Growing Shortage of CPAs in the US: Causes and Implications

The accounting profession in the United States is facing a significant challenge: a shortage of Certified Public Accountants (CPAs). Despite the essential role CPAs play in ensuring the financial health and compliance of businesses and individuals, the number of licensed CPAs has been steadily declining. This shortage presents concerns for companies, public institutions, and the broader economy. But why is there such a lack of CPAs in the U.S.?

1. Decline in Accounting Graduates

One of the most significant factors contributing to the CPA shortage is a decrease in the number of students pursuing accounting degrees. Enrollment in undergraduate accounting programs has been declining over the past decade. According to the American Institute of CPAs (AICPA), accounting graduate numbers have fallen by nearly 7% since 2016.

Several reasons may account for this decline:

●      Perceived Limited Career Paths: Many young professionals perceive accounting as a less dynamic or exciting career compared to other fields such as technology, finance, or data science. They may believe that the career growth in accounting is limited or that the profession lacks innovation, which can deter new entrants.

●      Increased Awareness of Alternative Careers: With the rise of data analytics, financial technology (fintech), and business intelligence, more students are drawn to emerging fields that offer higher salaries and diverse career opportunities. These alternatives often do not require CPA certification.

2. The Rigorous Path to Becoming a CPA

Becoming a CPA is not an easy task. It requires a significant investment of time, money, and effort:

●      Educational Requirements: Most states require CPA candidates to complete 150 semester hours of college education, which is typically 30 hours more than a standard bachelor's degree. This often requires additional coursework, which can mean extra tuition costs and time.

●      Challenging Exam: The CPA Exam is known for its rigor, with a low pass rate compared to many other professional exams. Candidates must pass four sections within an 18-month window, adding pressure and discouragement for many.

●      Ongoing Continuing Education: Once certified, CPAs must complete continuing professional education (CPE) credits to maintain their licenses. The constant need for renewal and education can deter potential candidates from pursuing certification in the first place.

3. Compensation Discrepancies

Despite the importance of their work, many CPAs feel that they are undercompensated relative to the demands and responsibilities of their role. While salaries for CPAs can be substantial, they often lag behind those in fields like investment banking, private equity, or tech.

The perception that accounting jobs are high-stress, especially during tax season or audits, combined with compensation that is not always commensurate with workload, can discourage both new graduates and seasoned professionals from entering or remaining in the field.

4. Demographic Shifts and Retirements

The CPA profession is also facing a demographic shift. A significant portion of current CPAs are nearing retirement age, leading to an anticipated wave of retirements over the next decade. As these experienced professionals exit the workforce, there aren't enough new entrants to fill the gap.

This aging workforce trend, coupled with the decline in new CPA candidates, creates a supply-and-demand imbalance, further exacerbating the shortage.

5. Lack of Diversity and Inclusion

The accounting profession has struggled with diversity and inclusion, which may also contribute to the CPA shortage. Many minority groups are underrepresented in the field, leading to missed opportunities for attracting a broader range of talent. Lack of representation and mentorship opportunities can discourage people from diverse backgrounds from pursuing careers in accounting.

Efforts to address this issue, such as scholarship programs and outreach initiatives, have been made but have yet to yield substantial change.

6. Impact of Technology and Automation

Technology and automation are transforming the accounting profession. While this presents opportunities for growth, it also contributes to uncertainty and reluctance among potential CPAs. Some may perceive the traditional role of the accountant as being at risk of becoming obsolete due to advancements in artificial intelligence (AI) and machine learning.

Automation of routine tasks like data entry, reconciliations, and even some aspects of audit procedures may lead prospective accountants to believe that fewer CPAs will be needed in the future, further discouraging entry into the field.

7. Evolving Skills Requirements

The accounting profession is rapidly evolving, requiring a broader skill set beyond traditional accounting and tax preparation. CPAs now need skills in data analytics, cybersecurity, and technology-driven financial management. This shift means that potential CPAs may need to acquire additional, non-traditional knowledge and training, which can be both time-consuming and costly. The changing nature of the profession may deter those who are unwilling or unable to adapt to these new demands.

Addressing the CPA Shortage

Addressing the CPA shortage will require a multi-faceted approach. Here are some potential solutions:

●      Promoting the Profession's Value: The industry needs to enhance its efforts to market the benefits and rewards of becoming a CPA. Highlighting career flexibility, growth opportunities, and the profession’s evolving role in strategic financial management can attract more talent.

●      Modernizing Education and Certification Processes: Streamlining educational requirements and offering alternative pathways to certification could help remove some barriers to entry. Modernizing the CPA Exam to include more diverse skills and knowledge areas may also attract more candidates.

●      Improving Compensation and Work-Life Balance: Firms need to address compensation gaps and focus on improving work-life balance to retain current CPAs and attract new talent.

●      Fostering Diversity and Inclusion: Creating more inclusive pathways for underrepresented groups through mentorship, scholarships, and supportive networks can broaden the pool of potential candidates.

●      Adapting to Technological Changes: Embracing technology and equipping CPAs with skills in data analytics, AI, and cybersecurity can make the profession more appealing to a new generation of tech-savvy professionals.

Bottom Line

The shortage of CPAs in the United States is a complex issue influenced by multiple factors, from declining interest in accounting programs to the rigorous path to certification and an aging workforce. Addressing this shortage will require a concerted effort from educational institutions, professional bodies, and accounting firms to adapt to changing market dynamics, modernize the profession, and attract the next generation of CPAs.

Sources:

https://anderson-review.ucla.edu/technologys-hidden-role-in-the-accountant-shortage/

https://www.cpajournal.com/2023/12/01/the-accounting-profession-is-in-crisis/ 

Disclosures:

This information is an overview and should not be considered as specific guidance or recommendations for any individual or business.

This material is provided as a courtesy and for educational purposes only.

These are the views of the author, not the named Representative or Advisory Services Network, LLC, and should not be construed as investment advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. Please consult your Financial Advisor for further information