring in accounting education. I seldom attend AAA meetings or conferences that don't include presentations and discussions of educational innovations. These presentations make it clear that quite a few professors indeed have changed what and how they teach, and the size of the audiences suggest that many others are open to change.

When I think about my own teaching, I know I'm lecturing less than I was five years ago and I'm assigning more case studies, reasearch problems and team projects.

Q. What specific changes does the study recommend?

A. The study authors have analyzed the results and recommend changes in two categories: "big picture" and "specific." In the big picture, they recommend that:

* Individual programs develop an understanding of the needs of the companies and firms that employ their graduates and design curricula to meet those needs.

* Accounting programs determine their comparative advantages and design niche programs to maximize those advantages.

* Accounting faculty work with non-accounting colleagues to reengineer business education in efforts to consider degrees offered, and consolidate programs where appropriate --such as accounting and finance or accounting and information systems.

* Faculty question every course offered by asking if each is still relevant or whether technology, globalization and other realities have made it obsolete.

* Faculty consider how each course is taught and, as appropriate, replace lecturing with more active approaches to skill development.

* Colleges of business invest in faculty development by providing time and resources for faculty to take courses and attend conferences, to broaden their understanding of business and improve their technological skills.

For the category "specific," it's recommended that faculty:

* Reduce time spent teaching students to perform tasks routinely performed by software.

* Replace the focus on financial statement preparation with a focus on analysis, planning, interpretation and decision-making.

* De-emphasize the attention given to teaching detailed GAAP and GAAS standards and rules.

* Reduce emphasis on budget preparation and cost accounting.

* Strive to enhance students' understanding of globalization, technology, alternative business models and innovation.

* Concentrate more on developing students' skills and less on delivery of content.

Q. Will you explain why you believe these recommendations also apply to business disciplines other than accounting?

A. Yes, I am convinced they do because what they call for is developing curricula and teaching methods to sharpen students' research skills, problem identification and solving skills, communication skills, self-reliance and interpersonal skills. These skills are necessary for success in any line of business, as well as in personal life.

Q. How have accounting practitioners, educators and others reacted to the study?

A. Practitioners generally agree with the study's findings and recommendations. However, as expected, accounting educators' reactions have been mixed -- some agree with the findings and recommendations; others agree but think that change will be difficult or impossible to achieve; others question the methodological merits of using surveys and focus groups; and still others view the study as overly pessimistic and say it fails to provide examples of the improvements in accounting education during the past decade.

Regardless of their reaction, it's accurate to conclude the Perilous Future project has prompted accounting educators to think more carefully about what and how they teach.

Q. What's the outlook for change ... realistically, what do you expect? Will the educators "buy in?" What obstacles need to be overcome?

A. I think that there's been a lot more positive change in accounting education than participants in the Perilous Future project realized, and I believe the publicity that the project is generating will cause professors with programs that have made changes to step forward and publicize those improvements. If their changes genuinely are improvements, the firms and companies that recruit accounting students will notice and hire and, therefore, sup port the efforts accordingly. I believe this will catch the attention of deans and department chairs and thereby provide incentives for other pro grams to choose whether they will improve, or leave the market and become primarily providers of service courses to other college-of-business majors.

Just as continuous improvement has become a more or less permanent feature of corporate America, I think that it's also becoming part of business education. And, if I'm correct on this, there never will be a time when a large number of professors will conclude that accounting and business education is as good as it can and should be.

Q. What is the organization you lead, doing to help members change what and how they teach accounting?

A. The AAA is doing a number of things, including making the Perilous Future publication available as broadly as possible, using the AAA Web site to sponsor threaded discussions [about] how different schools are improving their programs, and by sponsoring faculty development programs and conferences to help AAA members learn about e-commerce, globalization or technology.

Q. For interested readers, where can copies of the study be obtained?

A. At the AAA's Website: AAA edu.org or by calling the office in Sarasota, Fla., at 941.921.7747.

Q. Finally, from your perspective, why should FEI members and other financial executives be interested in accounting education? They've got jobs and senior-level positions.

A. Financial executives are in the business of providing financial services [to their organizations]. In order to continue to provide high-quality services, they have to have a steady stream of high-quality people coming into the profession and willing to work. If they don't understand the issues at stake, whether hiring or talking with people who recruit for them, they could be very surprised three or five years down the road when there aren't suitable people to promote up in their companies.