The Present State of the Business Law Education of Accounting Students: The Business Law Professor's Perspective

• Author: Brett Long,A. David Austill,Mehmet C. Kocakulah
• Published date: 01 January 2009
• Date: 01 January 2009
• DOI: http://doi.org/10.1111/j.1744-1722.2009.00063.x

The Present State of the Business Law

Education of Accounting Students:

The Business Law Professor’s

Perspective

Mehmet C. Kocakulah,

n

A. David Austill,

nn

and Brett Long

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I. INTRODUCTION

There is a reason why law relevant to business is part of the curricula

of most colleges of business and also part of the content tested on the

Certified Public Accountant Uniform Examination (CPA Exam). Knowl-

edge of the law is important to those who conduct business and especially

to those professionals who conduct business in the form of a public ac-

counting practice. Accountants are similar to other business professionals

in that they must be able to identify important legal issues as they arise so as

to reduce their exposure to legal liability. While human resource depart-

ments and legal counsel may attempt to keep businesses current with their

legal compliance responsibilities, individual business professionals need to

have an awareness of legal issues.

1

They need to be familiar with legal

concepts like defamation, invasion of privacy, misrepresentation, fraud,

negligence, criminal intent, administrative sanctions, and breach of con-

r2009, Copyright the Authors

Journal compilation rAcademy of Legal Studies in Business 2009

137

Journal of Legal Studies Education

Volume 26, Issue 1, 137–183, Winter/Spring 2009

n

Professor of Accounting, Department of Accounting and Business Law, University of

Southern Indiana.

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Professor of Legal Studies & Accounting, McAfee School of Business, Union University.

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Associate Professor of Business Law, Department of Accounting and Business Law,

University of Southern Indiana.

1

Claire A. King, Liability Exposures and Ethical Responsibilities for CPAs in Industry, 2001 OHIO

CPA J. 15, 20 (Oct.) (the director of risk management for the AICPAProfessional and Personal

Liability Insurance Program discussing ways for CPAsto minimize legal liability when serving

as officers and directors); Norman P. Arnoff & Sue C. Jacobs, Accountant’s Malpractice: A Current

Review Part I, N.Y. L.J., Dec. 27, 2005, at 3 (two practicing attorneys discussing loss prevention

in accounting malpractice cases).

tract to manage risk.

2

In addition, accountants need specific legal knowl-

edge to provide their services to the public. Accountants practicing in

public accounting identify and distinguish various types of assets, liabilities,

debt, equity, and income in diverse and sometimes very complex transac-

tions. These accounting concepts require at least a basic understanding of

the law of property, negotiable instruments, contracts, securities, secured

transactions, sales, and business entities.

3

Whether certified public accoun-

tant (CPA) candidates possess the necessary legal knowledge to begin their

careers as public accountants is dependent upon an educational process

that includes the candidates, business law professors, accounting profes-

sors, state boards of accountancy, professional organizations, and educa-

tional accreditation bodies. Each of these groups contributes to the

educational process that ultimately produces a new CPA. Business law fac-

ulty design and present legal courses to accounting students while ac-

counting faculty influence the design and implementation of accounting

and business curricula. State boards of accountancy administer and

enforce the regulations that must be met for the certification and licens-

ing of CPAs while the American Institute of Certified Public Accountants

(AICPA) determines CPA Exam content. Accreditation bodies like the

Association to Advance Collegiate Schools of Business International

(AACSB) set standards that influence curricular decisions made by busi-

ness faculty members. Mistakes in judgment by these groups and/or failure

to communicate may result in an unnecessary number of CPA candidates

being inadequately prepared for the CPA Exam and, more importantly,

their subsequent careers.

4

This article first describes various factors, including the positions

taken by the fifty-four state boards of accountancy, the NASBA, the AICPA,

and the AACSB concerning the business law education of accounting

graduates that have impacted business law curricula, and it reviews the

literature as to the most appropriate business law education for accoun-

2

Robert A. Prentice, The Case for Education Legally-Aware Accountants,38AM.BUS. L.J. 597,

597–600 (2001).

3

Id.

4

While CPA Exam pass rates have recently been improving, the majority of sections still re-

main below 50 percent. NATIONAL ASSOCIATION OF STATE BOARDS OF ACCOUNTANCY (NASBA),

NASBA CANDIDATE PERFORMANCE ON THE UNIFORM CPA EXAMINATION 6 (2006). See AnthonyR .

Pustorino, Some Thoughts on the Uniform CPA Examination, CPAJ., Aug. 1996, at 36 (discussing

why there are low CPA Exam pass rates).

138 Vol. 26 / The Journal of Legal Studies Education

tants. It then compares the findings of a 1993 survey and a 2005 survey of

business law professors concerning their perceptions of the legal training

of accounting students, examining how those perceptions have changed

over the twelve-year period.

5

The surveys included questions concerning

the respondent’s perceptions of curricular content, importance of substan-

tive law topics, integration of business law into accounting programs, and

the quality of legal training accounting students receive. Finally, the article

compares the perceptions and actions of business law professors with those

of the major accounting organizations, finding that the major accounting

organizations treat business law as a field of general business knowledge

with decreasing relative importance to accounting graduates. The article is

intended to provide CPA candidates, accounting faculty, the AICPA, and

the state boards of accountancy with an insight into the business law pro-

fessor’s perspective concerning the legal education of accountants. It re-

veals to business law professors inconsistencies between the business law

curriculum they believe they should be providing their accounting stu-

dents and the business law curriculum they are in fact delivering to those

students, finding that a large majority of business law professors feel a re-

sponsibility to prepare their accounting students for their careers in public

accounting but have adopted business curricula more consistent with the

goals and objectives of the AACSB. The article recommends that business

law professors join together with accounting professors in teaching and in

scholarship to make the relevance of business law more transparent to both

accounting graduates and practicing accountants.

II. STATE ACCOUNTANCY ACTS

There are fifty-five jurisdictions that have passed laws that provide for the

certification and licensing of CPAs.

6

These jurisdictions include all fifty

U.S. states, the District of Columbia, the U.S. territories of Guam, Puerto

Rico, and the Virgin Islands, and the Commonwealth of the Northern

5

This article is based on a study funded by a grant from the Lilly Foundation. This article is

part of a broader study of the business law education of accounting students that will also

include the measurement of the perceptions of accounting chairs and executive directors of

state boards of accountancy.

6

See NASBA, http://www.nasba.org/nasbaweb/NASBAWeb.nsf/WPECUSM (last visited Dec.

29, 2008).

2009 / Business L aw Education of Accounting Students 139