CPA Exam Changes: Now, Future, & Beyond
Change is coming! As trends in technology continue to transform the accounting profession, the CPA Exam must evolve to reflect the skills and knowledge required of a newly licensed CPA. In fact, some major exam changes are right around the corner in 2021.
– Hello, I’m Roger Philipp of UWorld Roger CPA Review, and today we’re gonna talk about CPA Exam Changes Now, the Future, and Beyond. As I mentioned, I’m Roger Philipp of UWorld Roger CPA Review. A little background on myself, I grew up in Los Angeles. I worked at Deloitte & Touche in Downtown LA where I got my CPA certificate. Started teaching CPA review over 30 years ago. And our job is to help you accomplish your goal of getting through the CPA exam. Now Roger Philipp is part of UWorld, and we’ve merged together. And UWorld is a company that’s helped over two million students prepare for high-stakes exams such as medical, nursing, finance, law, pharmacy, and now CPA review. UWorld has invested greatly in the product bringing you the highest quality multiple choice questions and task-based simulations that exactly map the AICPA Blueprints. We’ve also upgraded our technology to provide students with products like our featured mobile application which is awesome, you can use it anywhere anytime. We also have a proven track record of over 91% pass rate, and that’s improved dramatically since we’ve even updated all of our questions, solutions, and added a whole bunch of detail. We also have this product that we developed called SmartPath, and SmartPath is great ’cause it makes your studying more effective, more efficient, and it’ll basically give you questions in areas that you’re weak in based on the studying you’ve been doing. Now today I wanna talk about the CPA exam basics, what is the exam, why the exam is changing which again they update every year but there are also significant changes periodically which I’ll talk about, the overview of those changes both now, the future, and way beyond, and finally starting your CPA journey which means, hey, how can I get through this CPA exam? Now some of the CPA exam basics, there are four parts to the exam, and those four parts are 16 hours in total, four hours per part, and you can go in any order you like. We have FAR, Audit, REG, and BEC. FAR is Financial Accounting and Reporting. That includes your intermediate one, intermediate two, advanced government, non-profit squeezed into a fun-filled four-hour exam. We also have Audit which is planning, internal controls, substantive testing, IT, audit reports and so on. We have Regulation which is tax, law, and ethics. Tax could be individual tax, corporate tax, S corps, C corps, partnerships, LLCs, LLPs, and all of that stuff. And then finally BEC is Business Environment and Concepts that includes governmental, corporate governance, internal control, enterprise risk management, financial management, budgets, operations management, IT, and your favorite, cost managerial, it’s back. Now on the exam, the way it’s currently set up, 50% multiple choice, 50% task-based simulations, and that’s for all three of Audit, FAR, and REG. As far as BEC which is economics, cost accounting, and so on, that’s about 50% multiple choice, 35% task-based simulations which are detailed problems where it could be fill in the blank, it could be preparing a spreadsheet, things like that, and then 15% written communication which are essays. So there are generally three essays of which two are graded and the essays are only in the BEC exam. Now what’s the passing score? 75 and above, woo-hoo, I’m a CPA! 74 and below, darn, I came this close to passing. Once you pass an exam, you keep that part for 18 months. So that means you pass, pass, pass as long as you get the last part within 18 months, you’re done. If not, you don’t lose everything, you just lose that first part. Again you just gotta get through everything within 18 months. So as I always like to tell students, it’s not an IQ test, it’s a test of discipline. 75 and above is passing, 74. Though 75 feels like a C, that’s all you need to pass the CPA exam. Now why are these CPA exam changes occurring? Well, the CPA exam is continuously evolving and it’s doing so in order to meet the skillset needs of the accounting profession. And what’s exciting about this profession and what I love as well is once you get your job, you start working, you don’t get bored because every year there’s new changes, new updates in the profession. That’s also why the exam is changing as well. The other thing in today’s environment is CPAs are performing more advanced tasks and complex projects much earlier in their careers. What I did back at Deloitte when I started working many, many moons ago is much different than what you’re doing today. You’re doing much more advanced tasks, therefore you need to have a better handle on things like Excel and things like technology. Therefore the CPA exam also has to remain relevant as a measure of the knowledge and skills that CPAs need to have in order to practice their profession both more effectively and more efficiently. Now we have something called the CPA Exam Blueprints. And in this changing environment, the AICPA