BEC CPA Exam Section: 2021 Ultimate Guide to Business Environment and Concepts

bec cpa exam

The process of earning the Certified Public Accountant (CPA) license involves passing the BEC CPA Exam. The CPA Exam has 4 different sections, and one of them is Business Environment and Concepts (BEC). To pass BEC CPA Exam, you must know the content, pass rates, questions, format, difficulty, structure, timing, and more, and you can get all of that information here. Use it to beat BEC!

Introduction to the BEC CPA Exam Section

As we learn in the BEC CPA Exam Blueprints, the BEC CPA Exam section covers the knowledge of the general business environment and business concepts that candidates must know in order to understand the underlying business reasons for and accounting implications of business transactions. BEC also assesses candidates for 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.

Now, many candidates find the CPA BEC exam to be the easiest (or rather, least difficult) of the 4 exam sections. With my background in economics, I also found BEC to be a less stressful CPA Exam section. However, if you are fresh out of college or are unfamiliar with real business operations, you cannot afford to underestimate BEC.

BEC CPA Exam Section Content

Again, BEC focuses on business. In 5 content areas, BEC addresses audit, attest, accounting, and review services, financial reporting, tax preparation, and other professional responsibilities of CPAs. This table outlines the CPA BEC exam content for you.

CPA Exam BEC Section Content

Content Area Title Allocation 
I Enterprise Risk Management, Internal Controls and Business Processes 20-30%
II Economic 15-25%
III Financial Management 10-20%
IV Information Technology 15-25%
V Operations Management 15-25%

2020 vs 2021 Blueprints

You should also be aware that the AICPA occasionally updates the content tested on the CPA Exam. These alterations keep the exam in line with the skills needed by a newly licensed CPA.

For example, the CPA Exam Blueprints are changing on July 1, 2021. Before making these updates, the AICPA first worked with professionals in the field to figure out how the roles of newly licensed CPAs are changing. They decided that while most of the exam content was still needed, some were outdated and needed to be removed. The differences between IFRS and U.S. GAAP, for instance, were deleted since newly licensed CPAs no longer deal with that information. Additionally, other new topics were included in the Blueprints for the first time, such as understanding business processes and identifying risks.

Therefore, the topics for the CPA Exam BEC content areas as updated for 2021 include:

Area I: Enterprise Risk Management, Internal Controls and Business Processes

  • Knowledge and use of enterprise risk management and applying internal controls
  • Identifying key corporate governance provisions of regulatory frameworks and laws such as the Sarbanes-Oxley Act of 2002
  • Understanding the use of accounting and financial reporting software
  • Identifying an entity’s business processes and controls, both manual and automated
  • Analyzing how transactions flow in order to identify risks in business processes

Area II: Economic Concepts and Analysis

  • Knowledge of economic concepts and analysis that would demonstrate an understanding of the impact of business cycles on an entity’s industry or business operations
  • Being able to quantify how changes in economic conditions can impact an entity’s products
  • Determining market influences on the business environment, such as globalization
  • Determining the business reasons for, and the underlying economic substance of, transactions and their accounting implications
  • Understanding financial risks and the methods for mitigating the impact of these risks

Area III: Financial Management

  • Assessing the factors influencing a company’s capital structure, such as risk, leverage, cost of capital, growth rate, profitability, asset structure, and loan covenants
  • Calculating metrics associated with the components of working capital, such as current ratio, quick ratio, cash conversion cycle, and turnover ratios
  • Determining the impact of business decisions on working capital
  • Understanding commonly used financial valuation and decision models and applying that knowledge to assess assumptions, calculate the value of assets, and compare investment alternatives

Area IV: Information Technology

  • Understanding the role of IT and systems, including the use of data in supporting business decisions
  • Identifying IT-related risks associated with an entity’s information systems and processes, such as processing integrity, protection of information and system availability, including those risks introduced by relationships with third-parties
  • Identifying application and IT general control activities, whether manual, IT-dependent or automated, that are responsive to IT-related risks, such as access and authorization controls, system implementation testing, and incident response plans
  • Understanding how to obtain and transform data for data analytics to support an entity’s business decisions

Area V: Operations Management

  • Understanding business operations and use of quality control initiatives and performance measures to improve operations
  • Applications of cost accounting concepts and use of variance analysis techniques
  • Utilizing budgeting and forecasting techniques to monitor progress and enhance accountability

CPA BEC Exam Pass Rates and Reputation

At this moment, the BEC CPA Exam pass rates are, quite simply, the best of the best. BEC achieved some record-breaking pass rates in 2018 and has basically dominated the pass rate charts for the last several years.

