Global Demand
for the CPA Exam
ByRandy
Howard, Kotaro Anjo, and Irvin N. GleimIn Brief
In Brief
Foreign Accountants Covet the CPA
Currently, the CPA exam is administered only in the
United States or one of its territories (Guam, the
U.S. Virgin Islands, Puerto Rico). Although some
state boards of accountancy (which administer the
exam) discourage international candidates (non-U.S.
residents or citizens) from taking the CPA exam,
many professional accountants in other countries
wish to pass the CPA exam to prove their knowledge
of U.S. accounting standards.
The authors argue that it is in the national public
interest to encourage professional accountants
throughout the world to take and pass the CPA exam.
It will improve accounting practice, promote U.S.
leadership in international commerce, facilitate
international trade and finance, and help
underdeveloped nations create efficient,
market-based economies.
Population growth and advances in transportation and
communications have made the world smaller, and the
global economy daily becomes more of a reality. One
aspect of globalization significant to the
accounting profession is the movement toward global
communication. English has become the second
language of choice, particularly in business, begun
by the colonial and commercial sweep of the British
Empire and extended by the cultural and economic
effects of U.S. industry, especially entertainment
and the Internet. What will be the financial
language of the global economy? Accounting has long
been recognized as the language of business, and the
world is working toward global accounting standards.
In accord with well-established principles of
information economics, the widespread adoption of
such standards will promote free trade and efficient
international operations by removing the barriers
created by competing accounting systems.
The role of the U.S. Uniform CPA Examination in this
context is crucial. By opening the CPA exam to
candidates from abroad, the U.S. accounting
profession will be able to adapt to, guide, and
benefit from the trends of globalization and
convergence.
The developed countries have slowly begun to accept
that convergence of their national standards with
International Accounting Standards (IAS) is a
necessary step for the orderly globalizations of
capital markets. Accounting standards setters in the
U.S. and other nations have begun to work more
closely with the new International Accounting
Standards Board (IASB) to accelerate the convergence
of global accounting standards. For example, SFAS
128 substantially harmonized earnings per share
calculations with IAS 33; both standards were issued
in February 1997. Another example is the ongoing
development of XBRL, a computer-based method of
producing and sharing financial information through
the standardization of data elements. One of the
XBRL data dictionaries currently being developed by
a consortium of U.S. accounting, information
technology, and financial services entities is
designed for use by all companies that adhere to
IASB standards.
The incremental progress toward convergence of U.S.
and international accounting standards should
continue as companies increasingly enter business
combinations and raise capital in foreign markets.
Foreign companies that want to raise capital in the
U.S. markets have strong incentives to improve the
transparency of their financial reporting in order
to comply with SEC standards and forge relationships
with U.S. companies.
For the foregoing reasons, market forces are pushing
strongly to make the U.S. CPA designation the global
standard. For the past few years, each May and
November, the CPA exam has attracted an estimated
3,000 to 5,000 international candidates. Currently,
most non-U.S. candidates come from countries in Asia
(e.g., Japan and Korea) and the Middle East (e.g.,
Saudi Arabia and Jordan). These candidates must
travel to one of the 54 U.S. jurisdictions (the 50
states, District of Columbia, Puerto Rico, Guam, and
the U.S. Virgin Islands) to sit for the U.S. CPA
exam. Chartered Accountant candidates from Canada
and Australia can, however, take the International
Uniform CPA Qualification Exam (IQEX) in their home
countries. The IQEX is a computer-based, 4.5-hour
exam that focuses on the differences between
accounting and auditing standards in the U.S. and
Canada and Australia and sets the precedent for
offering a CPA exam outside the United States.
Why Do International Candidates Take the U.S. CPA
Exam?
Consider a simple example. Assume that a Japanese
business school graduate applies for an accounting
position with a U.S. firm’s Japan office. The
management of the firm may want assurance that the
applicant understands both U.S. and Japanese
accounting standards. Furthermore, management may
want to know whether the accounting graduate has a
working knowledge of English. An effective way to
prove this competence is for the candidate to pass
the U.S. CPA exam.
Many Japanese companies doing business with U.S.
companies also want accounting graduates with
knowledge of U.S. accounting standards. In addition,
companies from other nations doing business in Japan
seek Japanese accounting graduates that understand
U.S. accounting standards. Despite their interest in
the CPA exam, accounting graduates in Japan and
other foreign countries rarely wish to practice in
the U.S. In fact, they are generally not concerned
with receiving a permit or license. What is most
important to them is the ability to provide
employers with verifiable evidence that they have
the accounting and English skills necessary to pass
the U.S. CPA exam.
