With a radically new version of the test launching in 2024, the American Institute of CPAs' vice president of CPA examination and pipeline, Mike Decker, details the major changes, and shares valuable insights for how candidates can approach it.
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Daniel Hood (00:03):
Welcome to On the Air with Accounting. Today I'm editor-in-chief Dan Hood. Most people only take the CPA exam once, so it's easy to forget that it actually changes over time to keep up with the tremendous changes that are going on in the accounting profession. There's been a tremendous amount of change in accounting recently, so it makes sense that the exam is on the verge of a fairly major revamp in the near future. Here to talk about all that is Mike Decker. He's vice president of CPA examination and pipeline at the American Institute of CPAs. Mike, thanks for joining us.
Mike Decker (00:29):
Thanks for having me. Glad to be here.
Daniel Hood (00:32):
Thank you for joining us. This is a big topic and it's happening fairly soon and it's going to be a big deal for those who have to take the exam. Like I said, people who finished the exam have it behind them. Nobody goes, you know what, let me do that again. And if they did, they would be in for some surprises because there's a lot going on. Let's talk about maybe some of the background of these changes they're being brought about as part of the CPA Evolution project. Maybe you can give us a little background on that project and sort what its results were.
Mike Decker (00:57):
Sure, sure. So we've been working on this for, oh, at least four or five years now, even more, and CPA evolution is the greatest amount of change that we've had to the CPA exam since the exam was computerized back in 2004. I don't know if you know or don't know, but we do update the exam almost every quarter looking at items that go obsolete. We put in different pretest items, items that are not scored on the exam, and then every year we do an annual blueprint review. But CPA evolution was a result of a change in the licensing model proposed and agreed to by both the AI CPA and naspa, which now drives change to the exam with three core sections, audit, financial, accounting and tax, and then three discipline sections ISC tax compliance and planning and business analysis and reporting. So with three core required sections and candidates may choose one of the other three discipline sections. All of that combined really drive the change and the greatest change to the exam since 2004.
Daniel Hood (02:20):
And the notion there is that there's so many new aspects of new aspects of the business environment, everything that are impacting accounting, that it's trying to bring some of those in IS, is it ISE is the technology systems? Yeah, it's information systems
Mike Decker (02:32):
And controls, right?
Daniel Hood (02:34):
And it's a way to sort of reflect the new centrality of technology to the profession, but also all the importance of all these other areas tax for instance. So it's really, as you say, it's pretty sweeping and pretty interesting. Maybe we can talk a little bit more detail how you given us a sense of the different elements of the exam, but a little bit more about how that focus on, I don't want to call it mix and match because it is, but it's of a mix and match approach to building your CPA exam or your CPA license's. Put it that way, A little bit more detail on how that's being reflected in the exam itself.
Mike Decker (03:09):
Yeah, so I think there's an acknowledgement that all candidates must pass sort of the core sections, and then it provides added flexibility given that A CPA can practice in multiple different areas within the profession. So I think that added flexibility is sort of key to what CPA evolution is. Clearly we're always adding more technology to the exam, the assessment of both cashflow business processes and controls. You'll see that in ISC data analytics is clearly a driver within the profession. And so having a candidate be able to identify patterns and trends and correlations in relationship to an entity's results is critical. What I think of data analytics, I think of the accuracy of the data, the reliability of the data, and something CPAs really need to be looking at. Is the doubt data valid? Is it secure? Is the customer asserting truly what is on the record kind of thing.
(04:22):
So when you look at what we've done with the core and discipline sections, we've taken some of the content and shifted some content from the core sections into disciplines. So specifically to your question with ISC enhanced focus on IT infrastructure, cybersecurity, privacy, and then the whole SOC audit systems and organization controls and engagements and the like for tax compliance and planning. The current exam prior to CPA evolution, we didn't really dive a lot into personal financial and or tax planning. So a little bit more content in that space on TCP. And then in business analysis and reporting, it's really a financial accounting discipline with increased focus on financial statement audits, financial and business analysis, and then client accounting services.
Daniel Hood (05:24):
Gotcha. Maybe you can just give us a couple of high points of how the new exam is going to be different from the old one. I mean, for instance, here's an example, right? There's four sections of the, well I should say the current exam and I think people will be listening to this before the new exam comes out, but so there's four sections. Are there still going to be four sections and some of the other sort of literal experience of the exam, things that will change for people looking to take it in the future?