2017-2020 BEC CPA Exam Pass Rates

Year First Quarter Second Quarter Third Quarter Fourth Quarter Cumulative
2020 61.76% 76.92% 69.89% 67.95%
2019 58.00% 59.74% 63.04% 58.61% 59.98%
2018 56.43% 60.31% 60.17% 60.13% 59.35%
2017 50.39% 55.09% 55.35% 55.33% 52.99%

BEC rose to the top of the CPA Exam pass rates in 2011 by coming back from behind. From 2006-2011, BEC lived at the bottom of the pack with the lowest pass rates. Then, after the CPA Exam changed in 2011, it pulled off an unpredictable betrayal and supplanted all the other sections. Since then, BEC has never looked back but retained its top-dog position for 8 years straight.

CPA BEC Exam Difficulty

So, what enabled BEC to shake its underdog status and then subsequently rule the roost for so long? Well, of all the CPA Exam sections, BEC is the least technical. What’s more, the majority of BEC tests candidates for the second-lowest skill level, Application. And, BEC has only included task-based simulations (TBSs) for about a year and a half now, having received them for the first time in April 2017. But BEC still only has half as many TBSs as the other exam sections (4 compared to AUD, FAR, and REG’s 8), so BEC is still half as difficult in this regard.

BEC also comes away with fewer multiple-choice questions (MCQs) than any other exam section, having just 62. And finally, the reason BEC features less of the other types of exam questions is that BEC is the only section to boast written communications (WCs). BEC has 3 WCs, and these questions comprise 15% of your score. WCs aren’t so bad as MCQs and TBSs because their purpose is to prove that you can write an organized, well-developed business document containing clearly expressed correct information.

So, all of these factors work together to make BEC the least challenging CPA Exam section and consequently the holder of the highest CPA Exam pass rates.

Types of BEC CPA Exam Questions

The BEC CPA Exam section stands out from the other 3 CPA Exam sections by having one additional question type. While the other 3 sections only have 2 types of questions, BEC has 3.

The AUD, FAR, and REG CPA Exam sections utilize just 2 types of questions: multiple-choice questions (MCQs) and task-based simulations (TBSs). However, BEC uses both of these question types as well as a third question type: written communications (WCs).

On the CPA BEC exam, the MCQs contribute to 50% of your total score. The TBSs account for another 35% and the WCs add the remaining 15%.

Multiple-choice questions (MCQs):

The CPA Exam multiple-choice questions do look like the MCQs you’ve seen on other exams. However, the CPA Exam has made its versions more complicated. For example, a CPA Exam MCQ has 3 parts:

  1. The question stem: the question stem contains the question being asked (usually found at the end of the stem), details necessary for answering the question, and additional information.
  2. Correct answer choice: the 1 answer choice of the 4 provided that best responds to the question.
  3. The distractors: the 3 other answer choices designed to distract you from the correct answer.

Task-based simulations (TBSs):

Task-based simulations are the CPA Exam’s version of condensed case studies. TBSs present you with real work-related situations and require you to apply your knowledge and skills to resolve those situations. For example, to finish a TBS, you may need to use the information found either in the question or in the exhibits provided to perform a calculation, fill in a series of blanks, or revise a document.

The BEC CPA Exam sections feature one particularly important type of TBS: the Document Review Simulation (DRS). The DRS expects you to look over various resources in the process of analyzing a document.

Written Communications (WCs):

Written communications are the only CPA Exam questions that require you to write out your response. To answer a WC, you must read a scenario and then follow the instructions to write the appropriate document relating to the scenario and give that document the proper focus. Your written response should include the correct information and be clear, complete, and professional.

