It’s that time again. The Uniform CPA Examination, last revised in 2011, is getting an upgrade. The revised version will roll out in 2017, but, to get an idea of what it may look like, you can read the recently released Exposure Draft. The draft provides a comprehensive proposal for the next Exam, outlining in detail how and why the proposed changes came to be.
The AICPA encourages comments on the ED. Email feedback to ExposureDraft@aicpa.org by Nov. 30.
To provide some insight into the proposed changes and the process of updating the Exam, we spoke with Jeffrey Hoops, CPA, assistant professor of accounting at Long Island University in Brookville, N.Y., a retired partner at EY, and a member of the AICPA Board of Examiners (BOE), and Tim Louwers, CPA, Ph.D., chair of the BOE’s Auditing and Attestation subcommittee and director of the School of Accounting at James Madison University in Harrisonburg, Va.
EXTRA CREDIT: What’s the most important of the changes that are being contemplated for the Exam?
LOUWERS: The biggest change is that the CPA Exam will prioritize higher-order cognitive skills like analysis and evaluation. Right now, a lot of the Exam is about remembering and understanding. For the new exam, it won’t be enough for candidates to just memorize the standards any more. They’re going to need to know how to apply them.
EC: Can you give us an example of a question that tests higher-order skills?
HOOPS: In the past, there might have been a multiple choice question on the test that provided a list of information such as: a taxpayer has $80,000 in wages, $10,000 partnership income from a partnership that is a passive activity, $500 in dividend income, and $4,000 net capital losses. The candidate would then be asked to calculate adjusted gross income based upon that information.
But now that question might take the form of a task-based simulation (TBS). For instance, the candidate might be asked to review a copy of the taxpayer’s consolidated brokerage Form 1099 (showing dividend income and the sales of stock resulting in the net capital loss), a copy of the taxpayer’s Form W-2, and a copy of the taxpayer’s partnership Schedule K-1. Rather than having to pick from a list of answers, the candidate will need to analyze the documents presented and calculate the correct adjusted gross income.
EC: Will the Exam still have multiple-choice questions? Or will the way students answer questions change?
LOUWERS: Yes, but we expect there will be more TBS questions. For some questions, students will need to type in a dollar amount or a reference to a particular section in the professional guidance, such as the FASB Accounting Standards Codification or the AICPA Code of Professional Conduct. For other questions, there will be drop-down menus of potential answers, but there will generally be more choices to pick from than the four found in a typical multiple-choice question.
EC: What other changes do faculty need to know about?
HOOPS: There will likely be more contextual integration of subject areas in the revised Exam. In practice, auditing and financial accounting don’t exist in a vacuum. So, for example, some financial accounting knowledge may be needed to complete a given task in the auditing section.
EC: Will the topics of the four main sections stay the same?
HOOPS: In the beginning of this process, we had considered replacing the Business Environment and Concepts (BEC) section with an integrative section. But in the end we decided to keep that section in place. The BEC section will still have a writing component, but it and the other three sections of the Exam will all incorporate TBS questions.
EC: Why is the Exam being updated?
LOUWERS: Periodically, the AICPA puts out a practice analysis: a study of the profession that asks the question, “What does the next generation of CPAs need to know to support the profession’s commitment to protect the public interest?” We survey hundreds of thousands of CPAs: new CPAs, partners, and managers. We have focus groups. And what we’ve found is that new CPAs need to do more than just the basic memorization that we’ve asked of them in the past. We need them to use critical thinking skills.
EC: What’s happening with the Content Specification Outline and the Skill Specification Outline?
LOUWERS: They’ve been replaced by what we call the blueprints. Each section of the Exam now has a blueprint consisting of a list of topics and descriptive tasks that a candidate would be expected to know how to do. For example, one of these tasks might be “Evaluate the significance of the differences of recorded amounts from expected values when performing analytical procedures in an audit.” The blueprint also indicates the skill level at which the content topic and task will be assessed on the Exam. Students will be able to access the blueprints to help them study.
EC: What practices or teaching methodologies could professors employ to get students ready for the revised Exam?
LOUWERS: I think the changes to the Exam are very much in alignment with a movement that is going on in academia called the flipped classroom, where students watch the lectures on their own and then come into the classroom to do their hands-on work. The lecture part of the class is about remembering and understanding, whereas the in-class part is about analysis and critical thinking.
HOOPS: You have to challenge students not only to know the rules but also how to apply them. What I emphasize in my classes are real-life examples of how things work. I ask students to solve a problem, such as, “Say you have an individual who is going to make $500,000 in 2015 and 2016, and he wants to make a donation of $100,000 to his school. Should he make the donation in 2015, 2016, or split it between the years?” Because of the way marginal tax rates work, you may end up saving money if you split it over two years. But you have to know about more than just whether a donation is tax-deductible to answer that question.
Have more questions about the ED? Click here for more information.
Alex Granados is a Raleigh, N.C.-based freelance writer.
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