Deciphering the State of Diversity in the Accounting Profession
As demographics change across the United States, there’s both business imperatives and moral reasons for why the accounting profession must keep up.
When Theresa A. Hammond published her book, “A White-Collar Profession: African American Certified Public Accountants Since 1921,” in 2002, she shone a light on the sullen fact that the accounting profession—and more specifically the CPA profession—among all the major professions, had “the most severe underrepresentation of African Americans,” emphasizing then that less than 1% of CPAs were Black. Two decades later, little has changed.
Just 2% of CPAs in U.S. accounting firms are Black as of 2020, according to the AICPA’s “2021 Trends” report released in spring 2022, which is regarded as an authoritative source on demographic trends in the accounting profession. In fact, significant change in the profession’s diversity has been arguably elusive over the 101 years since John W. Cromwell Jr. became the first Black CPA in the United States in 1921, some 25 years into the license’s existence. Also consider that it wasn’t until 1943, another 22 years later, that the first Black woman was granted a CPA license—the esteemed Mary T. Washington Wylie, who was licensed in Illinois and played a pivotal role in the advancement of Black CPAs. Her firm became known as an “underground railroad” for Black CPAs, as Black accountants from across the country moved to Chicago just for the chance to work for her and gain the experience needed to earn the coveted CPA credential. Maybe more staggering, however, is the fact that it took some 45 years—stretching deep into the 1960s—for just the first 100 Black accountants to become licensed CPAs.
There’s no denying that the success against the odds of the early Black trailblazers—who determinedly overcame racial, economic, and educational barriers—opened a door through which thousands of Black accountants would eventually pass. However, paving the way for future generations of Black accountants and CPAs has continuously been met with challenges. Hammond’s book reminds us that, prior to the 1960s, few white-owned accounting firms would even employ Black professionals, widely denying them the requisite experience to ever become CPAs. And despite the eventual rise of the civil rights movement and establishment of historically Black colleges and universities with business and accounting programs, race-related issues throughout our nation’s history have often hampered Black participation in the profession.
Consider this: The U.S. Census Bureau’s 2020 census measured the country’s Black population at 12.4%, yet the Black population of CPAs in 2020 stood at just 2%. The “2021 Trends” report further highlights that the Black population of U.S. CPA firm partners—those in the most visible leadership roles of these firms, and with the most power to influence change—also stood at just 2%. Conversely, 2020 census estimates indicate white individuals made up 61.6% of the U.S. population, while white accountants made up 77% of CPAs and 82% of CPA firm partners at that same time. The disparity is clear. That said, it’s not just Black accounting graduates and professionals that are struggling to gain ground in what has historically been a white, white-collar profession.
Again, we can look to 2020 census figures: Individuals identifying as Hispanic or Latino make up 18.7% of the U.S. population; Asian individuals account for 6%; and individuals identifying as “Two or More Races,” i.e., multiethnic, account for 10.2% of the population.
Now, compare those figures to the “2021 Trends” report’s populations among CPAs: Hispanic or Latino, 5%; Asian or Pacific Islander, 14%; multiethnic, 2%. If you assume these numbers are lower at the partner level, you’re correct.
Executive recruiting firm Crist|Kolder Associates’ “Volatility Report 2022” also gives us a glimpse into the state of diversity at the highest level of corporate finance—among chief financial officers (CFOs). The report analyzed 681 S&P 500 and Fortune 500 companies, of which 677 had sitting CFOs. Among them, 10.9% were “non-white” in 2022. Putting that into perspective, just 74 of the 677 CFOs leading our largest companies are minorities—43 Asian (6.4%), 19 Black (2.8%), and 12 Hispanic or Latino (1.8%).
Again, clear disparities in representation exist within CPA firms and within our largest, often most visible companies. Currently, the Asian population is the only racial or ethnic minority group in the accounting profession that has strong representation when compared to its percentage among the U.S. population, yet even this group struggles to maintain equal representation at the executive levels.
The accounting profession can’t afford to ignore the race-related inequities and barriers that exist within it. Nor can it ignore this simple fact: People like people who are like them. Why would a client or company want to do business with an accountant or CPA firm that they can’t, don’t, or won’t identify with? In our increasingly socially conscious culture, they wouldn’t. Put another way, the profession will struggle to remain relevant if it doesn’t look like the people it serves. Beyond simply doing what’s morally right to ensure equal opportunity for all, there’s a clear business imperative for increasing diversity, equity, and inclusion (DEI) across all levels of the accounting profession.
The AICPA suggests there’s a hint of change on the horizon: “While at a slower pace than we’d like to see, diverse hiring has increased.” In fact, the “2021 Trends” report shows, for the first time since 2012, the percentage of white accounting graduates hired into the accounting/finance functions of U.S. CPA firms has declined, down five percentage points to 65% of new accounting graduates hired. Hiring of Asian or Pacific Islander, Black or African American, Hispanic or Latino, and multiethnic new accounting graduates all increased ever so slightly in the latest report, accounting for the decline in white new hires.
The AICPA’s findings show that the diversity of accounting graduates is also shifting slightly. While white accounting graduates are still the majority (59%), 13% are Hispanic or Latino, 9% are Asian or Pacific Islander, 8% identify as “Other,” and 7% are Black, edging closer to aligning with our country’s changing demographics.
And while slightly increasing diversity over one reporting period doesn’t yet make a trend, those wishing to be cautiously optimistic might see this recent uptick as notable for a couple of reasons.
One, our population will continue to become more diverse. Directly quoting the U.S. Census Bureau on its 2020 census figures: “Nearly all groups saw population gains this decade and the increase in the Two or More Races population … was especially large (up 276%) [from 9 million people in 2010 to 33.8 million in 2020]. The white alone population declined by 8.6% since 2010.” Further, the bureau has already said that its 2021 population estimates, released in mid-2022, indicate that “all race and Hispanic origin groups experienced population increases, apart from the white population.”
Two, a more diverse accounting student and graduate pipeline can be seen as a small testament that, combined with demographic shifts, the national initiatives and action items focused on increasing awareness of the accounting profession among minority populations are beginning to work—but there’s more work to be done.
Convincing diverse students to major in accounting is just one part of deciphering how to achieve greater DEI in the accounting profession. And while achieving a much-desired uptick in diverse hiring is another key to the code, a new survey by the Illinois CPA Society shows that more diversity among accounting students, graduates, and even new hires doesn’t necessarily translate to their long-term sustainability or success in the profession. That’s because what many of them are experiencing once becoming part of the profession is what’s ultimately driving them out of it.
For more on the disparity of diverse talent in the accounting profession, read the latest Insight Special Feature, “A CPA Diversity Report: Uncovering the Barriers to Success” at www.icpas.org/cpadiversity.
Derrick Lilly is the Illinois CPA Society’s assistant director of communications and publications and editor-in-chief of Insight.