At some point in our lifetimes, we all get asked some version of “What career path do you want to follow?” If we’re planning to become accountants, we might respond, “I’m going to be a CPA.” Those of us who do decide to become a CPA embark on a tortuous journey to that goal. The process includes obtaining college credits in accounting from an accredited college or university, at least one year of work experience, and successfully passing the CPA Exam.
This examination is one of the most grueling tests administered to would-be professionals. It covers wide-ranging areas of material that are always being updated. Much of this material is relevant to the future career of a CPA.
Yet there is a professional paradox. Would-be CPAs find that 1) they will never again have exposure to a significant portion of this material and 2) some of the most important preparation for becoming a CPA is not to be found on the CPA Exam.
What Is Covered on The CPA Exam?
The CPA Exam consists of four sections. It is administered four times a year by the American Institute of Certified Public Accountants (AICPA) and the National Association of State Boards of Accountancy (NASBA).
As of this writing, the four main areas covered on the CPA Exam consist of:
- Auditing and Attestation
- Business Environment and Concepts
- Financial Accounting and Reporting
Each of these areas comprehensively covers a great deal of material that a CPA might encounter in an accountancy or industry practice.
CPA Exam candidates must receive a score of 75 or higher in each area to pass the exam. The content covered by the exam is updated regularly.
Preparing for the CPA Exam
Candidates often prepare for the CPA Exam through enrolling in cram classes and using practice guides. Exam prep providers such as Becker, UWorld, Surgent, Gleim, and various others create materials based on actual CPA Exam questions. They offer courses that teach techniques meant to help aspiring candidates focus on the areas covered by the exam as well as the question formats.
Each prep program has its own unique combination of teaching methods. Becker relies heavily on mnemonics and acronyms to remember information covered on the exam. UWorld links attractive images, flowcharts, and graphics with explanations in simple language.
Real-Life Preparation for CPAs
But how much does the CPA Exam content have in common with the real-life work of CPAs?
That is a subjective question. The accounting industry is a highly specialized one. We have auditors, bookkeepers, tax preparers, investment advisors, forensic accountants, public sector accountants, and industry accountants in every field. And each of us uses different accounting knowledge.
For example, I’ve prepared financial statements for clients using GAAP, the cash basis, and the income tax basis of accounting. I’ve prepared numerous income, payroll, and sales tax returns. I’ve done bookkeeping for individuals, small and medium-sized businesses, and nonprofits and helped them with forecasting, projections and budgeting. So, I certainly have needed to know the ins and outs of financial reporting and tax preparation.
And yes, it is important to be aware of the ethics of being a CPA. That’s a lesson Arthur Andersen accountants in my home town of Houston forgot when auditing Enron.
But then again, I’ve never actively participated in an audit (although I have acted as a liaison to outside auditors). I have never worked in a public sector setting using budgetary accounting. I have never been called on to perform job order or batch process costing, track variances from standard costs, or account for the movement of raw materials to work-in-process and finished goods inventories. I have never participated in a physical inventory count. And I have never been asked for percentage of completion accounting or ratio analysis. Yet all of these are covered on the CPA Exam, among many other topics I have never had to deal with in over 20 years of professional experience.
That Which Isn’t Covered on the Exam
Some of the most important aspects of being a CPA don’t even receive coverage on the CPA Exam.
Exam prep courses don’t tell you how to deal with basic client experience skills, such as managing a client who throws receipts into an envelope without sorting them. There’s nothing in the exam about how to encourage a slow client to get open items for you in order to complete their returns. You certainly don’t get tested on what to say to a client who argues about your fees and wants to do their own bookkeeping.
Exam prep also doesn't cover some of the basic knowledge a junior CPA needs to know. For example, a CPA firm associate might need to know how to assemble and mail a paper tax return. And even more critical to core job knowledge, learning how to differentiate between and use desktop accounting or cloud accounting software isn’t covered.
Nor do CPA Exam candidates learn how to advise clients on what software to adopt, whether outsourcing is right for them, succession plans, exit strategies, or numerous other everyday business decisions. These are all issues that have to be tailored to each client and each advisor.
CPA Exam candidates also have to learn basic professionalism, like how to dress for a business meeting, clear jams in the photocopier, and greet clients on the phone and in person. In addition, they have to learn how to conduct themselves in meetings, such as dealing with IRS or state or local auditors during a tax audit.
The CPA Exam can provide only limited training for an aspiring accountant’s future career. But what it does provide covers so much material that passing the exam is one of the highlights of a CPA’s career path. Combined with actual professional experience, it opens the door to many opportunities for exciting and valuable careers.