The American Institute of CPAs (AICPA) published an Exposure Draft on December 23, 2019, following a months-long Practice Analysis. The AICPA Exposure Draft is designed to solicit feedback from CPA Exam stakeholders about recommended changes to the CPA Exam. The Practice Analysis is being used in the development and production of the CPA Exam to ensure that it remains current and reflects recent changes in the profession. It also examines the critical knowledge and skill sets required of newly licensed CPAs (nlCPAs) and the impact of technology on their work.
The AICPA describes the Practice Analysis as a primary resource for linking and relating CPA Exam content and licensure with the job-relatedness of the profession. Therefore, “inferences from test scores may be supported by arguments of content validity as related to the practice analysis.”
Exam stakeholders are invited to submit additional commentary on both the Invitation to Comment and the Exposure Draft until April 30, 2020. Depending on the comments received, changes to the CPA Exam based on the Practice Analysis will take effect in July 2021, or possibly as early as April 2021.
Exposure Draft Findings
The Exposure Draft considers the roles that both accounting technology and data analytics play in the CPA profession, specifically for new accountants. The draft also reexamines the core knowledge and skills essential to nlCPAs.
According to the AICPA:
The Exposure Draft incorporates feedback from 80 AICPA volunteer subject matter experts in addition to input from more than 130 CPAs who directly supervise the newly licensed. The resulting Draft details major themes from the research along with proposed Exam content additions, changes, and deletions. The goal is for the updates to appear in the CPA Exam Blueprints no later than December 31, 2020. The 16-hour, four-section structure will remain the same.
Practice Analysis Phase One Findings
The AICPA’s Practice Analysis delineates areas most impacted by technology within the profession for nlCPAs. The areas include the following:
Understanding business processes from inception to completion, including automated aspects, risk identification, and internal control mapping
The need for a digital and data-driven mindset and the use of data analytics
Increased reliance on System and Organization Controls for Service Organizations: Internal Control over Financial Reporting (SOC 1®) reports.
The sections of the CPA Exam most affected by the Practice Analysis findings are in Auditing and Attestation (AUD) and Business Environment and Concepts (BEC).
Practice Analysis Phase Two Findings
The Practice Analysis identifies sections of the CPA Exam with insufficient focus on the critical knowledge and skills required of nlCPAs, as well as content that could be revised in or removed from each section of the CPA Exam.
The Changing Role of Newly Licensed CPAs
As accounting technologies become more automated and the role of the new accountant shifts into that of business advisor, new skill sets will be required. These include professional skepticism, judgment, and critical thinking abilities. Also, with big data driving the business world, accounting firms are quickly aligning with market demand to incorporate data analytics into their own business models. This shift in accounting technology requires new accountants to have stronger analytical skills to remain competitive in the accounting job market.
The AICPA understands that the CPA Exam must embrace this changing landscape of accounting technology and adapt the exam to effectively prepare nlCPAs for their careers.
How the CPA Exam Is Aligning with the Profession
Business and Data-Driven Mindset Focus
Future CPAs will need to have a deeper understanding of business processes and operations. This type of business understanding is assessed in the AUD and BEC sections of the CPA Exam. The AUD and BEC Blueprints will “be reorganized to assess major business processes, including manual and IT systems, and related internal controls on a more integrated basis.”
Skill sets that are most impacted by accounting technologies and evolving business roles display a data-driven mindset. The Exposure Draft defines a data-driven mindset as “understanding the potential sources of data as well as the completeness, accuracy and relevance of the data.” Furthermore, “given the advances in technology, which allow for the extraction of data from systems, it is important that nlCPAs at a minimum have an understanding of data—and where and how it may be accessed—to be able to converse with clients about data and its potential use.”
In the Practice Analysis, the AICPA notes an increased awareness of how data analytics is increasingly being used throughout the profession and that nlCPAs play a significant role in its application. As such, the AICPA has worked with subject matter experts to develop audit data analytics (ADA), task-based simulations (TBS), and small case studies to help assess nlCPA ADA practice.
Specifically, the BEC section of the CPA Exam will assess content on data management, data governance, and data relationships.
Use of Microsoft Excel®
CPA Candidates will be required to sort, filter, and compare data sets in TBSs to “determine trends, identify missing or duplicate transactions, or highlight anomalies within data.” The Excel-based TBSs that assess data analytics with Excel are to be introduced in the AUD section beginning October 1, 2020, with the revised CPA Exam Blueprint to be introduced on April 1, 2020.
Use of SOC 1 Reports
The Practice Analysis indicates an increased reliance on SOC 1 reports in the accounting profession. The Exposure Draft indicates that SOC 1 reports “are specifically intended to assist businesses that use service organizations and their auditors in evaluating the effect of the controls at the service organization on the user entities’ financial statements.” However, while firms outsource these types of processes, inlCPAs must understand the types of SOC 1 reports, how they are to be interpreted, the implications for a client’s system of internal controls, and the effect on planned audit procedures. Therefore, SOC 1 reports will be emphasized in the AUD section and added to the BEC section as well.
What’s Not Changing on the CPA Exam
While the CPA Exam is aligning with new business processes and accounting technologies emerging in the profession, the overall need for strong foundational skills and knowledge remains a priority. According to the Exposure Draft, “There was universal support that technology advances require nlCPAs to have a clear understanding of basic accounting and auditing skills as well as professional skepticism.” Also, the Board of Examiners considers the current CPA Exam structure to be well designed for assessing the foundational knowledge and skills required by nlCPAs and for accommodating the changes identified by the Practice Analysis.