The New Content and Skill Specifications for the

Uniform CPA ExaminationPresentation to the

2009 AAA Annual MeetingAugust 3, 2009

William J. Montemarano, CPA, MBA

Director, Examinations Strategy – AICPA

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Agenda

Overview of the Exam Background & Purpose of CSOs The 2008 Practice Analysis Exposure Draft IFRS on the CPA Exam New CSOs

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Overview of the CPA Exam

Overview of The CPA Exam

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Section Time (Hours)

Content General Description

AUD 4½90 MCQs

2 Simulations

Knowledge of auditing procedures, generally accepted auditing standards and other standards related to attest engagements.

FAR 490 MCQs

2 Simulations

Knowledge of generally accepted accounting principles for business enterprises, not-for-profit organizations, and governmental entities.

REG 372 MCQs

2 Simulations

Knowledge of federal taxation, ethics, professional and legal responsibilities, and business law.

BEC 2½ 90 MCQs only

Knowledge of general business environment and business concepts that candidates need to know to understand the underlying business reasons for and accounting implications of business transactions

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Background & Purpose of CSOs/SSOs

Background – Purpose of CSOs/SSOs

Statements of knowledge and skills measured by the CPA Exam

Ensures testing is consistent across Exam administrations

“Blueprint” for the type of questions that can be asked Ensures every version reflects the required distribution of

knowledge & skill components Provides candidates with information regarding what can

be tested

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The 2008 Practice Analysis

Practice Analysis - Background

In its oversight role, the BOE must ensure that the Exam is consistent with the knowledge and skills requirements of entry-level CPAs

2008 Practice Analysis identified changes in important knowledge and skills for entry-level CPAs since the last 2000 practice analysis was completed (2000)

Multi-year process that began in 2006 Complete details of Practice Analysis, including

Technical Report & Appendices, are on AICPA website, www.cpa-exam.org

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Practice Analysis – Method

Survey developed using input from the prior survey and augmented based on the contribution from practicing CPA’s

Target sample was individuals who supervise entry- level CPAs

Sample was drawn from CPAs certified between 2-15 years

Invited AICPA members and licensees submitted by State Boards of Accountancy to volunteer to participate.

• 2,023 of 3,079 eligible AICPA members (66%) responded to the survey.

• 71 of 75 eligible licensees from State Boards (95%) participated.

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Practice Analysis - Survey Process

Survey participants were presented with a list of about 45 knowledge, task, and skills statements and asked to indicate:

• Relevance to entry-level CPAs• For relevant statements, importance and frequency• In total, over 450 statements were evaluated.

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Practice Analysis – State Sample

About 3,000 licensee names provided by State Boards• 22 states provided non-judgmentally selected names• Some states provided less than 200 names• AICPA members, if in state data, were removed (as were

CPAs with foreign addresses) Response

• Total registrations: 346 (12% of invited)• Qualified for any sample: 75 (21% of registrations)• Completed: 71 (95% completion rate)

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Practice Analysis – Profile of Respondents

Completed Surveys vs. AICPA Database, 2-15 YearsRegion

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15

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Per

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Survey Respondents AICPA Database

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Practice Analysis – Profile of Respondents (cont.)

Completed Surveys vs. AICPA Database 2-15 Years

Year Certified

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1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Per

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Survey Respondents AICPA Database

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Practice Analysis – Profile of Respondents (cont.)

Completed Surveys vs. AICPA Database 2-15 Years & 0-2 Years

Area of Employment

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Public Accounting Business/Industry Consulting Firm Education Government

Perc

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Survey Respondents AICPA Members Certif ied < 2 yrs AICPA Members Certif ied 2-15 yrs

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Practice Analysis – Development of CSOs

Exam Subcommittees met in September 2007 to develop CSO recommendations, which were based on survey results coupled with their professional judgment

The Content Committee met in October and November 2007 to:

• Review Subcommittee recommendations regarding CSOs and related weightings

• Revise and finalize draft CSOs• Develop draft SSOs based on survey data and research

performed by cognitive scientists with CPAs Content Committee presented CSO recommendations to

BOE in January 2008. After modifications, revised CSOs approved in March and

released as Exposure Draft in May 2008

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Exposure Draft

Exposure Draft

Draft CSOs exposed for comment during period May-July 2008

50 responses received from various stakeholders, e.g.:• State Boards & State CPA Societies• Educators, Academic Associations, Review Course Providers• CPA firms & PCAOB• Individuals

Content Committee met in September 2008 and considered every comment

CSOs and weightings were adjusted accordingly Content Committee revised CSO recommendations to BOE

in October 2008.

