REGULATORY ISSUES FOR ACCOUNTANTS DON'T ADD UP
October 6, 2004
Since 1988, the accounting industry has advocated requiring would-be accountants to have the equivalent of a 5-year college degree to sit for the Uniform Certified Public Accountant exam. Though few states originally responded, the Arthur Andersen and Enron scandals have now prompted 45 states to adopt the increase.
Colorado is one of the states that have resisted this change, insisting that increasing the years spent in college does little to resolve the problem of unethical activity and is against the public interest.
According to the Cato Institute:
- There is no evidence that maintaining the current requirement of a 4-year degree has harmed consumers -- Colorado has not seen a disproportionate increase in accounting industry problems relative to other states.
- Increasing the required length of study serves only to increase the barriers to entry, thus reducing the supply of accountants and driving up consumer costs.
- Educational requirements do not solve ethical problems in the accounting industry -- Arthur Andersen accountants, for instance, were some of the most highly educated accountants in the world.
Students and parents who pay for school want to maximize the benefits that flow from their tuition dollar. If a student can earn a finance or general business degree in four years versus an accounting degree in five, financial considerations may drive them to do so, says Cato.
Thus, while increased requirements may keep some unscrupulous accountants out of the industry, they would also discourage potentially first-rate accountants from entering it as well. This outcome does not protect consumers. It only raises their costs and protects the income of current accountants, says Cato.
Source: Richard F. O'Donnell and Nancy M. Lemein, "Reactionary Regulation," Cato Institute, Summer 2004.
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