CPA Exam changes 2020 is one of the most popular searches that CPA candidates make. (And for good reason.) Now, the CPA Exam is changing in 2020 and 2021 to ensure newly licensed CPAs continue to possess the knowledge and skills necessary to protect the public interest.
Specifically, newly licensed CPAs will be required to demonstrate increased knowledge and skills related to specific technology. So, if your journey to becoming a CPA includes taking an exam section during this time, then it is my pleasure to share what I know about the proposed changes to help you PASS.
The mission of the CPA Exam is to provide reasonable assurance to boards of accountancy that candidates passing the exam possess the minimum level of technical knowledge and skills necessary for a newly licensed CPA to protect the public interest in today’s business and financial environment. To ensure the knowledge, skills, and tasks assessed on the CPA Exam continue to reflect current practices of newly licensed CPAs, the AICPA’s Board of Examiners (BOE) conducts periodic practice analyses.
In 2019, the BOE conducted its most recent practice analysis:
(1) to explore the impact of technology on the work of newly licensed CPAs, and
(2) to identify areas where the CPA exam has become too broad and not sufficiently focused on the core knowledge and skills required of newly licensed CPAs.
The practice analysis identified several findings related to technology’s impact on newly licensed CPAs. Additionally, these findings broadly demonstrated a need for newly licensed CPAs to possess increased knowledge and skills related to the following three areas:
Accordingly, content will be added to the CPA Exam in response to the technology findings above.
The practice analysis also identified several findings related to areas where the CPA exam was too broad and not sufficiently focused on the core knowledge and skills required of newly licensed CPAs. Therefore, in response to these findings, the applicable content will either be removed from the CPA exam or assessed at a more appropriate skill level (i.e., remembering and understanding, application, analysis, evaluation).
|April 2020||Updated Blueprint published (audit data analytics)|
|July 2020||Updated sample tests available|
|October 2020||New AUD CPA exam released (audit data analytics task-based simulations)|
|January 2021*||Updated Blueprint published (in response to the 2019 practice analysis)|
|July 2021*||Next version of AUD, BEC, FAR, REG CPA exams released (in response to the 2019 practice analysis)|
*Note: The AICPA’s Board of Examiners could potentially approve the Blueprint changes in 2020 Q3. If this occurs, the Blueprint will be published in 2020 Q4, and the next version of the CPA Exam will be released in April 2021.
Since the CPA Exam is changing both in 2020 and 2021, I’ve broken out the changes by year.
|BEC||No changes in 2020|
|FAR||No changes in 2020|
|REG||No changes in 2020|
In summary, BEC, FAR, and REG are not changing in 2020. However, AUD is impacted by the 2020 CPA Exam changes.
The CPA Exam changes planned for 2021 affect every section. In contrast, only AUD changes in 2020.
|AUD||There are 22 high-level changes to AUD. As presented in further detail below, these changes include the following:|
|BEC||There are 7 high-level changes to BEC. As presented in further detail below, these changes include the following:|
|FAR||There are 10 high-level changes to FAR. As presented in further detail below, these changes include the following:|
|REG||There are 7 high-level changes REG. As presented in further detail below, these changes include the following:|
AUD will face the most changes in 2021. However, FAR receives the most changes after AUD, and BEC changes are not immaterial either. Moreover, there are a material amount of REG changes, but these changes are likely very positive for candidates who struggled with taxation.
There will not be significant CPA Exam changes to any of the following:
For better or worse, the total time per CPA Exam section remains the same in 2020 and 2021.
The AICPA is not expecting to significantly change the content allocation ranges in 2020 or 2021. Therefore, the current content allocation ranges for each section appear below. If any changes occur to these ranges in 2020 or 2021, such changes will be communicated when the new Blueprints are published. And the new Blueprints will be published in April 2020 (for the new AUD Exam in 2020), and no later than January 2021 (for the new CPA Exam in 2021).
|Area I||Ethics, Professional Responsibilities and General Principles||15-25%|
|Area II||Assessing Risk and Developing a Planned Response||20–30%|
|Area III||Performing Further Procedures and Obtaining Evidence||30–40%|
|Area IV||Forming Conclusions and Reporting||15-25%|
|Area I||Corporate Governance*||17–27%|
|Area II||Economic Concepts and Analysis||17–27%|
|Area III||Financial Management||11–21%|
|Area IV||Information Technology||15-25%|
|Area V||Operations Management||15-25%|
*In 2020, the name of Area I will continue to be “Corporate Governance.” In 2021, however, the name of Area I will change to “Business Process, Risks and Controls.”
