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The Standards-Setting Process in Accounting: Lessons for Education and Workplace Reform (MDS-949)

D. Merritt, T. Bailey

Perceptions about the changing nature of work and changing skill requirements have convinced many employers, educators, and policymakers that the United States needs a better system of education and workforce preparation. Many feel that standards can benefit such a system by improving the preparation of young people for work and life. The National Skill Standards Board (NSSB) is working to develop a national system of skill standards that will enhance workforce skills and increase national competitiveness, productivity, and economic growth. NSSB is committed to developing a more integrated system of education for students by linking various vocational and academic reform initiatives and establishing voluntary partnerships comprised of educators, employers, and representatives from labor unions and community-based organizations. These partnerships, coordinated by the NSSB, will form the governance structure under which skill standards will be developed, implemented, assessed, and updated.

The work of the NSSB, however, does not represent this nation's first efforts to develop national skill standards systems. Indeed, various industries, occupations, and professions in the U.S. have extensive experience with the development and implementation of skill standards. These experiences have important lessons for current standards-setting efforts.

Skill standards and certification have been at the core of professional development in the accounting industry for nearly 100 years. Accountants have vast experience in developing an industry-driven standards-setting system to guide professional behavior. The practice of accounting has faced many of the same economic and competitive pressures experienced by other professions and industries. Thus, the combination of long experience with similar external forces makes accounting a useful case study for other groups now developing their own standards.

Traditionally, standards for the accounting industry focused on the audit function, but this once-stable base is now shifting rapidly. Accountants are now operating in an environment that demands specialized services such as management advising, consulting, and personal financial planning. Economic conditions, technological changes, and more complex business environments have forced the accounting community to embrace this broader base of activities and drastically alter the waning auditing function. The industry has used skill standards, certification, and increased education requirements to overcome a narrow conception of the accountant's role and manage its transition into specialized services and broader workplace activities. Initially hesitating to embrace the integration of specialized services, accounting standards-setters were eventually driven to broaden their view of accounting by competition from outside organizations, tangential industry groups, and other business interests that have been successful in establishing a presence in accounting-related services. Accounting standards-setters must re-establish a direction for accounting education and certification that encompasses the specialization of services.

The evolving nature of accounting services has changed the complexion of the technical and academic skills required of accountants. Like the employees in a majority of U.S. industries, as businesses become more complex and technology advances, accountants must continue to increase their technical knowledge. In addition, they must work more creatively; apply their technical knowledge to a broader set of abstract academic concepts; communicate effectively with a more diverse group of coworkers, supervisors, and customers; solve problems proactively and with limited supervision; and work in teams with peers and individuals with different skills and backgrounds.

Despite decades of experience that has defined accounting as a highly technical and precise profession, it is no longer sufficient to limit accountants to the performance of technical skills that are framed as narrowly defined tasks and routine methods/procedures. To be effective in the workplace and satisfy customer and organizational needs, accountants must be able to apply their technical skills to handle an increasingly diverse, non-routine set of situations and events. Accountants and employees in most high-performance, competitive work environments must commit themselves to continually learning and increasing their skills. They must become more concerned about general issues such as ethics, effective communication, and positive public relations that were once the responsibility of partners or supervisory-level employees.

Broadening technical skills poses great problems for those who develop assessment instruments for certification such as the Certified Public Accountant (CPA) exam. Years of acceptance in the accounting community and among the public have not sheltered the CPA exam from criticism. Indeed, as the workplace continues to stress more advisory-type activities that demand more and different types of skills, the exam is being considered less of a gauge of accounting competence. Although few in today's standards-setting movement will argue against the need for skills such as problem solving and communication, it has been difficult to develop assessments to measure their depth and breadth. Clearly, additional time and thought needs to be devoted to the assessment process if the certification is to be valued by other practitioners and consumers. Although policymakers often present a stark distinction between standards-based and process-oriented ("seat time") regulation of educational practices, experience in accounting suggests that assessments must include both outcome measurements and regulation of the educational process. The rapidly changing nature of accounting skills makes it misleading to rely exclusively on an outcome assessment instrument to evaluate the education and substantive preparation of accountants. Accountants and educators need to work together to develop evolving and comprehensive approaches to assessment.

Academic accounting programs in colleges and universities have experienced difficulties keeping pace with the new demands for accounting services from the business community. For decades, various commissions funded by professional organizations and large accounting firms have concluded that accountants need more than technical training to fully utilize the vast amount of information they have available to them and advise clients. They must be able to gather and dissect information, apply general business concepts to specific data, communicate with a wide variety of individuals, and diagnose complex situations and offer solutions. These responsibilities require skills that span beyond the rote application of traditional methods and procedures. Unfortunately, educators in colleges and universities often lack the experience necessary to infuse classroom activities with contemporary marketplace applications. The gap between educator training and practitioner needs has widened to the point where accounting graduates feel unqualified, employers feel unsatisfied with their supply of recruits, and educators feel frustrated by conflicting demands on their time.

