Thoughts on the Future

1

Thoughts on the Future of the Academic Tax
Profession
ATA Midyear Meeting Memphis, TN February 22, 2008
Silvia Madeo Professor Emeritus Ed
Outslay Michigan State University
2
The Current Supply of Professors

• The Advisory Committee on the Auditing
  Profession
• One-half of accounting faculty is eligible to
  retire in the next few years.
• One-third of accounting faculty is 60 or older
  one half is 55 or older.
• http//www.treas.gov/offices/domestic-finance/aca
  p/index.shtml

Timothy Flynn, Chairman and CEO of KPMG is a
member of the Committee.
3
The Current Supply of Professors

• Ages of Accounting Faculty Jim Hasselback
• 53.4 are 55 or older

4
The Current Supply of Professors
5
The Future Demand for Accountants

• The Advisory Committee on the Auditing Profession
• Enrollments in accounting programs and accounting
  graduates up 19 from 2000 to 2004. Increase of
  9 to 40,400 Bachelors degree recipients from
  2003 to 2004.
• The demand for accountants is predicted to grow
  18-26 through 2014 (U.S. Bureau of Labor
  Statistics).
• The need for entry-level tax accountants has
  skyrocketed in the past five years most of the
  Big 4 firms have more than doubled their hires in
  tax from 2002 2008.

6
The Future Demand for Accountants

• Written Testimony of Edward E. Nusbaum, CEO of
  Grant Thornton LLP and Chairman of Grant Thornton
  International
• As the Advisory Committee has recognized, recent
  years have seen a reduction in accounting
  faculty, based on a wave of retirements and lack
  of accounting Ph.D.s coming into the system. The
  problem is exacerbated by the growth in the
  number of colleges and universities offering
  programs in accounting and auditing. A study
  conducted by the American Accounting Association
  found that only 23 percent of the projected
  demand for auditing Ph.D.s could be met by
  expected graduations, and 27 percent of the
  projected demand for tax Ph.D.s could be met. Yet
  some 91 percent and 79 percent of the projected
  demand for Ph.D.s in financial accounting and
  managerial accounting, respectively, could be met.

7
The Future Demand for Accountants

• Written Testimony of Edward E. Nusbaum, CEO of
  Grant Thornton LLP and Chairman of Grant Thornton
  International
• High caliber new entrants are deterred when
  professors who possess the education, research
  perspective and teaching skills to interest,
  challenge and motivate them are not available.

8
The Future Demand for Accountants

• Dennis Nally, Chairman and Senior Partner,
  PricewaterhouseCoopers, LLP
• Now, and as we look forward, accounting
  education and training must be a priority. This
  is an area that we hope will attract significant
  attention from the Committee, in part because we
  believe that the impending convergence of global
  accounting standards signals the critical need to
  modernize university accounting curriculum and to
  address the related issue of identifying and
  supporting the next generation of dedicated
  accounting and auditing professors.

9
The Future Demand for Accountants

• Written Testimony of Barry Salzberg, CEO,
  Deloitte LLP
• The need for specialized technical skills on
  audits of public companies has never been
  greater. This trend is likely to increase as our
  financial system becomes more complex. As such,
  the need for CPAs with specialized skills in
  traditional areas like taxation and internal
  controls, and in newer areas such as valuation,
  is likely to increase.

10
The Future Supply of Tax PhDs

• AAA/APLG/FSA Doctoral Education Committee Report,
  2007
• Students in Accounting Doctoral Programs, by
  topical area
• Financial 52
• Managerial 12
• Audit 12
• Tax 9 (62 respondents)
• Information Systems 4

11
The Future Supply of Tax PhDs

• AAA/AAPLG Report on the Supply and Demand for
  Accounting PhDs, 2005 (Madeo, et al.)
• Shortages are estimated by the difference
  between the number of new Ph.D.s expected to be
  hired and new Ph.D.s graduating. The most
  critical finding is that, although an overall
  shortage exists, it is acute in the audit and tax
  specialties (27.1 percent and 22.8 percent of
  demand, respectively). These shortages need to
  be considered in light of the significant demand
  for experienced Ph.D.s that was found in the
  accounting program leaders survey.

12
The Future Supply of Tax PhDs

• AAA/AAPLG Report on the Supply and Demand for
  Accounting PhDs, 2005 (Madeo, et al.)
• The Committee believes the dire shortages in tax
  and audit areas warrant particular focus. One
  possible solution to these specific shortages is
  for Ph.D. programs to create new tracks targeted
  toward developing high-quality faculty
  specifically in these areas. These tracks should
  be considered part of a well-rounded Ph.D.
  program in which students develop specialized
  knowledge in one area of accounting, but gain
  substantive exposure to other accounting research
  areas.