|Area I||Conceptual Framework, Standard-Setting and Financial Reporting||25–35%|
|Area II||Select Financial Statement Accounts||30–40%|
|Area III||Select Transactions||20–30%|
|Area IV||State and Local Governments||5–15%|
|Area I||Ethics, Professional Responsibilities and Federal Tax Procedures||10–20%|
|Area II||Business Law||10-20%|
|Area III||Federal Taxation of Property||12–22%|
|Area IV||Transactions Federal Taxation of Individuals||15-25%|
|Area V||Federal Taxation of Entities||28-38%|
Similar to the content allocation ranges, the skill allocation ranges for each section of the CPA Exam are not expected to change significantly in 2020 or 2021. Therefore, the current skill allocation ranges for each section are presented below. However, if any changes occur to these ranges in 2020 or 2021, such changes will be communicated when the new Blueprints are published. Consequently, the AICPA publishes the Blueprints in April 2020 (for the new AUD Exam in 2020), and no later than January 2021 (for the new CPA Exam in 2021).
|Section||Remembering and Understanding||Application||Analysis||Evaluation|
It is anticipated that the CPA Exam changes will not result in delayed score reporting. Therefore, you can utilize our CPA Exam score release schedule regardless of when you sit for the exam.
The extent of the 2021 CPA Exam changes for each section are presented in detail below. So, in total, there are 46 high-level changes to the CPA Exam divided as follows:
The main takeaways include the following:
|AREA I — ETHICS, PROFESSIONAL RESPONSIBILITY AND GENERAL PRINCIPLES|
|Group B: Ethics, independence and professional conduct.|
|1||Topic 3: Requirements of the Government Accountability Office and the Department of Labor.||Remove: content assessed at the application skill level (two tasks).|
|Group C: Terms of engagement.|
|2||Topic 1: Preconditions for an engagement.||Remove: entire topic (four tasks).|
|Group E: Communications with management and those charged with governance.|
|3||Topic 3: All other matters.||Remove: entire topic (three tasks).|
|4||Group F: Communication with component auditors and parties other than management and those charged with governance.||Remove: entire group (two tasks).|
|5||Group G: A firm’s system of quality control, including quality control at the engagement level.||Revise: entire group (two tasks).|
|AREA II — ASSESSING RISK AND DEVELOPING A PLANNED RESPONSE|
|Group A: Planning an engagement.|
|6||Topic 2: Developing a detailed engagement plan.||Remove: content assessed at the analysis skill level (1 task).|
|Group B: Understanding an entity and its environment.|
|7||Topic 1: External factors, including the applicable financial reporting framework.||Expand: scope of Topic 1 to emphasize technology as an external factor.|
|Topic 2: Internal factors, including nature of the entity, ownership and governance structures and risk strategy.||Expand: scope of Topic 2 to include content on the following:|
|Group C: Understanding an entity’s internal control.|
|8||Topic 1: Control environment and entity-level controls.||Revise: to include IT general controls and associated documentation (moved from Group C, Topic 4 below).|
|Topic 2: Flow of transactions and design of internal controls.||Revise: content on internal control walkthroughs and documenting the flow of transactions will be revised to include significant business processes and how they relate to the financial statements, as well as examples of types of documentation (i.e., flowcharts, process diagrams, etc.).|
Add: content relating to obtaining an understanding of the IT systems that are used for financial reporting.
Revise: content on identification and documentation of key controls will be revised to include
Revise: content on evaluating internal controls and whether the internal controls are effectively designed and placed in operation will be revised to include reference to manual and application controls.
|Topic 3: Implications of an entity using a service organization.||Add: content regarding SOC 1 (Type 2).|
|Topic 4: Information Technology (IT) general and application controls.||Remove: Topic is eliminated, and its content will be moved to Topics 1 and 2 above.|
|Group E: Identifying and assessing the risk of material misstatement, whether due to error or fraud, and planning further procedures responsive to identified risks.|
|9||Topic 3: Further procedures responsive to identified risks.||Add: content regarding the use of audit data analytic techniques to identify transactions that may have a higher risk of material misstatement.|
|10||Group G: Planning for and using the work of others, including group audits, the internal audit function and the work of a specialist.||Remove: content related to the use of the internal audit function (two tasks).|
Add: content related to using the work of an IT auditor .
|Group H: Specific areas of engagement risk.|
|11||Topic 3: Related parties and related party transactions.||Remove: content assessed at the analysis skill level (1 task).|
|AREA III — PERFORMING FURTHER PROCEDURES AND OBTAINING EVIDENCE|
|12||Group A: Understanding sufficient appropriate evidence.||Revise: change Group A title to “Sufficient appropriate evidence.”|
Expand: scope of Group A to include content focused on determining the sources of sufficient appropriate evidence and identifying procedures to validate the completeness and accuracy of data.
