CPA

CPA Evolution: The new CPA Exam’s Exposure Draft

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To remain relevant in a dynamic profession and current with the real-world demands on newly licensed CPAs (nlCPAs), the AICPA believes that the CPA Exam must continuously evolve. As Angie Brown, Becker instructor and Senior Director of Product Management shared on Accounting Today, the number of accounting graduates and licensed CPAs is drastically decreasing. As a result, the AICPA and NASBA have developed the CPA Evolution licensure model to introduce increasingly important subject areas into the CPA Exam. The AICPA’s newly released Exposure Draft (ED) presents their proposal for the new structure and content to be tested on the new CPA Exam, which will launch in January 2024.

In this article, we’ll assess changes to exam sections, scoring weight, section time, question count, and skill level between the current CPA Exam and the new CPA Exam. Afterwards, we’ll dive into the content updates in the Exposure Draft.

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)

CPA Evolution introduces a new CPA Exam structure, including three Core exams and three Discipline exams. The following three Core sections focus on knowledge and skills universal to all nlCPAs:

  • Financial Auditing and Reporting (FAR)
  • Auditing and Attestation (AUD)
  • Taxation and Regulation (REG) 

Discipline sections focus on knowledge and skills required of nlCPAs in their specialization.  Candidates will need to pass one of three discipline sections:

  • Business Analysis and Reporting (BAR)
  • Information Systems and Controls (ISC)
  • Tax Compliance and Planning (TCP)

CPA Exam scoring weight

The new CPA Exam’s scoring weight between the MCQ and TBSs is similar to the current exam scoring weight. This involves 50% MCQs and 50% TBSs per exam for each section, with two exceptions:

  • The current BEC exam has 15% allocated to written communication.  Consistent with previous communication from the AICPA, written communication will no longer be tested on the new CPA exam. 
  • ISC will be weighed 60% MCQs and 40% TBSs.

Current CPA Exam Score Weights

chart showing current cpa exam score weights

 

New CPA Exam Score Weights

chart showing new cpa exam score weights

 

Section time and question count

Section time is not changing - each section in the new exam, including Core sections and Discipline sections, are four hours.

The question count in the current exam ranges from 62 to 72 MCQs and 8 Sims, except for BEC, which has 4 TBSs and 3 Written Communication questions. The question count for the new exam has a couple notable items:

  • ISC has 82 MCQs and 6 TBSs which corresponds to the scoring weight of 60% MCQ and 40% TBSs in this section.
  • FAR and BAR both have 50 MCQs and 7 TBSs which is less than both the MCQ and TBS counts in the current exam sections.

Current CPA Exam Section Time and Question Count

chart showing current cpa exam section time

 

New CPA Exam Section Time and Question Count

chart showing new cpa exam section time

 

CPA Exam skill level

There have been no changes in the skill level categories or descriptions, but there are minor updates to the skill level allocation for some of the sections:

  • The new AUD section increased the percentage of questions at the Remembering and Understanding and Analysis levels.
  • The new FAR section increased the percentage of questions at the Remembering and Understanding and Application levels, while decreasing the percentage of questions at the Analysis levels.
  • The skill levels for the REG section remain unchanged between the new exam and the current exam.
  • ISC has the highest percentage allocation to Remembering and Understanding. This makes sense because this section will also have the highest percentage of MCQs.
  • FAR and BAR both have a lower number of MCQs (50 MCQs) compared to the other sections.  However, there is a higher percentage of questions at the Application level, which may indicate that MCQs in FAR and BAR will be more complex calculations rather than definition or identification MCQs.
  •  TCP has the highest percentage of questions at the Application level but a higher number of MCQs (68 MCQs) compared to the 50 MCQs in FAR and BAR.  It will be interesting to see if these numbers change with the release of the final Blueprint.

CPA Exam Skill Levels (No changes)

CPA Exam skill levels

 

Current CPA Exam Skill Level Assessment Allocation

current cpa exam skill level allocation

 

New CPA Exam Skill Level Assessment Allocation

new cpa exam skill level allocation

 

CPA Exam content changes

The AICPA’s Exposure Draft also outlined changes to the content of the CPA Exam.

