So you’ve decided you want to become a certified public accountant (CPA). If you've taken all the undergraduate andgraduate-level classes in accounting, business law, and general studies that your state requires, and have logged some work experience (as required in all but a few states), you’re ready to take the Uniform CPA Examination. This is a substantial undertaking. Let’s review what’s involved.
Key Takeaways
- The CPA exam consists of three required Core sections (Financial Accounting and Reporting (FAR), Auditing and Attestation (AUD), and Regulation (REG)) and one Discipline section of the candidate’s choosing.
- Candidates have up to four hours to complete each exam section; exam sections can be taken individually and candidates must pass all four sections within 30 months.
- The Core CPA exam has 200 multiple-choice questions and 22 task-based simulations. The candidate-selected Discipline section adds up to 82 multiple-choice questions and seven simulations.
- Each section of the test is graded on a scale of zero to 99; the minimum passing score is 75.
CPA Exam Structure
The CPA exam consists of three required Core sections and one Discipline section that the candidate may choose from three domains offered. The Core exam sections combined comprise 200 multiple-choice questions and 22 task-based simulations. The Discipline sections range from 50 to 82 multiple-choice questions and have six to seven task-based simulations.
The Core exam sections are:
- Auditing and Attestation (AUD)
- Financial Accounting and Reporting (FAR)
- Taxation and Regulation (REG)
The Discipline exam options are:
- Business Analysis and Reporting (BAR)
- Information Systems and Controls (ISC)
- Tax Compliance and Planning (TCP)
Candidates have four hours to complete each section, with a total exam time of 16 hours. Each section is taken individually, and candidates can choose the order in which they take them. Candidates must pass all four sections of the exam within 30 months. The beginning of the 30-month time frame varies by jurisdiction.
Many states reinstated exam credits lost from 2020 to 2023 due to the COVID-19 pandemic. Various states also extended the time to complete the exam to 30 or more months, depending on the jurisdiction. Shortly after the temporary extension, the board voted to make the 30 month extension an amendment to the CPA exam rules.
Test Scoring
The American Institute of Certified Public Accountants (AICPA) develops and scores the test, grading each part on a scale of zero to 99. You must score at least 75 to pass each section. Your total score is a weighted combination of scaled scores from multiple-choice questions and task-based simulations. For the AUD, FAR, and REG sections, multiple-choice questions count for 50% of the total score and tasked-based simulations count for the other 50%.
The exam sections employ multi-stage testlets for the multiple-choice questions. The first testlet is always of moderate difficulty. Depending on your performance, the next testlet will be of the same level or slightly more difficult.
Let's look at what each section covers.
Financial Accounting and Reporting
The FAR section tests knowledge and understanding of the financial reporting framework used by business enterprises, not-for-profit organizations, and government entities. It includes 50 multiple-choice questions as well as seven task-based simulations that use real-life work situations to test your skill.
This section deals with standards for financial statements, what needs to be included in statements, and how to account and report for government agencies, non-profits, and other types of organizations. Test takers are expected to prepare financial statements, including balance sheets, income statements, statements of retained earnings, equity, comprehensive income,and cash flows. They also must review source documents and enter data into subsidiaryand general ledgers.
Test takers must show they understand the process by which accounting standards are set and the roles of various governmental and industry groups such as the U.S. Securities and Exchange Commission (SEC), the Financial Accounting Standards Board (FASB), the Association of International Certified Professional Accountants (AICPA), and the Governmental Accounting Standards Board (GASB).
For most people, FAR is the toughest section of the overall CPA exam. You have up to four hours to take it.
Auditing and Attestation
The AUD section is a bit easier, especially if you’ve tackled FAR first. It has 78 multiple-choice questions and seven task-based simulations. It covers the planning and reviewing of engagements, internal controls, obtaining and documenting information, and communications preparation.
Test-takers must identify situations that might be unethical or a violation of professional standardsand determine the appropriate action to these situations. In addition, they mustidentify key risks in a financial information technology environment.
AUD also covers standards for preparing reports on audited financial statements, government auditing standards, compliance with laws, regulations, and internal control, along with other communication standards accountants must know. This section will also test your knowledge of the ethics and independence required by the AICPA, the Sarbanes-Oxley Act of 2002, the Government Accountability Office, and the Department of Labor.
Regulation
The REG section covers ethics and professional responsibility, business law, tax procedures and accounting, and federal taxation for individuals, entities, and property transactions. This section has 72 multiple-choice questions and eight task-based simulations.
Test-takers must show that they understand the professional and legal responsibilities of certified public accountants, as well as the legal implications of business transactions as they relate to accounting, auditing,and financial reporting. This section deals with federal and widely adopted state laws. You must show you understand the rights, duties, and liabilities of debtors, creditors, and guarantorsas well as the audit and appeals process employed by the Internal Revenue Service (IRS).
Business Environment and Concepts
BEC is arguably the easiest section, and most candidates pass it on their first attempt. The BEC section has 62 multiple-choice questions, four task-based simulations, and three written communication tasks, wherein test takers must respond in a letter or memo format to a work scenario. This is used to assess candidates’ writing skills as well as their organization, clarity, and conciseness.
This section addresses business structures, economic concepts, financial management,and information technology. You must show you understand corporate governance, financial risk management, financial management processes, strategic planning, and operations management. This section also tests your understanding of the economic concepts of global business and how they impact an entity’s business strategy.
Test-takers are called to assess the impact of business cycles on an entity’s operations and evaluate operations and quality control initiatives to measure and manage performance and costs.
Expect to be tested on the rights, duties,and ethics of an entity’s board of directors, officers, and other employees. Questions will also cover information systems and technology risks, the Committee of Sponsoring Organizations of the Treadway Commission (COSO), as well as corporate responsibility and financial disclosures necessitated by the Sarbanes-Oxley Act of 2002.
The Bottom Line
Even without the required schooling and work experience, CPA test takers have their work cut out for them. But the reward is a respected professional designation that most often comes with a significantly higher rate of pay. To give yourself the best chance possible when taking the exam, taking one of the best CPA prep courses might be worth considering.
