The Certified Public Accountant (CPA) exam is a licensure exam for accountants. The exam is offered by the American Institute of Certified Public Accountants, as well as several other professional organizations. However, licensure is granted by each state’s board of accountancy. The CPA exam is used in all fifty states as well as in several United States territories, including Puerto Rico, Guam, the U.S. Virgin Islands, the Northern Mariana Islands, and the District of Columbia.
The CPA exam is the first step towards gaining licensure as an accountant. However, passing the CPA exam alone will not guarantee licensure. You also need to reach a level of experience and education in your career in order to become licensed. The particular levels of education and career experience necessary may vary from state to state. Most states require you to have earned at least 150 college credits. A bachelor’s degree in accounting is usually 120 credits, so you need slightly more college credit than a bachelor’s degree in order to become licensed as a Certified Public Accountant. Many accounting degree programs are designed to help their graduates eventually become CPAs, so if you are still in school, check with your university’s career center and see what programs are available to help you earn your additional 30 college credits and pass the CPA exam. Some colleges will also offer study courses for the CPA exam outside of your regular coursework.
While many accountants become Certified Public Accountants early on in their careers, some do not. However, becoming a Certified Public Accountant by passing the CPA exam and amassing the other necessary licensure requirements is an important step to ensuring career mobility. Because most accountants are licensed CPAs, you will not be as marketable as your colleagues without obtaining licensure. Becoming licensed shows prospective employers and clients that you continuously remain up to date in your field and that you bring a high standard of knowledge of accounting to your work.
When you register to take one section of the CPA exam, you should allot an extra thirty minutes for your test appointment. For example, if you register to take the Financial Accounting and Reporting section of the CPA exam, your test appointment will be four and a half hours long. The extra half hour is for taking a brief survey and administrative procedures necessary to administer the CPA exam.
Content of the CPA Exam
The CPA exam is divided into four distinct content sections. Each section is three or four hours long, so CPA examinees do not take all of the sections of the test at once. Most examinees take two sections of the exam at a time; however, if you wish to take all four sections separately, you can. You can also take the four sections of the CPA exam in any order. You may wish to start with the section that is the easiest for you, or you may wish to get the most challenging section out of the way first. You just need to complete all four sections within one and a half years. Questions on the CPA exam are designed to encompass situations and scenarios that you may encounter on the job as an accountant. The CPA exam is meant to be a means of assessing your competency for performing your job duties well.
- The first section of the CPA exam is Auditing and Attestation. The content on this section of the exam covers procedures for auditing as well as procedures for evaluating evidence. You should know how to respond to risks and document evidence properly. You should also be able to evaluate whether financial documents are accurate or contain errors as well as prepare your own reports on what you discover. The Auditing and Attestation portion of the exam will also require you to have knowledge of how to do your job within the proper ethical standards. You will need to be familiar with these standards as well as how they apply to various situations you could encounter on the job.
- The second section of the CPA exam is Business Environment and Concepts. For this portion of the CPA exam, you will need to know financial management techniques and how these could apply to your potential clients or employers. You will also need a solid understanding of economic principles on the micro and macro level. Some accountants function as budget analysts or consultants as well as auditors, and this portion of the CPA exam is where you will be tested on your analytical skills with relation to business. You will need to know how to plan for a business’s long term success and how to amend businesses plans when necessary. You will also be tested on information systems and communications in the Business Environment and Concepts section of the CPA exam.
- The third section of the CPA exam is Financial Accounting and Reporting. This section will test you on how to prepare and read financial statements. You will need to know the various components of different kinds of financial statements and how to interpret financial statements in meaningful ways to your clients. The Financial Accounting and Reporting section of the CPA exam also covers content related to working within different fields of accounting. You will need to know what factors about your job description could changes if you are working for a government agency, a non-profit organization, or as an in-house accountant for a private company or corporation.
- The final section of the CPA exam is Regulation. This section covers ethics, taxes, and law. You will need to understand the federal tax process and how it relates to accounting, as well as how federal taxes influence property exchanges, individuals, and entities such as corporations or other organizations. You will also need to understand your ethical obligations as an accountant and why maintaining a high standard of ethics is important to your career. You need to understand what legal obligations you are under as an accountant in case you encounter a situation of fraud. You should know the procedures for handling these situations ethically and properly. You should also understand business law and the ways in which it can change over the years, and how potential changes in business law could affect your clients or employers.
