question-and-answers-with-roger-philipp

Roger Philipp, CPA, CGMA and CEO of Roger CPA Review was a recent presenter at San Diego State Univeristy for a CPA Exam Seminar. After the presentation, he held a Q&A session to answer any questions that future CPA Exam candidates might have about the CPA Exam. Below we've included some of the questions and answers that came out of that seminar along with the actual CPA Exam Q&A video footage from the event.

If you have further questions about the CPA Exam, please visit our CPA Exam FAQ page for more information.

Question:

Are there a lot of IFRS questions on the CPA Exam?

Roger Philipp:

Yes. There are IFRS questions, but one of the changes that they're making now is  deciding if they're going to test on the similarities and differences between IFRS.  So there's a lot of convergence on things like inventory. I think by the end of the year,  it goes to lower cost of or market, lower of cost or NRV, which is the same as IFRS.

They are making changes and they've been trying to do this for years, but one of the things that there trying to step back a little bit and focus on the differences. One of the things I do in class is I'll talk about GAAP, because 90%, 95% is GAAP. Then, now that we understand inventory, let's look at how it differs under IFRS. We'll show you mainly US GAAP because that's what we're using, your financial reporting framework, and then we'll also show you how it differs under IFRS.

Question:

Since the DRS programs are new and haven't been tested by the people who take the exam, does that mean that it won't be counted on the new version of the CPA Exam?

Roger Philipp:

Starting July of this year, I would say you'll have 7 questions, I bet the last one will be a DRS, maybe it's a pretested question because one of the questions is pretested. My guess is probably the first window or two will probably be more of a pretested question, just to show you what it looks like and also give you a taste of it.

Also, currently if you go to AICPA.org, then navigate to CPA Exam. They have three sample DRS questions available. One of them is in tax, one of them is in financial accounting, and one of them is in auditing dealing with ratios. You can kind of see and play with the exhibits. That's a great way to practice, so you can see what it looks like. Is it a pretested question starting in July? They won't tell us. If we hear more we'll let you know.

There's a chance that it could be, but they don't want everyone to go to the exam and bomb. They still want 48% to pass. We want 88% of our people to pass, but they want at least 40%, let's just say 50%, pass. They don't want to just blow you away. That's why they're giving samples. That's why they're feeding us information because they know that we're controlling 80%, 90% of the market of the people taking the exam. Therefore, they want to make sure you go in as prepared as possible.

Question:

What are pretest questions? 

Roger Philipp:

Pretest questions mean they don't count in your score. Let's say I give you 90 questions on the exam, 16% will not count, so 16% of 90 is about 15 questions of your 90 won't count. You won't know which they are, but it's probably going to be on a new topic. It could be a new type of question. It could be a more difficult question. It could be on a new tax law. The reason they do this is they pretest them because there's two categories of questions - difficult and moderate.

They need to know how people perform to know which category to put their answer in. For example, the first 30 questions are moderate. If you do well the next 30 questions get more difficult. If you do well, the questions stay difficult. You could have moderate, difficult, different, moderate, moderate difficult, moderate difficult, moderate.  They have to know which category to move to you, that's why they pretest them.

With the TBS they pretested to see how people performed. Maybe it's too hard, maybe it's too easy.

Question:

What kind of simulations should be expected for the BEC portion of the CPA Exam?

Roger Philipp:

BEC is broad. One of the things I'm doing is looking back at the last 30 years of CPA Exams and at the old way we used to call ARE - accounting and reporting. Cost managerial was on the old exam and there were actual problems from there that I took years ago, joint product costing, absorption costing, variance analysis, budgeting, those kind of questions, I could easily see those moving over.

Currently we have a CSO, content specification outline. They're giving us something different called a blueprint and the blueprint has it broken down between those 4 categories of remembering and understanding, application, analysis, and evaluation. Evaluation only applies to Audit. For the others, those 3 still exist and that's where you'll probably see more of the TBS. We'll come out with more information on that before it happens, but that's where I would see it.

I would see it in the cost accounting, managerial accounting, budgeting, operations management, things like we were talking about the cash conversion cycle calculation, things like that, payback period, and IRR, internal rate of return. That existed years ago and still exists on the exam.

Question:

If I'm currently working full-time. What is the best way to study for the CPA Exam?

