1. Accounting Education: Charting The Course Through A Perilous Future Presentation to the Northeast Region, The American Accounting Association May 4, 2001 - Portland, Maine Basis for Presentation: Monograph by Steve Albrecht & Robert Sack A Study Sponsored by: IMA, AICPA, AAA and Big 5

2. Our Charge Write a high-level thought piece, supported by evidence where possible, about the future of accounting education. Timetable: 6 months

3. Sponsors Task Force Steve and I greatly appreciate the help of Bud Kulesza and Keith Russell (IMA), Bea Sanders and Karen Pincus (AICPA), Michael Diamond and Jan Williams (AAA), and Ellen Glazerman and Brent Inman (Big 5). But we are the authors of the Report

4. Research Methodology Read everything possible, especially past reports about accounting education Interviewed key accounting leaders Held focus group meetings Conducted surveys Practitioner Survey Educator Survey Department Chair Survey

5. Previous Warnings about the need to Change IMA Studies ( Counting More, Counting Less, etc. ) AICPA Vision Study AAA Committee Reports Bedford Report (1986!) Changing Environment Committee Report AECC Monographs Big 8 White Paper

6. Our Conclusion While we have been long-time supporters of accounting education, if we were starting a new business school today, we would not have separate accounting programs, at least not structured the way they are today.

7. Our Conclusion Fundamentally, the Accounting Education Community is in trouble

8. Our Rational 1.The number and quality of accounting students is down. 2.Previous majors would elect other majors if starting over again today. 3.Our constituents tell us that our educational model is broken and needs to be fixed. The fact that these issues arise at the same time does not necessarily point to a cause and effect relationship. But…

9. Our Rationale The number and quality of accounting students is down. Previous majors would elect other majors if starting over again today. Our constituents tell us that our educational model is broken and needs to be fixed. 1 2 3

10. Decreases in Enrollments A few schools report stable enrollments but most are down by 20% or more. On a per-school basis, those schools with an AACSB or an ACBSP accreditation saw their enrollments drop by 38%. Other schools saw their enrollments rise by 10% We dont have comparably quantified data, but the consensus is that quality is down too

11. Why Enrollments are Down! 1.Accounting salaries havent kept up. 2.More attractive career alternatives. 3.Profession has lost some of its gloss 4.Increased willingness to choose risky majors and career tracks. 5.Lack of information and considerable misinformation about accounting profession. 6.150-hour program rule has increased opportunity costs to become an accountant.

12. Accounting Salaries Havent Kept Up In 1989, salaries to accounting grads averaged $25,223, second only to their MIS peers – and only $1,500 behind By 1999, salaries to accounting grads averaged $34300, but ranked fourth in the business school, and $7,000 behind their MIS peers Data summarized from annual reports issued by the National Association of Colleges and Employers

13. Enrollments Are Down Message from the Profession is Confused All indications are that the audit business is good - but consulting gets all the attention We desperately want accountants, but the fact is, we will pay more for IS people Accounting grads hired by All CPA firms has slipped only slightly in the past 5 years But the major firms hired 20% less (tax??), While the smaller firms hired 4% more The major firms are hiring more experienced hires and more paraprofessionals (tax??)

14. Enrollments are Down If the decline in enrollments (and the loss of our quality edge) concern you, you would be well advised to read and study: The AICPA Supply/Demand Study - 2000 The Taylor Report commissioned by the AICPA And, of course, our Report which cites other data

15. 150-hour rule isnt problem-- graduate school is preferred Practitioners who would recommend graduate school85.7% Educators who would recommend graduate school95.7% High school students who plan on graduate degree76% College students who plan on graduate degree (57% in 1990)80% Additional year would deter studying accounting High school students22% College students15% Requirements to be CPA seem fairGeneral150-hour High school students71%74% College students81%95% Switchers away from accounting80%91%

16. Eliminating the 5th-year Requirement The Problem isnt the extra 30 hours, its the nature of the 30 hours we have offered There may also be a timing issue