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International Financial Reporting Standards (IFRS) on the CPA Exam

IFRS on the CPA Exam – Recapping the Past Year

Of the 50 comments received for the Exposure Draft, 1/3 specifically discussed IFRS; vast majority of IFRS comments supported inclusion on the Exam.

When the BOE released the CSOs/SSOs in December 2008, it was with the understanding that in 2009 the Content Committee would recommend updates related to IFRS.

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IFRS on the CPA Exam – Use of IFRS by Entry-Level CPAs

CPAs who work for companies in the US that are owned by foreign IFRS entities (prepare reporting packages)

CPAs who work for companies in the US that own foreign entities reporting in IFRS (convert IFRS financials to US GAAP)

Auditors who audit companies that report in IFRS, or who audit their subsidiaries who report in IFRS

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IFRS on the CPA Exam – Protection of the Public Interest

Content Design for CPA Exam:• Knowledge and skills required for entry-level CPAs for the

protection of the public interest Criteria for determining knowledge/skills included on CPA

Exam:• Relevance to work of entry-level CPAs• Importance to work of entry-level CPAs• Frequency of use by entry-level CPAs

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IFRS on the CPA Exam – Need to be “Bilingual”

IFRS is already entry-level practice and many CPAs are now using IFRS

US GAAP is likely to continue for some time Implications:

• Entry-level CPAs will need to be “bilingual” and able to work under both US GAAP and IFRS

• Content on the Exam will likely include both US GAAP and IFRS for some time

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IFRS on the CPA Exam – Steps to Revised CSOs/SSOs

Content Committee and Examinations Team have been monitoring the roll out of IFRS in the US and assessing the impact of IFRS on entry-level practice.

Exams Team performed in-depth research of IFRS and consulted with experts, which resulted in proposed revisions to the CSOs related to the inclusion of IFRS.

Content Committee met in May 2009 to consider the Exam Team’s recommendations.

Content Committee recommended to the BOE at its recent meeting the updated CSOs to reflect the inclusion of IFRS, which were approved.

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New CSOs/SSOs

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New CSOs - AUD

AREASummary of Current

CSOsSummary of New CSOs

I Plan the Engagement(22-28%)

Auditing & Attestation: Engagement Acceptance & Understanding the Assignment (12-16%)

II Internal Control (12-18%)Auditing & Attestation: Understanding the Entity & its Environment (including Internal Control) (16-20%)

III Obtain and Document Information (32-38%)

Auditing & Attestation: Performing Audit Procedures & Evaluating Evidence (16-20%)

IV Review and Evaluate Work Performed (8-12%)

Auditing & Attestation: Evaluating Audit Findings, Communications & Reporting (16-20%)

V Communications & Reporting (12-18%)

Accounting & Review Service Engagements(12-16%)

VI N/AProfessional Responsibilities (including Ethics & Independence) (16-20%)

New CSOs – AUD (cont.)

Key provisions in the AUD CSOs related to IFRS include the following.

Candidates are expected to demonstrate knowledge and awareness of:

• International Auditing & Assurance Board (IAASB) and its role in establishing International Standards on Auditing (ISAs)

• Difference between ISAs and US Auditing Standards• International Ethics Standards Board for Accountants (IESBA)

and its role in establishing requirements of the International Federation of Accountants (IFAC) Code of Ethics for Professional Accountants.