needs a way to communicate to exam providers and candidates what is on the exam and what is changing from year to year to year. That’s the purpose of these things called the Blueprints. And the content framework of the CPA exam is determined by whom? By the AICPA. It maps out the skills and the tasks that are gonna be tested. And it was introduced in about 2017, replaced something called content specification outlines, and it’s updated as the exam requirements require. So in other words, as exam changes occur in the real world, that’s how they update this Blueprint as well. And that is kind of the basis of what our educational team uses to create our course content, our questions, our texts, lectures, software, all of that is based on this thing called the AICPA Blueprints. And you’ll see a copy of it here, a snapshot of it. And this is an example for the Audit exam, and you’ll see it’s broken down by every topic. It also indicates the skill level being tested and the representative task for that skill level. Now this is based on something that a lot of your professors use in college when they’re preparing classes and so on called Bloom’s taxonomy of educational objectives. And what it has is different categories, you’ll see them here, remembering and understanding, you’ve got application, analysis, and evaluation. Now one of the cool things with this is it also tells us how certain things may get tested. If it’s remembering and understanding category, that would generally be a multiple choice type question. If it’s application, it could be either you’re applying it so let’s work through a bond question, that could be multiple choice or a TBS, task-based simulation like a problem. Analysis is gonna be a problem, a task-based simulation. And evaluation is only in auditing ’cause you’re drawing some kind of conclusion, right? Conclude on the sufficiency and so on. So that’s what they’re looking at. So it kinda talks about the areas that are gonna be tested and how those areas will in fact be tested. Now as far as the overview of the changes, you’ll see here a timeline, and this timeline talks about, okay, what’s happening over the next few years for example, starting today, October, happening right now, and we’re gonna look at that in just a minute as far as those changes, but we’re gonna start from today for REG and for FAR, certain changes, then we’re gonna talk about January 21. And those are annual changes, they occur every year. And these are based on things like cost of living increases or tax law changes and so on. The other thing I wanna mention is there were bigger changes planned but they were delayed because of the COVID pandemic. So for example, audit reports was gonna change in 21, instead they pushed it off to 2022. That might be a good reason not to wait to sit for the exam. So I always suggest the sooner you can sit, the better. You’ll see here 21 and 22, as I mentioned, some audit report changes. 24 is gonna be a significant change to the CPA exam, and that’s one of the things that I’m gonna talk about in a few minutes. So if you could squeeze in the exam before 2024, I encourage you to do so. So what are some of those exam changes that are occurring now? For example in FAR, Financial Accounting and Reporting, they came out, remember there’s something called the CARE Act, and you’ve heard about that probably for tax and for financial. The CARE Act stands for Coronavirus Aid, Relief, and Economic Security Act, and it was basically set up in order to provide critical, very important cashflow and liquidity to businesses during the COVID-19 emergency. Because again, because of the coronavirus, new laws came out. Well, those then show up on the CPA exam. For example in Financial Accounting, we talk about accounting for taxes, we talk about net operating losses, and you’ll learn these when you start studying, but basically there used to be the deduction NOL limit of 80%. They changed it to 100% so you could take a bigger deduction for 2018, 19, 20. As far as doing these things, generally they’re carried forward. There’s an exception saying you can carry back but that’s only for years 2018 through 2020. So again they make it current and say, hey, this is what’s happening in the real world, those are some of the changes we’re gonna see. Another change is in the definition. This is regarding SEC reporting. You have a 10-K and a 10-Q and an 8-K, and the definition of accelerated, non-accelerated, and things like that got adjusted. A 10-K annual audited statements, a 10-Q quarterly reviewed statements, an 8-K significant changes in the business, and that would be due four days after the change like change in auditor, change in CEO, officers, and so on. For Regulation, we also have the CARES Act. It affected charitable contributions. You could deduct 60% cash contributions. Now you can do 100% for the year 2020. Corporate tax, there’s charity and there’s NOL. So there’s all these different changes, again I don’t wanna get into specifics now, is the things that we will update for you as you study with our course, whatever product you have in front of you, online, in the materials is current, what you need for that exam. Alright, let’s talk