Where have all the accounting students gone?

Over the last 10 years, California's colleges and universities have experienced a 30-50 percent decline in the number of students majoring in accounting. Traditional accounting programs no longer attract the best and brightest, nor are they keeping up with marketplace realities. In short, they are in real danger of becoming extinct.

"Were waiting to see what happens with the 150-hour requirement in California," says Joseph Mori, accounting department chair at San Jose State University. "If it doesn't happen at all, we'll probably get out of the traditional accounting business."

"The students who stay here in the accounting program do stay focused and go on to get their CPA. But the numbers aren't as high as they have been," says Maureen Beck, director of career development services at Loyola Marymount University. Beck notes that Loyola Marymount's intermediate accounting class this year is down to 27 students, compared to 70 in the fall of 1996.

FACTORS INFLUENCING THE DECLINE

Educators and college recruiters point to a number of factors to explain the decline. They claim that students seek exciting work with lots of autonomy right out of college as well as substantial compensation packages.

"Students used to be willing to come in, do their time, work in the trenches and all that, without having special, exciting projects to work on," says Beck. "What we're seeing with new hires today is that if those needs aren't met and the satisfaction doesn't come quickly enough, they may leave the firm."

Additionally, educators claim that the majority of young people don't understand what accountants do, or the myriad directions an accounting career can take. The image of spending one's life stuck behind a computer tapping out numbers on a calculator and talking to no one, is certainly not as sexy to a high school student or college sophomore as a cell-phone toting, SUV-driving IT professional. Although in reality, the latter might end up spending more time in front of a computer than any accountant ever would-at least he's "shown the money" from the get-go. (See entry-level salary comparisons, this page.)

Scott McConnell, an accounting major in his junior year at Loyola Marymount, a small, private, liberal arts school in Los Angeles that is often courted by the Big Five, says that when he tells freshmen or sophomores that he is an accounting major, they say, "Eeww--why?"

"Students don't realize that with accounting there is a lot of interaction with people, as opposed to sitting behind a desk or computer all day typing numbers into a calculator. I think that is still a common perception," McConnell says.

McConnell's sister is an accountant with KPMG, so he had an insider's track into the realities of what it's really like to be an accountant today. He noticed that she has a lot of interaction with many different people, which influenced his decision to major in accounting. But McConnell also is taking a track many students today choose-a double major in accounting and information systems.

Says Mon, "People perceive accountants as no longer relevant. Certainly kids are somewhat impressionable and if they get the feeling that [accounting] is dry, not dynamic, not mainline, nor compensated well, they're not going to give you the time of day."

SHOW ME THE MONEY

"Our pay rates for graduates haven't kept up with other majors," says Bill Holder, accounting professor at the University of Southern California. "There was a time when accounting majors clearly received the highest pay of any beginning, entry-level graduates with business degrees, but that is no longer the case. It suggests to me that for whatever reason, the work [accountants] do isn't valued as highly by the market."

Beck attributes much of the recent decline to students being wooed by the glamour and trendiness of the dot-coin explosion, as well as the financial opportunities that the booming economy offered. "Those [accounting] students who also had technology skills were gobbled up," she says.

"They were in demand by [dot-com] companies because of their strategic, quantitative, critical thinking and analytical skills. [Our students] brought a lot-they can do the business, they can compile information and give it to the management team."

Beck adds that students who interviewed with Big Five firms last fall were holding out--looking for any sort of creative offer the firms would give. "But the Big Five recruiters weren't offering perks such as company cars to an entry-level, $40,000 to $45,000a-year position," she says. "At higher levels, people were getting some really lucrative, tantalizing perks to go along with their job, but we weren't seeing that at the [accounting] entry-level."

INFORMATION SYSTEMS TAKE OVER

"We've seen an exodus of students going to information systems." notes John Lacey, accounting professor at the University of California, Long Beach. He adds that the decline in the school's accounting majors has been matched with an increase in students majoring in information systems.

Since USC added a degree in accounting information systems to its accounting program, Holder notes that the overall number of students enrolled at his school has remained rather constant, while the number of students in the traditional accounting program has diminished considerably. "I'm told that enrollments for fall are rebounding rather robustly in the traditional program," he says. "But I suspect that's a function of the dot-coin demise."

Also, graduates with technology experience are able to command more money: "Our accounting information systems students go out of here with salaries 20-30 percent higher than traditional accounting majors" says Holder. "The MEAs or those who get master's degrees in accounting with a broad background, our master's of business tax people--their starting salaries are really quite competitive. It's the traditional accounting major, the one who is getting a lot of education in cost accounting, financial reporting, auditing and taxation [who is lagging behind salary-wise]."

"I don't necessarily think students find information systems and telecommunications more intellectually stimulating, but it's simply a dollars and cents thing," says Phil Storrer, chair of the accounting department at California State University, Hayward. "And the firms have trouble competing with the salaries students can get [as IT professionals]."

A QUESTION OF QUALITY, TOO

Mori notes a decline in the quality of the students choosing accounting. "What is most troublesome is the proportion of quality students has declined at a faster and higher rate--we have a lot of square pegs in round holes," he says. "We have a lot of students, and this is not unusual, who have a perception of accounting that it is what it used to be decades ago. They feel secure in writing numbers and they do not see it as a communications area, or the need to be a part of the decision making process. They just want to collect the numbers and present them. And that draws a certain mentality-the mentality of a bookkeeper."

