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MAY/JUNE 2007 |
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Motivating new
hires to pass the
CPA exam
By
Paul M. Fischer, CPA, Ph.D.
and Brian E. Daugherty, CPA, Ph.D.
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"In my experience, my peers
are motivated to pass the exam for two reasons. One, it is the norm
for an accounting career. Second, it is an issue of self-worth, thus
most are intrinsically motivated. The hard part is buckling down and
getting it done."
-survey respondent
This article is in response to the expressed concern of many CPA
firm employers that new hires are often not taking and passing the
CPA Exam on a timely basis. It appears that the proper
interpretation of the situation may be that the old regimented
structure of taking the pencil-and-paper exam en mass on one of two
annual dates, complete with staff parties following the exam, has
been replaced by a less noticeable, year-round computerized
exam-taking environment. The end result, though, has still been one
of relative success as discussed below.
To further explore this issue, surveys were sent to approximately
450 full-time audit and tax personnel at the rank of senior and
staff at 12 major Wisconsin employers of accounting graduates. The
surveys requested information on recent graduates’ experiences in
preparing for and taking the CPA Exam. One hundred forty six
responses (32 percent) were received and analyzed. Results from
respondents in public accounting at the rank of senior and staff
show that 99 percent have taken or intend to take the exam, 90
percent consider the CPA credential essential for overall success,
51 percent have passed all four parts of the exam and 25 percent
have passed one or more parts.
Demographics of survey respondents
On average, respondents had 34 months of experience, had been with
their current firm for 21 months and females represented 59 percent
of respondents. While most respondents met the current Wisconsin
150-credit-hour requirement (a few were grandfathered at 120
credits), only 31 percent earned a master’s degree in accounting. It
is interesting to note that 17 percent did not have an accounting
degree, though they had completed the legally mandated courses for
exam eligibility.
The following overall metrics suggest high quality candidates that,
in many cases, exceed the credit requirements of the exam:
Choice of public accounting employer
Only 31 percent of respondents interned for the firm where they are
now employed. Twenty-four percent of respondents work for Big 4
firms, 49 percent for national firms, 23 percent for regional firms
and four percent for local firms. Sixty percent of respondents work
in financial/audit, 31 percent in tax and nine percent work in both
areas.
Candidate attributes and success on the exam
Chart 1 shows exam success by GPA range, based
on the number of respondents in three categories of success used in
this study; (i) no parts passed, (ii) some parts passed and (iii)
all parts passed. The majority of respondents had a GPA greater than
3.5.
Chart 2 shows the success rate in each grade
point category. While 79 percent of respondents with a 3.75 – 4.00
GPA had passed all four parts of the exam, only 35 percent of those
with a 3.00 – 3.24 GPA had a four-part pass.
The 31 percent of the respondents with a master’s degree in
accounting did slightly better on the exam than those without the
degree.
Chart 3
shows the number of candidates, by the three categories of success,
and
Chart 4 compares the pass rates of the two
groups. Fifty-eight percent of graduate students passed the exam
versus 47 percent for non-graduate candidates. The lower passage
rate for non-graduate candidates is influenced in part by a subset
of individuals who do not yet meet the educational requirements to
sit for the exam.
Internships with the firm seem to help exam success to a degree; 58
percent of those that interned passed all parts of the exam compared
with 48 percent for those that did not intern. Seventy-three percent
of respondents took a CPA Review course, experiencing a 60 percent
four-part pass rate. Only 18 percent of respondents did not take or
intend to take a review, and their four-part pass rate was 38
percent.
Chart 5
compares the number of respondents based on their review experience
and intentions.
Exam success status of respondents improves until their second year
working for a firm and then plateaus.
Chart 6
compares CPA Exam success for respondents with various years of
service with their firm. Only 30 percent of respondents in their
first year with the firm have passed the exam. The four-part pass
rate becomes about 60 percent for respondents in their second
through third year. At the four- year mark, 70 percent of the
respondents remaining with the firm have passed all four parts. The
graph would also suggest that after three years respondents who have
not passed the exam would make an effort to pass the exam.
Chart 7
looks at the exam status of respondents based on the number of
respondents in each experience group, suggesting a major exodus of
staff after two years. While many firms will promote to senior
without a CPA, the vast majority require the credential for
promotion to manager.
" Please encourage
students to sit for the exam ASAP. It becomes more difficult after
starting work." -survey
respondent
What are the factors that lead to success on the CPA Exam?
The employer’s policies are an important influence on the success of
candidates.