First, we’ll cover several points related to all sections of the exam:

  • The AICPA reaffirmed that “data and technology” will be assessed in all Core and Discipline Exam sections. This will be done by focusing on understanding how data is structured and how information flows through IT systems and business practices; determining methods to transform data to be useful for decision making; verifying completeness and accuracy of source data; and using the outputs of automated tools, visualizations, and data analytic techniques
  • Candidates are not required to generate reports or visualizations, nor use data analytics software applications
  • All Core and Discipline sections will test “higher-order skills,” including critical thinking, problem-solving, analytical ability, professional skepticism and research.

Below are the content changes for each section of the new CPA Exam.

Core sections

Auditing and Attestation (AUD)

The AUD Core section remains largely unchanged, aside from the addition of selected BEC content.  No existing AUD content was moved to other 2024 CPA Exam sections. BEC topics moved to AUD include:

  • Basic economic concepts – supply and demand, business cycles
  • Business process and internal controls

There were no changes to the content areas, or the allocation of content tested in each content area.  Below is a table from the CPA Evolution Exposure Draft summarizing the AUD content areas and allocation.

New CPA Exam AUD Content Allocation (No changes)

new AUD content allocation

 

Financial Accounting and Reporting (FAR)

The FAR Core section tests the knowledge and skills that all nlCPAs must demonstrate with respect to financial accounting and reporting frameworks used by for-profit (public and nonpublic) and not-for-profit entities. Under the Core and Discipline Model, some existing FAR content will be allocated between the FAR Core Exam section and the BAR Discipline Exam.  The current FAR topics that will be moved to BAR include:

  • Indefinite lived intangible assets, including goodwill
  • Internally developed software
  • Analysis skill level representative tasks for revenue recognition
  • Stock compensation (share-based payments)
  • R&D costs
  • Business combinations
  • Consolidated financial statements
  • Derivatives and hedge accounting
  • Leases – sale-leaseback accounting and lessor accounting
  • Public company reporting
    • Reporting requirements of S-X and S-K
    • XBRL
    • Disclosures for reportable segments
  • Financial statements of employee benefit plans
  • Government accounting
    • Format and content of the financial section of the annual comprehensive financial report
    • Deriving government-wide financial statements and reconciliation statements
    • Typical items and specific types of transactions and events

There were also some BEC topics that were moved to FAR which include:

  • Understanding and applying financial statement ratios and performance metrics

Current FAR Content Allocation

current FAR content

New FAR Content Allocation

new FAR content

 

Regulation (REG)

The REG Core section tests the knowledge and skills that all nlCPAs must demonstrate with respect to U.S. ethics and professional responsibilities related to tax practice, U.S. business law and U.S. federal tax compliance for individuals and entities with a focus on recurring and routine transactions. Under the CPA Evolution Core and Discipline model, existing REG content will be allocated between the REG Core Exam section and the TCP Discipline Exam section. The REG Core Exam section will focus on routine and recurring tasks.  The current REG topics that will be moved to TCP include:

  • Gross income concepts such as:
    • Exercise of incentive stock options (ISO)
    • Imputed interest on a below-market-rate loan
    • Compensation earned while employed outside the U.S.

No current BEC content has been moved to REG.  

Current REG Content Allocation

current REG content

 

New REG Content Allocation

new REG content

 

Discipline sections

Business Analytics and Reporting (BAR)

The BAR Discipline section tests the knowledge and skills an nlCPA must demonstrate with respect to:

  • Analyzing financial statements and financial information with a focus on an nlCPA’s role in comparing historical results to budgets and forecasts; deriving the impact of transactions, events (actual and proposed), and market conditions on performance measures; and comparing investment alternatives.
  • Select technical accounting and reporting requirements under the FASB and SEC that are applicable to for-profit business entities (e.g., stock compensation, business combinations, derivatives) and higher order skills related to revenue recognition and lease accounting. These topics are moving from the current FAR exam to BAR.
  • Financial accounting and reporting requirements under GASB that are applicable to state and local government entities. These topics are also moving from the current FAR exam to BAR.

