The CPA Exam

Introduction

The Certified Public Accountant Examination (CPA Exam) is administered to test one's knowledge of accounting and general business practices. Acceptable completion of the CPA Exam bestows the title of Certified Public Accountant (CPA) on the candidate, assuming all other state requirements have been met.

Reasons to get, and not to get, the CPA designation

On its website, the AICPA asserts that the "CPA credential is a symbol of trust and professionalism in the world of business. It's a highly challenging professional track, but the reward is that CPAs are considered the most trusted advisors in business." In the business world, the CPA designation adds potential for career growth and entitles the CPA to receiving extra trust in serving in advisory roles for clients.

However, accounting academics will be able to receive different benefits from earnign the CPA designation. The CPA designation may add credibility in the classroom (This is not proven, but is a great [[Research Ideas|empirical question]). Some schools want you to have professional certifications, in particular, schools that are more teaching oriented.

Similar to working as a practitioner, the academic may be able to secure consulting opportunities in the profession because of the CPA credential. It also gives you credibility with practitioners. Additionally, if you ever decide to leave academia, this is a helpful certification for employment. The CPA designation is also useful for expert witnessing or serving on a corporate board.

Reasons not to get the CPA designation

• Time may be better spent early in a career on conducting research or improving teaching effectiveness.
• It can be a hassle to keep up on CPE credit.
• Some schools (most likely research intensive schools) may view it as a negative signal of where you are devoting your time (i.e., you are not a serious researcher).

Exam Content

Because of planned changes to IFRS for SEC filings, current exam content as of Spring 2009 includes the following sections:

Auditing and Attestation (AUD)

The Auditing and Attestation portion lasts 4.5 hours. The following six topics are part of this section:

1. Auditing and Attestation: Engagement Acceptance and Understanding the Assignment (12-16%)
2. Auditing and Attestation: Understanding the Entity and Its Environment (including Internal Control) (16-20%)
3. Auditing and Attestation: Performing Audit Procedures and Evaluating Evidence (16-20%)
4. Auditing and Attestation: Evaluating Audit Findings, Communications and Reporting (16-20%)
5. Accounting and Review Service Engagements (12-16%)
6. Professional Responsibilities (including Ethics and Independence) (16-20%)

Business Environment and Concepts (BEC)

The Business Environment and Concepts portion lasts 2.5 hours. The following six topics are part of this section:

1. Corporate Governance (16-20%)
2. Economic Concepts and Analysis (16-20%)
3. Financial Management (19-23%)
4. Information Systems and Communication (15-19%)
5. Strategic Planning (10-14%)
6. Operations Management (12-16%)

Financial Accounting and Reporting (FAR)

The Financial Accounting and Reporting portion lasts 4.0 hours. The following five topics are part of this section:

1. Conceptual Framework, Standards, Standard Setting and Presentation of Financial Statements (17-23%)
2. Financial Statement Accounts: Recognition, Measurement, Valuation, Calculation, Presentation, and Disclosures (27-33%)
3. Specific Transactions, Events and Disclosures (27-33%)
4. Governmental Accounting and Reporting (8-12%)
5. Not-for-Profit (Nongovernmental) Accounting and Reporting (8-12%)

Regulation (REG)

The Regulation portion lasts 3.0 hours. The following six topics are part of this section:

1. Ethics, Professional and Legal Responsibilities (15-19%)
2. Business Law (17-21%)
3. Federal Tax Process, Procedures, Accounting and Planning (11-15%)
4. Federal Taxation of Property Transactions (12-16%)
5. Federal Taxation of Individuals (13-19%)
6. Federal Taxation of Entities (18-24%)

FAQ

Should I get my CPA? If so, when?

This is probably more important for those with research and teaching interests in audit or tax. However, regardless of research interests, it can't hurt to get a CPA license. It's relatively cheap and you'll never be more prepared than you are when leaving BYU. It won't close any doors, but you never know what doors it may open.

What resources are available to help me review for the CPA exam?

• Becker CPA Review is generally considered to be the best CPA review course. Most students who use Becker choose the in-class instruction option, which provides course manuals, offers in-class instruction several nights each week, and assigns homework for each class. This method is purported to have a very high success rate; however, it is also very expensive.
• Wiley CPA Exam Review is not quite as structured as Becker, perhaps, but it is much cheaper and is sufficient. If you've done relatively well in your courses at BYU, this should be enough to help you pass the exam. Though, additional material is on the CPA exam that is not covered in BYU's accounting program. In particular, accounting for non-profits and governmental entities on the exam but is not taught at BYU.

Where can I find information about the CPA exam requirements for each state?

The Becker CPA Review website has a comprehensive listing of the CPA requirements for each state.

Additionally, you could try the National Association of State Boards of Accountancy (NASBA). While they possess all the information you would ever need, accessing the information is difficult. Each state has a NASBA representative assigned to it, and the helpfulness of the representatives varies wildly by state.

The AICPA has also created a document that lists all of the requirements for certification and a permit to practice in each state.