Continuing Education and the CPA Exam
Passing all four sections of the CPA exam is only the first step to maintaining your licensure as a Certified Public Accountant throughout the course of your career. When you first obtain your licensure from your state’s board of accountancy, you will have to meet a minimum work experience requirement as well as a minimum education requirement. The minimum requirements for work and education may vary slightly from state to state, but usually the minimum education requirement is thirty credit hours more than those necessary to earn a bachelor’s degree.
Once you have obtained licensure as a Certified Public Accountant by passing the CPA exam and acquiring the necessary work and education experience, you will need to earn Continuing Professional Education credits (CPEs) in order to maintain your licensure. Earning CPEs gives licensure as a CPA more credibility, because it ensures that all licensed CPAs have kept abreast of new trends and technology in their field and have pledged to be lifelong learners in order to remain at the top of the accounting field. It is because of CPEs that employers and clients value licensure as a CPA so highly.
The American Institute of Certified Public Accountants (AICPA) requires that its licensed CPA members earn 120 CPEs every three years in order to remain licensed. You will also need to meet a minimum number of CPEs each calendar year; you cannot attempt to earn all of your CPEs at the last minute or stock up on CPEs at the beginning of the three year cycle. The AICPA has a formula for converting college credit hours into CPEs. Usually you will receive fifteen CPEs for each college semester credit hour you earn. You will receive ten CPEs for each college quarter credit hour you earn. For other CPE events you attend that do not give college credit, you will generally be awarded roughly one CPE for each clock hour you spend at a CPE seminar or workshop.
You can attend college classes or other workshops and seminars as a means to earn CPEs. The AICPA can be a great resource for locating CPE events near you. You also may want to check with your alma mater and see if the accounting program through which you earned your bachelor’s or master’s degree offers any CPE programs or classes. The subject matter of CPEs can vary greatly. You may attend CPEs based on new technological advances in accounting computer software, changing trends or ideas in the accounting industry, or recent updates to tax laws. You can choose CPEs based on your personal interests. However, it is wise to choose CPEs that cover any industry changes that could affect your career. That way, you can ensure that you do not fall behind your colleagues and can present the most up to date information to your clients.
You are responsible for keeping track of all of the CPEs that you earn. You may or may not be asked to supply the AICPA with documentation of the CPEs that you earn, but your best bet is to keep accurate records in case you do need to produce documentation. When you renew your membership and pay your AICPA dews every three years, you will need to submit your CPEs.
There are a few situations in which licensed CPAs can maintain their licensure without earning 120 CPEs in a three year time period. CPAs currently serving in the military, retired CPAs, or CPAs otherwise on a leave of absence from their work in accounting are exempt from the CPE specifications, and can remain licensed members of the AICPA. These exemptions exist so that CPAs in extenuating circumstances are not punished by being unable to earn their CPEs with a valid reason. However, when a situation changes and you are actively working as an accountant again, you will need to resume earning and documenting your CPEs.
Who Takes the CPA Exam
While some accountants merely go by the job titles of “Accountant” or “Certified Public Accountant” there are many different career paths in the accounting field. Some of these career paths have their own certification exams, and people pursuing these paths may opt to take those exams in place of the CPA exam, while some will opt to take both as a means of keeping their options open for various kinds of work in accounting. The CPA exam is the most general of certification exams for accountants, and applies to accountants working in many subsets of the accounting world.
Many accountants who take the CPA exam work as auditors. Auditors often work for large accounting firms and travel to their clients’ sites, especially at the onset of their careers. Auditors are very detail oriented and spend a great deal of time going over financial documents in order to ensure that everything in these documents is correct. Auditors must have strong concentration and a good work ethic. As their careers grow, many auditors go on to work in-house for private companies, for the government, or for non-profit organizations. Some auditors go on to become self-employed so that they can have greater control over their work schedule. Because businesses and organizations of all kinds need auditors in order to ensure that their financial documents comply with tax codes and the law, job security for auditors is fairly high. Job security at a particular employer may not always be high, but job security in the industry usually holds steady. Usually the busiest time of year for auditors is tax season, which lasts roughly from January until mid-April.
