The 150-Hour Requirement and the Number of CPA Exam Candidates, Pass Rates, and the Number Passing

Abstract

This study examines the association of the 150-hour education requirement with the number of CPA exam candidates, pass rates, and the number passing. Proponents of the 150-hour requirement argue that additional education produces higher quality students who are better prepared for the CPA exam and accounting careers. Opponents argue it imposes opportunity costs on students and costly barriers to entry into public accounting. On average we find a large drop (36 percent) in the number of candidates in each state taking each exam, a small increase in pass rates for first-time candidates only (3 percent), and a large drop (31.5 percent) in the number passing the CPA exam after the 150-hour requirement. Our results may be useful to accounting educators evaluating the success of their 150-hour programs, state boards considering revisions of their 150-hour requirements, and public accounting firms setting strategies to achieve audit quality.

Accounting education literature review (2006–2009)

“…The results, which are consistent with other pass rate research, show that students from selective schools, those with advanced degrees, and the 150-h requirement are positively associated with improved pass rates. The findings contradict those reported by Allen and Woodland (2006). Gramling and Rosman (2009) study the supply shortage of accountants by comparing CPA candidacy rates in 120-h and 150-h states.…”

“…The results of the review and recommendation to certifying agencies are presented. Allen and Woodland (2006) examine the association of the 150-h requirement with the number of Uniform CPA Exam candidates, exam pass rates, and number of candidates passing the exam. 5 Regression analysis is used for the time period of 1991-2002, including 50 states and three US territories.…”

Cost of an Accounting Education, Economic Returns, and Preparation to Enter the Profession

“…Nelson et al (2002) report an increase in the quality of accounting students and an increased interest in taking the CPA exam and pursuing careers in public accounting between 1995 and 2000. Allen and Woodland (2006) argue that the 150-hour requirement could impose costly barriers to entry and report a drop in the number of candidates taking the exam and the number of candidates passing the exam after the 150-hour requirement is implemented. Boone et al (2006) examine factors related to the CPA exam pass rates.…”

Factors affecting success in the professional entry exam for accountants in Brazil

“…They found higher average pass rates were achieved by graduates from more selective schools, holders of advanced degrees (see also Titard & Russell, 1989), and graduates of schools located in jurisdictions with a 150 credit-hour degree requirement. The effect of the latter requirement to become a CPA in the US has been analysed extensively (Allen & Woodland, 2006;Gramling & Rosman, 2009;Haen et al, 2014). The balance of accumulated evidence shows that the 150 credit-hour requirement is not a critical factor in improving student success in the CPA exam.…”