about the CPA exam changes in the future. Now we have something called the Practice Analysis, and every few years the AICPA sits down and they say, okay, what are the skillsets that are required by the profession? And it gives an opportunity for the stakeholders, generally the firms, to provide feedback. And they’ll say to us, look, this is what a second-year CPA needs to be able to do, because that’s how the CPA exam is based, generally it says what does a second-year CPA do? These are the skills they need. And we set this up in order to ensure that the CPA exam reflects the skills that the firms wanna see in you. So these are the skills they’re looking for in you, the new hire. Now the Practice Analysis results in a new Blueprint, and we have a new Blueprint coming out soon. What happened is is it stems from about 2019 they did this Practice Analysis, they talked to the firms, they talked to professors, they see what’s going on in the real world, and they realized that technology is changing business and the accounting profession. Because of that, they need to focus on critical knowledge and skills especially increasing and adding more technology. So some of the changes for, an example here July 21, and these are especially in Audit and in BEC, we’re looking at technology and especially as it produces a significant amount of data, and the new data needs to be controlled, it needs to be understood, it needs to be verified. So we need to understand the digital mindset, in other words, how the data is structured, how it’s extracted, how you get it, the analysis of that data, data governance, judgment in analyzing the data. You also need to understand data analytics. Data analytics means we’re analyzing data in order to draw a conclusion. And that will help us when we look at that data, it helps us reveal trends in the data that helps us make decisions to make a smoother company. Technological impacts on the business processes, the internal controls, general and application controls which we’ll talk about in detail in the Audit portion of the exam. So as you can see here, technology is becoming even more heavily-tested in the future. A couple of other changes, July 21 expected changes here, the removal of some things, and as I said, they go through the Practice Analysis and they said you know what? A second-year CPA doesn’t deal with IFRS that often, so in the FAR exam, we’re gonna get rid of IFRS, International Financial Reporting Standards. We have estates and trust taxation, they said, you know what? Estates and trusts were up to like 11, 12 million dollars a person. Most people don’t have that so we’re gonna get rid of that, but we’ll still leave things like gift tax, right? You can get 15,000 a person, married filing joint $30,000. Feel free to give me a gift anytime. But the point is that’s something they’ll still leave on the exam. Other things that they’re keeping would be FAR, in FAR, the state and local government. And the reason I mention this is ’cause they were thinking of getting rid of these. These were on the chopping block, right? You’re fired, they were gonna get rid of it. And then after the Practice Analysis when they talked to the firms, they realized you know what? They need to keep certain things. So state and local governments, written communication, those are the essays in the BEC exam. For a while they were considering getting rid of those, and they realized you know what? Let’s end up keeping those because it’s a skillset that we need in the real world. As far as CPA exam changes beyond, beyond that would be CPA exam evolution. And the changes in the 2021 are just the start of addressing the technological shifts in the profession. So in 2024, they’re gonna be adding even more technology on the exam. And this is expected. Now, again, this is several years out so it can always change. So there’s several years between now and then for this to occur, but again it can always change. But what does that 2024 exam look like? And this is again as of today, but just keep checking back with us, ’cause if there’s any updates, we’ll let you know. We expect to still have a four-part exam. We still think it’s gonna be 16 hours. Three parts on the core parts of being a CPA, and then one part you get a choice on these disciplines. So the three core exams are gonna include things, accounting, audit, tax, technology, so the stuff we currently have, about 12 hours. The other four hours will be on a discipline. So four hours of one of your choices, either compliance and planning or business reporting and analysis or information systems and control. So you can see there that you’re gonna get more of a deep dive into that one area. Now again there’s more to come on this, stay tuned. But again the AICPA, based on a future Practice Analysis, may make changes to it again, but that’s currently the way that that future exam looks to be starting in January of 2024. Now that I’ve motivated you, I’ve sat there and I said here’s what’s changing today, here’s what’s changing a little bit tomorrow, here’s what the future looks like, and you’re all sitting there going, Rog, I’m excited, I’m motivated, I can’t wait to pass the exam. What do I need to