Reducing a Barrier to Entry: The 120/150 CPA Licensing Rule

In the United States, one of the most common state-level occupational licensing requirements is education. Education requirements for certified public accountants (CPAs) in many states have increased over the past few decades, but recently a few states have reduced their educational requirement to s...

Full description

Saved in:
Bibliographic Details
Published in:Journal of labor research 2020-12, Vol.41 (4), p.382-402
Main Authors: Meehan, Brian, Stephenson, E. Frank
Format: Article
Language:English
Subjects:
Accountants
Candidates
CPAs
Educational attainment
Labor
Licensing
Occupational qualifications
Social Sciences
Citations: Items that this one cites
Items that cite this one
Online Access:Get full text
Tags: Add Tag
No Tags, Be the first to tag this record!
Description
Summary:In the United States, one of the most common state-level occupational licensing requirements is education. Education requirements for certified public accountants (CPAs) in many states have increased over the past few decades, but recently a few states have reduced their educational requirement to sit for the CPA exam. Using data from 2006 to 2016, we separately examine the effects of relaxing or strengthening educational requirements on the number of first-time candidates sitting for the CPA exam and on candidate performance. Our results indicate that a reduction in the number of credit hours required to sit for the CPA exam increases the number of candidates, while an increase in the number of prerequisite hours reduces the number of candidates (the latter effect is sensitive to the inclusion of control variables). We also find no relationship between changes in CPA exam requirements and pass rates or scores. Hence, requiring 150 h instead of 120 acts as a barrier to entry for potential CPAs with no accompanying increase in candidate quality.
ISSN:0195-3613
1936-4768
DOI:10.1007/s12122-020-09313-4