The results of this feedback led to the CPA Evolution Initiative, a new licensure model that is set to launch in January 2024. This new model will require potential CPA candidates to take three core parts of the CPA exam and select a discipline section of the exam in order to obtain their CPA license (dubbed a “Core + Discipline” model). The core includes Financial Accounting and Reporting (FAR), Auditing and Attestation (AUD), and Taxation and Regulation (REG), with an overarching emphasis on integrating technology. The discipline areas include Business Analysis and Reporting (BAR), Tax Compliance and Planning (TCP), and Information Systems and Controls (ISC). Candidates have the ability to select any discipline to become licensed; however, this selection does not limit their career path to the chosen specialization. Regardless of the discipline selected by the CPA candidate, the result will be the same CPA license for all candidates. This new format will replace the existing CPA exam format, which includes Financial Accounting and Reporting (FAR), Auditing and Attestation (AUD), Taxation and Regulation (REG), and Business Entities and Concepts (BEC).
Given its anticipated launch in January 2024, the AICPA and NASBA have been working closely with academia to allow for changes in accounting curriculum. In June 2021, the AICPA made available a CPA Evolution Curriculum Model, which provided suggested learning objectives specific to the new CPA exam’s content. Using this model, academic institutions have been able to consider whether curriculum changes for new courses or existing courses are necessary to better align with the CPA Evolution content. In addition, in order to provide additional preparation and content related to the specialized disciplines within the CPA Evolution, academic institutions may have also begun making changes to their existing graduate programs. Some may have also decided to launch a graduate accounting program to assist students with their preparation. Graduate programs can provide the extra benefit of ensuring that candidates obtain the 150 credit hours required for licen-sure. Overall, academia is proactively analyzing the content to determine the potential impact the new CPA exam format may have on their undergraduate and graduate programs.
More recently, in July 2022, the AICPA delivered its exposure draft, “Maintaining the Relevance of the Uniform CPA Examination—Aligning the Exam with the CPA Evolution Licensure Model” (https://tinyurl.com/5bn59rz8). Included in the exposure draft is a preliminary “CPA Blueprint,” which outlines the core content and knowledge/skillset required for newly licensed CPAs. The CPA Blueprint is intended to assist potential CPA candidates with exam preparation (by outlining the exam content), to inform educators about the necessary knowledge/skillset needed for CPA licensure, and to assist examiners with CPA exam question development. The draft’s comment period closed on September 30, 2022, and the AICPA is currently reviewing stakeholder comments.
On November 2, 2022, NASBA issued an update and provided key tentative dates for the transition to the new CPA exam format. This update provided that the last day of testing for AUD, BEC, FAR, and REG will be December 15, 2023. No CPA exams will be scheduled or administered by NASBA between December 16, 2023 through January 9, 2024 to allow for the existing IT systems to transition to the new CPA exam format. Testing will begin on January 10, 2024 for the new CPA exam format.
Overall, the CPA Evolution Initiative has made significant headway in terms of better preparing the future of the profession. Although the CPA Evolution Initiative is reactive to the changes in practice, it is also proactive to the extent that the CPA exam serves as a roadmap for those planning to enter the accounting profession to become a newly licensed CPA. In addition, it also provides guidance for colleges and universities that strive to better prepare students for the profession.
Given the CPA Evolution’s recent developments, it is important for those in accounting practice and academia to understand the new format and content of the CPA exam. Those in practice and academia will be advising, mentoring, and recruiting potential CPA candidates. Academics and practitioners are often asked for advice regarding careers in accounting, including the value of the CPA license and the best approach for obtaining licensure. Therefore, it is critical for existing CPAs and academics that mentor CPA candidates to understand the exam format and content.
The following five elements are critical to discuss when mentoring future and current professionals who are currently taking the CPA or will be subject to the new CPA exam format.
Highlight the Main Reasons for the CPA Evolution
The CPA Evolution Initiative is a direct result of a changing profession, which emphasizes the importance of developing skillsets in technology, data analytics, and critical thinking. Specifically, the new exam format seeks to address the concepts of professional judgment/skepticism; problem solving; an understanding of business systems, controls, and risks; data management and analysis; and SOC engagements. Technology does not reside in the one specific area, but rather serves as an over-arching theme for each section along with critical thinking, problem solving, analytical ability, professional skepticism, and research skills.
Understand the General Content of Each Core Section
The Core portion of the exam will include three sections: Core FAR, Core AUD, and Core REG. Each section has several key content areas described below and summarized in Exhibit 1.
Summarized Content for Core and Specialization Section, According to Draft CPA Evolution Blueprint
Core FAR will remain similar to the previous FAR section of the exam, which included knowledge and skills related to financial reporting and accounting for both profit and not-for-profit entities under FASB, the SEC, and the AICPA frameworks. This section will cover balance sheet and other selected transactions. Some content previously covered in FAR will be allocated between the Core FAR and BAR discipline section of the exam, such as complex areas of revenue recognition and lease accounting. In addition, certain parts of BEC related to financial statements ratios and performance metrics have been shifted to the Core FAR section (AICPA 2022).
