Building the Pipeline of Diverse Accounting Professionals

Date: April 24, 2015

Speaker: Jeanette M. Franzel, Board Member

Event: The Roundtable on Building a Sustainable Diverse Pipeline of Accounting  Professionals for the 21st Century

Location: Williamsburg, VA

I am very pleased to have the opportunity to participate in this Roundtable on "Building a Sustainable Diverse Pipeline of Accounting Professionals in the 21st Century."

Before I get started, I must tell you that the views I express today are my own and do not necessarily reflect the views of the Board or the PCAOB as a whole.

Reliable accounting, financial reporting and auditing are crucial for the effective functioning of our financial and capital markets, which in turn fuel businesses, jobs, and our economy.

Investors entrust their savings to the integrity of this system and rely on its effective functioning for their financial security, retirement, and other life goals.

Given the important role of the accounting profession to our markets and our society, it is critically important for the profession to attract and retain a diverse pool of talented candidates. Increasing diversity will enrich and strengthen the human capital pool in the profession and enhance teams' perspectives, which is critical for effective problem-solving and innovation.

The accounting profession provides abundant opportunities for rewarding careers across all types of organizations in the private and public sectors. The demand for new accounting and auditing professionals continues to be strong, with an expected 13 percent growth in the decade from 2012-2022.^[1]

Yet, despite decades of initiatives and efforts, diversity in the accounting profession remains dismal. For example, African Americans and Hispanics made up 13.1 percent and 16.9 percent, respectively, of the U.S. population in 2012, according to U.S. Census data; but these groups secured just 4 percent and 6 percent of the new hires in 2011—12 at certified public accounting firms, according to data from the American Institute of Certified Public Accountants.^[2]

I want to commend Linda Espahbodi, the founder and organizer of the Accounting Diversity Pipeline Project, for organizing this roundtable. After spending close to 15 years in accounting education at the University of Notre Dame and the College of William and Mary, Linda has decided to take the bold step of organizing a collaboration among stakeholder groups to create an education model that provides quality access to those who are currently excluded from the process.

One of the specific approaches on the agenda for discussion deals with the development of a community college bridge course and "soft skills enrichment" program to help qualified candidates transition to a four-year accounting program and ultimately to CPA certification.

This type of initiative has been recommended by a variety of Commissions and studies over the years.

In 1992, the Accounting Education Change Commission^[3] released, Issues Statement Number 3: The Importance of Two-Year Colleges for Accounting Education.^[4] This paper recognized the importance of two-year colleges in accounting education and encouraged closer coordination between two- and four-year colleges in the development of accounting curricula, preparation of students to enter four-year colleges, and recruiting top students into accounting programs.

In 2008, the U.S. Treasury Department's Advisory Committee on the Auditing Profession (ACAP) issued a comprehensive report^[5] that included a multi-part recommendation to improve the representation and retention of minorities in the auditing profession to enrich the pool of human capital in the profession.

One of its recommendations was to emphasize the role of community colleges in the recruitment of minorities into the auditing profession, including the following:

"The Committee believes that more attention to community colleges may provide, in addition to an increase in the overall supply of students, another avenue for minorities to become familiar with and attracted to the auditing profession… Further, the Committee recommends that auditing firms and educational institutions at all levels support and cooperate in building strong fundamental academic accounting programs at community colleges, including providing internships or financial support for students who begin their studies in two-year programs and may be seeking careers in the auditing profession. The Committee also recommends that auditing firms and four-year colleges and universities and their faculty focus on outreach to community college students in order to support students' transition from community colleges to four-year educational institutions."^[6]

The ACAP report also encouraged the AICPA and the American Accounting Association (AAA) to "jointly form a commission to provide a timely study of the possible future structure of higher education for the accounting profession."^[7]

In July 2012, the Pathways Commission, which was established in 2010 by the AICPA and AAA in response to the ACAP recommendation, put forth seven recommendations with 22 detailed action items intended to enhance the educational preparation of accountants.^[8] One of them was to "improve the ability to attract high-potential, diverse entrants into the profession," which had an associated action item of encouraging "a separate and more focused study of the impediments to better diversity within the profession."^[9]

To address these challenges, the Howard University School of Business, Center for Accounting Education, created the Pipeline Working Group (the working group). The working group issued a report in April 2014, entitled, "Attracting Underrepresented Minorities to the Accounting Professions: Insights into Diversifying the Talent Pipeline."^[10] The report presents a comprehensive set of initiatives aimed at increasing minority representation in the profession:

• communications, marketing, and awareness — to highlight the benefits and intellectual rewards of accounting as a profession;
• school-based outreach programs, with a heavy emphasis on community colleges;
• promotion of CPA and other professional certifications;
• internships and career exploration opportunities; and
• scholarships.^[11]

The working group emphasizes the need to boost the numbers of community college accounting students who successfully transfer to four-year programs and earn bachelor's degrees, bringing them one step closer to being qualified to sit for the CPA exam.^[12]

Such an approach can significantly boost the numbers of highly qualified diverse candidates to the profession. Of the students enrolled for credit in community colleges in the fall of 2013, 21 percent were Hispanic and 14 percent were African American.^[13]

The Pipeline Working Group report characterizes its recommendations as a "starting point," with the challenge being "clear and urgent."

***

Clearly the accounting profession has much work to do to improve its track record in attracting and retaining minorities. Making progress will require that all stakeholders work together in a concerted, coordinated, and constructive manner.

Again, I want to thank Linda Espahbodi for organizing this roundtable. I also thank all of you for your interest and involvement in efforts to make progress on the critical issue of improving the representation of minorities in the accounting profession to enrich and strengthen human capital in the accounting profession, enabling the profession to continue to fulfill its important role in the capital markets and our economy into the future.