Colorado’s schools of higher education have enough to do just surviving. Yet, the Department of Regulatory Agencies recommends requiring accounting students to pay more tuition costs and to take more semester credits so that Colorado standards match the rest of the nation. That position marks a change since DORA’s last reviews, in 1999 and 2004, when the department opposed such an increase.
The Certified Public Accountants Board now requires aspiring CPAs to take 120 credit hours, and is seeking to increase that requirement to 150 credit hours. The board shouldn’t increase the standards; doing so would cost students more and thus reduce competition. But that is the major recommendation by DORA in its Sunset review of CPA regulation.
The requirement of 150 credit hours would be effective as of July 1, 2015, and wouldn’t affect anyone who would graduate before then. Nor would it affect presently regulated CPAs.
The present 120 credit hour program offers a four-year bachelor’s degree with a concentration in accounting. And the National Association of State Boards of Accountants concedes that “there is no significant meaningful difference between 120 and 150 credit hour states as to exam pass rates.” In fact, under the current standards, Colorado’s students outdo the rest of the nation in passing the written tests, even though Colorado and California are the only two states still using the 120 credit hour standard.
Here’s how Colorado students compare to students from the rest of the nation in percentage who passed the CPA exam from 2004 to 2008.
Year Colorado The Nation 2004-’05: 59.86 41.35 2005-’06: 51.27 43.18 2006-’07: 52.76 45.61 2007-’08: 52.97 48.06
The passage rate for the rest of the nation has improved, but it still cannot top Colorado.
Those who support increasing the standard to 150 hours cite the need for “mobility legislation.” Colorado is one of 45 states that allow CPAs from other states to come into Colorado without having a Colorado license, and without notice to the CPA board, but subject to the second state’s (Colorado’s) regulation. That means accounting graduates who take only 120 credit hours and pass the CPA exam wouldn’t qualify under another state’s regulations, but are able to practice here or in California — which encourages them to move here.
In 1999, DORA presented research showing that adding 30 credit hours to the standard would create an artificial scarcity (based on reducing the number of graduates), “allowing licensees to charge higher prices for their service.”
In 1999, the director of accounting programs at CU-Denver claimed that adding 30 semester hours to the standard would add about $25,000 to the cost of each graduate’s tuition. How much that would be in 2015 is anyone’s guess. Even if we don’t consider that deepening cuts to higher education funding already have stretched faculties thin, there’s also the fact that no state school on the Western Slope offers a graduate degree in accounting.
Should Colorado consider remaining an “island of 120 credit hours for CPAs?” On one hand, it makes CPAs who graduate in Colorado subject to more regulation if they move to other states. However, on the other hand, states DORA:
“Non-U.S. Colorado licensed CPAs (from around the world) are engaged in international commerce. By extension, then, so, too, is Colorado. As the U.S. and Colorado economies continue to become more global in nature, it is reasonable to conclude that the increasing amount of accounting work will flow across borders.”
By requiring only 120 credit hours of education, Colorado could attract an increasing number of highly qualified accountants from other nations. The Colorado economy, too, could witness greater internationalization, and the state could become a hub of international finance and deal making.
Other DORA recommendations are less costly and certainly would be useful, including:
1. Expand the board’s disciplinary authority over registered firms to include the same discipline tools it has with respect to licensed individual CPAs. The board can revoke or suspend the registration of an entity for causes enumerated, but not fine, censure, issue a letter of admonition or place a CPA firm on probation.
2. Increase fines. Instead of fines of $1,000 for individuals to $2,000 for firms — sums that have not been altered since 2000 — raise fines to $5,000 for individuals and to $10,000 for registered firms per violation.
3. The “mobility process” should allow anyone in good standing in their home state to use the term CPA while working in Colorado without undergoing action by the CPA Board.
Jerry Kopel served 22 years in the Colorado House.