The accounting community initially attempted to narrow the gap between professional expectations and educational preparation by increasing the amount of schooling required for accountants. Merely increasing the number of hours in the classroom, however, will not offer the same caliber of training as that received by other professionals such as physicians and lawyers. Many accountants now believe that the educational experience of accountants must be linked to specified outcomes and must include a workplace component similar to residencies and clerkships in law and medicine.

Although the accounting profession has been successful in creating a widespread national system of skill standards and assessments, the community has not succeeded in developing an integrated educational system for which many education reformers are now calling. Accounting's standards-setting experiences do, however, provide some valuable lessons for those groups that are now working toward education reform and a national system of industry-based skill standards.

  1. Skill standards developed for high-performance, professional workplaces have philosophical obstacles to overcome. Efforts to broaden accounting skill standards and re-align educational requirements present philosophical obstacles for standards-setters that go beyond technical analyses of work tasks. Individuals and organizations must first rethink how they have come to define work and overcome the boundaries that traditional industrial categorizations have created. Furthermore, those involved with contemporary skill standards development must understand the cultural changes necessary to expand the often-limited roles held by individuals in traditional occupational hierarchies and promote the full development and maturity of high-performance workplaces.

  2. Standards setting must be an ongoing and constantly evolving process that emphasizes continual communication between stakeholder groups. In rapidly changing industries, standards can actually become obsolete before they are published and well before educational programs can be adjusted to prepare students appropriately. Standards-setting efforts that dissolve after an initial set of standards has been produced have doomed those standards to imminent obsolescence. Even worse, groups that support such one-shot activities may eventually hold people to standards that fail to represent reality. Standards, assessment, and training tied to such a static certification process have little, if any, worth to practitioners, educators, employers, or the lay public. In the end, the most valuable contribution of the standards-setting process may simply be the continuing dialogue that is developed between practitioners, employers, customers, and educators. The most important characteristic of any standards-setting process is that it promotes, or indeed requires, constant updating and communicating.

  3. Professional workplace performance requires standards that offer conventions or conceptual guidelines rather than narrowly defined methods and procedures. As is now the case in many contemporary industries, accountants are required to perform an increasingly broader set of duties that offer less guidance and more ambiguity. Accounting jobs now require skills such as the ability to judge, problem solve, investigate, clarify, and communicate-what contemporary skill standards developers refer to as SCANS skills. The complexity and depth of these skills cannot be adequately represented by technical standards that merely list and measure the performance of isolated tasks and procedures. Instead, standards must offer guidance for the professional workforce and a conceptual basis for which to make nonroutine, intricate activities and decisions.

  4. A solid standards-setting system requires strong support from constituency groups and adequate time for planning, research, and experimentation. Skill standards do not function in a vacuum. They affect many individuals and organizations. The success and sustainability of standards systems demands adequate time for initial planning, research, and experimentation. Standards-setters need to understand and appreciate the sweeping effects of their efforts-the threats standards pose, the territories that will be infringed upon by standards, and the dynamics that surround the institutionalization of standards. Understanding such issues requires time and coherent direction. More importantly, understanding requires solid communication and support from all of those involved.

  5. Certification has potential positive and negative effects that must be balanced. The certification process in accounting has been subjected to increasing criticisms for not reflecting actual work experiences-a well-known controversy in all certification systems, especially those in which certain functions must be performed by certified practitioners. Narrowly defined assessments limit the information that consumers need to be able to make informed decisions and therefore fail to protect them by limiting their risks. Assessments limit consumer choice by decreasing the supply of practitioners and, thereby, increasing the prices that consumers must pay for services. Despite the potential disadvantages of certification, established standards and assessments do facilitate employment mobility by providing uniform information about skills and abilities to prospective employers or clients. An established and consistent certification process can increase the public's trust in practitioners and help promote a sense of professionalism.

  6. Skill standards are most effective if they are industry-driven. Professional organizations, founded and comprised of practicing accountants, have directed the discussion about accounting skill standards and educational requirements since the profession was established in the late 19th century. Despite the fact that regulatory agencies have periodically threatened the private sector standards-setting infrastructure, the system has managed to maintain its distance from non-accountant business interests and governmental regulators who conspire to define accounting procedures and, therefore, accountant skills to meet their short-term needs. One important motivation for keeping standards setting in the private sector is the ability to control and upgrade the professional image of accountants through standards. Accountants have been particularly interested in trying to achieve the same status and prestige as professions such as medicine and law that direct their own standards and certification processes. Outsiders in the standards-setting process often limit the prestige and image of the profession.

  7. A seamless preparation system that offers academic and workforce training to meet the demands of a high-performance society must be comprised of education, hands-on experience, and examination requirements. No set of standards can specify all of the knowledge and skills necessary to perform in a complex workplace environment. Similarly, no singular set of experiences (classroom or workplace) can ensure the ability to apply the necessary skills, knowledge, and insights in the most efficient, effective manner. A broad-based certification that encourages the type of professional performance required in high-performance workplaces must, therefore, be comprised of three components-(1) education, (2) hands-on experience, and (3) an examination process to demonstrate the skills that educational and workplace experiences develop. All of these components must be improved if they are to work symbiotically and ensure that employees are capable of complex workplace roles and responsibilities.


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