Mike Decker (05:49):
And I think we're starting to see how candidates will look at CPA evolution and then sort of change their testing behavior. So again, everybody's got to know the core sections. So we do believe that candidates will start with those three core sections once CPA evolution goes live on January 10th. And then I think once they've passed the core sections, they'll probably take a look at which discipline, whether it best matches their interests, best matches their passion. Maybe it matches an area that maybe they've got an internship or some employment with. We're not going to know pass rates for quite a while. So I don't think candidates are going to rush to what they believe is easiest. I think they're going to focus on really what they know best and we're starting to see some of that kind of candidate behavior. They're exhibiting it now on how they're going to take a look at CPA evolution.
Daniel Hood (06:49):
Right, right. That this raises a question I hadn't even thought to bring up. Usually I think in advance of major changes, as you say, there's changes all the time, adding new questions, new types of questions, that sort of thing. But in terms of major changes, I think traditionally it's been held that you see a lot of people rushing to take the old exam and this says, we know how this works. We have metrics for instance for now, for a couple of decades on the examiner's current format. Are we seeing a similar sort of rush of it? A lot of people have been taking it over the past year. Also, the pandemic has made everything weird. I don't know. So I'm just curious, have we seen that?
Mike Decker (07:22):
You wouldn't believe so. Yeah. So as we looked at it working with DAPA and the state boards and our board of examiners, as we looked at the conversion from the current exam to CPA evolution, the assertion was made that if you pass BEC business environment concepts in 20 or prior to January 1st of 24, you can hold credit for BEC through June 30th of 25. And you do not have to sit for a discipline. So clearly everybody's saying, I want to take BEC and I want to hold BEC, so I don't have to take a discipline. I'd rather test on an exam I know versus quote the devil, I don't know. So right now candidates are rushing in to sit for BEC in 2023, we're seeing a 20% increase in first time test takers, 12% increase in unique test takers in Q4, we are going to be 86% above where we were last year.
(08:29):
So clearly candidates are rushing in. We're going to have over 80,000 sections delivered versus 43,000 last quarter Q4 of last year versus 80, over 80,000 this quarter versus 43,000 in Q4 of 23. And BEC is four times B, EC will be four times what it was in Q4 of 23. It'll be four times more in Q4 of 24. So clearly candidates are rushing in, it's over half of the vol section scheduled as BEC candidates are rushing in. They're going to sit for BEC, which is okay. And if they don't hold any of the core sections because they map one-to-one audit foreign and reg match one-to-one to the new core sections, they'll have to take them next year, which is okay.
Daniel Hood (09:24):
Right. Excellent. Alright, well I mean we, we've started to dive into some of the timing issues and timing maybe issues, but a ton of questions that come around anytime you have the change in the exam. I want to dive into those a little bit more deeply, but we're going to take a quick break first. Alright, we're back with Mike Decker of the A-I-C-P-A. We're talking about the new exam, the new CPA exam that's coming relatively soon and that is the new CPA exam. I should make clear though, hopefully if you're with us already, you've already know what we're talking about the CPA exam. I wanted to dive into the timing. You mentioned a little bit what is the timing of all this, when are they going to start taking the exam? And obviously there's some complexities there in terms of how long the exam, when does it open, all that sort of stuff. But when does it start going?
Mike Decker (10:10):
So we launched this on January 10th, 2024. We sort of wanted to stay away from the holidays and we are going to discontinue testing in 2023 on December 15th. So that gives NASPA ourselves per metric, the state boards all time to get all the scores out for the current exam, shut the systems down and move everything over to CPA evolution and we'll be launching on the 10th. So I'm real excited, we're ready to go. The content's been built, we're in the final testing of all the systems across all the parties and for right now everything's a go for January 10th.
Daniel Hood (10:51):
Excellent. You mentioned Prometric, and I think you may have explained this earlier, but for those who don't know, they're the administers of the test, right? Correct. They run the test sites where you go and you actually sit down and take over. They run the technology of it. Yes. Do they actually still have test sites? I don't even know now at this point. Yeah,
Mike Decker (11:07):
We still use test centers. We've used them since we went computerized in 2004. I get the question a lot and it's for two major reasons. One is security, right? Everybody's audiotaped, videotape, biometrics, fingerprinting and things. We're making sure you're the candidate that has been deemed eligible to sit for that exam. And the second reason is consistency. So whether you take the exam in Chicago, Illinois or Miami, Florida or Japan or South Korea or Guam, you're getting a consistent test experience. Consistent, consistent computer and environment and the like.
