Increased Credit Hours for CPA’sMatthew J. RuchStephen ExeterJames DeStefano

Introduction: The CPA Journal

•Article: The 150-Hour Requirement’s Effect on the CPA Exam Candidate Performance in Florida, New York, and Texas

•Article composed by:▫Charles G. Carpenter, PhD, is a professor

of accounting in the school of business at Francis Marion University, Florence, S.C.

▫Clayton A. Hock, PhD, is a professor of accountancy in the Farmer School of Business at Miami University, Oxford, Ohio.

Introduction: Continued•1989, the AICPA membership voted to

recommend that states require candidates to complete 150 hours credit hours to sit for the CPA exam.

•The article focused on the effects of the 150 hour requirement in three states:▫Florida – 1983 First State to implement the

requirement.▫Texas – 1998▫New York - 2009

Introduction: Continued

•Today according to the AICPA there is 47 out of 54 jurisdictions that have adopted the 150 credit requirement. However, the years immediately after the states had adopted the 150 credit rule the average amount of students taking the CPA exam drops over 50%. This trend has continued and has yet to increase since the creation of the rule. With PA adopting this requirement for our senior year (2012), we feel the same trends will continue.

Introduction: Continued•Pass Rate: Pre-Requirements

▫Florida:14.9%▫Texas: 42.3%▫New York: 44.8 %

•Pass Rate: Post-Requirements▫Florida: 64.7% (increase of 49.8%)▫Texas: 61.2% (increase of 18.9)▫New York: 46.6% (increase of 1.8%)

*The longer the requirement has been in effect the higher the rate of passage has become.

Introduction: Continued

•Current Pennsylvania Requirements:▫Current Wilkes Requirement:

125 Credits : 4 year Bachelor’s Degree in Accounting.

•Future Pennsylvania Requirements: 150 Credit Hours: 5 year Bachelor’s Degree

in Accounting.

Research Hypothesis:1) We believe that the increase in credit hours,

from 125 credit hours to 150 credit hours, will have a negative effect on the number of accounting student sitting for the CPA exam.

2) We believe that the average scores in Pennsylvania will increase overall once the requirement has been implemented.

3) We believe that the new requirements will effect the class of 2012 more so than the class of 2013 with respect to the amount of students sitting for the CPA exam.

General Questions:1) Is the 150 credit hour requirement going to reduce the number of

accounting majors?2) Is the 150 credit hour requirement going to reduce the number of

accounting majors sitting for the CPA exam?3) Do accounting majors find the increased amount of credit hours to

be beneficial to them?4) Are the new requirements equitable in comparison to those who

have graduated prior to the new 150 credit hour rule?5) What happens to test scores as the hour requirement is increased?6) Does the population agree with the implementation of the new 150

hour credit rule?7) Does the sample population feel that it would more beneficial if

the additional 25 credit hours were strictly in Accounting, rather than general free elective courses?

8) Can it be assumed that this increased requirement acts as a “weeding-out” process for those individuals not fit for CPA status?

9) Will the new 150 credit hour requirement have the same effect on the graduating class of 2012 as it does on the class of 2013? 

Research/Target Audience:

•Since we are conducting our study prior to the implementation of the new requirement, our findings will be strictly based on the opinion of our sample population and not numeric data.

•Target Audience: ▫Wilkes University Accounting Majors.▫Class of 2012 – 30 respondents▫Class of 2013 – 30 respondents

Methods of Collecting Data:• Questionnaire:

▫ 1) Gender? M/F (choose one)

2) Do you plan on sitting for the CPA Exam?a) yesb) no

3) Do the new requirements (125 credits to 150 credits) change your intentions of taking the exam upon graduation?a) yesb) no

4) Do you agree that the number of Accounting Majors sitting for the CPA Exam will decreased due to the new requirements?a) Strongly Agreeb) Agreec) Disagreed) Disagree Strongly

5) Do you feel that the number of individuals declaring an Accounting Major will decrease, now that studies will increase from four years to five?a) yesb) no

6) What effect, if any, will the extra 25 credits have on students overall CPA Exam test score?a) Scores will Increase overallb) Scores will Decrease overallc) Will have no overall effect on scores

Methods of Collecting Data:• Personal Interviews:

▫1) What are your personal feelings toward the new requirements for Accounting Majors to sit for the CPA Exam?

2) Do you think the addition of a fifth year to the curriculum of an Accounting Major is a positive or negative thing? Why or Why Not?

3) Does it seem unfair to you, that as of 2012, all Accounting Majors will be required to complete 150 credits, whereas students graduating one year prior only have to complete 120 credits? Why or Why Not?

4) As a current Wilkes University Accounting Major, are your future plans of sitting for the CPA Exam discouraged by these new requirements? Explain.

No Yes05

1015202530354045

Sitting for CPA Exam (Pre)

Total

No Yes26

27

28

29

30

31

32

33

Did The Requirements Change Your Mind?

Total

11

40

9

Will the number of Acc. Majors sitting for the CPA Exam de-

crease?

Dis-agreeAgreeAgree Strongly

No Yes05

1015202530354045

Will the number of Acc. Ma-jors Decrease?