Roger Philipp:

The best way is to set up a study schedule whether it's 3, 6, 9, or 12 months. Then you're going to say okay, and here's how to think about it, figure every hour of lecture you need at least 2 hours of study time. Let's say, for example, my audit course is 25 hours, you need another 50 hours of studying. You're going to say I want to take auditing two months, so I need to stick 75 hours between today and two months from today, so what do I need? I need 25 hours a month, I need about 8 hours a week, so how am I going to get that? I'm going to come home every night and put an hour in. I'm going to take one day a weekend and go to the library for 6 hours, and I'm going to take half a day on Sunday.

You have to work it around your life. Here's the difference, when I took the exam you had to sit for all four parts at the same time. You had to pass at least two parts and the parts you didn't pass you had to get at least a 50% on or you kept nothing, so if you got a 99, 99, 99, 49, you kept nothing.

Now you can study for a part and take a part. That makes it easier for someone like you to say I don't have to study all four, I can study one part. I'm just going to jump in the next two months and nail it out. You have to set up a reasonable study schedule and that's why we give you the recommended hours. 

If I'm going to set up my exam date in two months that's 100 hours in the next 2 months. That's probably the best way to set it up. I remember I used to go to the library at night and on the weekends and just lock myself up and study.

Question:

I graduate in December of 2016 and I want to start taking my CPA Exam in the beginning of 2017. Let's say I sit for two of the tests, what order do you recommend I take the CPA Exam?

Roger Philipp:

If you're sitting at the end of the year, beginning of next year like you said what would I start with first? To me, the hierarchy is BEC first. Why? It's going to increase by an hour and it's going to include problems where it currently doesn't. Second one is regulation because it's currently 3 hours, it's going to go up to 4 hour. Why not take a shorter exam.

The next one would be Audit. Why? Audit will include a new thing called evaluation, which we've never seen before. Then the one with the least amount of changes is FAR because it's currently 4 hours, it's going to be 4 hours, it's currently multiple choice and problems, it's going to be multiple choice and problems.

That would be my hierarchy recommendation - BEC, REG, AUD, FAR. Now, what if you pass one part in quarter one and the exam changes? You get credit. You keep it for 18 months, no change. It's a rolling 18 months. I pass, pass, pass, don't pass, 18 months goes by, you just lose the first part. If you can pass BEC as a 3-hour exam in January you're done with it forever. If you can pass  it as a 3-hour exam in January/February you're done. If I don't pass it then it just goes to four. If you don't sit for the exam until the end of next year that's fine. It's 16 hours, no big deal, we'll get you through it.

Question:

Can you do three CPA Exam parts in three  months?

Roger Philipp:

You can do four parts in 3 months, just have no life, no friends, nothing going on. Here's the point, let's just say 400 hours, it's like a full-time job, you work 40 hours a week I could study 40 hour as week, so it's up to you. It's going to be 10 weeks of 40 hours a week and you're done, 10 weeks is 2-1/2 months. You could easily do it, it's a full-time job, but you can't work full time like him and study 40 hours a week. You'll go bald like me.

Question:

After the 2017 Exam changes occur, which order do you recommend taking the CPA Exam?

Roger Philipp:

Let's say the transition is over and it's 2017 or 2018, well normally people say, "What part should I do first", and there's two ways to look at it.

One way is I just graduated college yesterday, I had a really good Audit teacher, Audit is fresh in my head, let me do it first. Here's the bottom line, any part you do there's stuff in there you've never seen. I've never met an intermediate accounting teacher who finished a whole book. They always skip the last few chapters and go, "Don't worry about it." Guess what, it's still on the exam, but don't worry about it because I'll teach it to you, so realize that's fine. We'll teach it to you. My advice if you haven't  had a great teacher, it's been too long or you don't remember it, then which part should you take first or which part takes the most preparation time? FAR.

Next REG, next AUD, then BEC. As far as which one takes the most preparation time, FAR has the most material. Plus you'll see up here it's the thickest book. The next thickest is REG. The next thickest is AUD. The thinnest is BEC. That would be my suggestion.

The reason you want you to start with the longest one first is you don't want those 18 months to go by too quickly and you lose the first part because some people say, 'I'll  start with BEC," and then they hit FAR at the end and they struggle, and it takes more time than they have because they're working full-time and they did stuff that's silly like got married, fell in love, had a kid, bought a house, have a mortgage, life gets in the way, so all of a sudden it takes longer and they lose the first part. They've got to study BEC again.

I'd rather get FAR out of the way because your clock doesn't start until you pass it. Then your 18 months starts and now the others usually take less preparation time.

