CPA
In order to become a CPA in the US, one must pass the Uniform CPA Exam.
Eligibility to sit for the Uniform CPA Exam is determined by individual State Boards of Accountancy. Typically the requirement is a U.S. bachelors degree which includes a minimum number of qualifying credit hours in accounting and business administration with an additional 1 year study. This requirement for 5 years study is known as the “150 hour rule” and has been adopted by the majority of state boards, although there are still some exceptions (e.g.California). This requirement mandating 150 hours of study has been adopted by 45 states.
Since 2004, the exam has been entirely computer based. Research skills are assessed, as are the ability to use electronic tools-of-art, such as rudimentary spreadsheets, as well as widely-used dataabse software.
The testing year is divided into four “windows”. In each three-month window the candidates may take one or more sections, but may only take each section once.
Credit earned for passing a section is valid for 18 months. If a CPA candidate fails to pass all four sections within an 18-month period, credit is lost for any section passed more than 18 months earlier and must be retaken.
Sections and topics covered
The sections have been reorganized as follows:
- Auditing and Attestation (4.5 hours): (AUD) – This section covers knowledge of planning the engagement, internal controls, obtaining and documenting information, reviewing engagements and evaluating information, and preparing communications.
- Financial Accounting and Reporting (4.0 hours): (FAR) – This section covers knowledge of concepts and standards for financial statements, typical items in financial statements, specific types of transactions and events, accounting and reporting for governmental agencies, and accounting and reporting for non-governmental and not-for-profit organizations.
- Regulation (3.0 hours): (REG) – This section covers knowledge of ethics and professional responsibility, business law, Federal tax procedures and accounting issues, Federal taxation of property transactions, Federal taxation – individuals, and Federal taxation – entities.
- Business Environment and Concepts (2.5 hours): (BEC) – This section covers knowledge of business structures, economic concepts, financial management, information technology, and planning and measurement.
The Uniform CPA Exam tests primarily understanding and the ability to apply authoritative literature—such as auditing and accounting standards, the Uniform Commercial Code, and the Internal Revenue Code—that are universally adopted by all US jurisdictions or are federal in nature. Every effort is made to avoid asking about subject matter that may have different correct answers in different jurisdictions.
Testing method
Multiple-choice questions comprise approximately 70% of the exam, while the other 30% consist of simulations, with the exception of Business Environment and Concepts (BEC). Accounting knowledge is tested in simulations through a variety of tasks, some of which require searching databases, completing written communication exercises, and working with spreadsheets and forms. The skills that simulations are intended to measure are: analysis, judgment, communication, and research.
In all simulations, candidates are presented with a situation and are instructed to write a letter or memorandum on a specific topic.
Written communication responses are scored on the basis of three criteria:
- Organization – structure, ordering of ideas, linking of ideas one to another.
- Development – presentation of supporting evidence.
- Expression – use of standard business English.
Responses that do not address the assigned topic are not scored.
In Auditing and Attestation (AUD), Financial Accounting and Reporting (FAR), and Regulation (REG), multiple-choice testlets account for 70%, and simulations (case studies) 30%, of the score. The 30% simulation portion is further divided into 10% for written communication and 20% for all other parts of the simulation. It has been said that only one of the two communications is graded for the full 10% and the other is not graded at all. In Business Environment and Concepts (BEC), multiple-choice questions account for 100% of the score, although the AICPA has planned to introduce simulations.
During the examination, candidates may take a break after completing a “testlet” (either a set of multiple choice questions or a simulation). Once a testlet is completed, however, the candidate is not allowed to return to it, so it is not possible to use the “break time” to improve one’s score by looking up answers. The clock continues to run during breaks.
The “bank” of questions is much larger than the set presented to each candidate. Different candidates (even taking the examination at the same time) may therefore receive a completely different examination. This variance is accounted for in the scoring.
Adaptive testing
The Uniform CPA exam is administered using a modified adaptive testing model. Each CPA candidate begins the exam with a multiple-choice item testlet of moderate difficulty, after which an ability estimate based on item response theory is made. If the candidate’s ability estimate is sufficiently high, the second testlet administered is more difficult. If the estimate fails to meet that threshold, another moderately difficult testlet is administered. After completing the second testlet, a new ability estimate is computed. If that estimate exceeds a predetermined threshold, a difficult testlet is administered as the third testlet. If not, a moderately difficult testlet is administered. On sections that contain simulations, these are administered after the third multiple-choice testlets. The simulations are not administered adaptively. That is, there is no relationship between a candidate’s ability estimate and the simulations administered to the candidate.
A candidate is free to review and change any answers within a testlet or simulation until the candidate submits the work as completed. From that point on, the candidate may not review or change answers in a completed testlet or simulation.
The AICPA takes the position that adaptive testing allows the ability of a candidate to be assessed with fewer questions than would be required for a static, or non-adaptive, testing methodology.
Currently, the BEC portion of the exam is not adaptive and it has not been announced when it will be.
Scoring
The score represents the candidate’s overall performance on the identified examination section. Scores are reported on a numeric scale of 0 to 99, with 75 as the passing score. The scale does not represent “percent correct.” A score of 75 indicates examination performance that hypothetically reflects a level of knowledge and skill required for the protection of the public.
Per NASBA’s website, completed tests are sent to the AICPA for scoring. The Examination Section ID only is used for identification. When the candidates performance has been scored NASBA receives the scores for processing. The scores are subsequently forwarded to Boards of Accountancy for their approval and release. Each Board of Accountancy maintains its own process and schedule of releasing the scores to candidates.