Recruiters are feeling the pinch, too. "The pool is smaller than it used to be," says Herb Perlmutter, partner with Deloitte & Touche who assists with recruiting at USC. "The number that we hire from USC is a smidgen less, but the trend is clear. There are less accounting majors today and the talent pool is not as large as it used to be."

POSSIBLE SOLUTIONS

"We are hearing that we need to raise our salaries if want to stay competitive--not just our firms but all the firms," says Perlmutter.

To capture non-accounting undergraduate majors and bring them into the profession, many Big Five firms have developed specialized master's programs.

Ernst & Young's program called "Your Master Plan" is designed for non-accounting majors to complete a master's of accounting program through the University of Virginia or the University of Notre Dame.

According to Joanne McVey, director of campus recruiting for Ernst & Young's Pacific Southwest area, "By the time they've finished the program, they've broadened their accounting knowledge considerably in order for them to sit for the exam and also to work for us as typical new hires. They are working in the audit department, just like any accounting major that we would have hired off campus."

"In essence, we are broadening the pool of applicants that come to the firm," says McVey. "It is unique because they get work experience and school experience at the same time."

For most firms, an expensive education program is not an option, which makes a scene that is being acted out in Sacramento quite intriguing. Pending legislation would alter California licensing requirements such that candidates could continue to sit for the Uniform CPA Exam after completion of 120 units and become licensed with a bachelor's degree and two years of general experience or they could choose an alternative track guided by the Uniform Accountancy Act which requires 150 semester hours and one year of general experience.

"I believe that the reduction in experience will definitely result in an increase in applicants to become CPAs, especially those working in the tax departments or consulting groups," says Chrislynn Freed, director, masters programs and associate professor, clinical, USC Leventhal School of Accounting.

But also at issue is the relevancy of today's traditional accounting curriculum. "We're still teaching the same stuff to a great extent, that we were teaching 30-40 years ago," says Holder. "And it's not that it's without value, it's just that its value relative to other endeavors seems to have diminished in the marketplace," says Holder. "We could benefit very much from giving our students a broader education. I think they need lots more finance, for example. They need to become steeped in option-pricing models and derivative and matrix-pricing models. Our guys need to know a lot more about that to be world-class."

At Cal State Hayward a committee was developed to examine the current curriculum and see what changes need to be made to keep up with marketplace realities. "We're expecting the committee to look at everything--every jot and tittle, no stone will remain unturned, including titles of courses, to see whether or not what we teach is really relevant," says Storrer. He is most concerned about revising the curriculum to reflect current advances in technology and the multinational nature of business today.

"In light of that we hope to spruce it up and meet the needs of our clientele--the firms that hire our students," Storrer says. To that end, Cal State Hayward also is interviewing employers, all the Big Five and some smaller and medium-sized firms who hire their students, to learn how they can better meet their needs.

"The issue is that they need students, graduates, who can think critically--that's the key that we're getting--rather than those who have a command of information about accounting," he says.

Storrer says that one of the firms indicated that they would prefer an anthropology major who can think critically to an accounting major who can't. "They're not interested in accounting majors--even master's students--who are not fast on their feet intellectually. I think that the education part of it is lagging. I've been in this business for 30 years and it seems that with this one we're behind the curve. We are reacting rather than innovating. I think all of the universities across the country are going to have to deal with this issue of what is relevant in their accounting curriculum."

Educating high schoolers about what an accountant does and having resources available to students is another countermeasure. "We need to get the message out about how dynamic and exciting public accounting is as a career," says Nancy Weber-Brough, experienced-level recruiter for Ernst & Young.

"We have to start at the high school level or even before. Working with career counselors, going out and doing presentations to students on campus so that they really understand what type of career public accounting would warrant for them. I don't think this effort should rest on one pair of shoulders. I think certainly the firms ought to be doing it. It is a matter of education and that should be coming from various directions--schools, firms, CPA societies."

AND IF THINGS DON'T CHANGE ...

"Maybe accounting professors will go away," says Storrer. "But the industry is not going to go away." He also speculates that recruitment will broaden. "If we don't do the training [the Big Five] have got to, because they're not going away."

"I think society's expectations increase over time so more and more will be demanded of [accountants]," says Holder. "The individuals that they interact with at the top levels of American business are going to be extraordinarily bright, capable people, generally armed with MBA-type skills, training, education and experience. [Our students] are likely to be ill-equipped to deal effectively with those kinds of people. I think there is every chance that they will be relegated further and further down the value chain of information to be becoming mere preparers of information rather than interpreters and decision makers, using information. If we don't take the appropriate steps to maintain our ability to be state of the art in the eyes of the CEOs and CFOs that we serve we will continue to diminish in stature, remuneration and desirability as a profession."

Deanna McCrary is CalCPA's editor and writer.

The Salaries
Starting Salaries for Bachelor's Degrees
Accountin             $38,739
Business Admin.       $36,314
Econmics/Finance      $40,297
Investment Banking    $49,741
MIS                   $44,879
Computer Engineering  $53,443
Hardware Design       $58,129
Computer Science      $51,581
Info.Sciences         $44,251

Consider This

California Board of Acountancy Licensee Statistics

IN THE PAST FOUR fiscal years, the number of licenses issued has averaged just over 2,000 per year. Down from more than 2,500 in 1992.

In the past two fiscal years, there has been an approximate 9 percent increase in candidates sitting for the Uniform CPA Examination.