This paper examines the significant transformations that reshaped the Certified Public Accountant (CPA) profession in the late 1990s and early 2000s. It traces the decline in accounting degree enrollment, the impact of high-profile corporate scandals such as Enron and WorldCom, and the legislative response embodied in the Sarbanes-Oxley Act of 2002. The paper also explores how CPAs and professional organizations like the AICPA worked to restore public trust, strengthen ethical standards, and revive the auditing function. Ultimately, it argues that despite the profession's difficulties, the changed regulatory environment created new opportunities and responsibilities for skilled accounting professionals.
The accounting profession has experienced more than its share of ups and downs over the last two decades. The business environment during this period, driven by major technological innovations, changed drastically and became infinitely complex — making the work of accountants far more varied. Whereas Certified Public Accountants (CPAs) once worked almost exclusively in accounting, auditing, or tax preparation, CPA firms must now handle fields such as financial planning, tax planning, business development, financial management, information systems, risk management, and forensic and fraud auditing, among others.
In addition, highly publicized business scandals — including the Enron and WorldCom bankruptcies in 2001 — along with the resulting public focus on the accounting profession and the enactment of important legislation such as the Sarbanes-Oxley Act of 2002, forced CPAs to respond to sweeping changes. This paper examines some of the most significant recent changes in the CPA profession and the current regulatory environment.
The 1990s saw a significant decline in the attractiveness of the accounting profession among students. This is reflected in a 25% drop in the award of accounting degrees in just four years, from 1996 to 2001, in the United States (Inman, qtd. in Colson, p. 21). One of the primary reasons for this decline was that the educational model for accounting professionals had not been able to keep pace with the rapidly changing business environment. The overly narrow scope of accounting education early in students' academic careers — as opposed to a broader-based education — coupled with the growing popularity of other business disciplines such as finance, marketing, and management, was largely responsible for this trend.
Recognizing the need to address this crisis, the AICPA made a bachelor's degree and 150 hours of higher education mandatory for AICPA membership as early as 1988. Since then, most states have adopted the 150-hour requirement for an accounting degree. Even so, the value of accounting as an academic discipline and its relevance in the marketplace remained debatable, with many recruiting firms preferring MBAs and professionals with more general degrees for positions previously reserved for professional accountants. The unprecedented economic boom of the 1990s also contributed to diminishing the appeal of the accountancy profession, as fields such as Information Technology and Management attracted the brightest and most ambitious graduates (Colson).
Even as educators and accounting organizations were grappling with the considerable challenges facing CPAs, a downturn in the U.S. economy — exacerbated by the September 11 terror attacks — coincided with the Enron, WorldCom, Global Crossing, and other corporate scandals. Because these highly publicized scandals involved the filing of inaccurate and misleading financial statements prepared with the collusion of accounting firms, auditors, and financial managers, the prestige and public image of the accounting profession fell to an all-time low. Most business analysts predicted it would take a very long time before the image and credibility of the accounting profession could be restored, if ever.
Ironically, the widespread business scandals proved to be a turning point for the profession. By early 2004, CPAs were positioned to reclaim their role as respected professionals. The business community now expected CPAs to act as "ethical beacons for the business world" in addition to performing their core function of accurate and honest accounting (Telberg). Several factors contributed to this unexpected reversal, some of which are discussed below.
"Landmark 2002 legislation reshapes auditing and compliance"
"AICPA efforts and Gallup poll show image recovery"
"Ethics exams and renewed emphasis on fraud detection"
After a prolonged slump in the 1980s and 1990s, the accounting profession is poised for a strong comeback in the changed regulatory environment that followed the disastrous business scandals of 2001. Stricter auditing and accounting rules in the Sarbanes-Oxley Act and the high expectations of corporate stakeholders regarding fraud detection have forced CPAs to make necessary adjustments in their educational model, examinations, and professional training. On balance, these changed circumstances have transformed the accounting profession for the better — placing greater responsibility on the shoulders of CPAs while also creating more job opportunities and avenues for growth for skilled professionals.
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