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NewYork State Society of Certified Public Accountants/November 15, 2010

By MELISSA R. HOFFMANN
Trusted Professional Staff
C
PA exam-takers in January 2011 will
be among the first to take a revised test
that features reorganized sections and
new contentincluding questions on
International Financial Reporting Standards
(IFRS).
The NewYork State Board for Public
Accountancy discussed these changes
with AICPA Executive Director of
Examinations Craig N. Mills providing new
detailsat its Sept. 15 meeting.
This is truly an exciting year, Mills
said, as the revisions for the 2011 exam are
the largest set of changes to the exam since
the electronic version was introduced. Of
course, this profession is changing very
rapidly, and were trying to reflect that in
the exam.
The CPA exam employs a combination
of question formats. It includes the tradi-
tional multiple-choice questions and essays,
as well as the highly innovative simula-
tionsquestions that replicate workplace
situations and require the application of
knowledge and skills to arrive at solutions,
according to the AICPA.
In its nearly 100-year history, the exam
has undergone many changes. Until the end
of 2003, it was a paper-and-pencil examina-
tion administered twice each year. In April
2004, the computer-based CPA
Examination was launched and the paper-
and-pencil examination was discontinued.
The computer-based CPA exam achieved its
millionth administration in 2009, the
AICPA said.
Basic Exam Changes
The three entities that control the exam
the AICPA, the National Association of State
Boards of Accountancy (NASBA) and the
for-profit testing service Prometricare
calling the revised exam CBT-e.
The exam sections remain the same
Auditing and Attestation (AUD), Financial
Accounting and Reporting (FAR),
Regulation (REG) and Business
Environment and Concepts (BEC)but the
content within those sections and how that
content is weighted have changed.
The current exam tests writing skills in
every section except in the BEC, but the
revised exam will test written communica-
tions only in the BEC section of the exam.
The new test will still contain three multi-
ple-choice testlets in each of the four sec-
tionsjust like the current exam doesbut
the BEC section will no longer include any
simulations, which are case studies cen-
tered on real-life challenges the candidate
may face in the working world.
Moving writing to the BEC section also
allows the time allotted for the AUD sec-
tionat 4.5 hours, the longest section of
the examto be reduced by .5 hours on the
CBT-e. The time allowed for the BEC sec-
tion, thus, will extend from 2.5 to 3 hours,
so the CPA exam will remain a 14-hour-
long test.
Elaine Rodeck, former AICPA director
of examination strategy, told The Trusted
Professional in its March 15 issue that time
saved by consolidating the written test
questions into the BEC section allows for
another major change in the exam format
the two long-format simulations will be
replaced with more shorter task-based sim-
ulations in the AUD, FAR and REG sec-
tions. There will be six to seven task-based
simulations in each of the three sections.
Multiple-choice questions for the exam
are developed by two outside vendors, with
CPAs recruited to write and review the
questions. The questions then go to a selec-
tions subcommittee for final approval. No
question appears unless it has been
approved by CPAs, Mills noted.
Simulations are developed in a similar
manner, he said, except that those are
developed without the use of outside ven-
dors.
The multiple-choice questions on the
exam will remain the same; however, they
will be weighted differently from the way
they are in the current exam. Currently,
multiple-choice questions are weighted at
70 percent of the total score in each of the
AUD, FAR and REG sections. Starting
Jan. 1, multiple-choice questions will be
worth 60 percent of the total score in each
section. In the BEC section, how a test-
taker does on the multiple-choice questions
will make up 85 percent of his or her score
on that section, with the written portion
making up the remainder of that sections
score.
The biggest change, as far as weighing
goesand perhaps overallis in how a
candidates scores on the task-based simu-
lations are weighed in the AUD, FAR and
REG sections. Currently, the simulations
make up 20 percent of the total score for
each of those three sections; on Jan. 1, they
will make up 40 percent of a candidates
score, according to the AICPA.
With the new exam, the changes are
sufficient that we [had] to go through a
standards-setting study, Mills said, adding
that this consists of CPAs spending two
days per section, reviewing questions and
candidate performance on questions. The
analysis is under way on that right now, and
[results] will be presented to the Board of
Examiners at a special meeting in
November.
That will lead to a new passing standard
being set for the new exam. The score
itself75will not change, but what will
be adjusted is how well you have to do on
the content to get that score, Mills said.
