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William J. Montemarano, CPA, MBA Director, Examinations Strategy – AICPA

The New Content and Skill Specifications for the Uniform CPA Examination Presentation to the 2009 AAA Annual Meeting August 3, 2009. William J. Montemarano, CPA, MBA Director, Examinations Strategy – AICPA. Agenda. Overview of the Exam Background & Purpose of CSOs

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William J. Montemarano, CPA, MBA Director, Examinations Strategy – AICPA

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  1. 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

  2. Agenda Overview of the Exam Background & Purpose of CSOs The 2008 Practice Analysis Exposure Draft IFRS on the CPA Exam New CSOs 2

  3. Overview of the CPA Exam 3

  4. Overview of The CPA Exam 4

  5. Background & Purpose of CSOs/SSOs 5

  6. 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 6

  7. The 2008 Practice Analysis 7

  8. 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 8

  9. 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. 9

  10. 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. 10

  11. 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) 11

  12. Practice Analysis – Profile of Respondents Completed Surveys vs. AICPA Database, 2-15 Years 12

  13. Practice Analysis – Profile of Respondents (cont.) Completed Surveys vs. AICPA Database 2-15 Years 13

  14. Practice Analysis – Profile of Respondents (cont.) Completed Surveys vs. AICPA Database 2-15 Years & 0-2 Years 14

  15. 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 15

  16. Exposure Draft 16

  17. 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. 17

  18. International Financial Reporting Standards (IFRS) on the CPA Exam 18

  19. 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. 19

  20. 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 20

  21. 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 21

  22. 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 22

  23. 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. 23

  24. New CSOs/SSOs 24

  25. New CSOs - AUD 25

  26. 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” 26

  27. New CSOs - FAR 27

  28. 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 28

  29. New CSOs - REG 29

  30. 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. 30

  31. New CSOs - BEC 31

  32. 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 32

  33. New SSOs – Skill Specification Outlines 33

  34. 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. 34

  35. 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. 35

  36. Thank you. 36

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