Total

120 125 130 135 140 145 150 1550

0.2

0.4

0.6

0.8

1

1.2

f(x) = 0.022 x − 2.75R² = 0.379310344827584

Effect on Scores

Effect on ScoresLinear (Effect on Scores)

Increase in Credit Hours from 125 to 150

Sco

res (

Incre

ase

or

Decre

ase)

One Sample Hypothesis Test•Is the 150 credit hour requirement going

to reduce the number of accounting majors?

•NULL: п < = 51% Credit hour requirement will not reduce the number of accounting majors.

•Alt: п > 51% The credit hour requirement will reduce the number of accounting majors.

test statistic (obs) 2.43critical measure 1.64

obs > critical? Yes

p-value 0.00760

a-level 5%p-value < a-

level? yes

Reject the Null

One Sample Hypothesis Test:•Is the 150 credit hour requirement going

to reduce the number of accounting majors sitting for the CPA exam?

•Null: п < = 51% The 150 credit hour requirement will not reduce the number of accounting majors sitting for the CPA exam.

•Alt: п > 51% The 150 credit hour requirement will reduce the number of accounting majors sittings for the CPA exam.

test statistic (obs) 0.36critical measure 1.64

obs > critical? No

p-value 0.3588

a-level 5%p-value < a-level? NoAccept the Null

Two Sample Hypothesis Test•Will the new 150 credit hour requirement

have the same effect on the graduating class of 2012 as it does on the class of 2013?

•Null: п1 = п2 The new 150 credit hour requirement has the same effect on both classes.

•Alt: п1 < > п2 The new 150 credit hour requirement has a inequitable effect on both classes.

test statistic (obs)

-

critical measure

1.960 |obs| > critical?? no

p-value 100%

a-level 5% p-value < a-level?? noAccept the Null

Analysis of 2 Sample Hypothesis Test:

•Our statistics may be different if we were able to continue our study into the future. For example, we have concluded that the class of 2012 and 2013 are to close to show any significant difference. Change will most like occur with the class of 2016, because the requirement will take effect in the same year in which they enter college.

Regression Test:•What happens to test scores as the hour

requirement is increased?

Null: Slope = 0

No Relationship

Alternative: Slope < > 0Some Relationship

Strong Positive Relationship

P-value 7.07036E-14

Alpha 5%

P-value < Alpha Yes

Reject the Null

120 125 130 135 140 145 150 1550

0.2

0.4

0.6

0.8

1

1.2

f(x) = 0.022 x − 2.75R² = 0.379310344827584

Effect on Scores

Effect on ScoresLinear (Effect on Scores)

Increase in Credit Hours from 125 to 150

Sco

res (

Incre

ase

or

Decre

ase)

Interviews:• 1) What are your personal feelings toward

the new requirements for Accounting Majors to sit for the CPA Exam?

• “Already being a Junior it is very stressful trying to find room to fit these extra classes in and still graduate on time.”

• “I don’t like that it’s changing right before we graduate because we could have prepared ourselves better.”

Interviews:•2) Do you think the addition of a fifth year

to the curriculum of an Accounting Major is a positive or negative thing? Why or Why Not?

“Even though I disagree, the additional year will be positive because we will have more knowledge and practice for the exam.”

“It’s a positive thing because we will gain more experience, but it’s also negative because of cost.”

Interviews:•3) Does it seem unfair to you, that as of

2012, all Accounting Majors will be required to complete 150 credits, whereas students graduating one year prior only have to complete 120 credits? Why or Why Not?

“Yes because it will take the 2012 class even longer to get the 150 credits. I think the individuals who graduated prior to 2012 should have to take the additional credits.”

Interviews:

•4) As a current Wilkes University Accounting Major, are your future plans of sitting for the CPA Exam discouraged by these new requirements? Explain.

“I am very discouraged because I do not want to waste useless time and money on a degree I should have already obtained.”

Conclusion:•Research Hypothesis #1:•We believe that the increase in credit

hours, from 125 credit hours to 150 credit hours, will have a negative effect on the number of accounting student sitting for the CPA exam.

After conducting our One Sample Hypothesis Tests and taking a look at the research from other states, we accept our first initial research hypothesis.

Conclusion:•Research Hypothesis #2:•We believe that the average scores in

Pennsylvania will increase overall once the requirement has been implemented.

Due to our regression test as well as the research done in other states, we accept our second Research Hypothesis statement that the scores will increase overall.

Conclusion:• Research Hypothesis #3:• We believe that the new requirements

will effect the class of 2012 more so than the class of 2013 with respect to the amount of students sitting for the CPA exam.

Due to our Two Sample Hypothesis Test, we will reject our third and final Research Hypothesis statement, because the data provided did not show any significant results.

Suggestions for Improving our Study:

•Increasing the number of our observations.

•Extending our observations to future classes beyond 2013 (ex. 2014 - …..)

•Observing actual test scores in Pennsylvania pre and post 2012.

•Observing more states then just Florida, Texas and New York.

Our Studies Impact:•Based on our finding we feel that the

increase in credit hours from 125 to 150 credit hours will increase the pass rate in the state of Pennsylvania. Furthermore, we are confident in assuming that because the amount of Accounting Majors will decrease as a result of these new requirements and scores will increase, this new requirement does act as a “weeding out” process.

Sources:

•http://www.nysscpa.org/cpajournal/2008/608/essentials/p62.htm

•http://www.questia.com/googleScholar.qst;jsessionid=D3E444D279CC596A57A4579CCD15BAB3.inst2_1b?docId=5001246973