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Uniform Certified Public Accountant Examination

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The Uniform Certified Public Accountant Examination (Uniform CPA Exam) is the examination administered to most people who become Certified Public Accountants in the United States.

The Uniform CPA Exam was developed and is maintained by the American Institute of Certified Public Accountants (AICPA), and is administered by the National Association of State Boards of Accountancy. The CPA exam is used by the regulatory bodies of all fifty states plus the District of Columbia, Guam, Puerto Rico, the U.S. Virgin Islands and the Northern Mariana Islands.

History

Until the 1990s, the Uniform CPA Exam was a nineteen and a half (19.5) hour test given over a three-day period, consisting of four subject areas (sections) which were tested in five sittings: Auditing (3.5 hours); Business Law (3.5 hours); Accounting Theory (3.5 hours); and Accounting Practice (Part I & Part II; 4.5 hours each). Although Accounting Practice I and Accounting Practice II were given in separate sittings, they were counted as one section for grading purposes (i.e., five exam parts, resulting in four separate scores). The exam was given only twice per year: on the first consecutive Wednesday, Thursday and Friday in May and November of each year. Test takers were allowed to use only paper and pencil (no electronic calculators or computers of any kind).

In 1992, the exam was restructured into a four-section, two-day exam. The subject matter was reorganized and redundant material was eliminated, primarily between Accounting Theory and Accounting Practice (Parts I and II). In addition, innovative machine-scorable test questions were incorporated to better assess the skills needed by CPAs to protect the public. For the first time, proprietary electronic calculators were provided to CPA candidates for the two new accounting sections. The four new sections were:

Until 1996, completely new versions of the CPA Exam were prepared every six months, and after each administration all questions and the keyed responses (correct answers) were published and available for purchase. Beginning with the May 1996 administration, almost all exam material was kept secure so that many high-quality questions could be reused. Though this is common practice in the world of large-scale testing, it was a policy decision that was momentous at the time, and made only after extensive comments were elicited from all key stakeholders, such as the 54 Boards of Accountancy, members of the CPA profession, accounting educators, CPA candidates, and testing professionals. By deciding to release only a small portion of each exam--to help candidates prepare for the examination experience--high quality exam material could be reused in the future. It also became possible for the first time to use statistical techniques for test equating and to use criterion-referenced passing scores.

Computer-based examination

Since April 5, 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 word processing and spreadsheets, as well as widely-used database 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.[1]

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 & 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 & 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 & 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 IRS 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. [2]

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. 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 is administered a 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 competence of a candidate to be assessed with fewer questions than would be required for a static, or non-adaptive, testing methodology.

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 forwared 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.

Eligibility to sit for Uniform CPA Exam

In order to sit for the Uniform CPA Exam, a person must be declared eligible to do so by one of the 55 U.S. State Boards of Accountancy.

Requirements of state boards vary, but usually consist of a U.S. bachelors degree with a concentration in accounting (not necessarily an accounting degree) plus an extra year's study (which can be either at undergraduate or graduate level). The requirement for 5 years full time equivalent study is known as the "150 hour rule" and has been adopted by the majority of state boards. An important distinction should be made between requirements to sit for the exam, and requirements for certification. In some states, such as Minnesota, the "150-hour rule" only applies to certification; anyone with a bachelors degree (from a qualifying institution) in Accounting may sit for the exam. Certification does require 150 credit hours, however.

Noteworthy exceptions to the "150 hour rule" include:

As of October 1, 2007, CT may now require only 120 hours to sit. However 150 hrs are still required for the certificate.

Examination process

The steps involved in sitting for the Uniform CPA Examination are as follows:

[4]===First time applicants===

  • Apply to one of the 55 state boards to determine eligibility. Some state boards delegate this to NASBA. It is not necessary to apply to sit all four sections of the Uniform CPA Exam (at least one section must be applied for).
  • State Board notifies NASBA of eligible candidate
  • NASBA places candidate on the National Candidate Database and issues a 'Notice to Schedule (NTS). The validity of the NTS is normally 6 months, however a few states issue NTS with a validity of 3, 9, 12 or 18 months.
  • Candidate contacts Prometric to arrange to sit the examination section within the validity of the NTS. This can be done through the Prometric website.
  • On the day of the examination, the Prometric test center receives electronic data from the American Institute of Certified Public Accountants to allow the exam to be set.
  • The exam responses of the candidate are sent back to AICPA, identified only by a section ID number which NASBA has provided to the candidate.
  • AICPA scores the examination and sends the result to NASBA
  • NASBA match up the score (from the section ID) to the candidate details on the National Candidate Database
  • NASBA forward the score to the candidate's State Board (some state boards allow NASBA to report the scores direct to the candidate)
  • State Board forwards the scores to candidates, after conducting its own review.

CPA EXAM POLICY CHANGE:

Re-examination applicants

A candidate who has previously taken a section of the Uniform CPA Exam is a re-examination applicant. The registration process for re-examination candidates with state boards is normally simpler than that for first-time candidates, and does not usually require new proof of ID or qualifications. Some state boards allow online registration for re-examination candidates. Additionally the candidate's entry is already on the National Candidate Database, which allows quicker processing by NASBA. Otherwise the process is similar.

