CPA BEC Exam Tips: Overview, Pass Rate and Study Tactics

This [Business Environment and Concepts] section covers knowledge of general business environment and business concepts that candidates need to know in order to understand the underlying business reasons for and accounting implications of business transactions, and the skills needed to apply that knowledge in performing financial statement audit and attestation engagements and other functions normally performed by CPAs that affect the public interest.”   – The Uniform CPA Exam Website

CPA BEC Exam: An Overview

Many CPA candidates find CPA BEC exam the easiest (or rather, least difficult) exam. It is certainly the shortest and comprises only 3 testlets of 24 multiple choice questions, i.e. 72 questions all-together, and 3 written communications.  There is no task-based simulation in this exam section.

Given my background in Economics I also find BEC to be a more relaxing part of the exam. Having said that, for those who are fresh out of college or are unfamiliar to how businesses are run in real life, it could come as a nasty surprise… as shown below.

Historical CPA BEC Exam Pass Rate

BEC is historically one of the lowest performing parts in the CPA exam. Encouragingly, the pass rate has seen marked improvement and is the only part with pass rate above 50% in 2012.CPA BEC exam pass rate: 2005-2012

Source: AICPA

What Does The CPA BEC Exam Cover?

It is a test of all the business concepts applicable to an accountant:

  • Corporate Governance (16%-20%). Role of Board of Directors, audit committee and other stake holders in corporate governance.
  • Economic Concepts and Analysis (16%-20%). Inflation, deflation, interest rates, exchange rates, foreign currencies and their impact to businesses.
  • Financial Management (17%-23%). Financial modeling e.g. EVA, DCF, NPV, IRR, and financing options such as various cost of capital (debt vs equity) and derivatives, plus related concepts such as loan rates (fixed vs variable) and loan covenants.
  • Information Systems and Communications (15%-19%). Role of business information system in terms of management reporting and transaction processing; roles within the IT functions, IT basics (e.g. operating system, security, file organization), disaster recovery and business continuity.
  • Strategic Planning (10%-14%). Planning, projection, budgeting, performance measures, cost measures.
  • Operations Management (12%-16%). Cost accounting.

CPA BEC exam topics

CPA BEC Exam Tips

Tackle The Different Topics One By One

BEC is a basket of miscellaneous business, economics and financial concepts. They don’t relate to each other, which makes the materials difficult to retain for some candidates. It is best to tackle each topic one by one.

1. Corporate Governance

This is an important topic and it ties with other parts of the CPA exam, particularly AUD. Special attention should be paid on the role of Board of Directors and the Audit Committee. It is not a difficult topic but questions could be tricky.

2. Economics

If you’ve had course work in Economics, the questions should be straightforward because the exam covers only elementary micro and macro economics. Even if you’ve never seen it, the concepts shouldn’t be too difficult. Candidates can “guesstimate” by common sense.

The strategy is to go through the textbook or DVD fairly quickly and focus the time in practice tests. You will be surprised to see how many wrong answers you may get — yes, that’s how tricky the CPA exam can be, and how they manage to have such a low passing rate. Don’t get discouraged! Once you get used to the format of the questions you will do much better.

3. Financial Management

I work in the strategic planning department and this is easy topic for me, but I understand it could look very complex for people who haven’t done any financial modeling.

The trick is to really understand how the calculation works, and you should not memorize anything more than the basic formula. If you can’t figure it out, ask the instructor in your class, or call/email Cindy Simpson if you are taking Yaeger CPA review.  She has never disappointed my readers when answering their questions.

4. Information Technology

IT is a huge topic, and no CPA review course can ever cover all the content. IT is important in real life though: accounting nowadays does involve a lot of IT — all the journal entries are posted to the “System” that generates everything from monthly statements to management reports. As a result of its importance, an accountant must learn how to maintain the integrity and security of this system.