The content of the exam, including the
simulations, is detailed in newly revised
content specification outlines (CSOs)
approved by the Board of Examiners in
May. The CSOs describe technical content
that will be tested on the CPA exam, but
they do not include actual test questions.
The new CSOs, at 39 pages, are more than
twice as long as the current CSOs, which
were approved by the Board of Examiners
in 2002 and updated in 2005. While the
CSOs describe in greater detail the content
that will be tested on the exam, and the
task-based simulations allow for the testing
of a broader range of content, the exam also
includes new content, such as questions on
IFRS and an expansion of ethics questions.
I know the emphasis of IFRS in this ini-
tial release will be in FAR section, Mills
said. I dont know definitively [if] it will
be in othersIm not sure about that.
The ethics questions are a series of mul-
tiple-choice questions, although ethics, by
nature, is inherent in situations where
there is no clear-cut answer, Mills said.
State Board Chair Richard D. Isserman,
at the board meeting, addressed the issue of
testing international ethics, standards on the
exam.
When it comes to testing ethics, my
question is: Why international ethics, when
we dont ask them to know [Securities and
Exchange Commission] or [Public
Company Accounting Oversight Board] or
government ethics? There are issues there
that should be considered carefully, he
said.
The Inclusion of IFRS
IFRS is a part of the new exam, as the
content tested on the Uniform CPA
Examination must be reflective of the
knowledge and skills required for entry-
level CPAs, Mills said.
Mills referred to this as a need to be
bilingual.
Mills said that every five to seven years,
the AICPA conducts a practice analysis,
which is a survey of what constitutes entry-
level practice. It was at this point that
IFRS became an issue, he said. The sur-
vey indicated that IFRS was an important
part of entry-level practice.
Mills noted that there is legal prece-
dent for what can and cannot be tested.
You dont have to test all the things
required, or just entry-level things, but they
have to be important for entry-level prac-
tice, he said.
Data collected during a practice analy-
sisused in determining how to update the
exam questionsindicated that a signifi-
cant number of newly licensed CPAs need
to have a working knowledge of IFRS
when they enter the workforce, he said.
For example, Mills noted that if a com-
pany owns a foreign subsidiary or is owned
by a foreign entity, its auditors and
accountants probably need to be able to
deal with IFRS financial statements.
International Exam
The Uniform CPA Examination will be
offered outside the 55 U.S. jurisdictions for
the first time in its history in 2011. The
three administrators of the exam, the
AICPA, NASBA and Prometric, reached an
agreement to administer the exam in
international locations next year, beginning
in Japan, Bahrain, Kuwait, Lebanon and the
United Arab Emirates.
The international exam will be the same
exam offered in the United States, using the
same computerized format and adminis-
tered in English. As in the United States,
the purpose of taking the examination will
be to qualify for licensure as a CPA
through U.S. state boards of accountancy,
according to the AICPA.
Mills also discussed these plans at the
meeting.
This issue has been around at least a
exam decade, he said. The convenience to
candidates is important.
However, Mills outlined two concerns
relating to this idea. The first, he said, is
test security. Depending on where you are
in the world, the culture of holding infor-
mation in confidence is different, he said,
adding that this is true most notably in
Asia. The Chinese government has enor-
mous problems with test security, he said.
The second issue he noted was the ten-
dency for many individuals in other
countries to pass the exam and then hold
themselves out as licensed CPAs.
Isserman said that its clear that what the
students want is a letter certifying their pas-
sage of all four sections of the exam. For
them, its a credential, he said.
Board member Kevin D. Bandoian said
that he was concerned that allowing foreign
students who never intend to pursue licen-
sure to sit for the exam without requiring
course credits could bring down the value
of [the CPA] designation.
A potential solution to this was presented
at the meeting by Mills: If we give them
the convenience of taking the test in a home
location, we could get them to commit to
the principle of licensure, becoming
licensed, earning [continuing professional
education] and so on.
In fact, Mills said that the international-
ization of the exam includes key elements
of informed consent, which will require
that
international candidates obtain and
retain a CPA license within three years
(scores will be archived if this requirement
is not met);
candidates not use the CPA designation
in any form not approved;
candidates agree to provide all request-
ed information and agree that data can be
provided to NASBA and the AICPA;
candidates agree that information
regarding license status and disciplinary
actions can be provided to NASBA and the
AICPA; and
candidates agree that the AICPA and
NASBA can require confirmation of scores
of questionable validity.
mhoffmann@nysscpa.org
2011 CPA Exam Update
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