17. Our Rationale The number and quality of accounting students is down. Previous majors would elect other majors if starting over again today. Our constituents tell us that our educational model is broken and needs to be fixed. 1 2 3

18. Type of Degree % of Educators Who Would % of Practitioners Who Would Earn a bachelors degree in something other than accounting and then stop 0.07.9 Earn a bachelors degree in accounting, then stop 4.36.4 Earn an MBA Degree 37.736.4 Earn a Masters of Accountancy Degree 31.55.9 Earn a Masters of Information Systems Degree 17.921.3 Earn a Masters Degree in Something Else 5.46.4 Earn a Ph.D. 1.64.4 Earn a J.D. (Law Degree) 1.611.4 Accounting Majors Wouldnt Major Again!

19. Accounting Careers are Less Attractive Less attractive financially Starting salaries Wealth accumulation Less psychic income True of all professions? Much of what we did is no longer valued Technology has replaced much of what we do

20. Accounting careers are less attractive Our friends in industry are leading the way NACA=NAA=IMA= ?? Management Accounting=Strategic Finance The Accounting Function is either insourced or outsourced either way its a dead end job Technology has isolated accounting in favor of information

21. Accounting Careers are less attractive The scratching sound you hear is the sound the bright people are making, as they scramble to avoid the Accounting trap Instead, Im a finance professional or an information provider

22. Our Rationale The number and quality of accounting students is down. Previous majors would elect other majors if starting over again today. Our constituents tell us that our educational model is broken and needs to be fixed. 1 2 3

23. Accounting Education is Broken We teach accounting as if information were still costly. $10/hour $30/hour $100/hour $300/hour $1,000/hour Teach too much here! Teach too little here! Introductory Accounting Intermediate Accounting Cost Accounting Other Specialized courses 1 Turning information into knowledge Converting data into information Summarizing recorded events Recording business events Making value-added decisions 2 Major culprits

24. Changes in Business Increased Competition Inexpensive Information Fundamentals are assumed But life is much more complex, and more demanding The people who can deal with that complexity will have all the fun, and the rewards e.g. Deltas fuel inventory – LIFO, FIFO, LCM Vs. measuring risk of fuel inventories and futures, in various currencies, with planned revenues from various countries GlobalizationTechnologyConcentration of Market Power

25. What Change Means For Us Increased Competition Inexpensive Information GlobalizationTechnologyConcentration of Market Power Too many of us teach Accounting as it was practiced in the good old days. Recording, Processing, Reporting as the end all, be all Debits & Credits, Standard Cost, Financial Reporting But Its Different Than It Was - - and we risk becoming an anachronism

26. A Helpful Analogy Accounting is like Dentistry Practitioners Cant Live by Filling Teeth/ Preparing Financials Technology has changed the market place forever We can train people to become Hygienists / Processors or We can raise our sights and educate people to become Orthodontists / Analysts

27. 36.425.0 Accounting is integrated enough PractitionersEducators Percent of Accounting… 47.362.3 Business majors are too isolated and 58.641.2 and finance should be combined 52.057.5 and I/S should be combined 31.122.8 is more attractive than I/S 49.538.6 is more attractive than Finance who agreed with the statement Perceptions About Accounting Programs

28. Type of Pedagogy Percentage who use Too much Too little Assignments with companies 40.84.352.7 Case analysis 69.38.537.5 Quizzes (feedback exercises) 75.610.511.7 Lecture 90.641.41.5 Oral presentations 62.48.434.3 Reading textbooks 84.012.17.8 Role playing 15.35.134.1 Group work 74.620.427.8 Team teaching 11.14.348.5 Technology assignments 77.05.153.0 Videos 37.65.412.9 Writing assignments 78.42.445.8 Perceptions of Pedagogies

29. Representative Quotes The tremendous benefit that comes from an accounting education is the organization and the structure and the discipline and the understanding you gain from looking at the business from an accountants eyes. But then, the course goes off into a study of paragraph 114 of SFAS 131, and all that perspective is lost. Students dont have the luxury of learning about business on the job - They have to be productive from day one.

