May 2003

Not Your Parents’ CPA Exam

By Neal R. VanZante

The last major change in the AICPA Uniform CPA examination took effect in May 1994, and effective in 2004, the examination will be drastically different in format, length, content, location, and time.

The final pencil-and-paper CPA exam will take place in November 2003. Beginning in 2004, a new computerized exam will be offered at Prometric testing centers nationwide. The AICPA Board of Examiners has recommended that candidates be allowed to take the examination parts individually. The states will probably follow this recommendation, which means that CPA candidates will no longer be required to take the entire exam on first sitting, as most states currently require.

The current CPA examination consists of four parts requiring a total of 15.5 hours to complete. The new exam will also consist of four parts, but will require only 14 hours to complete. The Exhibit compares the old and new parts and time requirements.

Subject Matter and Question Type Changes

The new Auditing and Attestation part will contain much of the same material as the current auditing part, but the other three parts have major changes. The new Financial Account-ing and Reporting part will include governmental and not-for-profit material that currently represents 30% of the accounting and reporting (ARE) part. The new Regulation part will be 60% taxation and 40% law and professional responsibilities. The new Business Environment and Concepts part will be 20% business structure, 10% managerial accounting, and 70% new subject matter that is not currently tested. The new subject matter will test the candidate’s understanding of economic concepts, information technology, and general business measurement. This section is being added because of a growing recognition of the need for understanding the business environment when applying the audit risk model.

The current CPA exam is 50–60% multiple-choice questions on each part. Essay questions account for 20–30% on all but the current ARE part. Multiple-choice questions will account for 80% of each of the four parts of the new exam. The remaining 20% of each part will consist of simulations. (The new Business Environment & Concepts part will contain no simulations for the first exam.) The AICPA describes these simulations as an assessment of knowledge and skills in a workplace context. Some simulations will involve a research activity, such as searching authoritative literature and the IRC. Other simulations will require candidates to access workpapers or other published materials. The simulations will require candidates to have basic computer skills, knowledge of common spreadsheet and word-processing functions, the ability to use a financial calculator or a spreadsheet to perform standard financial calculations, and the ability to use electronic tools such as databases. To assist interested individuals to better understand these new simulations, the AICPA has created a six-minute self-running CD-ROM titled “Moving Forward: A First Look at the New Uniform CPA Examination Simulations.”


Whenever the CPA exam changes, inconsistencies are bound to occur. For example, when the exam changed in 1994, the total examination time re-quired ranged from 13.5 to 21.5 hours depending on the specific parts the candidate had passed before the change. This wide range of examination time was caused primarily because credit for the current ARE part, which lasted 3.5 hours, was earned for the old “practice” part, which lasted nine hours. This time difference was seen in other parts of the exam as well.

Although major differences in time requirements are not expected this time, several oddities will exist because candidates who have passed current parts of the exam will be allowed credit for parts of the new exam in accordance with how the various subjects line up, as shown in the Exhibit. For example, candidates who have passed the current ARE part will be given credit for the new Regulation part, and candidates who have passed the current LPR will be credited for the new Business Environment & Concepts part. It will be possible for candidates who have passed the current FARE to avoid the Governmental and Not-for-Profit material. Candidates who have passed the current ARE can avoid business law material that is included in the new Regulation part. Candidates who have passed the current LPR will avoid all of the currently untested material that will make up most of the Business Environment & Concepts part.

New Exam for New Generations

The new CPA exam will definitely impact future CPA candidates, because they will be tested on subject matter that is not currently examined. The inclusion of simulations will require CPA candidates to demonstrate the ability to use skills and understand technology that did not exist when earlier generations took the CPA exam.

Editor’s Note: Additional information about the new CPA exam is available online at, or contact Gregory Johnson, director of the CPA examination, at

Neal R. VanZante, PhD, CMA, CFM, CPA, is a professor of accounting at Texas A&M University in Kingsville, Texas.

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