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The CPA Exam and How to Prepare for It

November 22, 2019

What is a CPA?

Those three little letters- CPA- represent a lot more than a fancy LinkedIn title. Besides demonstrating licensure as a Certified Public Accountant, earning the coveted CPA designation signals professional drive and dedication among other things. For example, the CPA signals to an employer that you have the drive and maturity to see things through, given the heavy workload of study that 16 total hours of a difficult exam necessitates. Passing the exam also shows your ability to think critically about business issues, understanding of business concepts, proficiency in communication, ability to solve problems, and a deep understanding of professional conduct and ethics. Your employer will see you as informed and up-to-date on the latest developments in the accounting field throughout your career, as each CPA is required to take 120 hours of continuing professional education credits every three years. With continuing education, you will always be on top of market trends and best practices. And besides, doesn’t the coveted three-letter abbreviation just look good? If that doesn’t say, “I’m a professional you can trust,” I don’t know what does. 

 

Why take the CPA exam?

Obtaining the coveted CPA designation should be at the top of your to-do list if you are serious about pursuing a career in accounting. While taking the CPA is not required to practice in the accounting field, you may not go very far without it, as most mid and upper-level jobs require CPA certification as a job requirement.

If you’re thinking of waiting until you get a few years of work experience before attempting the exam, think again. According to the American Institute of CPAs (AICPA), the absolute best time to start studying for the CPA exam is before you graduate- and the best time to take it is within 1 to 2 years of graduating. While still in school, the information is still fresh in your mind, you are still accustomed to putting in long hours of study, and you still have the campus resources to help you study and pass each section of the exam. While you are still a student, there are even some scholarships available to cover the cost of the exam: about $835 in the state of Idaho. Additionally, if you decide to pursue a Master of Accountancy degree here at the Idaho State University College of Business, you will be well prepared by taking capstone classes that align with each of the four sections of the CPA exam- right as you take them. That special curriculum design is a major contributor to the above average  first-time pass rate for ISU graduate students who take the CPA exam. 

If the process sounds daunting, that’s probably because it is, but there are big payoffs: not only do CPAs earn five to 15 percent more per year than non-certified professionals according to the Robert Half Salary Guide, CPAs have many more job opportunities because of the versatility of the designation. The CPA signals to an employer that you are qualified to work in any of the areas of auditing and attestation, financial accounting and reporting, business environment and concepts, and regulation. The CPA is also the most sought-after credential for accounting and finance roles. 

 

What is the exam like?

WARNING: Not for the faint of heart.

The exam is made up of four sections which are each four hours long. Each section is taken separately, so don’t worry about sitting in a testing center for 16 hours. All four sections need to be passed within an 18 month period, so you’ll need to watch the calendar and make sure that you don’t run out of time—if you do, you’ll need to start retaking the expired sections. 

There are several qualifications you must meet before you can schedule to take the exam, such as completing the necessary education requirements, submitting your application, verifying that you are in good moral standing, etc. The detailed requirements for the state of Idaho can be found here: https://www.accountingedu.org/idaho-cpa.html

The four sections cover the following topics, but do not need to be taken in any particular order: 

  1. Auditing and Attestation (AUD)
    1. Ethics, professional responsibilities and general principles
    2. Assessing risk and developing a planned response
    3. Performing further procedures and obtaining evidence
    4. Forming conclusions and reporting
  2. Financial Accounting & Reporting (FAR)
    1. Conceptual framework, standard-setting and financial reporting
    2. Select financial statement accounts
    3. Select transactions
    4. State and local governments
  3. Regulation (REG)
    1. Ethics, professional responsibilities and federal tax procedures
    2. Business law
    3. Federal taxation of property transactions
    4. Federal taxation of individuals
    5. Federal taxation of entities
  4. Business Environment & Concepts (BEC) 
    1. Corporate governance
    2. Economic concepts and principles
    3. Financial management
    4. Information technology
    5. Operations management

The exam sections include multiple choice questions, task-based simulations, and a written communication portion. The multiple-choice section is progressive, which means that the difficulty of your questions will increase as you continue to answer correctly, or become easier as you continue to answer incorrectly. The harder questions will give you more points if answered correctly, so do your best—it’s worth it to answer the hard questions correctly. You are also not penalized for answering incorrectly, so it is better to guess than to leave a blank answer. Each exam includes between 60-80 multiple-choice questions. 