• The related independence requirements.• The AICPA Codification of Statements on Auditing Standards,

AU Appendix B, “Analysis of International Standards on Auditing”

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New CSOs - FAR

AREA Summary of Current CSOs Summary of New CSOs

I Concepts & Standards for Financial Statements (17-23%)

Conceptual Framework, Standards, Standard Setting & Presentation of Financial Statements (17-23%)

II Typical Items in Financial Statements (27-33%)

Financial Statement Accounts: Recognition, Measurement, Valuation, Calculation, Presentation & Disclosures (27-33%)

III Specific Types of Transactions (27-33%)

Specific Transactions, Events & Disclosures (27-33%)

IV Governmental Accounting and Reporting (8-12%)

Governmental Accounting and Reporting(8-12%)

V Not-for-Profit Accounting and Reporting (8-12%)

Not-for-Profit Accounting and Reporting(8-12%)

VI N/A N/A

New CSOs – FAR (cont.)

Key provisions in the FAR CSOs related to IFRS include the following.

Candidates are expected to:• Identify and understand the differences between financial

statements prepared on the basis of US GAAP and under IFRS• First-time adoption of IFRS related to financial reporting,

presentation and disclosures in general-purpose financial statements

Various FAR CSO “Groups” and “Topics” were modified from the December 2008 version of the CSOs to reflect the inclusion of IFRS

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New CSOs - REG

AREA Summary of Current CSOs Summary of New CSOs

I Ethics & Professional and Legal Responsibilities (15-20%)

Ethics, Professional and Legal Responsibilities (15-19%)

II Business Law (20-25%) Business Law (17-21%)

III Federal Tax Procedures and Accounting Issues (8-12%)

Federal Tax Process, Procedures, Accounting and Planning (11-15%)

IV Federal Taxation of Property Transactions (8-12%)

Federal Taxation of Property Transactions (12-16%)

V Federal Taxation of Individuals (12-18%)

Federal Taxation of Individuals (13-19%)

VI Federal Taxation of Entities (22-28%)

Federal Taxation of Entities (18-24%)

New CSOs – REG (cont.)

Due to the substantial uncertainty at this time relative to the US tax ramifications of the potential use of IFRS by US companies, the REG CSOs were not modified to reflect IFRS.

The REG CSOs may be modified in the future to reflect IFRS.

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New CSOs - BEC

AREA Summary of Current CSOs Summary of New CSOs

I Business Structure (17-23%) Corporate Governance (16-20%)

II Economic Concepts (8-12%)Economic Concepts & Analysis(16-20%)

III Financial Management (17-23%) Financial Management (19-23%)

IV Information Technology (22-28%)Information Systems and Communications (15-19%)

V Planning & Measurement (22-28%)

Strategic Planning (10-14%)

VI N/A Operations Management (12-16%)

New CSOs – BEC (cont.)

Key provisions in the BEC CSOs related to IFRS include the following.

Candidates are expected to:

• Demonstrate an understanding of globalization on the business environment

• Explain the underlying economic substance of transactions and their accounting implications.

Various BEC CSO “Topics” were modified from the December 2008 version of the CSOs to reflect the inclusion of IFRS

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New SSOs – Skill Specification Outlines

Skills CategoryWeights

AUD, FAR, REGWeights

BEC

Knowledge and Understanding (1) 50% - 60% 80% - 90%

Application of the Body of Knowledge (2) 40% - 50% N/A

Written Communication (3) N/A 10% - 20%

(1) Expertise and skills developed through learning processes, recall and reading comprehension.

(2) Including Analysis, Judgment, Synthesis, Evaluation and Research. Higher level cognitive skills that require individuals to act or transform knowledge in some fashion.

(3) The various skills involved in preparing written communication.

New SSOs (cont.)

No changes were necessary to the SSOs to reflect the inclusion of IFRS since the skills would be the same under both US GAAAP and IFRS.

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CSOs/SSOs - Looking Ahead

The Content Committee will review the CSOs/SSOs annually to determine whether any refinements are necessary.

Any changes will be communicated to all affected

stakeholders on a timely basis.

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Thank you.

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