BEC CPA Exam Format

The AICPA has completely computerized every section of the CPA Exam. Additionally, each section contains 5 testlets presenting different question types. BEC has 2 testlets of 62 total MCQs, 2 testlets of 4 total TBSs, and 1 testlet of 3 WCs.

Format of the CPA Exam BEC Section

Testlet Question Type Number of Questions
Testlet 1 MCQ 31
Testlet 2 MCQ 31
Total MCQs: 62 (50% of your score)
Testlet 3 TBS 2
Testlet 4 TBS 2
Total TBSs: 4 (35% of your score)
Testlet 5 WCs 3
Total WCs: 3 (15% of your score)

Each CPA Exam section’s total number of questions features both operational and pretest questions. However, only the operational questions affect your CPA Exam score. The pretest questions do not because the AICPA includes them on the exam to collect candidate performance data instead. The AICPA uses this information to decide whether to use the pretest questions as operational questions on future exam iterations.

Yet, while you may assign operational and pretest questions a different value, you can’t give them a different amount of attention. I say this because the operational and pretest questions are indistinguishable in each exam section. So, you really must answer all the CPA Exam questions you receive to the best of your ability.

However, the presence of pretest questions shouldn’t discourage you. Rather, pretest questions should encourage you due to the fact that some of the most challenging or surprising questions you see on BEC may be pretest questions. So, if you see such a question, you shouldn’t worry about it. You should simply answer it as well as you can and move on with the hope that it was probably a pretest question and therefore will not influence your score.

The total number of BEC CPA Exam questions includes these totals for operational and pretest questions:

Format of CPA Exam BEC Questions

Question Type Operational Pretest
MCQ 50 12
TBS 3 1
WC 2 1

Difficulty Levels of Business Environment and Concepts on the CPA Exam

The AICPA makes the goal of the CPA Exam explicit: to verify that candidates have the knowledge and skills needed for a newly-licensed CPA and to represent the certification well. The AICPA ensures that the CPA Exam can fulfill this purpose by defining the difficulty of each exam section with 4 different levels of skill.

CPA Exam Skill Levels

(from highest to lowest)

Skill Level Description
Evaluation The examination or assessment of problems, and use of judgment to draw conclusions.
Analysis The examination and study of the interrelationships of separate areas in order to identify causes and find evidence to support inferences.
Application The use or demonstration of knowledge, concepts, or techniques.
Remembering and Understanding The perception and comprehension of the significance of an area utilizing knowledge gained.

The BEC CPA Exam section tests candidates at 3 of these skill levels.

CPA BEC Exam Skill Levels

Skill Level Remembering and Understanding Application Analysis
Content Percentage 15-25% 50-60% 20-30%
Content Areas I, II, III, IV, & V I, II, III, IV, & V I, II, III, & V
Question Type Mostly MCQs Mostly MCQs, possibly TBS and WCs Primarily TBSs, possibly MCQs

According to the chart, BEC places the most weight on the Application skill level and distributes this weight across all 5 content areas. Therefore, you need to have more than just a passing familiarity with all of BEC’s content. But, at the same time, you don’t need to know the BEC material at the deepest level of knowledge.

BEC’s lack of depth makes sense because it consists mostly of MCQs, even though it has the lowest number of MCQs out of all the exam sections. Furthermore, the WCs only assess you for the Application level of knowledge, and these make up 15% of your score. So, you’re left with just 4 TBSs to challenge you at a higher level of knowledge than Application. Consequently, many candidates don’t find BEC to be as difficult as some of the other exam sections.

Testing Process for the CPA BEC Exam

Because BEC has MCQs like the other CPA Exam sections, it follows the exam-standard presentation of MCQ testlets, which is a multistage adaptive delivery model. This big term may be ambiguous, but it just means that your performance in the first MCQ testlet determines the difficulty level of the second MCQ testlet you receive.

cpa exam testlet selection

Testlet selection

As this graphic illustrates, you’ll always receive a moderately difficulty (“medium”) MCQ testlet first for any CPA Exam section. Then, if you perform well on this testlet, you’ll receive a slightly more difficult (“difficult”) MCQ testlet second. If you don’t perform very well on the medium testlet, the exam will serve you another medium MCQ testlet.