Fees

Fees to sit for the Uniform CPA Exam vary by state, however for first time applicants sitting for all four sections, a fee between USD550 and USD850 is typical. The equivalent re-examination fee is normally about USD50 less.

Score reporting timescale

The timescale for score reporting depends on:

  • when AICPA forward results to NASBA
  • NASBA processing time
  • state board processing time (unless the state board delegates this to NASBA)

As of July 2006, scores of some applicants who sit for the exam in the first month of a testing window are reported by AICPA sooner, usually in the third week of the second month of that window. For example, some scores of persons who sat for the Uniform CPA Exam in April 2006 were reported in the third week of May 2006. The remaining scores from April 2006, plus the scores from May 2006 attendees, were reported in the last two weeks of June 2006.

Candidates who do not receive a score by the end of the first month after the testing window in which they sat for the exam are advised to contact their state board. For example, all scores of candidates from the April/May 2006 test window should be reported by 30 June 2006. It is however, unusual for a result to be received so late.

Failed sections

Where a candidate fails a section, it may be re-done without any penalty other than a re-examination fee and the risk of credits for other sections expiring under the "18 month rule". Re-sitting for a failed section in the same testing window is not permitted.

Re-scoring and appeals

A candidate who fails a section may request that the exam be re-scored. As of July 2006, the fee for a re-score is USD150 for the Business Environment and Concepts section (BEC) and USD200 for the other sections. Application for a re-score must be made by a particular deadline, usually around the end of the first month after the testing window in which the examination was taken. For example, for the April/June test window, an application for a re-score must be made before the end of July.

Some but not all state boards allow a failed candidate to lodge a score appeal where the candidate can review the examination section and challenge the response. This involves paying a fee of USD500 and travelling to the NASBA offices in Nashville, TN. Under secure conditions, the examination can be reviewed and specific questions can be challenged for a fee of USD100 each. The deadline for lodging an appeal is the same as that for a re-score.

Results of either process take about 8 weeks and are sent by NASBA to the candidate's state board of accountancy. It is unusual for either re-scores or appeals to result in a changed score for the candidate. Lodging a re-score or appeal application does not prevent the candidate from applying to re-sit the examination.

Confidentiality

The Uniform CPA Exam is a confidential examination. All persons involved with the Uniform CPA Exam, including candidates, must sign a confidentiality agreement not to disclose the contents of specific questions asked.

International Qualification Examination (IQEX)

Certain overseas qualified accountants may sit for the International Qualification Examination (IQEX) is an alternative to the Uniform CPA Exam. As of July 2006 this eligibility extends to most Canadian, Irish and Australian Chartered Accountants together with Australian CPAs and the Instituto Mexicano De Contadores Publicos (Mexican Institute of Public Accountants).

Non U.S. candidates

There is no specific bar to non-U.S. candidates sitting for the Uniform CPA Examination, however:

  • It is not possible to take the examination outside the United States and its territories
  • Most states will accept non-U.S. education credentials, however they must normally be evaluated by a member of the National Association of Credential Evaluators. Some states prefer specific evaluators, such as Foreign Academic Credential Services or World Education Services, while the Illinois State Board of Accountancy prefers to conduct credential evaluations itself.
  • Approximately one-third of the state boards require a candidate for the Uniform CPA Exam to be living or working in that state. However, the majority have no residence requirement.
  • A few U.S. states (such as the Alabama State Board of Public Accountancy) require the candidate to be a U.S. citizen

Notes

  1. ^ By contrast, each state formerly imposed varying requirements on whether a candidate was required to sit for the entire exam. For example, in the 1970s and early 1980s, Louisiana required that first-time candidates sit for all four examination sections. Under the Louisiana rules, the candidate was required to pass at least two sections (with a score of 75 or above) while scoring no less than 50 on any section, (the Accounting Practice score was derived by averaging the scores on parts I and II). The rule was later changed to count Accounting Practice I and II as two separate scores for this purpose. Thus, a first time Louisiana candidate who scored a 75 or above on each of the "Auditing," Theory," and "Law" sections of the exam but who scored a 49 or less on "Practice" would have received no credit, and would have been required to re-take the entire exam.
  2. ^ Occasionally, questions may be asked that reflect the need for CPAs to understand that certain laws and authoritative pronouncements, while not federal in nature, are consistent across all US jurisdictions. Also, though most jurisdictions follow English common law, a few (e.g., Louisiana) have legal systems based primarily on French law. As a result, CPA candidates are warned that in some cases where answers may differ across jurisdictions, the majority rule will apply. In fact, such questions rarely occur, except when the purpose of the question is to assess whether candidates know the areas of law that may not be universal. See generally Uniform CPA Examination: Examination Content Specifications, American Inst. of Certified Public Accountants, p. 11-12 (orig. issued June 14, 2002; references updated Oct. 19, 2005) at [1]
  3. ^ As of July 2006, the "eligible jurisdictions" for Chartered Accountants seeking to sit for the Uniform CPA Exam as a Colorado candidate are: Australia *, Bangladesh, Bermuda *, Canada *, England & Wales, India, Ireland *, Pakistan, Scotland, South Africa, Sri Lanka, Zimbabwe. Hong Kong Certified Public Accountants are treated as "Chartered Accountants" for the purpose of this regulation and are also eligible. Those annotated with * may also be eligible for the International Qualification Examination. Details
  4. ^ Insert footnote text here

See also

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