“For decades the accounting profession basked in the highest kind of public confidence. If they certified an earnings statement, it meant what it said. … People tended to believe what they read in annual reports. It was there in hard figures. And figures don’t lie. … Now all at once there are more than 50 major lawsuits pending against public accounting firms charging irregularities and negligence in preparing earnings reports and other financial statements.” 

Denise Dickins, CPA, attends Florida Atlantic University where she is working on her Ph.D. in accounting. She is also an instructor of Auditing and Accounting courses at Florida Atlantic University. Prior to returning to school, Dickins worked for Arthur Andersen where she most-recently served as the partner-in-charge of Arthur Andersen’s South Florida Audit Division.

Each of these statements could be a headline from a 2002 issue of the Wall Street Journal, but they are actually the introductory paragraph of an editorial in the May 15, 1967 issue of Forbes. Over the past five decades, the accounting profession has experienced a variety of challenges. These include the lawsuits described by the Forbes editorial in the ’60s, the savings and loan crisis in the mid-’80s, and in 2002 a surge of highly publicized accounting scandals including Enron, WorldCom and Tyco.

This article addresses whether the negative publicity associated with the accounting scandals in 2002 may have adversely impacted students’ interest in accounting careers. It also discusses the potential that students now interested in accounting careers may be greater risk-takers than accountants prior to the 2002 scandals.

It is likely that students have a higher level of awareness of the accounting scandals in 2002 than prior profession-challenging events because of the impact of technology on information dissemination. This increased awareness may turn off students who were previously interested in accounting careers, or may attract students not previously interested.

Evidence suggests that since the scandals in 2002 the number of students interested in accounting careers has increased. Several articles would suggest this result. For example, Diya Gullapalli of the Wall Street Journal (2004) reports, “Some schools nationwide report record numbers of accounting applicants for the fall semester, on top of strong gains over the past year.” Similarly, Jonathan Glater of the New York Times (2003) declares, “After an avalanche of scandal, accounting’s numbers rise.” This increased interest in accounting reverses recent experience. According to the AICPA’s publication The Supply of Accounting Graduates and the Demand for Public Accounting Recruits, the number of bachelor's degrees in accounting awarded nationwide increased by 11 percent in 2003 over the prior year, compared to decreases ranging from eight to 21 percent since 1998.

Although various factors, including economic forces, likely impact the attractiveness of an accounting career, the increased interest in accounting careers may also be partly due to the elevated publicity associated with the scandals in 2002. In the past, accounting careers were viewed as "doing boring, tedious, and monotonous number-crunching" (AICPA Topline Report 2001) and the AICPA’s Taylor Report (2000) found that the No. 1 reason students change their major from accounting is that it is seen as boring, with not enough variety. Research suggests that individuals attracted to accounting careers prior to the scandals in 2002 could be described as conservative, concerned with future earnings and career options,¹ and risk neutral.²

Given the media’s portrayal of the accounting profession in light of the scandals, students currently attracted to accounting careers may be less conservative and more willing to accept risk. Such a finding would have important implications for the accounting profession. For example, new entrants with a higher risk tolerance may be more willing to perform testing using smaller sample sizes, or make more liberal judgments related to materiality issues.

The Study

To test this possibility a survey was administered to 235 students³ to determine whether their awareness of the scandals in 2002 influenced their decision to choose an accounting career. The survey measured each student’s level of understanding and exposure to the recent accounting scandals,⁴ and asked each student to assess his or her interest in accounting careers.

Analysis of the students’ responses suggests a significant, positive relationship between their awareness of the scandals and their interest in accounting careers. That is, the more they know about the scandals in 2002, the more they are interested in accounting careers.

To determine whether students currently interested in accounting careers are less risk averse than prior accountants, the same students were asked to complete a standardized scale that measures an individual’s control orientation.⁵ A person’s control orientation ranges from internal to external. Because they believe they can control outcomes, internal personalities are often more willing to accept uncertainty and risk. External personalities believe they have little control over outcomes. A logical proposition is that accountants with strong internal orientations may have a tendency to underestimate the risk associated with their client engagements. Prior to the scandals in 2002, there was no distinct pattern in the control orientation of individuals beginning their careers in public accounting.⁶

Analysis of the students’ responses suggests that a student’s interest in accounting careers is not associated with his or her control orientation. That is, students interested in accounting careers after the scandals in 2002 are not more likely to have internal orientations and, by extension, are not more likely to accept risk.

Summary

The news is good! The scandals in 2002 appear not to have turned students off to the prospect of accounting careers. In fact, the evidence suggests that the more aware students are, the more likely they are to choose an accounting career. Importantly, those students expressing an interest in accounting careers since the scandals are not more likely to make risky engagement decisions. These findings are important to the accounting profession.

¹ Lowe, R. D., and K. Simons. 1997. Factors Influencing Choice of Business Majors, Some Additional Evidence: A Research Note. Accounting Education 6 (1): 39-46.
² Hartog, J., A. Ferrer-Carbonell, and N. Jonker. 2002. Linking Measured Risk Aversion to Individual Characteristics. Kyklos 5 (1): 3-26.
³ The students were enrolled in principles of accounting classes at a Florida university during the summer of 2003.
⁴ This design methodology is similar to that used by Dennis, D. M., T. J. Engle, and W. L. Stephens. 1996. The Effect of Litigation on Public Accounting as a Career Choice. Accounting Horizons 10: 1-13.
⁵ Rotter, J. B. 1966. Generalized Expectancies for Internal versus External Control of Reinforcement. Psychological Monographs 80 (1): Whole No. 601.
⁶ Bernardi, R. A., and R. V. Nydegger. 1999. Changes in Distribution of Mean Scores on Locus of Control by Staff Level in Public Accounting Firms. Psychological Reports 85: 1081-1087.