Accountants as Problem SolversBy
Managers often complain that accounting graduates aren’t prepared for today’s business environment. The complexity of our global economy and the increasing influence of, and reliance on, technology leads to practitioners and instructors questioning if undergraduate accounting programs focus on the right curriculum to prepare students for careers.
One soft skill that can help prepare accounting students for their careers is problem solving. Management accountants need to be able to work cross-functionally to solve problems and provide meaningful analyses. Many colleges, universities, and accrediting bodies in academia incorporate strategic goals requiring curriculum that facilitates problem-solving skills.
As instructors, we teach technical accounting skills by demonstrating and providing practice with accounting concepts and structured problems, which we assess via homework and exams. Teaching soft skills, such as unstructured problem solving, poses greater challenges that are more difficult to incorporate into the curriculum. How can students learn and approach unstructured problem solving?
A SLOW-THINKING APPROACH
Recent scientific discoveries into the brain reveal that humans employ fast and slow thinking to solve problems. The brain especially prefers making decisions and solving problems quickly based on recognized patterns, visual and verbal cues, prior knowledge, routines, familiar preferences, prejudices, and emotions.
In contrast, decision making and problem solving often require slow thinking to digest new information, hypothesize alternatives, employ quantitative mathematical and statistical analysis, overtly recognize and break free from cognitive biases, challenge preconceived notions, synthesize ideas, and create new knowledge. To support this kind of slow, rational thinking, accountants can learn a methodical process for problem solving (see Table 1).
Many common business models—such as Six Sigma, A3 Lean, and Appreciative Inquiry—and the Association of American Colleges and Universities value problem solving, and critical-thinking grading rubrics describe specific steps for rational (i.e., slow thinking) problem solving. Business students, however, learn and apply these models in various courses, typically with no thread that ties them specifically to the accounting profession. Students learn bits and pieces of rational thinking throughout their undergraduate coursework, but instructors often don’t teach a common framework to apply these skills in a relevant and value-added way (see “Survey of Practitioners”).
To help address this issue, we developed a problem-solving rubric for accounting students (see Table 2). The three of us are faculty members from Metropolitan State University in Minneapolis/St. Paul, Minn., and represent three different parts of the curriculum (auditing, business taxation, and management accounting), so it was important that it could be used across the entire accounting program.
The rubric assesses learning in an organized way, providing a common framework (criteria) for students to consistently approach problem solving. The criteria include problem identification, analysis, and communication of results. It guides students through a series of problem-solving steps using terms and vocabulary specific to the accounting profession. The rubric also reminds us, as instructors, to create a learning environment where problem solving can occur (see “Setting the Tone”).
STEP 1: PROBLEM IDENTIFICATION
The iterative and looping nature of problem solving confounds inexperienced accountants. Where does one begin? Students tell us using a rubric provides a starting point.
To implement the rubric, we assign students projects with unclear goals, incomplete information, and more than one possible solution. Assignment topics vary. It could have students develop a cost-benefit analysis between adding employees or adopting Lean manufacturing techniques, analyze tax outcomes of business decisions, create a risk assessment and audit response for a fictitious client, or some other accounting-related issue.
Students begin by developing one or several hypotheses as to the nature of the problem. To generate ideas, we assist students in their brainstorming discussions. The rubric leads students to consider the environment, strategy, unexpected observations, overall importance, and risk assessment. At this stage, the identified problem may change, but the original hypothesized problem gives direction for next steps. Upon completing the assignment, we assess students on how they identified the problem.
Metropolitan State University’s business taxation course used the rubric in a case study that involves assessing the implication of the Wayfair v. South Dakota U.S. Supreme Court decision on a company’s sales tax collection. Prior to Wayfair, companies operated under a physical presence nexus established in Quill v. North Dakota. The Quill decision required companies to have a physical presence in a taxing jurisdiction in order to require collection and remittance of sales taxes on transactions.
In Wayfair, the U.S. Supreme Court overturned Quill in favor of an economic nexus standard, where companies only needed to have a certain level of economic activity. For example, in South Dakota, the threshold economic activity is 200 transactions or $100,000 in sales. The change from Quill to Wayfair was a major development in how companies operate and collect sales tax. It required companies to assess all jurisdictions in which they operate and evaluate how the change in the nexus standards impact its operations.
To apply this rubric to the change, students learn about a fictitious company that sells inventory to multiple states and collects and remits sales tax under the Quill physical presence nexus standard. We give students a subledger with all sales data for the given year. The rubric leads students to ask about implications of the Wayfair decision on the company, how the ruling impacts the company’s strategic objectives, and risks to the company because of the change in the law. Using the rubric, students are guided to discover the issue at hand, which is whether the company will have a significant number of new sales tax jurisdictions requiring collections and remittance from its customers.
Students tell us that without the rubric, they often feel like they have no road map at the beginning of a project or case study; identifying the problem seems too big and undefined to tackle. Many students initially resist engaging with unstructured problem-solving assignments because they differ from past assignments. Similar to what one might find in cross-functional teams opposed to change, students show their displeasure with crossed arms and distant body language.