Add: content on the use of professional skepticism and judgment in analyzing corroborating or contradictory evidence and evaluating whether sufficient appropriate evidence has been obtained.
|13||Group B: Sampling techniques.||Revise: change Group B title to “General procedures to obtain sufficient appropriate evidence.”|
Add: the concept of using automated tools and audit data analytics in audit sampling.
Add: content related to the use of automated tools and techniques related to recalculation.
Add: the following content will be added from Group C
|14||Group C: Performing specific procedures to obtain evidence.||Revise: change Group C title to “Specific procedures to obtain evidence.”|
Remove: Topics 3-5 will be moved to Group B above.
Remove: Topic 6 (All other procedures) is eliminated.
Add: new Topic titled “Audit data analytics.” Added content includes
|Group D: Specific matters that require special consideration.|
|15||Topic 1: Opening balances.||Remove: entire Topic (1 task).|
|16||Topic 2: Investments in securities and derivative instruments.||Remove: derivative content.|
(I Pass note: it should follow that the title of Topic 2 should be revised accordingly; however, a proposed title change has not yet been communicated)
|17||Topic 4: Litigation, claims and assessments.||Remove: content assessed at the analysis skill level (1 task).|
|18||Topic 5: An entity’s ability to continue as a going concern.||Remove: content assessed at the application skill level (1 task).|
|19||Group F: Written representations.||Remove: content assessed at the application skill level (1 task).|
|20||Group G: Subsequent events and subsequently discovered facts.||Revise: change Group G title to “Subsequent events.”|
Remove: content on subsequently discovered “facts.”
|IV — FORMING CONCLUSIONS AND REPORTING|
|21||Group D: Reporting on compliance.||Remove: content assessed at the application skill level (2 tasks).|
|22||Group E: Other reporting considerations.||Remove: Topics 5 (Single Statements), 7 (Letters for underwriters and filings with the SEC), and 8 (Alerts that restrict the use of written communication) will be eliminated.|
|23||AREA I — CORPORATE GOVERNANCE||Rename: “Area I: Corporate Governance” will be renamed as “Area I: Business Process, Risks, and Controls.”|
|Group A: Internal control frameworks.||Revise: to include the Sarbanes-Oxley Act of 2002 as a new Topic (moved from Group C below)|
|Group C: Other regulatory frameworks and provisions.||Remove: current content on the Sarbanes-Oxley Act of 2002 will be moved to Group A above as a new Topic.|
Add: new Group C titled “Business processes and transaction level-risks and controls.” Content added to this new group includes the following
|24||AREA II — ECONOMIC CONCEPTS AND ANALYSIS|
|Group A: Economic and business cycles – measures and indicators.||Remove: general macroeconomics content.|
|Group B: Market influences on business.||Remove: general macroeconomics content.|
|AREA III — FINANCIAL MANAGEMENT|
|25||Group A: Capital structure.||Remove: content assessed at the analysis level (1 task).|
|AREA IV — INFORMATION TECHNOLOGY|
|Group A: Understanding of information technology (IT).|
|26||Topic 1: Organization and governance.||Add: content on understanding the need for SOC 1 reports for outsourced IT functions.|
|27||Topic 3: Data.||Add: Topic 3 – Data will become its own Group, and expanded to include content on|
|28||Group B: Risk associated with IT.|
|Topic 2: System development and maintenance.||Revise: Topic 2 will focus on concepts related to controls over software changes, and will be assessed at the remembering and understanding skill level instead of the application skill level.|
|29||Group C: Controls that respond to risks associated with IT.|
|Topic 4: Continuity and recovery plans.||Revise: Topic 4 will focus on recalling concepts related to business resiliency, and will be assessed at the remembering and understanding skill level instead of the application skill level.|
|AREA I — CONCEPTUAL FRAMEWORK, STANDARD-SETTING, AND FINANCIAL REPORTING|
|Group B: General-purpose financial statements: for-profit business entities.|
|30||Topic 8: Discontinued operations.||Remove: Topic 8 will be removed, and discontinued operations will be added to Topic 2 (Income statement/statement of profit or loss) as an example to the multi-step income statement task statement.|
|31||Topic 9: Going concern.||Remove: Topic 9 will be removed.|
|32||Group E: Financial statements of employee benefit plans.||Remove: content assessed at the application skill level (2 tasks)|
|AREA II — SELECT FINANCIAL STATEMENT ACCOUNTS|
|Group K: Compensation and benefits.|
|33||Topic 1: Compensated absences.||Remove: Topic 1 will be removed, and content on vacation accruals will now be assessed under Area II, Group G (Payables and accrued liabilities).|
|34||Topic 2: Retirement benefits.||Remove: Topic 2 will be removed.|
|AREA III — SELECT TRANSACTIONS|
|35||Group D: Derivatives and hedge accounting (e.g., swaps, options, forwards).||Remove: content assessed at the application skill level (2 tasks)|
|36||Group L: Differences between IFRS and U.S. GAAP.||Remove: Group L will be removed.|
|AREA IV — STATE AND LOCAL GOVERNMENTS|
|Group B: Format and content of the financial section of the comprehensive annual financial report (CAFR).|
|37||Topic 1: Government-wide financial statements.||Remove: content assessed at the application skill level (2 tasks)|
|38||Topic 2: Governmental funds financial statements.|
Topic 3: Proprietary funds financial statements.