Some accountants work as management accountants, which are also sometimes referred to as financial accountants. Management accountants work in-house for a large company and are responsible for creating and verifying their employer’s financial documents. Some management accountants perform job duties similar to those of auditors; the difference is that they do all of the work directly for their employer rather than being farmed out by their employer to various clients. Sometimes management accountants also take on a consultancy role for their employer. In this consultancy role, they help their employer analyze the budget and determine how to maximize profits and minimize loss. Management accountants analyze the budget to determine which areas of the company are profitable and should receive a higher investment of company assets and which areas of the company are not receiving high returns and should have funding diverted.
Many management accountants take the CPA exam at the onset of their careers. Usually to be hired as a management accountant you need to amass some experience in the accounting industry in order to be a competitive job candidate. Some auditors who begin their careers working at large accounting firms will go on to become management accountants later on in their careers after passing the CPA exam.
Some accountants who take the CPA exam go on to become financial planners. Accounting provides a solid background for work as a financial planner, and having passed the CPA exam shows your clients that you have a strong background in accounting and a solid base of knowledge of the financial world. Many financial planners are self employed and help their clients map out their financial future. For example, financial planners may analyze a client’s income and assets as well as that client’s financial goals, such as saving for educational expenses or buying a house. The financial planner helps clients budget and allocate assets in a manner that allows them to achieve their financial goals. A background in accounting procedures tested on the CPA exam helps financial planners interpret their clients’ financial documents and best organize their finances to get the most out of their assets.
Format and Scoring of the CPA Exam
There are three types of questions you will encounter on the CPA exam. The first question type is multiple choice. Each of the four sections of the CPA exam will contain three subsections of multiple choice questions. You should expect to see between twenty-four and thirty multiple choice questions in each section. The second kind of question you will encounter on the CPA exam is a task-based simulation. This kind of question presents you with a simulation of a workplace scenario to which you must apply your accounting skills and knowledge. You should budget about eight to fifteen minutes to complete each task-based simulation. There are no task-based simulations on the Business Environments and Concepts section of the CPA exam, but task-based simulations will appear on the other three sections of the exam. Auditing and Attestation contains seven task-based simulations, Financial Accounting and Reporting contains seven task-based simulations, and Regulation contains six task-based simulations.
On the Business Environments and Concepts section of the CPA exam, you will encounter three written communication tasks. In each written communication task, you will be presented with a short written scenario and asked to write a document in response. Different written communications tasks will require you to write different documents, such as letters or memos. You will be judged both on the quality and formatting of your writing.
Some pretest questions that will not count towards your score will be mixed into the CPA exam. These questions will not be marked on the exam as pretest questions, so you will not be able to distinguish them from exam questions that contribute to your score. The goal of pretest questions is to give the American Institute of Certified Public Accountants (AICPA) an opportunity to try out new test questions that may appear on future CPA exams. By pretesting these questions, the AICPA can use examinees’ responses to determine if the questions are two easy, too difficult, or at an appropriate level of difficulty for CPA examinees. You may encounter pretest multiple choice questions, pretest task-based simulations, or pretest written communications tasks. Because you will not be able to discern which CPA exam questions are pretest items and which are not, it is best not to try to guess which questions are pretest items and just try your best to answer each question on the CPA exam as well as you can.
All four sections of the CPA exam are scored anonymously by the AICPA. For the AUD, FAR, and REG sections of the CPA exam, the multiple choice questions will account for 50% of your score and the task-based simulations will account for 50% of your score. On the BEC section of the CPA exam, the multiple choice questions will account for 50% of your score, the task-based simulations will account for 35%, and the written communication tasks will account for 15% of your score.
Your CPA exam scores will be reported on a scale of 0-99. Your score is not a percentage of questions you answered correctly, but rather a marker on the 0-99 scale. CPA exam scores are not curved, so the performance of other examinees has no bearing on your score. You need a score of 75 to pass each exam section.
Rules, Regulations, and Administration of the CPA Exam
The administrative procedures for the CPA exam are strict, so you should familiarize yourself with these regulations before you take your exam. That way, you can ensure that you are not surprised by anything, bring the appropriate materials to the test site, and allow yourself plenty of time to go through the administrative procedures without rushing or confusion.
You need to arrive at your test location at least half an hour before the exam is scheduled to begin. Your Notice to Schedule will include an extra thirty minutes of time in your exam time to account for administrative procedures associated with taking the CPA exam. If you are late to your test appointment, you will likely not be allowed to take the exam, and you will not receive a refund for your exam fee.