How can I be a CPA without any work experience?

There is a difference between passing the CPA exam, receiving certification, and meeting the necessary requirements for licensing and public practice. In most states, once you meet the minimum degree and course requirements, you can sit for the CPA exam. After this point, most states require those who pass the exam to meet certain work requirements before they can receive a certificate showing that they passed the exam. This requirement is met by crossing one of two thresholds, either (1) working a specified minimum number of hours or (2) working in professional practice for a certain number of years after finishing your degree. Each state sets its own requirements for certification.

Additionally, some states require that certified professionals receive more experience beyond the aforementioned requirements before they receive a license to practice.

Though, keep in mind that some states do not have experience requirements for certification or licensing to practice; e.g., Colorado, Florida, Maryland, and Puerto Rico. Others allow substitution of additional education for experience. The AICPA has created a document that compares the educational and experience requirements for each state. Note: The posting date for this comparison is not listed, so always be sure to check with state's own Board of Accountancy for current requirements.

How can I study for the CPA without a firm to purchase study materials?

• There are many different ways to obtain study materials. For example, http://www.financialprep.com/ offers a free trial version of their practice test software, which contains 100 questions per section. 100 questions is very sufficient to give one a general sense of how the questions on the test are.

• If you are currently a doctoral student, you may approach one of the companies that provides CPA study material. They sometimes give free copies to future professors. Contact the representative who services your school to discuss this possibility.

• Becker has several ways in which to get free or discounted materials. If you work as the one campus representative for BYU, then you can get a Becker course for free. Dr. Black has something to do with the selection process for campus representatives. Further, you can help set up the classroom for the classroom reviews Becker does, and they will give you a $500 discount.

• You can purchase hugely discounted Becker (as well as other brands) materials off of Amazon.com or eBay.com. The ethicality of this is in question. While the 100 Hour Board at BYU claimed it was fine and legal, many (especially Becker themselves) would tell you it is not.

• Consider borrowing materials from someone who has already taken the test. However, the same ethical issue is involved as in purchasing it from Amazon or eBay.

• Some of the preparation courses are actually reasonably priced, between $300-400. Still a lot for a starving student, but a far cry from the $2700 Becker wants. One that has recently worked (passed all four sections first time) for a recent Ph.D. Prep student is the Wiley CPA software and books.

• The Accounting lab at the Utah Valley University has a current and full set of the Gleim materials for use in the lab. You could go over there, or somehow petition Gleim to outfit our lab as they have the UVU lab.

• You might consider just taking a couple of the sections without studying, and see how it goes. BYU has a very good program and you might find that you pass without much, if any, preparation. Do this at your own risk, as it is somewhat expensive to retake exams. But you might save on prep materials and extra working hours.

How long will it take to get the CPA?

In the summer of 2008, there were several Ph.D. prep students who decided to sit for the CPA exam. The goal was to finish all portions of the exam before Ph.D. programs began. So far, the endeavor has been successful. Before you decide to take the exam consider two important questions: (1) how long will it take to study for the CPA and (2) is it worth it? The first question is considered on this page, the second question is considered in the above section on the benefits of receiving the CPA designation for academics.

The first question is quantitative in nature, but can vary greatly by candidate. One student who took the exam in the summer of 2008 kept track of all the studying he did for it, in order that other candidates might be able to see how long it takes. About this student: He had not taken advanced financial, audit, or managerial accounting, and is not naturally inclined to do well in accounting. Given this, much more study was required for him that would be required for an average Ph.D. prep track student doing the professional stem. Some of his cohorts in the prep track who took the test studied considerably less (50-80% less time), and did equally well.

Further, note that a 75 is required to pass the exam. Any score above a 75 can be viewed as over preparation for the exam (of course, assuming one is interested in the acquisition of accounting knowledge, scoring higher is a good thing). This student exceeded 75 on all the tests--and was thus over prepared for all four sections of the exam. Further, there were some logistical problems that created issues, requiring even more study time for this person.

Those three qualifiers being stated, here is a spreadsheet that contains the hours studied and the results of the CPA exams for this student. Hopefully they will help you have a better idea of how much time is required to pass the CPA exam.

External Links

For additional information, take a look at the following websites:

• The Uniform CPA Exam - This is the official site for the CPA exam. It has a lot of information about the CPA exam itself. Also, interestingly enough, it contains press bulletins listing passing rates for each of the four portions for the past several quarters (currently about 50%).
• Wikipedia: The CPA Exam - This is a great resource that describes the actual examination process.
• Wikipedia: Certified Public Accountant - This resource explains a little bit about what CPA's do. Additionally, it contains links to many international professional accounting organizations.
• Wikipedia: AICPA - This site explains some of the basics about the American Institute of Certified Public Accountants (AICPA), which is the professional organization for CPA's in the United States.
• Wikipedia: NASBA - This site explains some of the basics about the National Association of State Boards of Accountancy (NASBA), which is the umbrella group of state boards of accountancy.
• NASBA - The official website for NASBA.
• AICPA - The official website for the AICPA.