13
The Future Supply of Tax PhDs

• AAA/AAPLG Report on the Supply and Demand for
  Accounting PhDs, 2005 (Madeo, et al.)
• A possible explanation for the shortages in
  these areas is that Ph.D. students perceive that
  publishing audit and tax research in top
  accounting journals is more difficult, which
  might have the unintended consequence of reducing
  the supply of Ph.D.-qualified faculty to teach in
  those specialties. Given that promotion and
  tenure requirements at major universities require
  publication in these journals, students are drawn
  to financial accounting in hopes of getting the
  necessary publications for career success. While
  the Committee has no evidence that bears directly
  on this point, it believes that the possibility
  deserves further consideration.

14
The Future Supply of Tax PhDs

• What are the barriers to entry into tax?
• Technical expertise tax is complex and ever
  changing
• Likelihood of multiple preparations early in
  ones career
• Lack of a research colleague on the faculty
• Is teaching tax the biggest impediment to doing
  tax research?

15
The Future Supply of Tax PhDs

• Attractions to being a tax accounting scholar
• Tax research issues are diverse and always
  interesting!
• Tax transcends multiple disciplines interaction
  with financial accounting, audit, managerial
• Tax is NEVER dull to teach

16
CPA Firm Support!

• KPMG
• The PhD Project
• ATA Mid-Year Doctoral Consortium
• ATA Mid-Year Meeting
• Faculty Symposiums
• Faculty Portal
• University of North Carolina Tax Conference
• Professor Residency Program

17
CPA Firm Support!

• Deloitte
• Tax Case Study Competition
• University of Illinois Tax Research Symposium
• Tax Faculty Symposium
• Doctoral Fellowship Program
• J. Michael Cook Doctoral Consortium
• FSA Faculty Consortium
• Dbriefs U

18
CPA Firm Support!

• EY
• Tax Educators Symposium
• Dialogue dinners
• EY Online
• EY University Fund
• Travel Support for Ph.D. attendance at the JATA
  Conference
• Grant Thornton
• Professors Resources
• Academic Fellowship Program

19
CPA Firm Support!

• PwC
• Tax Colloquium
• xTax
• PwC INQuires
• PwC Teaches
• PwC University for Faculty

20
Solutions to the Perceived Lack of PhDs

• Written Testimony of Barry Salzberg, CEO,
  Deloitte LLP
• In addition, although we and other firms have
  taken a number of steps to address the increasing
  shortage of accounting faculty (see description
  of some of the larger firms efforts at Appendix
  A), the Advisory Committee could assist by
  considering a recommendation to ease national
  accreditation requirements to permit universities
  to use more adjunct professors and by
  recommending that each firm with a substantial
  audit practice commit to provide resources to key
  schools in the form of adjunct professors. This
  would allow qualified instruction without the
  universities risking loss of accreditation.

21
Solutions to the Perceived Lack of PhDs

• Written Testimony of James S. Turley, Chairman
  and Chief Executive Officer, Ernst Young LLP
• We believe consideration should be given to
  alternative means of achieving the requirements
  of the 150-hour rule that supplement, not
  replace, traditional undergraduate and graduate
  classroom learning. Possibilities could include
  experiential learning, required (and perhaps
  accredited) firm training, or some combination of
  the two. Far from being a backing away from the
  need for educated accountants, this approach
  would be very much in line with our philosophy
  that sound accountants want a balanced approach
  of experience, classroom education, and mentoring
  and need that balanced approach to be
  successful.

22
Solutions to the Perceived Lack of PhDs

• Written Testimony of James S. Turley, Chairman
  and Chief Executive Officer, Ernst Young LLP
• College accreditation standards demand that most
  accounting faculty must have Ph.D.s to teach
  students, but there is a shortage of Ph.D.
  candidates. We suggest that there should be an
  examination of the desired balance in the
  classroom between teachers who are
  Ph.D.-qualified and those that are qualified
  practitioners the possibility of setting
  guidelines for the body of knowledge that would
  constitute an undergraduate accounting
  education and a graduate accounting degree
  and tie this to the learning required for
  professional certification.

23
Solutions to the Perceived Lack of PhDs

• Written Testimony of Edward E. Nusbaum, CEO of
  Grant Thornton LLP and Chairman of Grant Thornton
  International
• Some have expressed the view that a solution to
  the faculty shortage is to recruit retired
  accounting and auditing professionals to fill the
  gap. A number of schools are moving in this
  direction. Grant Thornton is concerned that,
  while possibly an immediate-term solution, too
  much reliance on former practitioners will
  transform the acceptance of accounting within
  higher education from a vibrant and challenging
  academic discipline to trade school status taught
  by former practitioners.

24
Solutions to the Perceived Lack of PhDs

• Thoughts from the Peanut Gallery?