Chart 8
shows the ranking of policies or influences that may impact CPA Exam
success. Eleven items that might contribute to success were ranked 1
(most important) to 11 (least important) by all respondents. The
top-ranked factors are:
Factor Average Rank
Firm pays for review 4.34
Firm pays for exam 4.97
Study time available off the job 5.21
Study time available at work 5.22
Cost is a factor; a $2,500 review and a $900 exam fee may be
unaffordable for new hires, many of whom start work with substantial
student loans. Time is also a precious commodity for exam
candidates.
The influence of the top four factors was also studied across the
three success groups. Responses indicate that:
• The firm’s payment for the review and the
exam remain important among all ranges, with slightly less
importance for the greater than 3.75 GPA respondents
• Time available off the job does not vary
with GPA
• Study time at work becomes more important
as GPA declines.
The influence of the top four factors was also compared to the exam
success categories. Four-part passers rank the payment for a review
higher than other categories. The same group also cares less about
the firm paying for the exam, or time available on or off the job.
The University’s role in candidate success
Chart 9 shows the universities attended by
three or more survey respondents and their success to date on the
CPA exam.
Based on survey responses, including written comments, the best plan
is for candidates to take the exam prior to beginning full-time
employment. University faculty should consider these strategies:
• Provide the student with a study plan that
includes all courses needed for exam success, which may well
exceed the minimum legal requirements
• Have students prepare and update timelines
that include coursework schedules, internships (as applicable),
applications to graduate school, review course and exam
applications. Sooner rather than later is key.
• Provide students with suggested CPA Review
options that coordinate with their studies and can be completed
near graduation and prior to full-time employment
• Encourage students to carefully consider
and coordinate start dates when evaluating job offers.
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Developing a firm-sponsored
CPA Exam success policy
Presented below is a suggested model for an Exam Success Policy
based on this survey and the authors’ experiences as faculty and one
author’s experience as a CPA firm recruiter:
1. Loan the new hires funds for the review and the exam
Affordability is an issue; so is the time to study. A review is
critical to success, but many new hires can’t afford it. After
signing a student, suggest that they take the review and exam prior
to their start date. Delay the start date if you have to. Loan the
money to the new hire with the understanding that one-third of the
loan will be forgiven for each year of service. Be honest; time to
study at work is unlikely and long hours make after-work study
difficult and inefficient. Student comments really support this
policy.
2. Don’t start a new hire until they are exam ready
Some respondents did not even meet the 150-credit-hour requirement.
The lack of meeting minimum educational requirements is particularly
troublesome as the combination of hectic work schedules, coupled
with declining exam success rates as job tenure increases, suggests
these individuals entered the workforce far too early. The
short-term lure of immediate employment (and substantial
compensation) will likely harm these individuals in the long run as
many are likely to leave public accounting due to lack of
promotability without the CPA credential. This is a formula for
disaster.
Other hires may have 150 credit hours, but may be missing courses
important to the exam. Either review the student’s transcript or ask
that they review it with a university faculty member. Meeting the
Wisconsin education requirement is no guarantee of exam readiness.
CPA Exam review courses are intended to review previously acquired
knowledge, not teach it.
3. Implement a two-tiered salary offer
Current signing bonuses do not tend to be contingent on passing the
exam before the start date. Pass bonuses after starting employment
are available whenever the exam is passed. Neither policy is shown
to be effective.
Consider a plus/minus 5 percent pay variation. For example, if the
"normal starting pay" is $50,000 per year, offer $47,500 without the
exam passed, $52,500 with the exam passed. The student should
understand that this pay differential becomes an annuity and many
will likely prepare for exam success before full-time employment.
This policy is helped by the Wisconsin law that allows a student to
take the exam 60 days before completing the education requirement.
A new hire with the exam completed is not devoting time to studying
and is not distracted in their performance by concerns about passing
the exam. The average hire salary may be unchanged, but if it does
increase, isn’t it worth it?
"If you want to take the exam, set up a study schedule and stick
with it! Also, I highly advise taking a few months in between
graduation and starting a new job. It allowed me to concentrate more
on my new job without the pressure of simultaneously studying for
the exam."
-suvery respondent
5. Consider a salary offer that reflects GPA
The current sameness of offers made to students does not make sense
if passing the exam is a key to success. Isn’t it also reasonable to
assume that a student with a far greater probability of exam success
may also be a more capable staff member? The law profession has long
adjusted salary to reflect academic performance. Should accountants
consider it?
Paul M. Fischer, CPA, Ph.D.
is the Jerry Leer Professor
of Accounting at the University of Wisconsin-Milwaukee. He can be
reached at pfischer@uwm.edu or 414-229-4545.
Brian E. Daugherty, CPA, Ph.D.
is an assistant professor of
accounting at the University of Wisconsin-Milwaukee. He can be
reached at daughert@uwm.edu or 414-229-5737. |
All
articles and photos or other artwork are copyrighted and
may not be duplicated without permission.
Contact amy@wicpa.org
for information. |
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