What is CPA Certification, and Why Does It Matter?
The title “Certified Public Accountant (CPA)” is granted to candidates who pass the uniform CPA exam and meet other state education and work-experience criteria. Candidates must apply for certification after passing the CPA exam and meeting any additional state requirements. Certification and licensing requirements for CPA candidates are imposed separately by each state’s laws and vary from state to state. For instance, Texas requires candidates to have 150 academic hours of study and a minimum of a bachelor’s degree before they can sit for the exam, while California has no semester hour requirement. More information about individual state requirements for certification and licensing can be found on our site.
Completing a certification program demonstrates to potential employers (and the general public) that you possess a high level of expertise in your industry which can bring you a higher than market average starting salary. Accountants who pass the CPA exam also have employment opportunities that uncertified accounts don’t, such as working for the FBI or providing independent accounting services to the public. Certification also enhances your upward mobility and it’s a necessary step to becoming a licensed CPA.
How Often Is the CPA Exam Administered?
The CPA Exam is a 14-hour, computer-based test that’s offered up to six days a week during January, February, April, May, July, August, October, and November of each year. The American Institute of CPA (AICPA) Board of Examiners (BOE) oversees the exam which is administered at test centers across the U.S. by Prometric The AICPA suggests you schedule your exam at least 45 days in advance of your preferred date, and its website can be used to cancel or reschedule testing times.
What Does the Test Entail?
While the education requirements for a person to sit for the CPA exam can vary state to state, the exam itself is uniform. Generally speaking, a bachelor’s degree or higher and 150 credit hours in a combination of accounting and business courses is required to sit for the CPA exam. Candidates for state board licensure are required to pass the CPA exam and meet additional state education and work-experience requirements. The exam is split into four sections: Auditing and Attestation (AUD), Financial Accounting and Reporting (FAR), Regulation (REG), and Business Environment and Concepts (BEC). Each section asks students to demonstrate their knowledge and understanding of business and financial law, standard accounting practices, and professional responsibility and ethics. They must also show they have the skills necessary to perform the duties of CPAs.
Current and upcoming CPA exam content and specification outlines (CSOs) are available on the American Institute of CPAs (AICPA) website. CSOs break down what you can expect to be tested on. Changes to the CPA exam CSO effective on January 1, 2014 include the removal of redundancies across CSOs and general editorial updates.
Here’s a brief look at the test areas:
Auditing & Attestation
This section of the CPA exam tests a candidate’s understanding of auditing standards promulgated in the U.S. related to public companies, governmental and non-profit entities, employee benefit plans, and standards for performing accounting and review services. The exam also includes questions about role of the International Auditing and Assurance Standards Board (IAASB) in establishing international auditing standards, and the difference between international and American standards. Test takers must also understand the professional responsibilities of certified public accountants and international ethical standards. To pass this section of the course you’ll need to demonstrate a proficiency in the skills needed to perform auditing and attestation tasks as a certified public accountant, including recognizing potentially unethical behavior by clients, performing and documenting risk assessment procedures, and evaluating audit findings.
Financial Accounting & Reporting
This part of the exam requires test takers to demonstrate an understanding of the financial reporting framework used by businesses, governmental agencies, and non-profit organizations. Candidates must know about the standards issued by the International Accounting Standards Board, U.S. Securities and Exchange Commission, Governmental Accounting Standards Board, and the Financial Accounting Standards Board. This section requires students to show they understand the differences between financial statements prepared using accounting principles accepted in the U.S. and the International Financial Reporting Standards (IFRS), and how to prepare consolidating and eliminating entries, account reconciliation and related schedules, and consolidated financial statements.
The regulation section of the CPA exam tests a candidate’s knowledge of business law, ethics, federal taxation, and professional and legal responsibilities. Ethics questions are based on the AICPA Statements on Standards for Tax Services, Treasury Department Circular 230, and regulations for tax return preparers. The federal taxation part requires candidates to know about the federal tax process and taxation of property transactions, individuals, and entities. Candidates must also show they know how to research alternative tax treatments, assess how taxes affect economic decisions, and identify data relevant for tax purposes.
Business Environment & Concepts
This section requires students to demonstrate their knowledge of corporate governance, economic concepts related to the global business environment, financial management processes, strategic planning, and risk management. Candidates are required to assess the impact of business cycles on industry or business operations, the factors influencing a company’s capital structure, distinguish between appropriate and inappropriate internal control systems, and more. Refer to the AICPAs’ website for more information on what each section of the CPA exam entails.
How Can I Do Well on the CPA Exam?
