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The Computerized CPA Exam

It’s a whole new ballgame

by William W. Holder

California CPA magazine: September 2004

This past April, aspiring CPAs were presented with a seminal change in the accounting profession’s licensing process when the computer-based Uniform CPA Examination was launched.

The introduction of this new test marked the biggest change to the examination in its 100-year history. The result of a strong collaborative effort by the AICPA, the National Association of State Boards of Accountancy, the technology-based testing service Thomson Prometric and the state boards of accountancy, the computer-based test is the product of more than five years of hard work by volunteers and these organizations’ professional staffs.

The exam’s changes were developed carefully and based on evidence of practice necessities, psychometric standards and the contributions of regulators, educators and accounting professionals. These alterations have resulted in a state-of-the-art examination that provides a platform from which the licensing process can continuously be improved.

Most importantly, the examination was revised to achieve a better alignment with professional practice requirements. In that fashion, protecting public interest remains paramount and those who rely on the work of CPAs can have confidence that the licensing process adequately protects their interests.

Now that the first testing window (April 5–May 29) has been completed, the question that is on everyone’s mind is, “How did it go?” The answer: Very well. Compared to other known computer-based test conversion projects, the CPA examination has gone remarkably well.

During April and May, some 23,000 test sections were delivered. Approximately 92 percent of the test takers reported that they’d had a positive testing experience. Of course, there are issues and challenges to be addressed, but as a profession we can take pride that the CPA examination continues to evolve in a positive manner and meet its mission of protecting the public.

The state boards of accountancy, with responsibility for the entire CPA licensing process, appear to be increasingly comfortable with the computer-based test process. While communication and some functionality and administrative operations need to be fine-tuned, the exam and the work that has been accomplished thus far is impressive.

But that doesn’t mean the job is done. This initial testing window is just the first step of an ongoing evolution that will foster continuous innovation and exceptional quality. The CPA exam must keep pace with the business world and the work done by CPAs. Also, it’s important to ensure that the CPA examination remains the premier financial licensing test and an effective tool for state boards of accountancy to use in their licensing procedures.

A Better-Aligned Examination
While the test’s most visible change is its transition from a paper and pencil exam to a computer-based test, the more important components are the content revisions. Based on practice analysis findings, the computer-based exam has been revised to more closely align with an entry-level CPA’s real-world, professional responsibilities.

Through amended content, format and delivery, plus a new case study component called “simulations,” the new exam strives to evaluate the research, analytical, judgment and communication skills required of entry-level CPAs.

The result is a 14-hour test with four sections:

Auditing and Attestation,
Financial Accounting & Reporting,
Regulation, and
Business Environment & Concepts.

The new sections’ specifications were established independently of the paper-based test’s specifications and the material differences between the structures are summarized as follows:

The subject areas that were tested in the paper and pencil section Accounting & Reporting––taxation, governmental and nonprofit organizations, and managerial––have been separated and grouped with subject matter that is more logically related. Specifically, the topic of accounting and reporting for governmental and nonprofits has been placed in Financial Accounting & Reporting; taxation has been placed in Regulation; and managerial accounting has been placed in Business Environment & Concepts.

Candidates are required to demonstrate general business knowledge that is related to auditing and financial reporting primarily in the new section: Business Environment & Concepts. In addition to managerial accounting, the Business Environment & Concepts section tests candidates’ knowledge of certain areas of economics, finance, strategy and information technology.

For more information about the exam’s content, the application or scheduling process, as well as links to the state boards of accountancy, NASBA and Prometric, visit the CPA exam website at www.cpa-exam.org.

Focus on Content, Not Process
Test administration also has been updated with expanded testing opportunities and increased flexibility. Candidates now have more than two testing opportunities per year and are no longer required to take all four sections at one time.

With the computer-based format, individuals deemed eligible by their state boards of accountancy can schedule any or all sections in two out of three months each quarter, throughout the year. These two-month periods are known as “testing windows.” Within broad constraints, candidates are able to choose the date, time and test center most convenient for them and their employers.

Once a section is passed, most jurisdictions require candidates to pass all remaining sections within 18 months to receive credit on the previously passed section(s). As an “early bird” incentive, California offered a 24-month credit-retention period to those candidates sitting for the first two testing windows (April–September 2004). But after September 2004, the credit-retention period becomes 18 months for every subsequent exam.

Conceptually, it’s important that competency in all areas that are considered essential for the protection of the public interest be demonstrated within a reasonable time frame.

Knowledge and abilities demonstrated at one point in time on a particular subject can become stale and no longer useful as evidence of competency over time. The period of 18 months represents the Board of Examiners’ judgment as to the reasonable period of time for such a show of competency.

Collaborative Effort
The strong, collaborative effort among the AICPA, NASBA, state boards of accountancy, educators and the accounting profession is a key to maintaining the computer-based exam’s integrity and strength.

For example, before test items or simulations are included for scoring on an actual exam, the AICPA conducts extensive pre-testing to ensure that individual questions perform as expected and are at the appropriate level of difficulty.

This collaborative effort was instrumental to the process of determining the passing standard for the new exam. In layman’s terms, the passing standard sets the bar that candidates must meet to demonstrate that they have the knowledge and skills necessary for licensure.

Because the test is a high-stakes element of the licensure process, standard-setting that distinguishes between successful and unsuccessful candidates must assure protection of the public interest and allow for defensible and fair pass/fail decisions.

The development of a passing standard is founded in a standard-setting study and other factors, including the professional judgment of the policy-setting body, in this case, the AICPA Board of Examiners.

The standard-setting process was rigorous and included input from NASBA, state board of accountancy members and several psychometric consultants.

As a result, the computerized CPA examination is an effective, state-of-the-art tool for making licensing decisions.

Overall, the computer-based exam’s launch was an historic event. Now we must continue to learn from our experience and continue to make the CPA examination, and the accounting profession, the best that they can be.

William W. Holder, CPA, chair of the AICPA Board of Examiners, is the Ernst and Young Professor of Accounting at the University of Southern California. He can be reached at wholder@marshall.usc.edu.Diane Babuinis a communications manager at the AICPA and can be reached at dbabuin@aicpa.org.