Exploring the Gender Gap: Does it Begin Earlier than Expected?
By: Rodger L Brannan, PhD, CPA (Inactive), CGMA, Randall Skalberg, JD, LLM, Ruwan Adikaram, PhD and Andrew Fluharty
Previous research has established that women suffer from the impacts of the “gender gap” in the middle to late stages of their career. This gender gap manifests itself as reduced pay and reduced advancement opportunity for women relative to men, and it is likely driven by numerous issues. The authors posit that one significant factor driving the gender gap in the accounting profession originates with the Uniform CPA Examination. Successfully passing the CPA exam and earning the CPA designation is an essential step for members of the profession; CPAs are rewarded with better job placements, higher salaries, and more opportunities for advancement. Accordingly, a discrepancy in CPA exam success would indicate a gender gap that arises early in one’s career.
To investigate, the authors examined the pass rates of male and female candidates taking the CPA exam for the first time. Absent underlying biases or obstacles, there should be no difference in pass rates between women and men. However, we find that female candidates score significantly lower than male candidates, and that this discrepancy is remarkably consistent over time and across geographic regions.
CPA Exam Success
Research that analyzes data from the National Association of State Boards of Accountancy (NASBA) has found that candidates are more likely to successfully pass the CPA exam if they are: male, young, graduated from an Association to Advance Collegiate Schools of Business International (AACSB) accredited business school, graduated from an AACSB accredited accounting program, or graduated from a private college or university (Trinkle, Brad S., James Scheiner, Amelia Annette Baldwin, and George Krull, “Gender and Other Determinants of CPA Exam Success: A Survival Analysis,” The Accounting Educators’ Journal, vol. 26, 2016, pp. 101–117). This line of research also finds that the more times candidates sit for the exam, the less likely they are to pass, and that there appears to be no difference in pass rates between candidates from states with the 150–credit hour requirement to become licensed and candidates from states without the requirement.
The gender gap is a well-documented reality impacting women CPAs at mid-career and later. Emerging evidence suggests it also handicaps women at the beginning of their accounting careers (Vanessa Fuhrmans, “Where Women Fall Behind at Work: The First Step into Management,” Wall Street Journal, Oct. 15, 2019; Rodger L. Brannan, “Minnesota has a CPA exam ‘gender gap,’” MNSCPA Footnote, April 29, 2019). The present question is whether this phenomenon exists for CPA exam pass rates at the regional and national level. NASBA publishes summary reports of CPA exam scores (https://bit.ly/3pgJmOi). To examine the gender gap on this wide scale, the NASBA data at both the national level and state level (for Minnesota and surrounding states) was examined. If there are no built-in biases against women or other obstacles unique to women, there should be no difference in pass rates between men and women at any level of measurement. Nevertheless, the authors found that women scored significantly lower on the CPA exam than men, both on first attempts and overall attempts.
A Challenge to the Profession
The hypothesis that women are operating at a disadvantage vis-a-vis men has been extensively chronicled, and seems to start with inequality in responsibilities at home [David Harrison and Soo Oh, “Women Working Longer Hours, Sleeping Less, as They Juggle Commitments,” Wall Street Journal, June 19, 2019; Melinda Gates, “Equality for Women Must Start at Home (Even the Gates Home),” Wall Street Journal, April 5, 2019]. Numerous studies document a pay and promotion gap in the workplace, including in the accounting profession. Women doing the same work as men receive less pay (Yasmine El-Ramly, “Steps toward closing the gender pay gap,” Journal of Accountancy, September 2019). Furthermore, less than 20% of the partners in public accounting are women (Dawn Wotapka, “Ways to reduce the gender pay gap,” Journal of Accountancy, May 2016), and 15% of the engagement partners on the Big Four audits of the S&P 500 firms are women (Michael Rapoport, “Women Rarely Run the Biggest Audits at the Big Four Accounting Firms,” Wall Streel Journal, Sept. 16, 2018). This is in spite of the fact that women make up approximately 50% of the accounting profession, a trend that has held true for a number of years (AICPA, “Trends in the Supply of Accounting Graduates and the Demand for Public Accounting Recruits,” 2019). These are clearly egregious issues.