FAR takes longer than REG, then AUD, then BEC. That's the order I would go in, unless you just got out of an excellent Audit class and it's fresh. I know how most of us get through school, we say this semester's going to be different, I'm not going to fall behind, I'm going to study right away, and then you don't. Then it's the night before and you memorize and you take the exam and you blow it out of your brain and you don't remember it anyway. We're going to teach it to you again, so if there's stuff you don't remember, you've seen it but don't remember, we'll teach it. There's stuff you've never seen, we'll still teach it.

Question:

If I'm working full-time and going to sit for the CPA Exam soon, should I consider study time or order in which to take the CPA Exam? 

Roger Philipp:

You're going to sit now, let's say starting in a month, I would still probably nail out the ones I know are changing more. I would probably want to nail out BEC and REG first to get those done because you just saved 2 hours of exam time no matter what. Then between FAR and AUD totally up to you, but I would still probably nail out BEC and REG just because I want to be done with them. Now, then you've got to be motivated to get the rest done within 18 months because I don't want to lose those.

Also, BEC will not have a DRS until 2017 when they change it, but the other three will include DRS starting in July of 2017.

Question:

What should I concentrate on while in college in order to help me pass the CPA Exam?

Roger Philipp:

I wouldn't worry about it. At this point your goal is to get a good GPA, meet the right people, get a good job, and to learn as much as you can from your professors.

We're CPA Exam experts, that's what we do. There's a lag, when a rule changes it won't hit the exam for 6 months, so you don't have to know what's current today, but you need to know what's current today for your CPA Exam. There's tax laws, a 179 tax deduction, well it changes, so what amount do I need to know, that's why your books are current and if it changes, boom, we flip that switch and your online course will change and we'll alert you that there's a new video or that a particular video has changed since you watched it.

That's why in school pick good teachers and try to learn a lot. Whatever you don't learn,  that's where we come in. That's why we really suggest that you take a review course because we'll summarize, we'll simplify, and we focus you in. We cut out what you don't need to know.

For example, when you're studying leases in college, they talk about the leasor and the leasee. Well, in college leasor is more difficult, you've got a sales type lease, direct financing lease, and leverage lease, so the teachers like to cover that more and test you on that more because it's harder, but on the exam it's more real world. Chances are you're not auditing a leasing company, you're auditing a client that has a leased asset, which means he's a leasee not a leasor. In school you spend time on leasor, on the exam they spend time on leasee. I'll cover leasor because there may be some questions, but most of it'll be leasee. That's where it's real world versus exam world.

That's why in school they do this. On the exam and the real world they do the other. That's why it's important that we try to show it that way.

Question:

I have a Bachelor's degree in China, so I'm taking a Masters in Taxation here in the US. I've almost finished my classes. Do you suggest that I take the exam before I graduate?

Roger Philipp:

Congratulations. First of all, you can send your transcripts in to the foreign evaluation company. They will evaluate it and tell you if you qualify. Chances are you're qualified to sit now. What would I do?

I would try to look at my schedule and see how much time I have. Do I have time to start studying one part or right when I graduate? Maybe I'll take it, but you could start studying now because you're in the study mode anyway and maybe you want to start with tax because it's stuff you're already studying and it's current. Then you can nail regulation and get it out of the way early before it goes up by an hour.

It all depends on how much time you have. You don't want your grades to suffer, but even though you're a full-time student, or I don't know if you're a full-time student or part-time student, everyone thinks they'll have more time later. You never have more time later. You get busy at work, you get busy with life, and so on.

Here's the deal in life, the firms will not promote you to manager until you've passed. Everyone goes that's 5 years, it goes by quickly. There was a time during the recession I was in New York and Manhattan and the recession hit and they had to fire people. The first people they fired were all those up for manager that hadn't passed the CPA Exam. They said, "We have good news and bad news. The good news is you have time to study. The bad news is you're fired."

They had to clear out and they said why not get rid of the people that haven't passed because they need 400 hours to study let's get people in here we can charge more money, too. You're a CPA with a higher billing rate and so on. For yourself, you want to get through it as early as possible, so I would, sure if you have the time, start studying before that would be great. When you send in your transcripts there's an evaluation company you send it to, they look at it, they'll send it to the state board or the NASBA to make sure that you're pre-approved.

Question:

If you passsed the CPA Exam, how long do you have to fulfill the experience requirement?

Roger Philipp:

There used to be a 5-year requirement. I don't think they have it anymore, which means your grades are good forever. I had a student the other way that had gotten his experience, but didn't pass the exam and he worked at a company called Coopers & Lybrand, which was one of the big 8 way back when. That's the C in PricewaterhouseCoopers.

