AI-Focused Accounting Is Hindered by State CPA Licensing Laws

Accounting firms need AI-enabled staff with deep technical accounting knowledge who can start performing manager-level review work shortly after being hired. The Venn diagram currently doesn’t have much overlap: The person deeply invested in artificial intelligence is unlikely to have the technical accounting knowledge, and many accounting graduates lack deep AI, computer science, or data analysis skills.

To bridge the gap, Australia’s Big Four Australia have come up with a novel solution that gives new hires with AI backgrounds a crash course in accounting fundamentals so they can be deployed on audit engagements. This reduces the risk of being understaffed if the predicted shortfall of accountants comes to pass. The firms also are upskilling their existing accounting staff in AI use.

US firms would benefit from a similar arrangement, but strict licensure rules—even after the removal of the 150-hour rule—likely would prevent the US firms from achieving the same results. Reforming CPA licensure requirements would give firms more ways to recruit talent in the age of AI.

The US’ antiquated licensure laws, which vary by state, haven’t kept pace with the changing nature of the profession. Take the state I am licensed in—New York. To be a licensed CPA in New York, you need 33 semesters hours of collegiate accounting credit, 18 of which must be in upper-level classes, and another 36 hours in business credits.

So, a firm could hire a brilliant AI engineer or computer scientist with a master’s degree in their field, train them to become an expert in US generally accepted accounting principles, and yet that person would never be able to sign an audit opinion because they wouldn’t be CPA-eligible.

It’s not just New York. Most other states have similar restrictions on what classes, degrees, and educational backgrounds count toward CPA licensure. Few of them consider courses in AI use, data analytics, computer science, or critical thinking as core accounting. Those skills may make for a better employee but make it less likely the employee will be CPA-eligible.

This mismatch between licensure requirements and the skills needed for today’s AI-enabled CPAs likely will worsen in the near term.

Thirty-one states have modernized their licensure requirements to allow for licensure at 120 hours after decades requiring 150 hours of college education, according to data maintained by the National Association of State Boards of Accountancy.

This was a long overdue change. The 150-hour barrier kept diverse candidates out of the talent pool and led to one of the lowest returns on investments for master’s degrees. It was costly to firms by keeping out qualified candidates and costly to candidates financially.

The problem is that despite loosening the total number of hours required to become a CPA, many states didn’t update the content within those hours. Most candidates still need the same number of accounting and business credits as they did when they needed 150 hours, but those credits must be completed in four years instead of five.

That leaves little room for accounting students to explore courses in AI or computer science. And it makes it harder for a talented student in those areas to graduate in four years and still be eligible to sit for the CPA exam in their state. Previously, a student could have double-majored in computer science or accounting or taken additional credits in in-demand areas to reach the final 30 credits needed for licensure.

Even the American Institute of Certified Public Accountants’ short-lived Experience, Learn, and Earn program—which offered affordable 30 credits in accounting to combat the costly fifth year—was only available to students who had an undergraduate degree in accounting. It wasn’t available to candidates with non-accounting backgrounds who needed accounting credits.

We took away the 150-hour moat around the profession but ultimately built the wall higher for non-accounting majors seeking to be CPAs. This leaves firms in the US with only one track for upskilling their accounting teams: Hire an accounting graduate or CPA and train them in AI. Those accounting staff will benefit from the training and should welcome the opportunity, but the profession will be worse off in the long run.

The accounting field needs nontraditional staff on engagements to blend the AI with accounting. And it still needs staff with strong technical accounting skills who understand the intricacies and nuances of US GAAP.

The Australian firms can begin with experts in either field and upskill them in the other. The US’ licensure models almost force us to start with accountants and teach them AI skills. It’s good to have accountants who are well-versed in AI, but it would be better to also have AI experts trained in accounting. We should create space for both.

This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law, Bloomberg Tax, and Bloomberg Government, or its owners.

Author Information

Jack Castonguay is a CPA, associate professor of accounting at Hofstra University, and vice president of content development at KnowFully Learning Group.

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