Daniel Hood (11:50):
Makes a
Mike Decker (11:50):
Lot of sense. Two things we look for in testing.
Daniel Hood (11:53):
Yeah, no, absolutely. You want to make sure it's the knowledge that determines the difference between people's scores, not the environment or something weird about their You got that right? Makes perfect sense. It's interesting you, because I don't think a lot of people necessarily know, oh the places overseas that you can take the CPA a exam, I dunno what the number is now, but I mean it's all over the place. Lot spaces in the Middle East and as you mentioned, I think you mentioned Guam, you mentioned Japan, all kinds of places where you could take the exam. I don't think as we say with that consistent sort of environment that it will give you any benefit to try to take it in Guam, but who knows, somebody may run the numbers on that and discover an extraordinarily high pass rate on BEC in Guam, but it would only work for them through December 15th because as you say,
Mike Decker (12:34):
That's right,
Daniel Hood (12:34):
It's going out. Let's talk about, you mentioned that that window, that specific window of BEC being something you hold onto as opposed to doing one of the disciplines. The disciplines, and I think you said that's basically for 18 months, right? That it's through June of 2025. Is that right?
Mike Decker (12:54):
Yeah, so there's a lot of state regulatory requirements and shifts in the administration schedule that we're going to navigate and I want to thank the state boards in NASPA for helping us with this. So if you pass BEC in 2023 or you hold credit as of January 1st of 24, that credit will be extended until June 30th, 2025. In fact, any credit that you hold as of January 1st of 24th extends to June 30th of 25. What this allows for is candidates not to be too concerned about the sort of restricted test administration schedule and the score holds that we absolutely positively need to have with the new exam in 2024. So instead of having to go to the state board for extensions in advance, they have said to the candidates, relax, we'll get you through the transition to evolution, give you a little bit more time, which then allows candidates to get through the process given their restricted time schedule. And you probably saw in the news, all of the state boards have unanimously extended the 18 month credit rule where credit for sections passed, used to expire in 18 months. They now will expire in 30 months. So once you pass one section of the exam, you now have 30 months to pass the remaining three. Which again, given today's students and candidates, they're doing more in the profession earlier, they're busier. That 30 months is really a blessing and I think will help support the pipeline and help support candidates sort of get through the process.
Daniel Hood (14:49):
Yeah, I think a lot candidates are very, very, very grateful for that, as you say, and that it's pretty much unanimous across the country. So just to clarify, I want to be clear, if I pass one of the other sections, not BEC, but one of the other sections, it's good now for 30 months, correct? For the new exam, for the old exam, whatever, from the minute it becomes official, I got 30 months for that to count for my first exam section becomes official, right? I've got 30 months. But for the BEC credit will only extend through June of 2025. Is that right?
Mike Decker (15:28):
So any section that you hold as of January 1st of 24 automatically gets extended till June 30th of 25 and BEC people are rushing in that way. They don't have to sit for a discipline. So for candidates that don't have BEC passed, they will have to sit for a discipline in order to secure licensure.
Daniel Hood (15:50):
Right. Gotcha. Okay, excellent. It's a complex shift, right? We have all these overlapping levels of, but I passed this and I passed that, so people obviously want to be sure that whatever they've passed still counts for as long as they can get it to count for. So
Mike Decker (16:06):
We're going to see candidates rush in 25 because all these credits will expire June 30th, 2025. So candidates will likely rush in to sit for any remaining sections in the first six months of 25. So they don't lose any credits that they had achieved previously. Right. So like you had said, they're rushing in now and then next year we're going to see sort of a leveling off of volume you said then it'll go up again in June 30th of 25.
Daniel Hood (16:40):
Gotcha. And just, I'm not an accountant, so this may explain my math issues here, but January, would you say January 10th, 2024 is when new exam comes in, correct? Yes. But that to June of 2025, that's 18 months, right?
Mike Decker (16:54):
Correct, yes.