The CPA Exam uses the average difficulty of the MCQs within a testlet to determine that testlet’s difficulty level. The MCQ difficulty level exists on a numeric scale; it is not binary.

Furthermore, on the CPA Exam, you earn more points for answering a difficult question correctly than for answering an easier question correctly. Consequently, the exam won’t penalize you for receiving a more difficult MCQ testlet or let you benefit from getting 2 medium MCQ testlets.

The CPA Exam follows a different system to establish TBS and WC testlet difficulty. Instead of allowing your performance to influence the difficulty, the CPA Exam predetermines the difficulty of your TBS and WC testlets. But thankfully, you can earn partial credit for your work on the TBSs and WCs you receive.

Structure of the CPA BEC Exam

Whether you sit for BEC or any other CPA Exam section, you will have the same amount of time to finish each exam section: 4 hours (240 minutes). Additionally, you’ll need to go through some additional screens at the beginning and end of the exam, and you’ll receive 15 minutes to do so. After the third testlet (first TBS testlet), you can also take advantage of a standardized 15-minute break. This optional break is the only one you can take that will pause the exam timer. Any other break you go on won’t stop the timer.

  • Welcome/enter launch code: 5 minutes
  • Confidentiality/section information: 5 minutes
  • Standardized break: 15 minutes
  • Survey: 5 minutes

As you can see in this illustration, you are allowed to take an optional break after each testlet. But as mentioned, these breaks don’t pause the exam timer, so you’ll be taking them at your own risk.

Time Management for the BEC CPA Exam Section

Want to know the secret of having the best chance to pass BEC? Time management.

That’s right: You can only ensure that you answer every exam question and maximize your exam score by practicing time management. For this reason, you should definitely develop, practice, and apply your BEC time management system before you take this exam section.

BEC Exam Time Management System: Option 1

When you stick to a strict time limit of 1 minute per BEC MCQ question, you can knock out both MCQ testlets in a little more than an hour (62 minutes). You can then give yourself a predetermined amount of time to finish each TBS according to type:

  • Basic TBS: 10-15 minutes
  • DRS: 20-40 minutes

Or, you can just give yourself 18 minutes for each TBS. Assigning 18 minutes to each TBS would leave you with 106 minutes for the 3 WCs, so you’d have about 35 minutes for each of those.

BEC Time Management System: Option 2

On the other hand, if you give yourself 1 ¼ minutes for each BEC MCQ, you’ll take as long as 78 minutes to complete the first 2 exam testlets. You may want to consider doing this in light of the fact that your second MCQ testlet could be harder than your first and therefore require more time to finish.

With the 162 minutes you have left, you could use 87 minutes for the 2 TBS testlets. This amount of time breaks down to a little less than 22 minutes per TBS.

Finally, with your remaining 75 minutes, you could give yourself 25 minutes for each WC.

BEC CPA Exam Section Testing Windows and Scheduling

In the past, candidates could only take the exam during the 4 annual CPA Exam testing windows:

  • January 1 – March 10
  • April 1 – June 10
  • July 1 – September 10
  • October 1 – December 10

However, as of July 2020, most jurisdictions now allow continuous testing. That is, candidates don’t have to wait for one of the windows to take the exam. A few states still don’t allow continuous testing, you can check on the status for your jurisdiction from NABSA, or the National Association of State Boards of Accountancy.

Regarding the timeline to pass the exam, you must pass all CPA Exam 4 sections within a rolling period of 18 months. Your 18 months begin as soon as you pass your first exam section. So, conveniently, you have another year and a half to pass the other 3 sections.

If you fail to pass the remaining exam sections within this time, then your credit for your first passed section will expire. What’s more, the start date of your 18-month window will move back to the day of your earliest section pass. At this point, you’ll have to pass the section you already passed again as well as the sections you haven’t yet passed within the new 18-month timeframe. And until you accomplish this, your 18-month window will continue to restart, and you’ll continue to lose credit for your earliest passed section.

Your CPA Exam Schedule

Having weighed the pros and cons of placing each exam section at the beginning of your CPA Exam schedule, I’ve determined that starting with the most difficult section is the wisest way to go. And currently, FAR, not BEC, is the most difficult CPA Exam section.

