The Uniform CPA Examination is an entry-level assessment of the knowledge CPA candidates should possess to practice public accountancy. The American Institute of Certified Public Accountants (AICPA) created the exam with assistance from the National Association of State Boards of Accountancy (NASBA) as a way for all state boards of accountancy to assess the readiness of those working toward the CPA credential based on common standards.
Although all 55 jurisdictions in the United States have their own licensing process and requirements for CPAs, they all use the Uniform CPA Examination as the standard test for verifying a candidate’s preparedness for CPA licensure.
CPA Examination Structure
The Uniform CPA Examination is organized into four sections:
- Auditing and Attestation (AUD)
- Business Environment and Concepts (BEC)
- Financial Accounting and Reporting (FAR)
- Regulation (REG)
All four sections of the CPA exam include multiple-choice questions, while the AUD, FAR, and REG sections also have task-based simulation questions. The multiple-choice questions in the exam are administered in three testlets. Each testlet includes operational and pretest questions. Pretest questions are not scored; instead, they are used to evaluate the question’s statistical performance. Candidates are not able to distinguish operational questions from pretest questions.
Multiple-choice questions within the examination vary in difficulty, with each question being labeled as either medium or difficult. All candidates receive a medium testlet first, and all testlets thereafter may be of the medium or difficult variety, depending on the performance of the candidate. The scoring procedures take into account the difficulty of the questions.
Task-based simulation questions consist of case studies that allow candidates to demonstrate their knowledge by answering questions instead of simply selecting the correct answer. These questions may require candidates to utilize spreadsheets or research authoritative literature, both of which are provided with the exam.
The BEC section contains three, written communication questions.
Candidates are given four hours each to complete the AUD and FAR sections and three hours each to complete the BEC and REG sections.
CPA Exam Content and Components
The Uniform CPA Examination includes the following components:
Auditing and Attestation
The Auditing and Attestation (AUD) section of the Uniform CPA Exam is designed to assess a candidate’s knowledge and understanding of the professional standards associated with the public accounting profession, which include:
- Auditing standards
- Non-issuers (entities other than public companies)
- Governmental entities
- Not-for-profit entities
- Employee benefit plans
- Standards related to attestation and assurance engagements
- Standards for performing accounting and review services
To successfully complete this section, candidates should be able to demonstrate an awareness of:
- International Auditing and Assurance Standards Board and the International Standards on Auditing
- The differences between ISAs and U.S. auditing standards
- Audit procedures for U.S. companies that support an audit report based upon the auditing standards of another country (ISAs)
- International Ethics Standards Board for Accountants (IESBA) and the International Federation of Accountants (IFAC) Code of Ethics for Professional Accountants
- Independence requirements for U.S. companies that support an audit report based upon the auditing standards of another country
Financial Accounting and Reporting
The Financial Accounting and Reporting (FAR) Section of the Uniform CPA Examination is designed to assess a candidate’s knowledge and understanding of the financial reporting framework that is used by governmental entities, not-for-profit organizations, and business enterprises. Financial reporting frameworks refer to those issued by the Financial Accounting Standards Board, the International Accounting Standards Board, the Governmental Accounting Standards Board, and the U.S. Securities and Exchange Commission.
This section also requires candidates to demonstrate their knowledge and understanding of financial reporting and other tasks commonly completed by CPAs. As such, candidates must be able to (among other things):
- Identify and understand the differences between financial statements prepared according U.S. accounting principles (U.S. GAAP) and International Financial Reporting Standards (IFRS)
- Calculate amounts for all components of financial statements
- Review or prepare source documents, including account classification
- Prepare notes to financial statements
- Prepare consolidated financial statements, including equity, balance sheets, cash flows, income statements, etc.
- Analyze financial statements, including analyses of trends, variances, ratios, and accounts
- Exercise judgment in the application of accounting principles
Regulation (REG)
The Regulation section is designed to assess a candidate’s knowledge and understanding of ethics, business law, federal taxation, and professional and legal responsibilities. To demonstrate knowledge of these topics, candidates must be able to (among others):
- Identify potentially unethical professional standards or violations of professional standards and determine the appropriate actions
- Demonstrate the importance of identifying and adhering to standards, rules, and requirements established by state accountancy boards
- Evaluate the economic substance of client transactions, such as loans and promissory notes, leases, purchase agreements, side agreements, contingencies, etc.
- Evaluate the legal structure of an entity as to determine the implication of regulations and laws regarding how it is organized, operated, and governed
Business Environment and Concepts
The Business Environment and Concepts (BEC) section of the Uniform CPA Examination is designed to assess a candidate’s knowledge and understanding of the general business environment and business concepts. Some of the topics included in this section include:
- Economic concepts essential to the understanding of the global business environment
- Financial risk management
- Knowledge of corporate governance
- Financial management processes
- Information systems and communications
- Strategic planning
- Operations management
The BEC section also requires candidates to (among other things):
- Demonstrate an understanding of the effect of globalization on the business environment
- Assess how a business’ operations are impacted by the business cycle
- Apply knowledge of changes in the global economic markets and their impact on an entity’s business strategy and financial management policies, including:
- Deflation
- Inflation
- Credit defaults
- Interest rate variations
- Commodity costs
- Regulation
- Currency fluctuations
- Evaluate assumptions used in financial valuations to determine their discount rates, investment return assumptions, etc.
- Assess factors influencing a company’s capital structure, which include:
- Leverage
- Risk
- Cost of capital
- Growth rate
- Asset structure
- Loan covenants
- Profitability
CPA Examination Score Scale and Pass Rates
All sections of the Uniform CPA Examination are scored on a scale from 0 to 99, with a reported score of 75 needed to pass each section. It is important to understand that a score of 75 is not a percentage score and cannot be interpreted as such because the score scale is a weighted combination of scale scores from both the task-based simulation questions and the multiple-choice questions.
For the BEC section, the total score is a weighted combination of the scaled scores from the multiple-choice questions and the written communication questions.
Passing rates for the Uniform CPA Examination in 2013 were:
- AUD: 45.87 percent
- BEC: 55.83 percent
- FAR: 48.32 percent
- REG: 48.48 percent