As the accounting profession evolves to meet today's needs, the Uniform CPA Examination is also evolving to reflect these industry changes. On July 1, 2021, the CPA exam is shifting significantly to put a heavier focus on technology, digital mindsets, data analytics, and the other skills that newly licensed CPAs need to succeed. Candidates preparing to take the CPA Exam must take these updates into consideration.
Every few years, the American Institute of CPAs solicits feedback from professors, CPA candidates, and accounting firms who are hiring the next generation of CPAs, and recent feedback revealed that the current CPA Exam was not reflecting the skills and knowledge that firms and businesses needed from their new hires, which resulted in a new
Today's CPAs are now required to use complex technologies to do their jobs effectively, such as:
- Big data cloud computing, including data analytics;
- Artificial intelligence; and,
- Automations in accounting business processes (which requires CPAs to understand a business's operations, information systems, data flows, risks, and related internal controls).
A digital mindset and strong data analytics
Starting in July, two parts of the CPA exam — the Auditing and Attestation (AUD) and the Business Environment and Concepts (BEC) sections — will assess digital and data competence.
Specifically, the revised AUD and BEC exams will test:
- Where and how to access data;
- How to use this new data; and,
- How these new technological frameworks impact the firm’s clients on a deeper level.
For instance, the industry is seeing an increased reliance on system and organizational controls for service organizations. These internal controls are frequently located in complex IT systems, either run in-house or outsourced to third parties, with data stored in the cloud. Newly licensed CPAs must be able to navigate these systems confidently.
Another prominent change in the exam is the addition of extracting, transforming and loading (ETL) data governance. As data analytics continues to impact the accounting profession, accountants will need to know how to:
- Extract data from internal and external systems;
- Clean and standardize the data (i.e., manage leading and trailing zeros, extra spaces, etc.); and,
- Load the data into another target data source for further analysis.
Candidates will not need to actually perform ETL in the updated CPA exam. However, they will need to demonstrate that they can do it at a conceptual level. This is why the content development team at UWorld Roger CPA Review has worked to create example scenarios for our students to review that will help them to:
- Understand the different phases of ETL;
- Appreciate the importance and significance of ETL; and,
- Be able to articulate the meaning behind specific IT terms.
ETL brings us to the third major update: data analytics. The AICPA added audit data analytics to the CPA exam a few years ago. But since then, advances in IT have led to an explosion of corporate data, big data and software that enable an auditor to mine that data to expose new insights. This July, the exam will require candidates to demonstrate in greater detail how they can use not just traditional data sources (such as spreadsheets and corporate relational databases), but also new sources of data for risk assessment procedures and other processes.
Additional updates to the data analytics assessment include reviewing candidates’ knowledge of:
- Data automations, especially within the audit function;
- Changes to internal controls, such as internal control documentation and the effect of key controls on data reliability; and
- The impact of IT (and IT auditors) on financial reporting.
The impact on exam preparation
The aforementioned digital and data-focused changes are not the only updates to the CPA exam. The AICPA’s recently revised CPA exam blueprints also indicate some minor changes to the FAR and REG exams, with a deemphasis and elimination of a few topics. This most notably includes the removal of IFRS from FAR and also the removal of estate tax and federal securities regulations from REG. REG will also undergo minor changes to reflect year-end tax updates.
Overall, the blueprints indicate that the bulk of the July 2021 CPA exam updates revolve around AUD and BEC. Therefore, candidates should focus their attention and study on these exam sections first, as it will have the greatest bearing on their final CPA exam results.
Choosing an exam sequence
UWorld Roger CPA Review’s general recommended sequence for taking the CPA exam is:
1. FAR;
2. AUD;
3. REG; and,
4. BEC.
Ultimately, the order in which candidates take the CPA exam comes down to personal preference. For example, a student fresh out of college who had an amazing audit professor may want to start with the AUD exam for a healthy boost of confidence. On the other hand, a candidate may want to start with the most difficult and time-consuming exam parts first so that they can get them out of the way early in the process. There’s no hard rule, as long as all four parts of the exam are completed within an 18-month window.
With these inside tips and insights into what's coming this summer, candidates can adjust their studying and be prepared for these significant, data-driven exam updates.