Daniel Hood (16:55):
Gotcha. So the 30 month extension does not apply to the Beck credits. Credits are good through June of 2025. Is that right? Which is the 18 months from January 10?
Mike Decker (17:10):
It depends when they secured that and when the state board passed that 30 months.
Daniel Hood (17:17):
Gotcha. Okay. Like I said was my math skills are not good enough to pass the CBA exam, let's put it that way. This is all super useful stuff and people will want to plot their exam approaches and their exam strategies and everyone has a different one. And that makes sense because different, but I want to sort of ask you, do you have any tips for people as they approach the exam and think about it or the new exam I should say specifically. And I realize as you say, one of the things you can't do, we don't have the metrics for it, is sort of say, well this what's worked in the past, right? We have no idea of that. But do you have any thoughts of what people should be thinking about as they approach the new exam?
Mike Decker (17:52):
So I always say this. Number one is make sure you're looking at the test blueprints. We publish them on our website. We've got the CPA evolution blueprints published, they're out there. We actually use those blueprints with our item writers. So it shows the area in which we're assessing the level of knowledge and skills that we're assessing in each of those areas. So if we're using it for the item writers, the candidate should look at that too, to make sure that they understand those entire blueprints. The other thing is I wouldn't be scared of either the core or discipline. So everybody's saying, and candidates always try to look for maybe the easier pass rates and should I take it now or I say follow your passion, follow where you're most interested. If you're working in a specific area, that's a discipline. By all means, sit for that discipline. I would recommend taking core before discipline. And I think what we're seeing is candidates are, audit is largely consistent. There's some candidates out there that believe far is going to be easier as some of the content's moving into the discipline bar. And that Ray may be easier as some of that content may be moving into TCP.
(19:25):
We don't know yet. We will have to wait and see what the results are. And to me, audit is audit and information systems controls is fairly unique, but it is sort of the hot area in accounting and auditing right now. So there's a lot of classes on that and a lot of interest in that area. So I would focus on that.
Daniel Hood (19:44):
There you go. Well, it makes sense as we say, what are you passionate about, what you've come out of school with in some cases. Did you have professors who are particularly good with certain areas? Maybe that's fresh in your mind, maybe you want to look at that. So it's all going to come down to some individual stuff. You could also see, as you say, if you're passionate about an area, maybe you want to knock that out first. Knock one of the disciplines out first just to have it onto your belt. And that's got to give you a boost of confidence. But again, these are it all, it's going to depend on the individual. And
Mike Decker (20:09):
I think the key thing, and you bring it up there is if that's the approach you'd like to take, by all means do it. I think the key is don't procrastinate. Look to take a section at least every quarter. So when you get done one, start studying for the next one. And again, if there's something that you're not sure about on the blueprints, check with your professor, check with a mentor, check with a colleague at work, but stay focused and sort of get it done kind of thing.
Daniel Hood (20:38):
Well yeah, you talk about that one of the crucial points of if you do one a quarter, give yourself some extra time, right? Don't assume. Yeah, correct. Don't plan it because you may, and I don't know the numbers even, you may know the numbers, I dunno if you do, but if you do, let us know. But large numbers of people fail a section section and then go back and become perfectly successful CPAs and pass the exam.
Mike Decker (20:59):
That's right. The average is six and a half attempts for all four. But again, that's across all candidates that pass all four. And again, I can tell you stories of people that just said, I focused, my girlfriend wanted to help me, she made me lunch and dinner all weekend and I got it done. So you hear lots of good stories about how candidates just they won't give up and they get it done and then they're better for it.
Daniel Hood (21:26):
Yeah, no. Well, and it's one of the reasons why the profession has the reputation that it has because the difficulty exam and the knowledge that it builds into, and if you start anything that disciplined and that difficult, it's all going to be easy after that. That's
Mike Decker (21:41):
Correct.
Daniel Hood (21:41):
Right. Excellent. Alright. Mike Decker of the A-I-C-P-A, thank you so much for joining us.
Mike Decker (21:46):
Thank you so much for having me.
Daniel Hood (21:47):
And thank you all for listening. This episode of On the Air was produced by Accounting Today with audio production by Win Way. Shamar ready to review us on your favorite podcast platform and see the rest of our content on accounting today.com. Thanks again to our guest and thank you for listening.