Thankfully, market forces are also at work. For example, female audit partners reign in earnings management more effectively, and command fee premiums over their male counterparts, leading to increased revenue for their firms (Ittonen, Kim, Emilia Vähämaa, and Sami Vähämaa, “Female Auditors and Accruals Quality,” Accounting Horizons, vol. 27, no. 2, 2013, pp. 205–228; Hardies, Kris, Diane Bressch, and Joel Branson, “The Female Audit Fee Premium,” Auditing: A Journal of Practice & Theory, vol. 34, no. 4, 2015, pp. 171–195). Firms naturally hope to attract and retain an extraordinarily talented pool of female CPAs, and many have implemented changes to foster career success for women. What’s more, these efforts are starting to pay off (Sean McCabe, “Female leadership on the rise, report finds,” Accounting Today, June 6, 2019). CPA firms finding the most success emphasize equality in the workplace, seek and implement feedback from women, and offer increased flexibility, generous benefit and leave packages, meaningful paths to partnership, and top pay (Danielle Lee, “Strategies from the 2019 Best Firms for Women,” Accounting Today, Oct. 10, 2019). Although these firms have assumed leadership roles and offer a blueprint for beginning to address these significant gaps in pay and promotion, the problem persists. Additional research to uncover the drivers of the gender gap is essential in identifying and addressing the structural issues at play.
The CPA Exam Gender Gap
The substantial gender gap in CPA exam success has been consistent over time. Previous research analyzing CPA exam data from state-level NASBA Reports finds that during 2005–2017, males passed at a considerably higher rate than females (Myers, Joan K., Mitchell A. Franklin, Greg M. Lepak, and Judy F. Graham, “The Impact of Gender and Cognitive Information Processing Models on CPA Exam Pass Rates: A Call for Research,” Journal of Business and Educational Leadership, vol. 7, no. 1, 2018, pp. 59–71). Female CPA pass rates are lower for both first-time and overall examination attempts, and this observation is consistent across age groups (Franklin, Mitchell A., Greg M. Lepak, and Joan K. Myers, “An Examination of Age and Gender Impact on CPA Examination Pass Rates,” ASBBS Proceedings, vol. 24, no. 1, 2017, p. 207). These gender differences are also consistent across racial groups (Ryan, Katherine and Allison M. Ryan, “Psychological Processes Underlying Stereotype Threat and Standardized Math Test Performance,” Educational Psychologist, vol. 48, no. 1, 2005, pp. 53–63).
Education and learning research finds that differences do exist between males and females. For example, females generally perform better in terms of attentiveness, organization, task persistence, eagerness to learn, learning independence and flexibility (Cornwell, Christopher, David B. Mustard, and Jessica Van Parys, “Noncognitive Skills and the Gender Disparities in Test Scores and Teacher Assessments: Evidence,” Journal of Human Resources, vol. 48, no. 1, 236–264). Males, on the other hand, perform better on standardized tests. This line of research is discussed further below.
Gender Differences in Information Processing
Males and females engage different information processing styles (Meyers-Levy, Joan, “Gender Differences in Information Processing: A Selectivity Interpretation,” Cognitive and Affective Responses to Advertising, ed. Patricia Cafferata and Allice Tybout, 1989). The Selectivity Model (Meyers-Levy, 1989) states that males are highly selective in utilizing information cues, focusing on those that are most highly available and disregarding others, sometimes irrespective of their relevance, whereas females tend to utilize both highly available and more subtle cues, and are therefore more comprehensive and detailed in their information processing. Hence, males tend to use heuristics and schema-based information processing strategies instead of the more comprehensive strategies employed by females. Put another way, females exert greater effort in processing information, and process it more comprehensively as a result. Females are also more likely to process inconsistent information cues. For example, in settings where information incongruity is high, females are more likely to process incongruent information (Meyers-Levy, Joan, and Brian Sternthal, “Gender Differences in the Use of Message Cues and Judgments,” Journal of Marketing Research, vol. 28, no. 1, 1991, pp. 84–96). These gender differences in processing style are also evident among accounting students. A study of information processing in an audit situation found that males are likely use a schema-based strategy whereas females are more detail-oriented, which leads to females paying more attention to disconfirming information (Chung, Janne and Gary S. Monroe, “Gender Differences in Information Processing: An Empirical Test of the Hypothesis-Confirming Strategy in an Audit Context,” Accounting and Finance, vol. 38, 1998, pp. 265–279).