do? Well, now is a great time to become a CPA. And it’s a great time because you’ve got great salaries, job security. It looks prestigious on your resume. And also as the economy picks up, the first thing a business needs is a CPA and accountant. Now we know current circumstances have been very difficult for a lot of us. Now is the time to refocus on your goals and come back stronger than we were before. So we suggest you start as soon as possible because research shows that the closer you are to graduating college, the better you’re gonna perform on the exam. And I always like people to realize that this is not an IQ test, but it’s a highly academic exam. In other words, the way you’ve been taking exams in college is part of 50% of exam is multiple choice, right? In the real world, no one’s gonna come up to you at your audit and go, hey Rog, I have a question. The second internal control structure element, is it, A, control environment, B, risk assessment, C, control, right? You don’t get ABC in the real world, but 50% of the exam on Audit, FAR, and REG are multiple choice, therefore you wanna sit for this exam as close to that graduation as possible. You will take the exam at a testing center called Prometrics. Now with Prometrics, they had closed down for a little while during COVID, then they opened up, and now they’ve opened up, they worked out any kinks that existed, they’re ensuring safe testing. So it is safe to go and take the CPA exam. Now knowing about all these changes coming up in July 21 and beyond, we suggest you take Audit and BEC as early as possible, maybe even before those changes. And again as far as the order, generally, I would say do FAR and then REG and so on. In this case, you might wanna nail Audit and BEC in that order out as soon as possible because there will be some significant changes and some new material being added to that part. Now what are we offering you? The highest quality in CPA exam prep. We have a team of experts that include practicing CPAs, we have professors, educators, and that way we can bring the highest quality content to you. What do we offer? Fully featured mobile app which is great. You’re traveling, you’re out and about, and you go, hey, let me log on and I can do some studying. We have time-saving technology which is our SmartPath. And our SmartPath technology is a software that we’ve developed and it’s amazing in the sense that it makes it more effective, more efficient because it’ll keep track of what areas you’re studying, how long you’re spending in that area, how long you’re spending on the questions, which ones you’re getting right and wrong, so it’ll keep feeding you questions until you get the right number of questions and the right score. Once you do that, it says, hey, you’re ready for this part, go to the next of 30 bi-parts, let’s do the next one. Because what a lot of us do is we go, oh, I love accounts receivable, this is great, I understand it. Let me do more questions. We say, no, no, no. You got it, you’re getting an 85%, you’re doing great. Let’s move on to bonds and leases and pensions and deferred taxes and areas where you might need more time to study. We also have the industry’s best material partially because we’ve just invested millions of dollars in updating, improving, and making all of our solutions even better. But the lectures, the questions, the software, everything you get is top of the line. We also give you free updates and lifetime access. And I have students that were my students five, 10, 20 years ago, and they go, you know what? I’m gonna be doing this in the real world. Let me log on to my course, watch Rog teach it for an hour. Now I understand it better. Now I’m ready to jump out into the real world and do it. We also have great pricing options. We have payment plans, we offer discounts. So definitely follow us on social media because we’ll run specials and promotions periodically. We’ve also partnered with hundreds of CPA firms, and the beauty of this is they will cover the cost of the course for you. Why would the course do that? Why would the companies do that? Because they want you to become a CPA. When I started at Deloitte, what did they give me? Nada, okay, nothing. Now they’ll pay for CPA review, they’ll give you a bonus, they’ll pay for your exam fees. So they really encourage you to do well to study to properly prepare because they want you to be a CPA because it’s beneficial not only to them but it’s beneficial to you. And it’s something you want for yourself. When I die, I’m putting in on my tombstone, Here lies Rog CPA, fully depreciated, right? ‘Cause there ain’t nothing left. Anyway, success can be yours. This is a goal you need to set and get through. As I said earlier, if you study, you will pass. It is not an IQ test. It’s a test of discipline. Our job is to motivate you to put the hours in so you will get through the material, get through the questions and solutions. That’s how you learn it. To encourage you, to motivate you to get a 75 or above in order to pass the exam. Start now and accomplish your goal of becoming a CPA. Thank you for your time and have a great career in accounting.
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