Another reason that the CPA exam is growing in
international importance is that some countries do
not have a strong national licensing exam. Hence,
passing the CPA exam provides a credential for which
there is no comparable domestic substitute and which
enhances a candidate’s attractiveness to both
domestic and international firms.
Benefits to the U.S. Accounting Profession
Having accountants from around the world become
experts in U.S. accounting standards would provide
distinct benefits to the United States. U.S.
companies operating in foreign countries would be
able to hire residents that understand U.S.
accounting standards. Still greater benefits would
accrue to U.S. companies operating abroad when local
standards approximate U.S. standards. U.S. companies
in foreign markets would then enjoy the same
globalization advantages as foreign companies in the
U.S. market.
In addition, as the number of foreign CPAs
increases, the likelihood that international
standards-setting bodies will adopt U.S. GAAP as
their reporting standards also increases. On the
other hand, if the CPA exam is not available to
foreign-educated accountants, they will become
certified in other systems of accounting, and the
progress toward the adoption of a global financial
language similar to U.S. GAAP may be impeded.
Challenges for International Candidates
Eligible states.
The first challenge for international CPA candidates
is finding a state board of accountancy willing to
permit non-U.S. candidates to sit for the CPA exam.
Approximately half of the state boards have
residency or citizenship requirements. Of the boards
that do allow non-U.S. candidates, few will
accommodate an individual without significant U.S.
accounting education, generally available only
through U.S. universities. The states with the
largest number of international candidates, in
order, are Delaware, California, Hawaii, Guam,
Illinois, and Washington. Other states with
significant numbers of international candidates are
Alaska, Montana, New Hampshire, Maine, Virginia, and
Vermont. A recent gold medal winner came from
Germany to take the CPA exam in Washington.
Travel.
International candidates incur significant
transportation and lodging costs to travel to a CPA
exam site in the United States. More importantly,
international candidates do not enjoy ideal
circumstances when taking the exam: They may have
traveled for many hours, suffer from jet lag, and
encounter logistical problems immediately
beforehand.
Visas.
International candidates from countries such as
Japan have little trouble obtaining a travel visa to
take the U.S. CPA exam. On the other hand, for
candidates from some countries in Asia, South
America, and the Middle East, obtaining a travel
visa may be difficult or even impossible.
Misconceptions.
The reluctance of state boards to extend their
eligibility requirements may be based in part on the
misconception that international candidates will
compete with U.S. CPAs for jobs in the United
States. Such fears are groundless because admission
to the CPA exam does not confer a right to
immigrate. Even so, the profession as a whole would
gain from an influx of accountants from abroad who
would bring their talent, energy, ambition, and new
ideas to this country. The benefits would be similar
to those enjoyed by the sciences, engineering,
information technology, and other disciplines that
have absorbed significant immigration of capable
foreign nationals. Furthermore, the globalization of
the economy, accounting standards, and the CPA exam
will offer opportunities for growth in the worldwide
market for services offered by CPAs. Free trade in
goods and services ultimately benefits all nations.
Restricting access to the U.S. CPA exam should be
viewed as protectionism that is harmful to the U.S.
national interest.
Challenges for State Boards
Some state boards of accountancy have adopted a
progressive attitude toward the global demand for
the CPA and have worked hard to help international
candidates sit for the CPA exam. Other state boards,
however, have modified their rules in ways that
effectively reduce their number of international
candidates.
Costs and inefficiencies.
An understandable concern of the state boards is the
added labor, costs, and complexities of handling the
applications of international candidates. Routine
exchanges of mail with such candidates require
additional resources, and telephone communication is
complicated by the differences in time zones.
Although faxes and e-mail are less affected by
geographical factors, communications with
individuals for whom English is a second language is
sometimes difficult. A candidate may feel
comfortable communicating in English about technical
or quantitative matters but still find communicating
in English about non-accounting matters to be
awkward.
This problem of communication could be largely
overcome by having clear application procedures and
instructions to guide international candidates
through the process. Charging an additional fee to
cover additional costs of handling international
applications would willingly be borne by
international applicants, especially if they could
take the CPA exam in their home countries and save
the substantial travel costs (e.g., Japanese
candidates spend from $1,500 to 3,000).
Licensing CPAs.