Males’ tendency to home in on the most highly available cues while ignoring others intimates better performance on quick response multiple choice questions (MCQ). Indeed, research consistently demonstrates a link between male information processing and better performance on standardized exams, which tend to use an MCQ format (Ben-Shakhar, Gershon and Yakov Sinai, “Gender Differences in Multiple Choice Tests: The Role of Differential Guessing Tendencies, Journal of Educational Measurement, vol. 28, no. 1, 1991, pp. 23–35; Koivula, Natalie, Peter Hassmen, and Darwin P. Hunt, “Performance on the Swedish Scholastic Aptitude Test: Effects of Self-Assessment and Gender,” Sex Roles, vol. 44, no. 11/12, June 2001, pp. 629–645). Hence, many standardized tests underpredict the capabilities of female candidates (Fairtest, “Gender Bias in College Admissions Tests,” August 7, 2007). For example, although women generally perform significantly worse on the Graduate Management Admissions Test (GMAT), their performance in MBA programs is on par with men. Standardized exams for accountants are no exception.
Women in accounting seem to be disadvantaged at the outset of their professional careers, rendering the task of overcoming other factors that lead to gender gaps even more daunting.
It follows that the significant MCQ component of the CPA exam disadvantages women. At the same time, the comprehensive and detail-oriented information processing style of women should pay dividends in the field, because they are likely to take a more holistic approach to their work. Empirical findings support this idea; women excel at performing audits of complex estimates, and their clients tend to have lower abnormal accruals, indicative of less earnings management (Hasan, Batul Towfique, Parmod Chand, and Meting Lu, “Influence of Auditor’s Gender, Experience, Rule Observance Attitudes and Critical Thinking Disposition on Materiality Judgments,” International Journal of Auditing, vol. 25, 2021, pp. 188–205; Ittonen, Kim, Emilia Vähämaa, and Sami Vähämaa, “Female Auditors and Accruals Quality,” Accounting Horizons, vol. 27, no. 2, 2013, pp. 205–228). Continued transitioning of CPA exam focus away from MCQ-type questions toward simulation-type questions that more closely emulate real-world working conditions should benefit females while simultaneously emphasizing and rewarding application-level knowledge that is of greater value to CPAs in business.
Implications for the Profession
The authors measured the difference in exams scores (gender gap) and found that in all but one case, women scored significantly lower than men—that is, the pass rate for women CPA exam candidates taking the exam for the first time is significantly lower than that of their male colleagues. The pass rate is the number of sections on which a candidate receives a passing score divided by the total number of sections attempted (e.g., one candidate attempting four parts in a calendar year and passing two parts would generate a pass rate of 50%). Over a five-year period (2013–2017), on a national level, the gap was approximately 6.7 points. During the same time frame, women candidates’ pass rates were up to 17 points lower than their male colleagues when measured at the national, regional, or state level. Because this phenomenon relates to an early-career hurdle that is exceedingly crucial for career advancement and overall success in the accounting profession (Sean McCabe, “How much is the CPA Exam worth in 2019?” Accounting Today, June 21, 2019), this observation is especially troubling. Women in accounting seem to be disadvantaged at the outset of their professional careers, rendering the task of overcoming other factors that lead to gender gaps even more daunting.
There is a significant gender gap with respect to the CPA exam results. Female pass rates are markedly lower than those of their male colleagues. The authors found similar results at on all levels of measurement: national, regional, state, and university accreditation.
Although the national gender gap averaged 6.7 points during the time period studied, it actually increased over time, creeping up from 6.3 in 2013 to 7.2 in 2017. Schools of business with AACSB accreditation showed similar results. Schools without separate accounting accreditation had an even higher average gap of 7.5, but the gap fluctuated, falling from 7.8 in 2013 to 6.9 in 2017, but increasing to 8.2 by 2017. AACSB-accredited schools with separate accounting accreditation displayed a similar trend: The average gap was 6.6 points over this time period, starting with a gap of 6.0 in 2013 that increased to 7.0 in 2017. At regional levels, the gap has followed the national trend of generally increasing from 2013 to 2017, but is even higher for the New England and north central states.
In state-by-state comparisons for Minnesota and surrounding states, the gap is likewise problematic. The average gap varied from a high of 13.3 to a low of 6.8. Only South Dakota experienced a reversal of this trend, whereby women outperformed men (+12.4); however, this happened only in the year 2013.
