CPA Exam Overview
The CPA exam includes 324 multiple-choice questions, 20 task-based simulation questions, and three writing sections. These are divided into four main areas: Audit and Attestation (AUD), Financial Accounting and Reporting (FAR), Regulation (REG), and Business Environment and Concepts (BEC). Each part is taken individually, and candidates can choose the order in which they are taken. Once a candidate has passed their first section of the exam, the remaining three must be passed within 18 months. The American Institute of CPAs (AICPA) administers and rates the test and rates each part on a scale of 0 to 99. You must have a minimum of 75 points to pass each section. Multiple choice questions count for 70% of the total score, Simulations are 20%, and written communication is 10% of the final result. Each question is weighted according to the level of difficulty so that the multiple-choice questions and going through the simulations and written parts result in an incorrect score. The total time for the test is 14 hours.
Financial accounting and reporting
The FAR section tests knowledge and understanding of the accounting framework used by corporations, non-profits, and government agencies. It contains 90 multiple-choice questions and seven task-based simulations that use real work situations to test your skills. (For related reading, see: What is the Average Salary of an Accountant?)
This section covers the standards for financial statements, what should be included in the statements, and how accounts should be recorded and reported. Government agencies, non-profits, and other types of organizations. Test takers are expected to prepare financial statements, including balance sheets, profit and loss statements, retained earnings, equity, comprehensive income, and cash flows, and review source documents and enter data in sub and general ledgers. (For more information, see: Investopedia Financial Statements Tutorial.)
Test takers must demonstrate that they understand how accounting standards are set and the roles of various government and industry groups such as US securities. And the Exchange Commission (SEC), the Financial Accounting Standards Board (FASB), the International Accounting Standards Board (IASB), and the Governmental Accounting Standards Board (GASB).
For most people, FAR is the hardest part of the entire CPA exam. You have up to four fours to take. (For related reading, see: What’s the Difference Between a CFA and a CPA?)
Auditing and attestation
The other four hour segment, AUD, is a bit easier, especially if you tackled FAR first. It also has 90 multiple choice questions and seven task-based simulations. It includes planning and reviewing engagements, internal controls, obtaining and documenting information, and preparing communications.
As with FAR, test takers must demonstrate international accounting standards, particularly the Difference between International Standards on Auditing (ISA) and US auditing standards. You need to identify situations that may be unethical or a violation of professional standards and determine the appropriate action to take in those situations. and identify key risks in a financial information technology environment. (For more information, see AICPA International Financial Reporting Standards (IFRS).
AUD also includes standards for audited financial reporting, government audit standards, compliance with laws and regulations, and internal controls. Accountants need to know, along with other communication standards. In this section, you 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 Labour. (For more information, see: CPA exam, CFA, or CPF: Choose Your Acronym Carefully)
The next part of CPA exam is REG which is up to three hours. It covers ethics and professional responsibility, business law, tax procedures and accounting, and federal taxes for individuals, corporations, and real estate transactions. This section contains 72 multiple choice questions and six task-based simulations.
Test takers must demonstrate that they understand auditors’ professional and legal responsibilities and the legal implications of business transactions in relation to accounting, auditing, and financial reporting. This section deals with federal and widely used state laws. They must show you that you understand the rights, obligations and liabilities of debtors, creditors and guarantors, the Internal Revenue Service (IRS) review and complaint procedure, and alternative minimum tax and estate and gift taxation (see for more information See: Investopedia’s tutorial on The Series 65 Exam.)
Business environment and concepts
BEC is arguably the easiest section, and most candidates pass it on on their first try. This three-hour section covers corporate structures, economic concepts, financial management, and information technology. You need to understand that you understand corporate governance, financial risk management, financial management processes, information systems and communications, strategic planning and operations management, and understand global business’s economic concepts and how they affect a company’s business strategy. Test takers are asked to evaluate the impact of business cycles on a company’s operations and evaluate operational and quality control initiatives to measure and manage performance and costs. (More on this under:
Expect to become familiar with the rights, duties, and ethics of the board of directors, officers, and other employees of a company. .. Questions also include risks to information systems and technology, the Treadway Commission’s Committee of Sponsorship Organizations (COSO), and corporate responsibility and financial information disclosure under the Sarbanes-Oxley Act of 2002.
The BEC section has 72 multiple choice options. Questions and three written communication elements, with test participants responding to a work scenario in a letter or memo format. This is used to assess candidates’ writing skills and their organization, clarity, and conciseness. (For related reading, see How To Become a CPA.)
CPA Exam Additional Information
Find out how the CPA Exam is graded.
Each component of the CPA Exam must have a minimum score of 75. Learn more about how your score is calculated. You may also examine the most recent pass rates for each section of the CPA Exam.
What are the requirements for an international candidate to sit for the CPA Exam?
International students and professionals who wish to obtain a CPA licence in the United States must follow the same steps as American citizens. Testing is also available in 15 countries outside of the United States. The NASBA can assist you with the application procedure.
For candidates, what does CPA Evolution imply?
In 2024, the CPA Evolution programme will alter the licensure model for aspiring CPAs. Learn what this implies for your CPA career.
The final result
Even without the required schooling and work experience, the CPA test-takers did their job for them. But the reward is a respected job title that is usually accompanied by a significantly higher wage level.