Becoming a certified public accountant means passing the CPA exam. A passing score on the exam leads to a license to practice. Even though the CPA exam may seem intimidating, taking the time to understand the concepts and types of questions on the exam can produce a successful result. The exam contains four sections and three different types of questions.
Types of Questions
In each section of the exam, the questions are structured as either multiple-choice, task-based simulations or short answer or essay. Although the multiple-choice format is fairly self-explanatory, the task-based simulations involve case studies that replicate real-life accounting scenarios. The short answer or essay format involves writing a response, sometimes in the form of memos or other means of business communications. Taking live cpa review courses can help someone become familiar with the three formats.
Four Sections
Within the CPA exam are four different subject areas that test a person’s accounting and business knowledge. Auditing and attestation, business environment and concepts, financial accounting and reporting, and regulation are the subject areas every test taker will need to study. Each of these subject areas covers various sub-components to different degrees.
The first subject area of auditing and attestation covers accounting ethics, principles, and responsibilities. A test taker will also need to be familiar with concepts such as risk assessment and risk response, obtaining evidence and conducting deeper investigations, and reaching conclusions and writing reports. The majority of the test deals with risk assessment and conducting further investigations.
Business environment and concepts deal with general business knowledge, including corporate governance, economics, information technology, financial management, and operations management. Each of these sub-components is covered relatively equally within the CPA exam’s questions. Those who have taken general business courses or gone through a business administration degree program will already be familiar with these concepts, but it is a good idea to take a refresher course.
Subject matter related to financial accounting and reporting covers several key areas. Basic conceptual reporting frameworks, financial statement accounts, transactions, and state and local governments are all included in this section of the test. The bulk of the material involves financial statement accounts, with the smallest percentage devoted to state and local governments.
The final section deals with regulation. This area covers ethics and tax procedures, business law, property transaction taxes, individual taxes, and entity and business taxes. Taxation of entities and individuals represent the majority of the material.
Taking the Test
Registering to take the test involves submitting an application to the Board of Accountancy. Once someone’s application is approved, he or she will receive a notice to schedule to take the exam within six months. A person does not have to take all four sections of the exam in one sitting, but can. However, to achieve a valid passing score on the exam, all sections must be taken with a passing score within a consecutive eighteen-month period.
Deciding to take the CPA exam can be an important step in beginning an accounting career. Due to the rigor of the test, months of preparation are recommended. Self-study, as well as in-person and virtual course options, are available. Some choose to supplement previous business education with additional continuing education courses or test preparation courses. To achieve the minimum score of 75 in each section, thorough planning and preparation are highly recommended.