Core AUD will remain as the AUD section of the exam and a majority of its content remains unchanged. The Core AUD section includes attestation, audit, and accounting and review engagements. The focus will remain on planning, risk assessment, performing procedures, evidence, and reporting as well as ethics, professional responsibilities, and general principles. The changes to the Core AUD will include an increased focus on technology, understanding business processes and Information Technology (IT)-related components, and the control environment including IT. Certain components of the BEC exam related to economic concepts are now included in the AUD section (https://tinyurl.com/5bn59rz8).
Core REG will remain as the REG section of the exam. This section includes matters related to tax practices, U.S. business law, and federal tax compliance for both individuals and entities for routine and recurring transactions. Some components of the previous REG section have been allocated to the TCP discipline section (https://tinyurl.com/5bn59rz8).
Understand the General Content of Each Discipline and Recommend the Area that Plays to the Candidate’s Strengths or Interests
Each of the discipline sections (BAR, ISC, and TCP) targets certain areas of accounting. Candidates may only select one discipline; however, it should be noted that this does not preclude candidates from pursuing a career or job opportunity in another area of accounting outside of the discipline selected for licensure. Nonetheless, it may be beneficial for candidates to consider a discipline that either accentuates their strengths or aligns with their field of interest in accounting. The discipline sections are diverse, and candidates may find that one section better complements their academic strengths in their accounting courses or knowledge obtained via a past internship. Candidates may also select a discipline that aligns with their career interests. For each discipline, the content is summarized below and in Exhibit 1.
BAR will primarily focus on financial statement analysis; consider budgets, forecasts, and market conditions; technical accounting requirements for complex areas (i.e., business combinations, stock compensation, derivatives, and technical accounting skills for the complex portions of revenue recognition and lease accounting); and financial accounting and reporting for government entities. This discipline will also include managerial and cost accounting topics, such as non-financial performance metrics, budgeting/forecasting/projection techniques, matters that impact a company’s equity structure, risk management, and the impact of economic and market conditions on a business (https://tinyurl.com/5bn59rz8).
Candidates may wish to sit for this discipline section if they are interested in a career in assurance and advisory services; financial statement analysis and reporting; technical accounting; or financial management and oversight. This could include positions as an auditor at a public accounting firm; in the accounting department at a corporation, government, or not-for-profit entity; a role in internal audit; or a future leadership role at an organization (i.e., controller, chief accounting officer, chief financial officer).
ISC will focus on the knowledge and skills related to information technology audits and advisory services, including SOC engagements (i.e., the use of SOC reports and the impact on planning, performing, and reporting, as well as procedures related to SOC engagements). It also addresses topics in data management (e.g., data collection, storage, usage over the data life cycle). Finally, this section includes certain topics previously covered in BEC for business processes, internal control, and risks associated to information technology and data management (https://tinyurl.com/5bn59rz8).
Candidates interested in ISC may be interested in assurance and advisory services related to business processes, information systems, information security and governance, and IT audits. Examples of positions might include an IT auditor in external or internal audit, a data scientist or data manager in various types of entities, or future management oversight roles (i.e., chief information officer, chief technology officer, chief internal auditor). In addition, this discipline may also complement a candidate who has a minor or dual-major in management information systems, or who has had an internship with a focus on information technology (e.g., an IT auditor).
Examples of Employment Opportunities, by Specialization Section
TCP focuses primarily on non-routine and complex transactions related to tax compliance, federal tax planning for both U.S. individuals and entities, and personal financial planning. For compliance, the preparation and review of tax returns will be assessed. For federal tax planning, the tax impact of transactions, available tax alternatives, and business structures will be assessed. For personal financial planning, the strategies and opportunities that present themselves in tax return preparation will be assessed. Some of the topics previously covered in REG have been moved to TCP, particularly those dealing with the tax implications for complex and non-routine transactions for tax returns of C corporations or international entities (https://tinyurl.com/5bn59rz8).
Candidates with strengths or interests in tax compliance (for individuals or corporations), financial planning, or advising on tax strategies may want to consider TCP. Examples of positions include working for an accounting or tax firm in preparing tax returns for individuals or corporations; in the tax department of a corporation, government, or not-for-profit entity; for an accounting, finance, or tax firm in tax planning; or at an accounting, advisory, or tax firm for tax planning strategies.
Know the Transition Policy
CPA candidates may be in a position where they will not have completed the CPA licensure exam requirements under the existing exam format by January 2024. Therefore, they may have completed some sections under the old format and be subject to the new requirements of the CPA Evolution. These candidates will need to transition to the new testing format for any sections they have not yet passed (NASBA, “Transition Policy Announced for the 2024 CPA Exam Under the CPA Evolution Initiative,” February 2022, https://nasba.org/blog/2022/02/25/transition-policy/).
