CPA Practice Analysis
CPA Practice Analysis: Certified Public Accountant (CPA) is the title of qualified accountants in numerous countries in the English-speaking world. In the United States, the CPA is a license to provide accounting services directly to the public. It is awarded by each of the 50 states for practice in that state. Additionally, almost every state (49 out of 50) has passed mobility laws in order to allow practice in their state by CPAs from other states. Although state licensing requirements vary, the minimum standard requirements include the passing of the Uniform Certified Public Accountant Examination, 150 semester units of college education, and one year of accounting related experience.
Continuing professional education (CPE) is also required to maintain licensure. Individuals who have been awarded the CPA but have lapsed in the fulfillment of the required CPE or have requested to be converted to inactive status are in many states permitted to use the designation “CPA Inactive” or an equivalent phrase. In most U.S. states, only CPAs are legally able to provide to the public attestation (including auditing) opinions on financial statements. Many CPAs are members of the American Institute of Certified Public Accountants and their state CPA society.
State laws vary widely regarding whether a non-CPA is even allowed to use the title accountant. To illustrate, Texas prohibits the use of the designations “accountant” and “auditor” by a person not certified as a Texas CPA, unless that person is a CPA in another state, is a non-resident of Texas, and otherwise meets the requirements for practice in Texas by out-of-state CPA firms and practitioners.
CPA Overview: Services provided
The primary functions performed by CPAs relate to assurance services. In assurance services, also known as financial audit services, CPAs attest to the reasonableness of disclosures, the freedom from material misstatement, and the adherence to the applicable generally accepted accounting principles (GAAP) in financial statements. CPAs can also be employed by corporations—termed “the private sector”—in finance functions such as Chief Financial Officer (CFO) or finance manager, or as CEOs subject to their full business knowledge and practice. These CPAs do not provide services directly to the public.
Although some CPA firms serve as business consultants, the consulting role has been under scrutiny following the Enron scandal where Arthur Andersen simultaneously provided audit and consulting services which affected their ability to maintain independence in their audit duties. This incident resulted in many accounting firms divesting in their consulting divisions, but this trend has since reversed. In audit engagements, CPAs are (and have always been) required by professional standards and Federal and State laws to maintain independence (both in fact and in appearance) from the entity for which they are conducting an attestation (audit and review) engagement. However, most individual CPAs who work as consultants do not also work as auditors.
CPA Practice Analysis
Final Design Launch Date The Exam will launch in the testing window starting in April 2017. As discussed further below, any combination of passing scores on the current Exam and the next Exam, within an 18-month window, will count toward licensure requirements. Exam Structure by Section The Exam structure, by section, will continue to be Auditing and Attestation (AUD), Business Environment and Concepts (BEC), Financial Accounting and Reporting (FAR) and Regulation (REG). Focus on Higher Order Skills The need to test higher order skills was a recurring theme of input received throughout the practice analysis and to the Exposure Draft.
The profession believes it is critically important that newly licensed CPAs are competent in recognizing issues, identifying errors, challenging assumptions, and applying both professional judgment and skepticism. To focus on and enhance the testing of higher order skills, the AICPA has adopted a skill framework based on the revised Bloom’s Taxonomy of Educational Objectives2. Bloom’s Taxonomy classifies a continuum of skills that students can be expected to learn and demonstrate. Approximately 600 representative tasks critical to a newly licensed CPA’s role in protecting the public interest were identified. The representative tasks combine both the applicable content knowledge and skills required in the context of the work of a newly licensed CPA. Based on the nature of a task, one of four skill levels, derived from the revised Bloom’s Taxonomy.
CPA Practice Analysis
Blueprints Replace CSOs/SSOs
A blueprint for each section (See Appendix A) will replace the current CSOs and SSOs. The blueprints, developed by experienced CPAs and psychometricians, serve as the foundation of the Exam and provide greater clarity in the presentation of content, skills and related representative tasks that may be tested on the Exam. The purpose of the blueprint is to: Document the minimum level of knowledge and skills necessary for initial licensure. Assist candidates in preparing for the Exam by outlining the knowledge and skills that may be tested. Apprise educators about the knowledge and skills candidates will need to function as newly licensed CPAs. Guide the development of Exam content.