This CPA exam performance gap is baffling. Research has found that female accounting students actually outperform male students, and women and men earn bachelor’s degrees in accounting in essentially equal numbers (Chung, Janne and Gary S. Monroe, “Gender Differences in Information Processing: An Empirical Test of the Hypothesis-Confirming Strategy in an Audit Context,” Accounting and Finance, vol. 38, 1998, pp. 265-279; AICPA, “Trends in the Supply of Accounting Graduates and the Demand for Public Accounting Recruits,” 2019). In addition, there are slightly more women than men pursuing graduate degrees in accounting. Exactly why women fall behind on the CPA exam is an empirical question that warrants additional research.
Looking to the Future
The gender gap in CPA exam performance should not exist, and yet it does. These are meaningful differences in the scores of men and women candidates. Importantly, the CPA exam score discrepancy indicates that a gender gap develops early in a woman’s career, which may undermine efforts to bring gender equality to the profession.
The authors put forth the following suggestions to help close the gap:
- Acknowledge the gender gap that exists at the national level, and address its causes and consequences at the local and firm level.
- Promote and conduct research to determine why women tend to score lower on the CPA exam, and act to modify the CPA exam based on these findings. This should start with interviews to identify and understand the barriers women faced while pursuing a CPA license. Consideration of work-life balance issues unique to women in accounting is important.
- Provide more flexibility with meaningful career paths. Alternative paths must be seen as moving towards partnership, not away from it.
- Develop more programs to address the work-life balance issues that disproportionately affect women.
- Mentors (women at the manager level or higher) can help women develop a three- or five-year program that includes passing the CPA exam as well as developing the professional and human relations skills necessary to succeed in public accounting (i.e., passing the CPA exam should be seen as only one marker on the path to developing a portfolio of skills associated with professional success).
Changes to the CPA exam that began implementation during the 2017 testing cycle place more emphasis on higher-order skills that CPAs need on the job (https://bit.ly/3DiCuoF). This may also mean a step in the right direction in terms of gender equity. Although the content remains mostly the same, testing will include questions that test analytical and problem-solving skills and professional skepticism, skills at which women tend to excel. The new approach moves away from measuring knowledge at the remembering and understanding levels of Bloom’s Taxonomy, toward assessing higher-order skills of application, analysis, and evaluation. Task-based simulation (TBS) questions receive increased emphasis, assessing 50% application and 50% analysis and evaluation. An additional feature of these TBS questions is a focus on candidates’ ability to distinguish between relevant and nonrelevant information. Accordingly, females should be able to better demonstrate their aptitude. Once the new CPA exam format is fully implemented and enough data becomes available, further exploration into question-type performance between males and females presents an interesting research opportunity.
The CPA exam gender gap demands acknowledgement at the national level, but must be solved at its roots.
The CPA exam gender gap demands acknowledgement at the national level, but must be solved at its roots. Although there is a clear acknowledgement of the pernicious effects of the gender gap nationally and while there are indications that some firms are making strides in this arena, actions aimed at acknowledging and addressing the problem are still sadly lacking at the lower levels. Yet, the authors remain optimistic that accounting professionals can solve the problem of implicit and explicit bias to make women truly equitable members of the accounting profession.
Rodger L Brannan, PhD, CPA (Inactive), CGMA, is an associate professor of accounting at the University of Minnesota Duluth.
Randall Skalberg, JD, LLM, is an associate professor of taxation and business law at the University of Minnesota Duluth.
Ruwan Adikaram, PhD, is an assistant professor of accounting at the University of Minnesota Duluth.
Andrew Fluharty is an assistant professor of accounting at the University of Minnesota Duluth.
The CPA Journal is known as the “Voice of the Profession,” and is The New York State Society of CPA’s monthly flagship publication and top member resource. An award-winning magazine and finalist for excellence in journalism (2018, 2017 FOLIO magazine awards), The Journal has over 95% nationally focused content written by thought leaders in the accounting and finance industry.
For more than 85 years, The CPA Journal has been earning its reputation as an objective, critical source of information on issues of interest to CPAs. The Journal provides analysis, perspective, and debate on the issues that affect the CPA profession. Major topics include accounting and auditing, taxation, personal financial planning, finance, technology, and professional ethics. The CPA Journal is issued monthly in print, and offers daily insight and analysis digitally here on cpajournal.com. Published by the New York State Society of CPAs, The Journal’s active editorial and review process ensures thorough technical quality and material relevant to CPAs in public practice, industry, government and education.