Changes Could Make Grueling CPA Test Even Tougher
More than 60,000 budding accountants will file into testing sites around the nation today to complete the second day of a grueling 15-hour test for certification that experts say is tougher than the bar exam.
But before stepping into any examination room, the majority of them have probably paid $1,500 to $2,000 for private review courses to prep for the test, which fewer than 20% are initially expected to pass. Many will repeat the test--and the pricey review courses--an average of three times before becoming certified public accountants.
Now, changes looming in the world of public accounting certification are expected to make the difficult test even harder. This will stoke the already fierce competition among CPA review schools, a largely private industry that prepares about 95% of the students who pass the exam.
Next week, the state Assembly Committee on Business and Professions is set to vote on a bill that would stiffen California’s requirements for taking the CPA exam. Coupled with the already low pass rate, this could boost the average number of times a candidate takes the test from three to four or five, said an Assembly staff member.
This comes as the American Institute of Certified Public Accountants, which oversees the CPA exam, is working to standardize the education and experience requirements for CPA candidates nationwide. Many say the changes would make it more difficult to even get a seat in the examination room.
The majority of certified public accountants conduct audits for publicly traded companies, and others work as tax and financial advisors for smaller companies. Both positions require a CPA license.
Many industry observers are concerned about the profession’s falling numbers. From 1992 to 1998, there was a 40% drop in the number of CPA candidates taking the exam.
“The future is very unclear at this point,” said Julianne D’Angelo Fellmeth, administrative director of the San Diego-based Center for Public Interest Law, which opposes the California bill awaiting committee approval. The “bottom line is that the test is hard, and there’s a good chance it’s going to get even more difficult. . . . Review companies help students pass. They are in a very powerful position.”
The largest CPA review school operator, Becker Conviser CPA Review, a division of DeVry Inc., which controls most of the market nationwide, began wooing students by cutting the price of its courses in some markets, including California, last year. The price-cutting has sparked accusations from some small, independent review companies that can’t afford to slash their course prices and are struggling to stay afloat.
“I was prepared for huge enrollment numbers in 2002 under the assumption that a lot of changes will be taking place,” said Mark Dauberman, a 30-year CPA and former owner of Mark’s CPA Review, once California’s largest CPA review school but which closed its doors in February. “It’s a lousy time to be out of the review business.”
Dauberman, 52, of Sherman Oaks, said the competitive market left him with little choice but to enter a price war with Becker Conviser. Although the average cost for a review course hovers near $1,700 in California, Dauberman eventually dropped his price to $875 to compete. After more than a year involved in a price war and mounting financial problems, Dauberman and his company filed for bankruptcy protection.
DeVry officials maintain they were unaware of a specific price war in the California market.
O. John Subiak, senior vice president of Oakbrook Terrace, Ill.-based DeVry, said in February that the competitive nature of the business left the company with little choice but to offer a more attractive course rate. He said that a rivalry in the industry had been taking place for some time and that some parts of the nation required lower prices. Becker Conviser has more than 32,000 students worldwide.
Jim Rigos, owner of Rigos Professional Educational Programs Ltd., a review company that profits from the wholesale distribution of CPA review publications, said his school was forced to cut prices in the Seattle area after DeVry lowered its rates within the last year. Rigos said he was willing to take a loss with his review school because of his strong hold in the publishing arena.
“It’s clear DeVry wants to be in control of the prices and of the market,” he said. “I have no choice but to sit back and watch.” DeVry officials were not available to respond to Rigos’ claims.
Dauberman and Rigos said they filed predatory pricing complaints with the Justice Department against DeVry and its Becker Conviser subsidiary. Justice Department officials could not confirm that any complaints had been filed or whether an investigation had begun.
In the meantime, the students who fail to pass the test today can retake the CPA exam again when it’s offered in November.
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A Tough Test to Take
Here are two sample questions from the CPA certification exam:
Source: American Institute of Certified Public Accountants
