The AICPA thinks that the CPA Exam must constantly change in order to be relevant in a fast-paced field and current with demands placed on newly licenced CPAs (nlCPAs). The number of accounting graduates and certified public accountants is rapidly declining, as Angie Brown, a Becker instructor and senior director of product management, reported on Accounting Today. Because of this, the AICPA and NASBA created the CPA Evolution licensure model to incorporate more and more crucial topics into the CPA Exam. The latest Exposure Draft (ED) from the AICPA outlines their proposed changes to the format and subject matter of the upcoming CPA Exam, which will debut in January 2024.
CPA Exam structure changes
CPA Exam sections, most are familiar with the four current CPA Exam sections:
- Financial Accounting and Reporting (FAR)
- Auditing and Attestation (AUD)
- Regulation (REG)
- Business Environment and Concepts (BEC)
A new CPA Exam framework, consisting of three Core examinations and three Discipline exams, is introduced by CPA Evolution. The next three Core parts concentrate on abilities and information that all nlCPAs share:
- Financial Auditing and Reporting (FAR)
- Auditing and Attestation (AUD)
- Taxation and Regulation (REG)
Discipline divisions concentrate on the expertise needed for nlCPAs in their area of concentration. Candidates must pass one of the following three discipline sections:
- Business Analysis and Reporting (BAR)
- Information Systems and Controls (ISC)
- Tax Compliance and Planning (TCP)
Exam grading for CPA
The scoring weight for the MCQs and TBSs on the new CPA Exam is comparable to that of the existing exam. For each portion of the exam, there will be 50% MCQs and 50% TBSs, with the following two exceptions:
- 15% of the BEC exam’s current weight is given to written communication. Writing skills will no longer be examined on the upcoming CPA exam, in line with earlier AICPA communications.
- The weighting for ISC will be 60% MCQs and 40% TBSs.
CPA Exam proficiency
The skill level categories and descriptions have not changed, but there have been some small tweaks to the skill level distribution for some of the sections:
- The proportion of questions at the levels of Remembering, Understanding, and Analysis rose in the new AUD section.
- The percentage of questions in the new FAR section that are at the levels of remembering, understanding, and application has increased, while the percentage of questions at the level of analysis has decreased.
- The REG section’s skill requirements are the same for the new exam as the existing exam.
- ISC has given Remembering and Understanding the greatest percentage allotment. This makes sense given that this section will also contain the majority of MCQs.
- In comparison to the other sections, FAR and BAR each have 50 fewer MCQs. Although there are more questions at the Application level than at the Definition or Identification level, this may mean that the FAR and BAR MCQs will involve more intricate calculations.
- In comparison to the 50 MCQs in FAR and BAR, TCP has the highest percentage of questions at the Application level, but it also has more MCQs (68). When the final Blueprint is released, it will be fascinating to see if these figures have changed.
Changes to CPA Exam content
The AICPA reiterated that all Core and Discipline Exam portions will assess “data and technology.” This will be accomplished by emphasising an understanding of data structure, information flow through IT systems, and business procedures; coming up with ways to transform data so that it can be used for decision-making; confirming the completeness and accuracy of the source data; and utilising the results of automated tools, visualisations, and data analytic techniques.
- It is not necessary for candidates to create reports or visualisations or to use data analytics software.
- All Core and Discipline parts will evaluate “higher order abilities,” such as analytical thinking, professional scepticism, problem-solving, and research.
The updated CPA Exam’s content modifications for each area are listed below.
Attestation and Auditing (AUD)
With the exception of the addition of specific BEC information, the AUD Core part is mostly unchanged. No pre-existing AUD material was transferred to additional 2024 CPA Exam sections. Topics from BEC shifted to AUD include:
- Business cycles and supply and demand are fundamental economic principles.
- Internal controls and business procedures
The distribution of content evaluated in each of the content sections, as well as the content areas themselves, remained unchanged. The AUD content sections and allocation are summarised in the table from the CPA Evolution Exposure Draft that is provided below.