The AICPA provides a CPA exam tutorial and sample tests. The tutorial shows the type of questions you can expect and the tools you’ll have to work with when taking the exam. The sample tests replicate the CPA exam to allow candidates to become familiar with the its format. However, the tutorial does not contain actual exam content, and the tests are not intended for use as study materials for the actual exam. Instead, the sample exam is meant to just familiarize test takers with the setup of the actual examination.
Write out a plan for studying, making sure you concentrate on subject areas you are less familiar with. In addition, make time to practice taking the exam, utilizing the free online tools available to you through the AICPA. Some common errors that can occur while taking the exam include computational errors, not watching the time, and not understanding the tools of the computerized test. These errors can be avoided by gaining familiarity with the exam setup in advance.
Advice From the Experts
“For the period of time you’re studying for it, you pretty much have to shut down your social life. There should be nothing else going on in your life except studying for this exam. Everyone I know who’s taken it, their entire sense of self-worth was locked into how well they did on this exam. They spent every waking hour studying for this exam. They didn’t go out and party or exercise; they studied for this exam. My advice is to just study, study, study until you pass it. Don’t take a break, don’t go on vacation, just study. It’s also important to understand how to take the exam. If you get stuck on a questions, move along and come back. You have to manage the time you have for each part of the exam.”
“Accounting program grads can certainly pass the exam, which has a fairly high passing rate and is given one section at a time. Passing is just a result of time spent preparing, so don’t be intimidated or discouraged. Study for at least a little while every day. Review courses are effective, but only if you do the things the instructors tell you to do to prepare. If you prepare on your own, work lots of actual exam problems.”
“It’s an academic exam, so start studying for it as soon as you can after college. It’s not an impossible exam, but it does require a sacrifice of your time to study for it. It’s better to make that sacrifice and study so that you can be done with it as soon as possible rather than just going at it half-heartedly. Pursuing it half-heartedly will just prolong the experience.”
“I would strongly urge people to be 100% committed to the exam. I’ve known many friends and colleagues who have given less than 100% and been completely frustrated. It sounds like a clich‚, but preparing for the exam is going to be very taxing and will demand your very best effort. Be totally committed. Study ferociously. Read, re-read and memorize. Take as many practice tests and do as many study questions as possible. Then do them again. It’s a model that I followed myself, and I was able to pass the exam on my first try (back when you took all four parts at the same time). I’m convinced that it was infinitely better to sacrifice all of my free time and some sleep for a few months and have the exam done than to give it 80% or 50% or 30% and then have the test hang over your head for months (or years) on end.”
“I have multiple certifications, so I’ve had a lot of people ask me what’s the secret of passing all the exams. I tell them that there is no real secret. It’s kind of easy — you learn the information that you’re supposed to know, and when you reach that point when you know the topics that are going to be tested on any of the exams, you’ll pass the exam. And until you know the information, you probably won’t pass the exam. It’s a matter of making it a priority and sitting down and learning the applicable knowledge. The thing about whether it’s a certificate like the CPA or CMA or a degree like an MBA, it’s not having the certificate or diploma on the wall that’s the value, it’s the knowledge that the certificate or diploma represents. It’s the knowledge the recipient has that they can then use in their job that makes them valuable.”
“One thing I tell my students, especially undergraduate students, is a lot of times they see a degree as a series of courses they need to check off in order to get a diploma at the end. But in professional fields like accounting or medicine or law, you really have to concentrate on the knowledge that is being put forth so that you’re learning it and not just trying to check off another course off of a list of many. Nobody would want to go to a physician who got their medical degree by memorizing a bunch of terms or situations and then forgetting them by the end of the semester. You want to go to a physician that you know really has the wealth of knowledge that somebody in that position should have. The same is true for accountants. You want somebody who can really knows what they’re talking about. If somebody wants to become a CMA or CPA, they need to look at what is going to be asked and then make sure that they learn it, and once they do they can pass the exam.”
“Don’t wait, put your mind to it, and study hard! If you can sit for it early in your career you won’t have as many other things going on in life to distract you from your studies. I put life on hold to get through the exam so I would work all day then study all night for months. But it paid off and I was able to pass each exam on the first try and get it over with in no time!”
“You have to have a schedule for everything. I meet plenty of people who want to get their certification, they order all the materials and exercises but then push it off. You have to have a schedule and you have to stick to the schedule. It basically consumes your life until you get certified, and a lot of people can’t handle that. Your life is almost all accounting every day. You have to spend time in a book every day. If you can’t handle that, if you can’t stay on that kind of schedule, it’s not going to work for you. People I’ve seen that are successful have the textbooks on their phone, they have a backpack with them all the time with materials in it. Those people I know will succeed. It has to be embedded into your daily routine. If you can do that, you’ll succeed. I’m confident of that.”