Having said that, studying all these for the CPA exam is extremely boring… I know, I have been there, and the reading took forever…

The good news is that this IT section involves mostly facts and terminology, and therefore questions are rarely too tricky. Most candidates are fine after reading over the materials once and spend the rest of the time working on practice questions.

5. Strategic Planning and Operational Management (Cost Accounting)

Many of you may have learned cost accounting in college, but for those who haven’t, this could be a very difficult section. This could be an area where you need extra help, e.g. call up the instructor to really understand the concepts behind it.

I think I still don’t really “get” cost accounting, but I know it well enough to pass the exam. If you really can’t figure it out, work extra hard on the rest of the BEC section and you should be okay.

My Recommendation and Tips

1. Do NOT underestimate BEC. Some candidates pass the other 3 parts on first try but stuck with BEC forever. It is easier for most candidates but not all candidates.

2. Work on your weakest area(s), be it cost accounting or financial modeling,  work on plenty of practice questions.

3. Don’t give up. Don’t panic if you think BEC is difficult while everybody seems to have a breeze with it. Did you know that BEC had the lowest passing rate back in 2009? It’s not supposed to be easy.

4. Get Prepared For The Written Communications tabs. You are going to face 3 questions, each asking you to write a business writing (a memo, a letter to the client for example). There is no need to write in flowery words and instead be relevant, concise and organized.

How Can I Get Help In Other Parts Of The Exam?

Need More BEC Study Tips and Exam Strategies?

cpa bec exam tipsAn entire chapter is dedicated to CPA BEC exam taking strategies in my new “How to Pass the CPA Exam” book (Wiley, 2013). While this book is written with international candidates in mind, Chapter 13 on BEC, as well as most other chapters in this book, is relevant to every CPA exam candidate.

You will find the BEC chapter broken down into 8 sub-topics, each with a useful summary and a collection of tips from myself and my most successful readers.

Here is the book for which we have been waiting… the best guidance to help accounting professionals get ready and pass the CPA exam” – Yan Tan, my reader and CPA exam candidate who passed all 4 parts in her first attempt with 80, 89, 91 and 91

Click here for a snapshot of the content of the book. It is available in all major online books store including Amazon, Barnes and Noble, BAM and Wiley Online.

All of my royalties will be donated to charity. Click below for details.

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Comments

  1. Laurie Johnson says

    Thanks so much for passing on your expertise and knowledge of what to expect in the BEC section of the exam. Helpful information!

    • Stephanie says

      Hi Laurie,
      You are most welcome! And I look forward to update this page with 2011 exam changes at the beginning of next year. It should provide more value-add to candidates then! Stephanie

  2. Divya says

    I DO NOT recommend Yaeger. I failed it horribly. I have been using Roger and lets put it this way – he knows his stuff. Even after spending rigorous amount of time memorizing the tactics by Yaeger – I did horrible. DONT skip the questions Yaeger tells you too unless you like surprises.

    • Stephanie says

      Hi Divya,
      Thanks a lot for your sharing. This is helpful — because almost everyone has been saying good things on Yaeger and I do want some opposite views. I will let other readers know of your thoughts. Stephanie

    • Stephanie says

      Hi PNguyen,
      Probably too late for me to give you the assurance… but no, many people pass BEC and other sections with Yaeger. The same applies to the top 10 cpa exam review courses. Please remember that your own ability is also (if not more) important than the course materials. Relax and good luck! Stephanie

  3. Kelly says

    I sat for BEC today, I am pretty confident that I did well, let’s see when grades show up, this is my first time and I used Wiley book and Bisk software, Wiley was overwhelming and unnecessary, none of the two pragraph problems were on the test and looking at time allotted I don’t know how they can test for problems requiring long calculations, stick to basic and understanding the subject matter and you will do fine in BEC, on to next one.

  4. Shirley says

    Hi Stephanie,
    Can you tell me if 2011 BEC will include the topics of business structures and cost management in the exam? It seems like corporate governance and operations management have been added to the exam, but I’m not sure what topics have been removed. Thank you.