CPA Practice Analysis : Task-Based Simulations.
A TBS is a case-study question designed to test higher order skills; it engages the CPA candidate in completing tasks related to practice. With the move to enhance the Exam’s overall ability to assess a candidate’s higher order skills, the use of TBSs will increase. TBSs will be included in the BEC section for the first time.
Additionally, TBSs on the Exam will feature increased background material and data that will require candidates to determine what information is or is not relevant to the question, which is more reflective of the nature of challenges newly licensed CPAs encounter in practice. Depending on the skill level being assessed, well-prepared candidates would likely spend 15–20 minutes on average for each TBS. Certain analysis and/or evaluation level TBSs could take a well-prepared candidate up to 30 minutes to complete. See Time Allocation below.
CPA Practice Analysis : Adjusted Scoring Weights
With the increase in TBSs for the AUD, FAR and REG sections, the scoring weight of multiple-choice questions (MCQs) and TBSs will be about 50% each in AUD, FAR and REG. BEC will have an approximate score weighting of 50% MCQs, 35% TBSs and 15% written communication.
Time Allocation With the enhanced assessment of higher order skills and an increased reliance on TBSs, one additional hour of testing time will be given to candidates in the BEC and REG sections. The four sections of the Exam will each have four hours of testing time, which as candidate data demonstrates, is adequate
CPA Practice Analysis : New Standardized Break A 15-minute, standardised break will be added to each Exam section. This standardised break will not count against candidates’ testing time, and will be automatically offered between testlets at the estimated midway point for the section. The candidate can accept or reject the standardised break. If a candidate chooses not to take the standardised break when offered, it will not be available to them again during that section of the Exam. Consistent with current practice, optional breaks between testlets, which count against candidates’ testing time, will continue.
CPA Practice Analysis : Cost Increase
Implementation of the Exam in 2017 will necessitate a cost increase resulting from the additional hour in candidate seat time for each of the BEC and REG sections. Information on Exam fees is available from the National Association of State Boards of Accountancy (NASBA) and boards of accountancy.
Transition Rule From the Current Exam to the Next Exam NASBA, boards of accountancy and the AICPA have agreed that any combination of passed current Exam sections and passed next Exam sections will count toward licensure requirements. For example, assume a candidate passed AUD and FAR in the fourth quarter of 2016 and the first quarter of 2017, respectively — that candidate would NOT be required to retake AUD or FAR upon the launch of the next Exam in the second quarter of 2017. All candidates will take the next Exam sections beginning in the second quarter of 2017. Thus, any sections passed prior to the launch of the next Exam in the second quarter of 2017 will count toward licensure requirements (subject to the 18-month rule).
CPA Practice Analysis
Maintain Score Release
Timelines The changes in the Exam will not impact the existing average 20-day score release timeline on an ongoing basis. However, consistent with Exam launches in the past, there will be a delay in the release of scores following the close of the initial testing window (second quarter of 2017). This delay is expected to be 10 weeks following the close of the testing window. During this period, panels of CPAs will review candidate Exam results and recommend passing standards to the BOE. The BOE will review results and establish the passing standards. For the third and fourth quarters of 2017, scores will be released approximately 10 days after the close of the testing window in order to statistically validate candidate performance on the Exam. In the first quarter of 2018, it is expected that the existing average 20-day score release timeline will resume. Ten-Day Extension of Testing Window Historical data show that candidates accelerate their testing schedule prior to the introduction of a different Exam version.
To prepare for this potential influx of candidates in the coming months, the AICPA, NASBA and Prometric (test-site administrator) announced that testing windows will be extended by 10 days to provide additional testing time, beginning in the second quarter of 2016. This 10-day extension will continue through the end of 2017, with the exception of the second quarter of 2017 when the next Exam launches. The exception will allow the AICPA to statistically validate candidate performance during this window.
CPA Practice Analysis
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