Editor’s note: This article is based on a Journal of Accountancy podcast hosted by Neil Amato featuring the AICPA’s Mike Decker, Vice President, CPA Exam and Pipeline and Joe Maslott, CPA, who serves as Director, CPA Exam Content Management. Go here to listen to the entire conversation.
The new Uniform CPA Examination is just over a year old. Let’s take a look at its structure and some tips for candidate success.
Recapping why CPA Exam changes were made
The CPA Exam changes were made to provide flexibility in initial licensure and align the Exam with the knowledge and skills needed by new CPAs, who need the knowledge and skills typically required of a person with one to two years of professional accounting experience.
The look and feel of the Exam is largely consistent with prior versions, with multiple choice questions and task-based simulations. Those task-based simulations are small case studies.
Under the new structure, all candidates must pass the Core sections: Auditing and Attestation (AUD), Financial Accounting and Reporting (FAR), and Taxation and Regulation (REG).
Candidates must complete one Discipline Exam section. Regardless of a candidate’s chosen Discipline, passing the Exam leads to the same CPA license. CPA professional practice is not limited or dictated by the Discipline passed.
The AICPA conducts practice analyses to ensure the CPA Exam remains aligned with professional practice. During the practice analysis for the new Exam, the AICPA engaged with hundreds of subject matter experts and other stakeholders to determine the appropriate content to be assessed in the Core and Discipline sections.
The Discipline choices are:
Information Systems And Controls (ISC), which aligns with IT audit and System and Organization Controls (SOC) engagements.
Tax Compliance and Planning (TCP), which focuses on tax compliance, tax planning, and financial planning, which is something the CPA Exam hasn't previously covered.
Business Analysis and Reporting (BAR), which covers a wide range of topics including higher-order concepts in lease accounting and revenue recognition. It also includes accounting for state and local governments and historical, current, and prospective analysis of the financial statements including data analytics.
Start with the Blueprints
A good place for students and CPA Exam candidates to start when considering the Exam is the CPA Exam Blueprints, a public document outlining the knowledge and skills assessed on the CPA Exam. “First, read the section introduction, which is a two- to three-page description of how the content is structured on the Exam and gives a nice overview,” suggested Joe Maslott, CPA, Director, CPA Exam Content Management for AICPA. “Then you can dig into the blueprints, which have the content, skills, and the representative task statements that really, in plain English, describe what a candidate needs to know and do on the Exam.”
Task-based simulation practice is key
The performance data shows that candidates are doing better on multiple-choice questions but are more challenged by the simulations. Candidates should include practice task-based simulations in their Exam preparation regimen. That includes using the Exam Blueprints to examine higher-order skills that are assessed via the simulations.
“As we look at the data, we’ve seen that candidates struggle with the task-based simulations or small case studies in the FAR and BAR sections, and we’re working with the Board of Examiners, which is a senior committee of the AICPA, to really break that down,” Masott said. “We think that candidates are still adjusting to those task-based simulations.”
For example, in FAR, the weighting of questions and the number of questions shifted with the launch of the new Exam to more analysis-based content, which is tested with task-based simulations. The simulations require candidates to consider and synthesize multiple elements to address the accounting problem they’re being tested on.
Consider Exam sequencing and let your interests guide your choices
CPA candidates work under a time limit to pass all Exam sections. What sets the clock ticking is passing the first Exam section of choice. What once was an 18-month limit for passing all four parts of the Exam is now at least 30 months, and in some states, three years. With the previous shorter window, the conventional wisdom was that it was best to attempt the challenging Core section Financial Accounting and Reporting (FAR) first. With more time, candidates may want to consider which approach best fits their circumstances.
“Instead of sitting for FAR first, should you sit for the one or two or potentially three sections that you’re most comfortable with and [finish] them quickly?” said Mike Decker, Vice President, CPA Exam and Pipeline for AICPA. “Let’s say, you're a tax professional, you sit for REG and TCP, hopefully, you can get that done in six months. Well, that leaves 24 months to pass AUD and FAR, and you could focus on each one taking almost a year to pass each one.”
“Sit for the Discipline that closely matches your education, experience, and passion,” Decker said. “Sit for that Discipline right after you’ve passed the related Core section. If you’re an auditor and … you sit for Audit, take ISC next because they’re related. … Test for where your passion exists, test for where you have the most education, and test for where you have the most experience.”
Biggest misconceptions around the new Exam
The CPA Exam is not scored on a curve. There is no pass-fail quota. The Board of Examiners sets an individual cut score for each of the sections, and AICPA, the National Association of State Boards of Accountancy (NASBA), and the Board of Examiners monitor to see how candidates perform on each section.
“The Exam follows rigorous psychometric standards, licensing examination standards, and focuses on what that one to two year level of accounting looks like. It’s not a graduation test, it’s a licensure test,” Decker said.
For more on the scoring of the Exam, go here and get details about the Candidate Performance Report that individuals receive if they fail an Exam section.
Shifting populations make comparisons difficult
Resist the urge to draw comparisons with previous pass rates. It is simply not apples to apples.
Various transitional measures and policy changes are intersecting with changes in candidate behavior and the new element of Discipline choice. The confluence makes drawing comparisons in current pass rates to previous rates challenging.
“We’ve got candidates who are returning to the pipeline and candidates who haven’t tested for a while. We’ve got candidates figuring out what the concept of choice means for the first time ever in the CPA Exam,” Decker said.
“We're seeing changing candidate behavior and then, clearly, there’s a lot of perceptions and expectations around the specific content, and that’s driving candidate choice.”
Continued monitoring
The new Exam is expected to have an adjustment period, just as there has been with previous updates.
Typically, with large-scale exam changes, pass rates increase over time as review course providers adjust, academia makes changes, and candidates get more comfortable preparing for the content.
The AICPA, NASBA, and the Board of Examiners, which provides oversight for Exam content, are monitoring the data. AICPA staff recently met with CPA Exam review course providers to hear their feedback and discuss candidate needs.
“Ultimately, I think you’ll see the pass rates increase,” Decker said, “which they’ve done every time after we’ve launched a new Exam after a practice analysis.”