He had been there in 1968 and he said, "Does my experience count?" I'm like, "Let's call the state board." We called the state board and they said, "Yes." I'm like okay, so he took the course, passed the exam. I don't want him doing my taxes, he's going to pull out an abacus and try to figure it out, but the point is I believe it doesn't.

Now, when you take it overseas it does. Like if you take it in Japan I believe you have 3 years to get your experience. That's why I tell Japanese students that it might be better to fly to America to take the CPA Exam because then you fall under the rules in the US, which means it doesn't expire, so it all depends.

Generally, it used to be 5 years, but now, I believe they're good forever. That means how long do I have to get my one year of experience. Incidentally, that one year of experience needs to be under the supervision of a licensed CPA. Anything you do before, during, or after counts. If you do an internship, it counts. If you're working part-time and one of the guys that you're supervised by is a CPA, it counts. That's great news, and it's only one year. When I started it was 2 years. We didn't need the 150 we just needed 120, but we needed 2 years of work. What they decided to do is let's make one less year of work, but one more year of college, in a sense.

Question:

What happens if the person I work for loses their CPA license? While I'm working for them they were active, then they lose their license afterwards?

Roger Philipp:

I would say that's between you and the state board. Basically there's a form of experience you get filled out and they sign out. The guy should be able to sign it and maybe put his license number that he had back then as active. I would assume that the main requirement is that it was active at the time he supervised you, not later. He could be a retired partner now, but they can still look at his license and see when it was active and not. That should be fine. I've had students where they went back to their employer and they wouldn't sign it. Then they're like, but I did my work and they still wouldn't sign it.

I tell people that if you're going to jump companies, you start at one big 4 you go to another big 4, you end up at a mid-size, you go to government. Before you give notice you go in and say, "Hey, you know what, can I have you guys fill out the part of the form just so I can keep track of it." That's for you, so I suggest every 3 months have it filled out and signed because once you give notice they may not be nice to you. Protect yourself and get it signed every so often. If you have 4 employers you're going to have 4 of them filled out.

Before you give notice to one of them have them fill out the form and sign the form. Usually they know you're getting ready to quit, but you say, "No, no, no, I just wanna get it signed because the manager I work for today may not be here tomorrow." That's one of the things I remember when I was at Deloitte I used to have to go to the file room and look for files to look for your signature. That's an important point. When you do work paper stuff make sure that your initials are on those papers because that's where you get credit for doing the work. You make sure you sign everything you're working on because that's where you get the credit. These days everything's computerized and you've got a schedule and you've got records, so keep those records. Copy them and keep them because that's you're evidence that you did your one year of experience.

Question:

Is there a standard experience form?

Roger Philipp:

Yes, there's a standard form. I think it's on the State Board of Accountancy's website, because every state is different, and it used to be called a form E of experience and there's one for attestation and non-attestation, which means you're doing audits.  They usually say that you need 500 hours of audit. I always suggest to start in the audit department for a few months to get the hours and then shift to tax, something like that, because when you start they always promise you that they'll get you the audit experience, but the longer you're there the more valuable you become and it's hard for them to loan you to the audit department.

When they're billing you in tax at $250 an hour they don't want to demote you to audit for $150 an hour because they're losing money. You want to make sure and  take care of yourself. Make sure you get that experience. It's for you to get your CPA.

Question:

Is the experience requirement for just Audit or Tax? I work in a different deapartment and I work under a CPA, so will those hours count?

Roger Philipp:

Yes, the hours will count. You need basically 500 hours of Audit, but one year of work, so 2,080 hours of work. So 2,080 hours that would count, but not towards Audit. You only need Audit if you think you're going to sign off on audits. You may want to start your own practice and just do tax. You may never do an audit, you may just do a compilation, but if you're going to do any kind of attestation, the attest function is the act of giving an opinion or conclusion, then you need to have 500 hours of audit experience, which with overtime is like 12 weeks or 6 weeks, but make sure you get some of that.

Question:

If I graduate with less than 150 units, is there way I can complete the units aside from getting a master's degree?

Roger Philipp:

Yes, you can do any class, as long as it's an accredited class, which means it could be an online class and you take an online exam. It could be pass/fail, as long as you get the credits and it shows up on a transcript and it's an accredited school. It can't be a fly by night school, "Hey get your Masters in 3 hours and pay $1,000," no it has to be accredited. Make sure it's accredited. You could go to a junior college and take an online class or you could go to a junior college and take a tax class.

You can't take the same class more than once, unless it's for undergrad and grad, but there's plenty of classes. When you find the 20 and the 10 categories if you're missing something, let's say the state board says you're short by three units then you just can go to a JC, but as long as it's accredited.