The transition policy indicates that FAR, REG, and AUD map to Core FAR, Core REG, Core AUD, respectively. BEC will map to any discipline area (BAR, ICS, TCP). For example, if a candidate has passed FAR, candidates will not need to take the Core FAR. If BEC is completed prior to the CPA Evolution, candidates are not required to take the discipline component of the new licensure model. If BEC has not been completed, then candidates will need to select a discipline as outlined in the CPA Evolution initiative. If any section previously passed expires after December 31, 2023, the CPA candidate will need to take the corresponding section under the new CPA exam format. For example, if BEC expires after December 31, 2023 and prior to a candidate passing all four sections, then the candidate must select a discipline section, as the BEC section will no longer be available.
The last testing dates for FAR, AUD, REG, and BEC is December 15, 2023. Furthermore, applications to sit for the BEC portion of the exam will not be processed by NASBA after November 15, 2023 as this section will no longer exist under the new licensure model (NASBA, “CPA Exam’s Future: Key Tentative Dates Announced,” November 2022, https://tinyurl.com/yc5sd8me).
Recommend that Candidates Develop a Plan
Potential CPA candidates should develop a plan that best fits where they are in their CPA licensure journey. In addition to understanding the content of the Core + Discipline format and the transition policy, each candidate has to develop a plan that fits their path. Future CPAs may have already begun to take the CPA exam, plan to take the exam beginning in 2023, or are still meeting the education requirements but are proactive in their CPA journey. Therefore, there are some considerations for candidates in these various stages that may help with developing a plan.
Current CPA candidates/eligible CPA candidates in 2023.
For those candidates who have already begun to sit for the CPA exam or who will be eligible to sit for the exam in 2023, it is advantageous to plan which sections of the exam under the existing format will provide the most favorable outcome under the transition policy. For example, students may find it valuable to sit for BEC in 2023, because a majority of the content from this section will be incorporated into the Core sections under the new exam format, providing overlap in study efforts. In addition, based on the transition policy, a candidate will not have to select and sit for a discipline section under the Core + Discipline format if they pass BEC prior January 2024. NASBA will stop processing BEC exam applications on November 15, 2023; as mentioned above, the last exams for BEC will be administered by December 15, 2023.
For the existing exam format’s AUD, FAR, and REG sections; it is up to a candidate’s discretion as to how to prioritize their Notice to Schedule (NTS) (considering jurisdictional requirements). Candidates should consider optimizing their strengths based on the content in the old and new exam formats.
Current undergraduate/graduate students eligible to sit beginning January 2024 or later. Mentors of interns or students working towards their accounting degree, should counsel them to identify and select courses that may assist with developing the key skills/competencies and learning objectives that the new CPA exam format emphasizes. Candidates should also consider whether a graduate degree program or an accelerated degree program are beneficial; specifically, if the graduate or accelerated degree program covers content included in the core and discipline sections. As noted, graduate accounting programs are also another avenue for obtaining the 150 credit hours required for licensure.
Next, candidates should determine a testing plan and identify the section they may want to take first. When planning, it should be noted that any section can be taken at any time. Nevertheless, selecting a discipline may be a good starting point for strategizing which Core section to sit for first. The Core portions of the exam aligns with similar content in each discipline. For example, candidates may benefit from taking Core REG first and then the TCP discipline, as REG covers more basic and recurring transactions as compared to TCP, which includes more complex tax concepts. Similarly, candidates may find it beneficial to take Core FAR and then BAR as BAR expands on the complexities of some of the topics covered in Core FAR (e.g., revenue recognition, share-based compensation). Likewise, the Core AUD section may provide a foundation of course assurance topics for candidates who may seek to take the ISC discipline, which focuses on various assurance-related services and the impact of information technology on assurance-related services. Although it may be helpful for a candidate to take the core section prior the related discipline section, candidates are permitted to take a discipline section first or simultaneously.
Other matters to consider.
Regardless of the CPA exam format, candidates should be aware of and consider jurisdictional requirements for sitting for the CPA exam and identify resources that may assist with exam preparation. Some of these matters are highlighted below.
When developing a plan, it is important for candidates to know their state’s requirements to sit, as some allow students to sit for the exam prior to obtaining the entire 150 credit hours required for licensure. Other states require the full 150 credit hours to sit for the exam. Another jurisdictional difference is a “Notice to Schedule” (NTS), which is an official authorization and indicates that one can begin scheduling an exam; however, this must be within the respective jurisdiction’s timeframe. Overall, it is important for candidates to know their jurisdiction’s requirements.
The CPA Evolution does not change the benefits that candidates may receive from taking a review course. Every candidate is different; however, a CPA review course provides structure, outlines content, and enables candidates to take practice tests. Candidates should consider a review course that meets their study needs. Various review courses are proactively addressing and integrating the changes to the exam in its program, including how materials will be transitioned for the changes in the Cores’ content and when discipline information will be made available to them. Candidates should be aware that there are also additional resources available from the AICPA to assist with exam preparation. State societies also may provide resources to help candidates succeed.