Accounting Articles for Students

A New Exam for a Changing Profession

by SmartPros | Published on 4/10/2003

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Say goodbye to the pencil-and-paper CPA exam. The last such exam is set for November. Come spring 2004, a new computer-based exam will be launched in its place that tests candidates on both their technical proficiency and their ability to integrate business knowledge

New Structure and Content
Being developed under the guidance of the American Institute of CPAs Board of Examiners (BOE), the revised exam will emphasize the analytical, communication and research skills that are critical -- along with technical expertise -- in today’s business environment.

The exam will more accurately reflect the knowledge and skills that employers require of entry-level CPAs. To meet that goal, the BOE’s Content Committee, comprising academics and accounting professionals, reviewed the results of the 2000 Accounting Practice Analysis to determine what content areas the exam should cover. The resulting four sections are: Auditing and Attestation, Financial Accounting and Reporting, Regulation, and Business Environment and Concepts.

The table below compares the areas tested under the current structure and the revised structure. The percentage shows how much each topic counts for within that section of the exam.

Current Exam (and Weight in %)	Revised Exam (and Weight in %)
Auditing (100%)	Auditing & Attestation (4.5 hours) 100% Covers knowledge of auditing procedures, generally accepted auditing standards (GAAS), and other standards related to attest engagements.
Financial Accounting & Reporting (100%)	Financial Accounting & Reporting (4 hours) Covers knowledge of generally accepted accounting principals (GAAP) for business enterprises, not-for-profit organizations and governmental entities. 80% Business enterprises 10% Governmental entities 10% Non-profit organizations
Accounting & Reporting 60% Taxation 30% Governmental and not-for-profit organizations 10% Managerial (measurement)	Regulation (3.5 hours) Covers knowledge of federal taxation, ethics, professional and legal responsibilities, and business law. 60% Taxation 40% Law & Professional Responsibilities [all areas other than business structure]
Law & Professional Responsibilities 20% Business structure 80% All areas other than business structure	Business Environment & Concepts (2.5 hours) Covers knowledge of underlying business reasons for and accounting implication of business transactions. 20% Business structure 10% Managerial (measurement) 70% All areas other than business structure and measurement

New Skill Testing
The 2000 Accounting Practice Analysis consisted of a survey to rate the tasks performed by entry-level CPAs and the knowledge and skills required. The analysis concluded that, in addition to being technically knowledgeable, today's CPAs need to be good at:

• Communicating

• Understanding

• Researching

• Organizing and analyzing information

• Making sound judgments

CPA candidates taking the computerized exam must demonstrate proficiency in those areas in each of the four sections of the exam. Each section will consist of multiple-choice questions and simulations. Multiple-choice questions will constitute approximately 80 percent of each section, while the other 20 percent will consist of simulations, each 20 to 40 minutes long.

The simulations will be case studies that test a candidate's accounting knowledge using real-life work situations. Most simulations will contain some research activity, usually involving an electronic search for standards or regulations in authoritative literature. For the Auditing and Attestation section, research also may include accessing work papers or other published material such as annual reports. Simulations will also require candidates to demonstrate their communication skills through such exercises as writing a letter or memorandum to a client. Those writings will be evaluated for content, clarity and coherence.

In addition to research, communication and analytical skills, the exam will require that candidates know how to work with computer software. They will need to know word processing and spreadsheet programs, including how to write spreadsheet formulas.

New Format
The change to a computer-based test will significantly alter the exam experience and the way in which candidates are tested. The AICPA has teamed up with Prometric, which will deliver the exam through more than 300 testing centers in the United States.

Although candidates may have to make an appointment to sit for the exam at specified testing centers, the exam will be offered in four exam windows per year, as opposed to the current two times per year. The four sections of the exam will be offered up to six days a week, two out of every three months, throughout the course of a year. Candidates will continue to apply for the exam through their state board of accountancy. While each state board will make the final decision regarding the granting of credit, the BOE has developed the following recommendations for administering the exam:

• Candidates should be allowed to sit for each section of the exam individually, and in any order.

• Candidates should be allowed to retain credit for any section(s) passed for 18 months, without having to attain a minimum score on failed sections and without regard to whether they have taken other sections.

• Candidates should be given a "rolling" 18-month period in which to pass all four sections, beginning on the date the first section is passed.

• If all four sections of the exam are not passed within the 18 months, credit for any sections passed after that period should be considered expired and that section required to be retaken.

According to the AICPA, the new format will not result in a dramatic increase in the cost of the exam, which will remain one of the most economical among licensure-related examinations. The AICPA estimates the average cost will be $533. The fee to take all four parts of the exam will be approximately $458; although the state boards have yet to set their fees for processing applications, the assumed average is $75. The cost for licensure-related exams for the top eight professions -- accounting, architecture, dentistry, engineering, law, medicine, nursing and pharmacy -- ranges from $237 (engineering) to $1,730 (medicine).

 For more information and the latest developments on the new computerized CPA exam, visit www.cpa-exam.org or www.nasba.org

Article courtesy of SmartPros.com

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