There are many different forms of task-based simulations, such as matching or fill-in-the-blank questions. You can also count on a research question that will ask you to cite the code that is referenced by a current topic in the authoritative literature. Each section has 8 task-based questions, except for the BEC section which only has four.

The BEC section is the only one that includes a writing portion, which includes three questions. The purpose is to test your written communication ability by asking you to write a memo or a letter to a client. 

 

How should I prepare for the exam?

Tip #1: Make a rock-solid schedule, and stick to it. The average person spends between 400 to 600 hours studying for the CPA exam, and you’ve got no time to lose. You’ll need to develop a study strategy that works for you, whether that includes waking up an hour earlier to study each day, or feasting on definitions during your lunch break, or both. You’ll also need to plan when to take each section, and in what order you would like to take them. You’ll need to factor in your work schedule and life responsibilities so that you don’t overbook yourself, so this can get a little complicated. Here is a tool that can help you plan out a study schedule based on the 18-month window for passing each section: https://www.thiswaytocpa.com/exam-licensure/cpa-exam-aid/. Once you’ve figured out something that works, stick to it. 

Tip #2: Most people prepare for only one section of the exam at a time. The average person studies each section for eight to 12 weeks before taking the section exam, which if done consecutively will leave you with about six to eight months of extra time in the 18-month window to retake any exam that you didn’t pass the first time around

Tip #3: Plan to spend between 100 and 140 hours studying for each section. Say that you study for 140 hours over 10 weeks- that’s 14 hours per week which is significant but doable. With all of this time studying, you will need the support of friends and family, and you may have to sacrifice your normal hobbies in order to adequately prepare for the exam. Just keep the end goal in mind and don’t lose sight of the glory and honor that awaits you. 

Tip #4: Plan your study so that you can spend two weeks reviewing before test day. This will give you the chance to refresh your memory, go over more examples, take practice tests, and catch any last-minute content that you didn’t quite master during your first pass. 

Tip #5: Learn definitions regularly. There are many guides and apps available to help you conquer the jargon of the field. It’s easier to learn these as you go rather than all at once. 

Tip #6: Practice as many multiple choice questions as possible. Improving your multiple-choice-question-literacy can save you time for the comprehensive questions which are very unpredictable and take more time.

Tip #7: Register early for your first exam. Processing your registration can take six to eight weeks, so make sure you plan ahead. After your first exam, scheduling following exams only take about one week.

Tip #8: If you are currently working for an accounting firm, see if they will shuffle your work responsibilities to allow you a few days off before you take an exam section. That time off can be valuable time to review, mentally prepare, and get plenty of sleep. Earning your CPA credential is a win-win for both you and your employer, so see what they can do for you. 

Tip #9: Consider pursuing a Master of Accountancy here at ISU. While there are many variables to consider when choosing to attend graduate school versus entering the workforce right away, I will simply say that the MAcc coursework will significantly increase your probability of passing the CPA exam on the first time. Each program follows a series of capstone courses that align with each section of the exam, so you will be well prepared. If you are starting to feel the test anxiety reading this post, then this degree may be an excellent option for you, and with only one additional year of study for those who have already completed an undergraduate degree in accounting. 

It's all Worth It

When the late nights, early mornings, long days and short weekends start creeping up on you, remember all the reasons behind your goal: purpose, prestige, higher pay, more job opportunities, more credibility and a better future. And if at first you don't succeed, think of Albert Einstein who said, "The hardest thing in the world to understand is income tax."