When you arrive at the test center, you will need to have your photograph taken and be fingerprinted. Every time you leave the exam for a break, you will have to be fingerprinted again. You will be asked to present two current forms of identification. Both of these forms of identification must include your signature, and at least one must also include a current photograph. Your IDs will be scanned at the test center. Forms of identification that are not acceptable include student identification cards, employee identification cards, social security cards, green cards, or draft classification cards. You also need to bring your Notice to Schedule to the test center. Your Notice to Schedule will include a login code that you will need to access the computer program to take the exam. If you do not have this login code, you will not be able to complete the CPA exam.
The test center will provide you with a storage locker to store your personal belongings during the exam. You are not allowed to bring personal belongings with you to the exam room. Because the lockers will not be very large, you should not bring any unnecessary items with you to the test center. You will be issued a key for your storage locker and must return the key before you leave the test center.
Electronic devices are not permitted in the exam room. These include cell phones, music players, calculators, and even watches. These are prohibited because many electronic devices can makes noises that could distract you or other examinees, and others are capable of communicating with other people, which is not allowed during the CPA exam. You also cannot bring any kind of bag or storage container into the exam room with you. This includes purses or briefcases, and even wallets or a glasses case. If you wear large jewelry to the exam, you may be asked to remove it and place it in your storage locker. You also cannot bring any kind of written material into the exam room, such as books, magazines, or even handwritten notes or blank paper and writing materials that are not furnished by the test center.
You are allowed to bring earplugs for the exam if you wish to block out any excess noise, such as the sound of other examinees typing on their keyboards. However, your earplugs must be cordless and will be subject to inspection by test center staff. You do not need to bring your own pens, pencils, or scratch paper for the CPA exam. The test center will provide these items for you to use. You must write your login ID number on each piece of scratch paper that you use, and you must turn in every piece of used and unused scratch paper when you finish the CPA exam. When you complete the exam, you will receive a Confirmation of Attendance form. Hold on to this form, as it contains information you may need later, such as contact information to report any concerns about your experience taking the CPA exam.
Tips for Taking the CPA Exam
Preparing to take the CPA exam entails not only studying the content that you will be tested on, but also preparing your body and mind to eliminate stress on test day and ensure that you do your very best when you take the exam.
As soon as you have registered for a date to take any section of the CPA exam, you should design a study schedule. Be sure to allow yourself ample time to study, so that you do not feel as though you need to cram information into your head several days before you take the exam. Depending on which section or sections of the CPA exam you are registered for, portion out the content of those sections over the amount of time you have before you take the test, easing up a week or a few days before the exam. You may want to begin by dividing up content and time proportionally based on what percentage of the exam covers what content. However, you may also want to revise your study schedule as you go along. If you realize that some content comes to you more easily than other content, allot more time to the content that is difficult for you.
Pacing yourself when you take the CPA exam is just as important as pacing yourself when you study. The amount and types of questions you need to answer will vary based on which section of the CPA exam you are taking. Plan ahead for each section of the exam how much time you should spend on average answering each multiple choice question and each task-based scenario or written communications task. However, when you take the exam keep in mind that some questions will be much easier for you to answer than others, and you will spend less than an average amount of time on the easy questions and more than an average amount of time on the more difficult questions. As long as you adhere to your average overall, you will be able to finish the exam on time.
When you answer multiple choice questions on the CPA exam, use the process of elimination on questions that you do not know the correct answer to. Try to eliminate one or more answer choices that you know are incorrect. That way your odds of answering the question correctly will increase. Also be aware that some multiple choice questions may appear to have several correct answers, but only one answer is the best answer for each question. Reread the question if you need to clarify what it is specifically asking in order to choose the best possible answer.
When you answer the written communications task on the Business Environments and Concepts section of the CPA exam, remember that you control the content of your responses in written assessments. This means that you only have to write about things you know well, whereas multiple choice or other forms of assessment could require you to answer questions about concepts you are not entirely familiar with.
Be sure you get enough rest before you take the CPA exam so that you do not have difficulty concentrating due to exhaustion. Get a good night’s sleep the night before the exam, and maintain a regular sleep schedule for at least a week before the exam if possible. Also be sure to eat a decent breakfast or lunch before you take the CPA exam so that you are not distracted by hunger. You should have a solid meal that contains protein. Protein will help prevent you from becoming hungry during the exam, whereas a meal high in sugar could cause you to feel energetic at first and then crash partially through the exam.
Allow plenty of time to travel to the test site before the exam in case you experience any unexpected delays due to traffic or public transit. Get directions ahead of time.