CPA Exam gets refresh after practice analysis

By Ken Tysiac

Emphasis on understanding business processes and data analytics is being expanded while other topics are being phased out as the CPA Exam undergoes a refresh designed to maintain its relevance to the evolving work that newly licensed CPAs perform.

New CPA Exam Blueprints released Friday are the result of a comprehensive practice analysis performed by the AICPA that included outreach to the profession, educators, regulators, and others, as well as an exposure draft (ED) that prompted more than 180 responses.

“Practice analysis is always necessary periodically because the Exam needs to keep pace with the profession,” said Barry Berkowitz, CPA, a shareholder at Mayer Hoffman McCann and managing director at the CBIZ office in Philadelphia who chairs the AICPA Board of Examiners. “This will make sure that the Exam matches what newly licensed CPAs need to know.”

Testing on the material in the updated blueprints will begin July 1, 2021, and the format of the Exam will not change. Candidates still will be tested for four hours each on the topics of Auditing and Attestation (AUD); Business Environment and Concepts (BEC); Financial Accounting and Reporting (FAR); and Regulation (REG).

Most of the changes will affect the AUD and BEC sections. Changes were clustered in four specific areas:

Business processes

The blueprints will require candidates to understand business processes from inception to completion, including automated aspects, risk identification, and internal control mapping.

In AUD, considerations of information technology systems, application, and controls are expanded, and tasks on the completeness and accuracy of data to be used as audit evidence are added. In BEC, the assessment of business processes will focus on governance and the design of internal controls, including IT general and application controls.

“In understanding the business processes, the Exam will be assessing how auditors are relying on IT controls and how they are using technology in the audit as well,” said Audrey Katcher, CPA/CITP, CGMA, partner, Business Advisory Services at RubinBrown LLP and a former member of the AICPA Board of Examiners. “The Exam will add [emphasis on] data analytics; business processes, including automated aspects; and transaction-level risks and controls.”

Focus on data

Additional material is concentrated on the need for a digital and data-driven mindset and the use of data analytics.

AUD additions will include procedures to obtain evidence, as well as analysis skill level task-based simulations incorporating basic data knowledge and interpreting the results of analytical procedures. A new BEC topic will focus on data management and relationships, including tasks related to data governance, extraction, transforming and loading data, and understanding the capabilities and uses of visualizations.

SOC reports

Material in the new blueprints will reflect the increased reliance on System and Organization Controls (SOC) 1 reports and their importance to newly licensed CPAs.

In AUD, changes will require an understanding of the differences between SOC 1 reports and SOC 2 reports. Reliance on SOC 1 reports and the impact to the nature and extent of testing of controls also will be covered in AUD. BEC will cover SOC 1 reports from the user entity’s view, including considerations about the period covered and complementary user entity controls.

“It’s important with the cloud and the reliance on third parties that the auditor and the CFO of the future understand how to rely on the SOC report,” Katcher said. “And the newly licensed CPA is actually doing some of the initial steps on this.”

Removal of less relevant material

Certain topics that the CPA Exam has tested in the past will no longer be assessed after the practice analysis found they are less relevant to work currently performed by newly licensed CPAs.

Candidates no longer will be tested on the differences between IFRS and U.S. GAAP. The topic of estate taxes and trusts also was removed from the blueprints.

Deciding which material to remove from the Exam was a difficult challenge, but it was necessary to keep the Exam focused on the more critical topics newly licensed CPAs need to know to protect the public interest. Predictions that IFRS would become the financial reporting basis in the United States have not come to fruition, and as a result IFRS is a topic that newly licensed CPAs don’t often encounter.

“Estate taxes and planning, meanwhile, is a highly specialized area that few newly licensed CPAs work with in great detail,” Berkowitz said.

One topic that was proposed for de-emphasis on the Exam will remain in the blueprints after strenuous objections were lodged during the exposure process. The invitation to comment questioned whether government accounting should be tested on the Exam. The ED proposed three changes to how government material should be presented if it remained on the Exam.

About 90% of the 180 comment letters were related to government accounting, with the vast majority objecting to the removal of state and local government accounting from the Exam. As a result, government accounting material will remain in the blueprints, unchanged.

“We decided to forgo those changes at this time, given the amount of pushback received,” said Joe Maslott, CPA, a senior technical manager with the AICPA.

Technology is a focus

Many of the changes are focused on measuring newly licensed CPAs’ ability to work with technology, which continues to be an increasingly important element of the profession.

“Technology knowledge and skills are essential to the newly licensed CPA, as they help serve the public interest,” Katcher said. “For example, the public counts on us, as CPAs, to protect their financial interest, which has evolved to include greater dependence on and the use of technology.”

Understanding business processes requires familiarity with IT systems and controls that are used in those processes. Technology is incorporated in the knowledge of data analytics and a digital and data-driven mindset, as well as the familiarity with SOC 1 reports.

Katcher said young people will be poised to succeed with tech-based knowledge and skills.

“We’re embracing what’s intuitive with this generation already,” she said. “My 9-year-old grandkid can do more on technology than I can. They already have this in them, and they do this every day. This isn’t necessarily creating new requirements for them.”

CPA Evolution and the future

The changes are separate from those that will be made in the future as the CPA Evolution project implements a new licensure model. The AICPA and the National Association of State Boards of Accountancy have joined forces to create a new model that will require CPA candidates to master core skills in accounting, auditing, tax, and technology plus show more in-depth knowledge in one of the following three areas:

  • Tax compliance and planning;
  • Business analysis and reporting; or
  • Information systems and controls.

Each successful candidate will receive the same CPA license, regardless of which discipline they choose.

Berkowitz said that when he started in the accounting profession more than 30 years ago, CPAs were generalists unless they were working at large firms. He said that’s not the case anymore, and he believes the Evolution model will aid in that specialization.

“We’re trying to get to the new skills that a newly licensed CPA needs to get started,” Katcher said. “And then when they get started at the firms, they get affinities for things they’re more interested in, and they’ll deepen those skills. But we’ve got to build a foundation that’s very strong.”

The core is expected to consist of three exam sections that all candidates would take. Each candidate would also be required to select one discipline and take the exam corresponding to that topic.

Research is beginning to define the knowledge and skills that will be required for the core exams and the discipline exams. That research is expected to be completed in mid-2022, when an ED is planned to be issued.

The final design of the Exam in the CPA Evolution project is expected to be completed by Jan. 1, 2023, and it will launch under the new format on Jan. 1, 2024.

“It will take a newly licensed CPA toward their career goal quicker,” Katcher said. “When they come out as a CPA with a path on technology, business analysis, or tax compliance, that will differentiate them and help them figure out their career path sooner because they were able to be more focused as they achieve the CPA Exam.”

Ken Tysiac ( is the JofA’s editorial director.

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