Question:

Can I complete the required educational units with an internship?

Roger Philipp:

An internship will count up to four units under the accounting category, so yes internships can count. Look at the specifics, I don't know if it's a paid internship I think it still counts, but I don't remember, but if it's unpaid for sure it counts.

Yeah, what I would do again is call the state board and talk to them and ask them. Go on the website, State of California State Board of Accountancy, or whatever state you're in, and then I would look at the form for certification of CPA, print it, look it over and read it, and then it'll say all that about auditing and accounting and all the hours. Look at that and then call them with questions because they're the ones that are the experts in that. They're the ones that sign off on it.

Question:

Between applying and then sending in transcripts,  how much time do I have to sit for the CPA Exam? Is it just a few days?

Roger Philipp:

No, no. Part of the application process is filling out the application, sending in transcripts and then once they approve it you have 90 days to pay the fee. I think it's 90 days to pay for what parts you want to sit for.

Basically, when you apply and send in your transcripts and approve it you have an ATT, which is an Authorization to Test. That authorization is good for 90 days, which means now I have 90 days to pay my $200, $400, $600, $800. I pay that then I get a Notice to Schedule. The clock starts running and it's good for 9 months. You have 90 days to pay and then 9 months to sit.

Also, it's $50 the first time you send in an application and then you can pay for whatever parts. Then if you don't pay for the parts and your 90 days expire then it's $25 to reapply plus the $200 per part. I'm just rounding up it's really like $173, etc.

Yeah, so $173 and then eventually they'll all be $20 more or whatever, so I'm just going to round up and say $200 bucks a part, figure $800 bucks, give or take a little, and you don't have to pay all $800, but you want to pay for the parts you're going to sit for. Here's the deal, you can have more than one Notice to Schedule simultaneously. So, I have one Notice to Schedule for two parts and it's good for 9 months. Then 3 months in I get another one, but not for these parts, but for the other parts. One of the things they're considering changing on the CPA Exam is letting you sit for the same part in the same window.

 

Question:

Is it possible to see the same exact questions within the same testing window on the CPA Exam?

Roger Philipp:

Well I could see the same questions. You could do that anyway, but there's so many questions. You guys could be taking the exact same CPA Exam at the same time and have completely different questions. It's random. All the questions are random. You could take the same exam 20 times and not see any of the same questions. They may have 3,000 Audit question you're only going to get 90.

It doesn't matter, in the same window they use different questions. There's still a huge test bank. You could see the same question in window one and window three of four. It's all randomized, but if you do statistically you'll probably have a higher chance of winning the lottery. I'm joking because there's 1 in 235 million to win the lottery.

Let's say they have 2,000 multiple choice you're only seeing a number of those, so chances are you won't see the same one. It's not like in the olden days. In the olden days everybody got the exact same question with the exact same exam with the same questions. We all sat in the room and we all took the exact same questions and that was it. Then they let you walk out with the test and then they threw those questions away and made new ones, but they only had to make 90 questions twice a year.

Now you've got thousands of people. You've got 90,000 people taking the CPA Exam a year and of the 90,000 people they mix up the questions and there are thousands of them for each part, so it's slim to none that you'll see it. There's a chance, but it's very slim.

Question:

Why do you recommend enrolling in a CPA Review Course before you apply to take the CPA Exam?

Roger Philipp:

The main reason we say to enroll in a CPA Review Course is you may as well start studying while you're waiting for the application process. Why lose 6 weeks, unless there's a question that I have a foreign degree and I don't know, then maybe wait the 6 weeks to make sure you are approved. You should be because you already got approved for your master's degree. That's the thought process, but if for some reason you were wrong then let us know and maybe we can stop the clock running on the course that you just bought.

Question:

Can you go over the new ethics requirement for 2017?

Roger Philipp:

Basically all the universities in the last few years have been scrambling to get an ethics class. With that being said, you need to have at least one ethics course, I think it's 3 units minimum in order to count as your units. In your 10 units of ethics you need to have at least an ethics class.

t's the same thing for me as a CPA to stay active. I need 80 hours of education every 2 years, a minimum of 20 hours a year, and I have to have at least 8 hours or 2 hours of ethics or 4 hours of ethics and 6 hours of this, so I have to keep that as well too.

Same thing starting in 2017,  you have to have an ethics class. All the schools should now have an ethics class. If they don't have it then you can take one online, but basically the requirement is that you have to have at least 3 units of an ethics class and it should already be a requirement in the accounting programs that is built into the program.

 

*Partial transcript and some questions have been edited for better clarity.