Another concern of some state boards is that of
licensing CPAs residing outside a state’s
geographical boundaries. In the U.S., a number of
CPAs hold licenses to practice in more than one
state. State boards are understandably concerned
about how to effectively monitor the activities of
CPAs residing outside of their state borders. Such
concerns are magnified when the CPAs reside in other
countries.
One method to mitigate these concerns is to allow
international candidates to sit for the U.S. CPA
exam and then, upon successful completion, be given
a certificate stating that they have passed the CPA
exam but are not licensed to practice. Such a
certificate would satisfy the needs of the vast
majority of international candidates. It also would
be similar to the two-tier system adopted by some
states, under which individuals possess either
certification status or permit-to-practice status.
Exam security.
State boards of accountancy have a natural fear of
not being able to guarantee adequate exam security
when administering the CPA exam. Since the CPA exam
went to its current, nondisclosed format, exam
security has been an issue of paramount importance.
The security issues related to the pen and pencil
exam, administered in many different sites, will
change substantially once the computerized CPA exam
is introduced in 2003. Prometric, a division of
Thomson Learning Company and a world leader in
computer-based testing, has testing centers and
provides the same service and security in over 250
international locations as in its U.S. testing
centers.
National security and visa issues. The tragic events
of September 11 have significantly reduced the
volume of international air travel. In addition,
persons wishing to obtain visas for short-term
visits to the United States are likely to experience
greater difficulties than in the past. Unless a new
way of thinking is applied, the number of
international candidates taking the U.S. CPA exam
may drop dramatically.
Augmenting efforts to strengthen national security
will be another benefit stemming from the
international administration of the CPA exam. The
reduced number of international visas requiring
review by the Immigration and Naturalization Service
will allow more time to review other visas.
Other Professional Examinations
It is common for U.S. professional certification
examinations to be administered to international
candidates in their home countries; for example, the
professional engineering (PE) certification exam is
offered in several countries. The list of U.S.
professional accounting-related examinations
administered in other countries is extensive and
includes the following:
-
CMA: Certified management accountant
-
CIA: Certified internal auditor
-
CFA: Certified financial advisor
-
CFM: Certified in financial management
-
CISA: Certified information systems analyst
-
CBA: Certified bank auditor.
Two examples of the demand for exams administered
outside the U.S. are the CFA and CMA. In 1995, both
exams were offered to a handful of candidates in
Egypt. By 2000, both exams had over 300 applicants.
Lagging behind other professional organizations that
are already offering their exams in other countries
only strengthens criticism of CPAs for not providing
“information relevant to the changing business
world.” Failing to offer the U.S. CPA exam to
international candidates in their own countries
works against the profession’s goal of leading the
global harmonization of accounting standards. In
addition, this failure forces thousands of
international candidates to travel to the U.S. in
order to take the CPA exam. Certainly people in
foreign countries are aware that other U.S.
professional organizations have responded to the
global economy in a more timely fashion than U.S.
CPAs.
Modest Steps Forward
The following steps may encourage state boards of
accountancy to accept international candidates:
-
The CPA exam should be administered in foreign
countries. This practice will be practical once
the CPA exam is computerized in 2003.
-
“Exam only” certificates rather than “permits to
practice” should be issued to international
candidates wishing to pass the CPA exam but not
to practice public accounting in the United
States.
-
International candidates who pass the CPA exam
but do not have a permit to practice should be
required to indicate this on business cards,
resumes, and correspondence.
Website.
The authors have established a website (https://commcenter.bresnan.net/Redirect/www.msubillings.%20edu/rhoward)
related to the issue of administering the CPA exam
in other countries. The website contains an open
letter to the AICPA and NASBA. To date, a wide range
of organizations and individuals from 17 countries,
located in every continent, have added their names
to the open letter as supporters of the
international administration of the CPA exam. The
supporting organizations include the American
Chambers of Commerce in Japan and Egypt. Countries
represented include: Australia, Brazil, Canada,
China, Egypt, France, Hong Kong, India, Japan,
Nairobi, Netherlands, Oman, Pakistan, Saudi Arabia,
Taiwan, United Arab Emirates, and the United States.
The U.S. CPA has the opportunity to become the
accepted global accounting designation. If the U.S.
accounting profession fails to capitalize on the
demand for a globally recognized accounting
certification, others will seize the opportunity.
Randy Howard, CPA,
is a professor emeritus at Montana State
University-Billings,
Kotaro Anjo is the CEO of Anjo International,
and
Irvin N. Gleim, PhD, CPA, is a professor
emeritus at the University of Florida.