Topic 4: Fiduciary funds financial statements.
|Revise: Topics 2-4 will be combined to form a new Topic titled “Fund financial statements.”|
Remove: content assessed at the application skill level, which required the preparation of specific financial statements.
|Group C: Deriving government-wide financial statements and reconciliation requirements.||Remove: Group C will be removed. Content will be moved to Group B as a new Topic, and will be assessed at the remembering and understanding skill level instead of the application skill level.|
|39||D. Typical items and specific types of transactions and events: measurement, valuation, calculation and presentation in governmental entity financial statements|
|Topic 1: Net position and components thereof.|
Topic 2: Fund balances and components thereof.
Topic 5: Interfund activity, including transfers.
|Revise: content will move to Group B, and will be assessed at the remembering and understanding skill level instead of the application skill level.|
|Topic 8: Special items.||Remove: Topic 8 will be removed.|
|Topic 3: Capital assets and infrastructure assets.|
Topic 4: General and proprietary long-term liabilities.
Topic 6: Nonexchange revenue
Topic 7: Expenditures and expenses.
Topic 9: Budgetary accounting and encumbrances.
|Revise: these Topics will no longer assess the preparation of journal entries.|
|AREA II — BUSINESS LAW|
|40||Group C: Debtor-creditor relationships.|
|Topic 1: Rights, duties and liabilities of debtors, creditors and guarantors.|
Topic 2: Bankruptcy and insolvency.
Topic 3: Secured transactions.
|Remove: content assessed at the application level in Topics 2 and 3.|
Revise: the content in Topic 1 and the remembering and understanding skill level content from Topics 2 and 3 will be combined in Group C. There will no longer be separate topics in Group C.
|Group D: Government regulation of business.|
|41||Topic 1: Federal securities regulation.||Remove: Topic 1 will be removed.|
|AREA III — FEDERAL TAXATION OF PROPERTY TRANSACTIONS|
|42||Group C: Estate and gift taxation.||Rename: Group C will be renamed “Gift Taxation.”|
Revise: There will no longer be separate topics in Group C.
Remove: content on estate taxation.
|AREA IV — FEDERAL TAXATION OF INDIVIDUALS|
|43||Group H: Alternative minimum tax||Remove: Group H will be removed.|
|AREA V — FEDERAL TAXATION OF ENTITIES|
|44||Group C: C Corporations.|
|Topic 2: Net operating losses and capital loss limitations.||Remove: content assessed at the analysis skill level (2 tasks).|
|45||Group G: Trusts and estates.|
|Topic 2: Income and deductions.||Remove: Topic 2 will be removed.|
|Topic 3: Determination of beneficiary’s share of taxable income.||Remove: Topic 3 will be removed.|
|46||Group H: Tax-exempt organizations.|
|Topic 2: Obtaining and maintaining tax-exempt status.||Remove: Topic 2 will be removed.|
|Topic 3: Unrelated business income.||Revise: Topic 3 will be limited to assessing the understanding of unrelated business income for a tax-exempt organization rather than calculating it.|
In conclusion, while the CPA Exam changes are always a cause for concern, I do not anticipate that these changes will make the exam any more difficult. And I also doubt that we’ll see any material changes in the CPA Exam pass rates as a result of these changes.
In fact, for those CPA candidates who despise REG, you may even find that the 2021 version is less difficult than the previous one. So, in this case, the REG changes to remove testing on AMT and more are especially positive.
Additionally, updating an exam to test on technology and analytics is becoming more commonplace. What’s more, it’s also becoming the norm to remove irrelevant content from exams that covers principles or areas that accountants aren’t using on a frequent basis.
For instance, in 2019, the IIA released CIA exam changes that aligned the exam content with more relevant technology information. Similarly, the ICMA published CMA exam changes that allowed the exam to focus more on technology and analytics. Also, the CMA exam dropped topics that weren’t considered relevant for CMAs, like internal auditing. So, what the AICPA is doing to update the CPA Exam is quite expected at this point.
Now, should these changes cause you to plan your exams any differently? Not really. However, I recommend you personally assess how the proposed changes may affect you and plan accordingly. For example, if the changes will give you an advantage, then wait to take the exam until the changed version becomes available. Conversely, if the changes would put you at a disadvantage, plan to take the exam(s) before the changes take effect.
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