FAR is the most difficult because it covers the most content and therefore requires the longest amount of study time. So, if you start your exam journey by passing FAR, then you won’t have to include all of that extra study time in your 18-month window. Another benefit of starting with FAR is that its content overlaps with that of AUD and BEC. Therefore, the material of AUD and BEC will look familiar when you come to it, and you won’t have to study for these 2 sections as long or as hard.

Recommended Placement of BEC in Your CPA Exam Schedule

So, if I don’t recommend putting BEC first on your schedule, where do I think it should go?

Honestly, I would leave BEC for last. The content relationship between AUD and FAR lends itself to placing them back-to-back. Then, because REG is fairly challenging on its own, addresses new material, and can take longer to study for, I’d drop REG in the third-place spot.

Though BEC also aligns with FAR and AUD, finishing the race with BEC isn’t a bad idea because studying for it shouldn’t take too long and will feel like going downhill. With the WCs accounting for 15% of your score, only 4 TBSs making an appearance, and the presence of very high BEC pass rates, you’re more likely to get that last pass you need if you end with BEC.

CPA BEC Exam Passing Score and Grading

The passing score for every CPA Exam section, including BEC, is 75. That 75 is a scaled score, not a percentage of correct questions. The AICPA configures your scaled BEC score by taking these steps:

BEC CPA Exam Section Study Time

Using my own personal experience, the feedback from my readers, and the suggestions of CPA review course providers, I estimate that you should prepare to spend somewhere between 60-80 hours studying for BEC.

Remember, if you’ve already passed FAR, studying for BEC shouldn’t take you as long. But, to give yourself a better idea of how long studying for BEC will take you, you can survey BEC’s content using the BEC CPA Exam Blueprints. The Blueprints reveal the content areas, groups, and topics you’ll see on BEC.

If you want to finish BEC in a flash, you should push yourself to study for at least 20 hours a week. Then you’ll finish your review in 3-4 weeks.

Not so pressed for time in your 18-month window? Then you can slow your BEC studies down a bit by putting in 15 hours a week and concluding your review in 4-5 weeks.

If you’re lacking time in the rest of your life for BEC studying, then you can keep it to just 10 hours a week and wrap things up in 6-8 weeks.

BEC CPA Exam Tips

My best advice for making sure you master the BEC material? Tackle the different topics one by one.

BEC is a basket of miscellaneous business, economics, and financial concepts. These topics don’t relate to each other, so some candidates struggle to retain the information. To prevent yourself from succumbing to this same struggle, take on each topic one at a time.

1. Corporate Governance

Corporate governance is an important topic with connections to other CPA Exam sections such as AUD. To do well with this topic, pay special attention to the role of the Board of Directors and the Audit Committee. This topic isn’t too difficult, but questions about it can be tricky, so you need to know your stuff when it comes to corporate governance.

2. Economics

If you’ve taken an economics class, you should find the questions on the BEC CPA Exam to be pretty straightforward, as they should only cover elementary micro and macroeconomics. Yet, even if you don’t have a lot of prior economics knowledge, the concepts still shouldn’t be too difficult. In fact, you can usually use common sense to guesstimate.

Your strategy for introducing yourself to the economics on the BEC exam should be to go through the textbook or video lectures fairly quickly and then focus your time on the practice questions. You may be surprised by how many wrong answers you may get in the beginning, but that’s just how tricky the CPA Exam can be. Hence, the low pass rates. But don’t get discouraged. Instead, know that your performance will improve once you get used to the question format.

3. Financial Management

My experience in the strategic planning department made this topic easier for me, but I understand that people who haven’t done much financial modeling may see it as very complex.

So, the trick for taming financial management is to really understand how the calculation works. Also, don’t memorize anything more than the basic formula. If you can’t figure the basic formula out, contact the accounting professors/experts to which your review course gives you access. These professionals should be able to offer an explanation that sets the record straight for you.

4. Information Technology (IT)

IT is such a huge topic that your CPA review course can’t really get to it all. However, IT is very important in real life, as the accounting industry continues to increase the involvement of IT in its operations. Already, accountants post all journal entries into the system that generates everything from monthly statements to management reports and more. So, due to IT’s ever-rising significance, each accountant must learn how to maintain the integrity and security of this system.