Many college courses still rely on testing facts and use formulas and calculations, an approach that doesn’t put the student in the decision-making role but is familiar to them. With a rubric, students see smaller doable steps, where the assignment is heading, and how they can move forward and loop backward, when necessary. The rubric breaks down the initial intimidation students feel with unstructured problems.
STEP 2: ANALYSIS
Next, the rubric guides students through analyzing the problem using accounting-specific skills they’ve acquired in each course. For example, students consider tax laws, financial reporting and audit principles, or cost accounting techniques.
Continuing the sales and use tax example, at this stage, students apply the rubric to perform a complete analysis, enabling them to form a conclusion to communicate. What are the relevant facts to determine Wayfair’s impact? What facts are irrelevant? What primary and secondary tax authority is needed to conduct research? Are there alternatives and exceptions to applying Wayfair? Have all states adopted an economic nexus standard? Have all states adopted South Dakota’s transactional thresholds? What’s the quantitative impact to the company? Are there financial accounting implications to the Wayfair decision? What’s the scope of the necessary research, and are there limitations, constraints, and so on? Through the rubric, students formulate and answer questions and perform analysis to solve the problem at hand.
We assess students on their ability to gather and identify relevant facts, research any applicable rules and laws, assess alternatives, and perform any needed qualitative and quantitative analyses. At this stage, students apply theories and best practices learned in specific course fields, such as management accounting, taxation, and auditing.
To encourage elaboration, the rubric uses words such as curious, skeptical, model, assumption, authoritative, best practices, relevant, and sufficient sources. Like many accountants, students want to get their work done quickly, but problem solving takes time and slow thinking. Thanks to the rubric, more students turned in papers with greater depth, less “cut and paste,” and more relevant supporting details.
As in the real world, students often discover their original hypothesis or identified problem is incorrect, incomplete, or irrelevant. They confront the iterative nature of problem solving as they work through the analysis stage and build evidence to support their hypothesis. When evidence doesn’t support an identified problem, students go back and redefine their problem, gather new evidence, explore new alternative solutions, and build a case for their conclusion.
STEP 3: COMMUNICATION
Finally, students present their results in a memorandum to a hypothetical manager or audit partner. The memorandum mirrors common styles, such as IFRAC (issues, facts, rules, analysis, and conclusion) and BLUF (bottom line up front). Students state the problem and include the conclusion (i.e., solution) up front along with a summary of relevant facts and assumptions. Supporting documentation presents additional in-depth analysis.
This format familiarizes students with a presentation style that allows management to quickly understand conclusions while also providing more depth to support the up-front conclusion. We expect students to write and present findings in a clear and concise manner as if in a professional accounting setting. The rubric grading criteria helps students solve problems using rational thinking and delivering a memorandum that directly supports management decision making.
In the Wayfair case study, students draft a memorandum to management addressing the implications of the sales tax nexus precedence change. The facts section should discuss the company’s current sales and use tax policies. Students identify the issue as the change from physical presence nexus to economic nexus. The up-front conclusion should identify new jurisdictions from which the company needs to register and collect sales tax and quantify the volume of sales tax it expects to collect. Finally, the analysis provides an in-depth discussion of the change from Quill to Wayfair. Students should discuss how they determined new jurisdictions, limitations, and further required resources for the company.
PREPARING STUDENTS FOR THEIR CAREERS
We use the rubric format for projects or cases at different stages throughout the accounting curriculum. The problem-solving rubric measures student learning and reinforces rational thinking with each assignment. The projects that use the rubric vary in length, depth, and complexity as students move from management accounting to tax and then finally to audit. We find the rubric flexible enough to adapt to an instructor’s needs, yet it provides consistent core steps—identify the problem, analyze, and communicate—to solve problems.
The rubric helps students organize their communication through the memorandum. Setting up a memorandum so the problem and solution appear “up front” highlights mismatches between the problem, evidence, and conclusion. Further, it encourages students to decide—rather than ramble and include information that isn’t relevant. We find students often get to the communication stage and realize that their analysis doesn’t support their conclusion or identified problem. Fortunately, the rubric allows them to loop back and redefine and reanalyze.
By using the same grading criteria in multiple courses, we provide students with a familiar approach to problem solving that turns fast thinking to slow, rational thinking. The process and steps become routine and less daunting for the student. While each step still requires arduous thinking, the approach itself is a recognized pattern for students.
From our point of view as accounting instructors, the rubric helps provide consistent and fair grading. We provide separate points for milestones in problem identification, analysis, and communication, which further encourages students to go through each step of the process. Metropolitan State University plans to expand the use of this rubric in the accounting curriculum. This common framework provides students with a process to identify problems, research and investigate facts, conduct analyses, and communicate results across all accounting disciplines.
This process reinforces the problem-solving skills that students will need in their professional careers. These capabilities will help them perform their roles in today’s strategic, fast-paced business environment. Solving problems is critical for today’s management accountant. Through implementing the rubric, instructors can help students systematically apply a problem-solving process that they can take with them as they move from student to management accountant.