The BAR Discipline Exam section will test more complex technical accounting topics and certain topics will be tested in both the FAR Core Exam section and the BAR Discipline Exam section, such as revenue recognition and lease accounting. The topics that will be moved from BEC to BAR include:

  • Non-financial measures of performance
  • Managerial and cost accounting concepts
  • Variance analysis
  • Budgeting, forecasting and projection techniques
  • Factors that influence an entity’s capital structure, including leverage, cost of capital, liquidity and loan covenants
  • Financial valuation decision models used to compare investment alternatives
  • COSO Enterprise Risk Management Framework
  • Effect of changes in economic conditions and market influences on an entity’s business

Below is a table from the ED summarizing the BAR content areas and allocation.

BAR content

 

Information Systems and Controls (ISC)

The ISC Discipline section tests the knowledge and skills an nlCPA must demonstrate with respect to information technology (IT) audit and advisory services, including SOC engagements. The ISC Discipline section also tests the knowledge and skills that nlCPAs must demonstrate with respect to data management, including data collection, storage, and usage throughout the data life cycle.

With respect to SOC engagements, the ISC Discipline Exam section primarily focuses on:

  • The use of the Description Criteria for a Description of a Service Organization’s System and Trust Services Criteria for Security, Availability, Processing Integrity, Confidentiality, and Privacy in planning, performing, and reporting in a SOC 2® engagement.
  • Planning, certain procedures (excluding the testing of internal controls over financial reporting) and reporting on a SOC 1® engagement.

BEC topics moved to ISC include:

  • Business processes and internal controls
  • Risks associated with IT and controls that respond to those risks
  • Data management and relationships

Below is a table from the ED summarizing the ISC content areas and allocation.

ISC content

 

Tax Compliance and Planning (TCP)

The TCP Discipline section tests the knowledge and skills an nlCPA must demonstrate with respect to:

  • U.S. federal tax compliance for individuals and entities with a focus on nonroutine and higher complexity transactions, U.S. federal tax planning for individuals and entities, and personal financial planning.
  • The assessment of federal tax compliance will focus on an nlCPA’s role in both the preparation and review of tax returns. The assessment of federal tax planning will focus on an nlCPA’s role in determining the tax implications of proposed transactions, available tax alternatives, or business structures.
  • The assessment of personal financial planning will focus on planning strategies and opportunities that an nlCPA typically identifies in connection with the preparation and review of individual tax returns.

As mentioned earlier, the existing REG content will be allocated between the REG Core section and the TCP Discipline section. The TCP Discipline section will focus on nonroutine and higher complexity tasks.  The current REG topics that will be moved to TCP include:

  • Consolidated C-Corporation tax returns
  • International tax issues

Below is a table from the ED summarizing the TCP content areas and allocation.

TCP content

 

Key takeaways from the new CPA Exam Exposure Draft

The Exposure Draft shares a ton of new information, but overall, it appears that a small amount of content will be eliminated from the current exam. 

Here are the biggest takeaways:

  • Most of the content that was previously assessed in the BEC section has been moved to the AUD, FAR, BAR and ISC sections, except the written communication item which will be completely removed. 
  • The content from the current FAR section will be split between the new FAR and BAR sections.
  • Content from the current REG section will be split between the new REG and TCP sections. 
  • Some content in the current FAR and REG sections will now be tested in the BAR and TCP Discipline sections, respectively.   

Below is a diagram to help summarize these changes. 

change summary

 

 

Comments on the ED are due by September 30, 2022.  The AICPA will process the comments and finalize the blueprint in December 2022.  Then, they will publish the final blueprint in January 2023.  The current launch date of the new exam is still scheduled for January 2024. 

We at Becker are staying on top of the latest updates and will be there with you every step of the way to help support and guide you through the changes. Keep up with all CPA Evolution news and changes at our CPA Evolution Content Hub.   

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