30. Minimum Changes Needed 1.More emphasis on skill development, less emphasis on content 2.Less emphasis on statement preparation, more emphasis on analysis, planing, interpretation and decision making 3.Change focus from rule based learning to conceptual understanding 4.Less specialization in accounting, more understanding of business 5.Breakdown the silos - teach accounting/information as an integral part of business - and of the market place 6.Emphasize the role of accounting and information in the management of a GLOBAL enterprise 7.Bring the best of the practice world into the classroom - and vice versa Bluntly said, teach what students need, not what we want to teach - or are comfortable teaching

31. The prize will go to... The team that can quickly teach the process (this is a hammer, and you hold it by the handle) But move promptly to the use of the information (here is how you build a house)

32. Minimum Changes Needed 1.Must develop school-specific mission playing to your strengths. Copycat mentality wont work anymore (too much information available that exposes weaknesses). 2.Consider your environment. 3.Consider carefully every degree offeredmaybe consolidate. 4.Consider carefully every course offeredis it still relevant or has technology, globalization, etc. rendered it obsolete? 5.Consider carefully the pedagogy of every course. 6.Invest in faculty developmentwe can only do what we know how to do. What can your school and program do better than anyone else?

33. The Problem is Complex Three things need to be said: Many schools have made significant change: Some schools/some professors have not. Even where dramatic change has been implemented, there is no time to catch a breath. It may be that the same criticisms can be laid to Finance & IS programs. But we have to be better, because we are losing the competition for the bright people

34. Summary of our Problem At best we are losing market share At worst we are losing in absolute terms Loss of students = loss of positions = loss of budget and resources Loss of Quality = more effort and less satisfaction

35. Reactions to the Report Little disagreement about the problem Lots of disagreement about the reasons The 150 hour rule The greed of the big firms The emphasis on student evaluations The exam, the textbook, the regulators, etc. The Accounting Review, etc. The dean, the department head, etc We have to work with the profession -- But in he end we have to solve what is our problem

36. Reactions to the Report Some argue that students will come back, when the economy returns to normal But it seems clear to us that the technology genie is out of the bottle, and that we will be forced to re-define normal The practice of Accounting will never look the same, like it or not

37. How Should a school Respond? The report carefully avoided any attempt to tell a school what to do. It seems clear that every school must think through its own response, after a careful analysis of its environment Strengths and weaknesses of the department Expectations of the University and the Community Present and potential student body

38. For Example…U Maryland, College Park Majors dropped from 250 to 125, and the pipeline is similarly depressed Strategic Planning Committee, with the Dean and the Advisory Board Great Location in an unusual market Considering a Diffusion Strategy Small Professional Program Intense MBA participation Service to the rest of the Business School

39. For Example... U Virginia Mcintire School Majors dropped from 120 to 60 with similar pipeline problems Major Info Systems Department - great reputation overall with the major firms Dean aheming, about tax staff Is considering a Redefinition Strategy Working in Risk Management Marketing Exec Ed Programs - to the big firms!

40. How Should a School Respond? Other Strategies?? Define accounting-as-information, and integrate IS and accounting (Arizona, BYU, Texas) A Law School Model ?? A Re-intellectualized curriculum ?? For your school ??

41. We are Not Alone…..But An Umbrella Group has been formed to deal with marketing to potential students We have Leadership from the IMA, cooperation from the AICPA, and the interest of FEI And in general, the big 5 The CPA exam is ready for revision We have the attention of NASBA AACSB???

42. How Should We Respond? Important decisions face us as individuals: As senior faculty As prime-of-life faculty As new young Doctoral candidates Important decisions face us as individual members of the Association

43. How Should We Respond? It will be difficult to predict where this is all going – but one thing is clear Maintaining the Status Quo is Not An Option