Financial Accounting and Reporting (FAR)
All nlCPAs are required to demonstrate certain knowledge and abilities about the financial accounting and reporting frameworks used by for-profit (public and nonpublic) and not-for-profit organisations. These requirements are tested in the FAR Core part. The FAR Core Exam part and the BAR Discipline Exam will each receive a portion of the existing FAR curriculum under the Core and Discipline Model. The following FAR subjects will be transferred to BAR:
- Intangibles with an indefinite lifespan, such as goodwill
- Independently created software
- Jobs with a high level of analysis expertise for revenue recognition
- Shares of compensation (share-based payments)
- R&D expenses
- Combinations of businesses
- Financial statements that are combined
- Accounting for derivatives and hedging
- Lessor accounting and sale-leaseback accounting for leases
- Reports From Public Companies
- S-X and S-K reporting requirements
– Information for reportable segments
- Accounting records for employee benefit plans
- Public accounting
- The annual comprehensive financial report’s financial section’s structure and content
- generating national financial statements and reconciliation statements for the government
- Typical objects and certain types of events and transactions
- Additionally, some BEC issues, such as the following, were transferred to FAR:
- Financial statement ratios and performance metrics: An understanding and application
The REG Core section of the exam assesses the knowledge and abilities that all nlCPAs are required to exhibit with regard to American ethics and professional obligations related to tax practise, American business law, and American federal tax compliance for individuals and entities with a focus on recurring and routine transactions. Existing REG content will be divided between the REG Core Exam segment and the TCP Discipline Exam component under the CPA Evolution Core and Discipline paradigm. Routine and recurring duties will be the subject of the REG Core Exam segment. The following REG topics are currently scheduled to transition to TCP:
Such notions of gross income as:
- Use of stock options granted as incentives (ISO)
- Imputed interest on a loan with a low interest rate
- earnings made while working outside of the United States.
Business Analytics and Reporting (BAR)
The BAR Discipline portion assesses the expertise a nlCPA must exhibit with regard to:
- Analyzing financial statements and financial information with an emphasis on the function of a nlCPA in determining the influence of transactions, events, and market circumstances on performance indicators, comparing investment options, and comparing past outcomes to budgets and predictions.
- Higher-order knowledge of certain technical accounting and reporting requirements under the FASB and SEC that apply to for-profit business entities (such as stock compensation, business combinations, and derivatives). These subjects are being transferred from the existing FAR test to the BAR.
- State and municipal governments are subject to GASB financial accounting and reporting rules. Also moving from the existing FAR test to BAR are these topics.
More advanced technical accounting concepts will be assessed in the BAR Discipline Exam portion, and some topics, such revenue recognition and lease accounting, will be tested in both the FAR Core Exam section and the BAR Discipline Exam section. The following subjects will be transferred from BEC to BAR:
- Non-monetary indicators of performance
- ideas of management and cost accounting
- Variance evaluation
- Techniques for planning, predicting, and projecting
- Leverage, cost of capital, liquidity, and loan covenants are a few variables that affect an entity’s capital structure.
- models for financial valuation decision-making that compare potential investments
- Framework for Enterprise Risk Management using COSO
- Impact of shifting economic conditions and market factors on a company’s operations
Information Systems and Controls (ISC)
The knowledge and abilities a nlCPA must exhibit in relation to information technology (IT) audit and consulting services, including SOC engagements, are tested in the ISC Discipline part. The knowledge and abilities that nlCPAs must exhibit in relation to data management, including data collection, storage, and consumption across the data life cycle, are also tested in the ISC Discipline part.
The ISC Discipline Exam component of SOC engagements largely focus on:
- The use of the Trust Services Criteria for Security, Availability, Processing Integrity, Confidentiality, and Privacy and the Description Criteria for a Description of a Service Organization’s System for organising, carrying out, and reporting on a SOC 2® engagement.
- Planning, specific processes, and reporting on a SOC 1® engagement, but not the testing of internal controls over financial reporting.
Topics from BEC shifted to ISC include:
- Internal controls and business procedures
- IT-related risks and measures that address such issues
- management of data and relationships
Tax Compliance and Planning (TCP)
The TCP Discipline portion assesses the expertise a nlCPA must exhibit with regard to:
- U.S. federal tax compliance for people and entities, with an emphasis on non-routine and transactions of higher complexity, as well as personal financial planning and U.S. federal tax planning for individuals and entities.
- The function of a nlCPA in the preparation and review of tax returns will be the main focus of the evaluation of federal tax compliance. An nlCPA’s role in identifying the tax ramifications of potential transactions, viable tax alternatives, or corporate structures will be the main emphasis of the examination of federal tax planning.
- With regard to the production and inspection of individual tax returns, a nlCPA often identifies planning opportunities and tactics that will be the focus of the evaluation of personal financial planning.
As previously noted, the current REG content will be divided between the TCP Discipline section and the REG Core component. The nonroutine and more complicated duties will be the main emphasis of the TCP Discipline section. The following REG topics are currently scheduled to transition to TCP:
- Consolidated tax returns for C-Corporations
- Concerns about foreign taxes