While IT is not always the most interesting thing to study (I know, I’ve been there, and the reading took forever…), it’s important to understand how IT impacts the finance and accounting industry. In fact, in the 2021 Blueprints, the CPA Exam is adding more coverage of technology’s impact on business environments, data management, and having a data-driven mindset. But still, you can do well with this material after studying the material in your review course and then focusing your time on the practice questions.

5. Strategic Planning and Operational Management (Cost Accounting)

You may have learned about cost accounting in college, but if you didn’t, then this BEC topic may be challenging for you. In fact, you may need extra help to get a handle on cost accounting, so don’t be afraid to call on the instructors who really understand the concepts behind it.

I must confess: I think I still don’t really get cost accounting, but at the time, I understood it well enough to pass the BEC exam. If you really can’t figure cost accounting out, work extra hard on understanding the rest of the BEC content, so you can still pass.

Study Advice for the CPA BEC Exam

Along with taking the above steps to get a solid grasp on the biggest BEC topics, you should follow these additional CPA BEC study tips to ensure exam success.

1. Do NOT underestimate BEC.

By bracing themselves for the worst, some candidates pass the other 3 exam sections on the first try. But then, they don’t put as much effort into BEC and get stuck on it for quite some time. It is easier for most candidates but not all candidates. So, don’t assume that passing BEC won’t take some effort still.

2. Strengthen your weak areas.

To pass BEC, you must master every content area no matter how much you hate it. So, whether it be cost accounting or financial modeling, commit to learning the content you don’t enjoy or that you struggle with as much as the content you prefer to study.

To strengthen your weak areas, you’ll need to watch all the video lectures and read all of the chapters about that content. You must also work through all of the practice questions that ask about those topics.

Basically, you can’t skimp on studying when it comes to your weak areas, or you won’t score as well on BEC as you want.

3. Don’t give up.

If you find BEC to be fairly difficult when everyone else you know thought it was a breeze, don’t panic. BEC has had its fair share of pretty low passing rates, so it’s not meant to be a walk in the park.

BEC’s content is a bit more varied than the content of some of the other exam sections, so you may find an area or 2 in which understanding doesn’t come naturally for you. And that really is okay. As long as you stick with it and give the hard parts the attention they need to become easy, you can pass.

4. Prepare for the written communications.

Writing a business memo might not seem as bad as working through a DRS, but you still can’t wing your responses to the WCs. Instead, you need to practice answering them, so you can ensure that you have a plan.

Once you’ve read the question, make note of each requirement. Then, create a quick little outline that addresses each requirement. Your main goal is to stay on topic and avoid providing illegal advice. Your second goal is to provide ample evidence for all of your claims. So, fill the outline in with all the important information, then add the final components and finish the formatting.

Once you’ve completed your draft, edit it for grammar, punctuation, word choice, and relevance. Also, confirm that you’ve said everything you could about the topic. If something else comes to mind, add it.

Unless you practice the process of crafting a well-written and well-thought-out WC, you’ll miss out on an easy 15% of your BEC score.

More Help for the CPA Exam Sections

BEC really isn’t as bad as some of the other CPA Exam sections, but you still need to put time and effort into passing it. Therefore, you must prepare for BEC by using the right CPA review course. You can find the best CPA review course for you in my comparison of the most popular options. Then, you can use my great CPA review course discounts to save big on your BEC CPA Exam prep.

If you haven’t already, you can also learn all about the benefits of becoming a CPA, the details of the CPA process, the best way to ensure that you pass the CPA Exam, and more in my free e-course. Get answers to your questions about my free CPA Exam guide now or sign up below to begin your CPA journey today!

About the Author Stephanie Ng

I am the author of How to Pass The CPA Exam (published by Wiley), and I also passed all 4 sections of the CPA Exam on my first try. Additionally, I have led webinars, such as for the Institute of Management Accountants, authored featured articles on websites like Going Concern and AccountingWeb, and I'm also the CFO for the charity New Sight. Finally, I have created other accounting certification websites to help mentor non-CPA candidates. I have already mentored thousands of CPA, CMA, CIA, EA, and CFA candidates, and I can help you too!

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