In this episode of CPA Conversations, Jonathan Zigman, senior CPA content developer for UWorld LLC, provides an update on the current status of CPA Exam and the CPA Evolution initiative. He touches on what the CPA Exam is now and what the AICPA and NASBA hope it will become, the immediate benefits of the new proposed model, the advantages for would-be CPAs looking to move into specializations, and much more.
By Bill Hayes, Pennsylvania CPA Journal Managing Editor
In this episode of CPA Conversations, our guest, Jonathan Zigman, senior CPA content developer for UWorld LLC, provides an update on the current status of CPA Exam Evolution, including what the CPA Exam currently is and what the AICPA and NASBA is looking to evolve to, benefits of the new proposed model, why the updated examination structure will be so beneficial to those would-be CPAs looking to move into certain specializations, and much more.
Before we get started with some of these more technical questions, can you give us a little bit about your background in the field and how it is you came to talking to us today?
[Zigman] My job, in a nutshell, with UWorld Rogers CPA Review is basically to take innovative and concise ways to make really dense information more digestible for our students so they can succeed on the CPA Exam and as they begin their careers. Before I came to UWorld, I worked in public accounting for about five years. First, I was at EY. Then, I was at a smaller national firm. In both firms, I worked in tax practices. I had a variety of responsibilities, including federal and state task compliance, planning and research for corporations, partnerships, high-net-worth individuals. I also did some financial statement preparation and audit assistance, particularly with ASC 740 income taxes, across a few different jobs. I've worn a variety of hats over the past few years.
Can you give us a general update on where we're at right now in the CPA Exam Evolution process as we record this podcast, which is December 16th? I know it's fast-moving, but where are we at in the process right now?
[Zigman] The AICPA and NASBA announced a new CPA licensure model that will go into effect in January 2024. Backing up a bit, we'll receive an exposure draft blueprint in July 2022 with a comment period through September 30th, 2022, and final blueprints in January 2023. For those who are unfamiliar, the blueprints are basically just content roadmaps provided by the AICPA, which tells us all the potential topics that can be tested on the exam. Then, once again, that new launch date is January 2024.
As of December 2021, since we don't have the blueprints, what do we know, and what resources do we have now? First off, we have the CPA Evolution model curriculum. It's a resource for college and university accounting programs, basically just to help them get their graduates up to speed for the changing demands of the CPA profession. It's a helpful tool for professors. But in terms of nuts and bolts – CPA Exam preparation – that probably goes a bit deeper into a lot more topics than students would normally be tested on.
The other thing that we have is the CPA Exam practice analysis survey, which is a research project designed to determine the knowledge and skills required of newly licensed CPAs. It's basically a very rough draft of the proposed content that could be included on the exam. It's preliminary research based off of input from a diverse set of volunteer CPAs. But, once again, the word preliminary is key. It's just a snapshot into what the AICPA is thinking.
Can you give us an explanation of what the CPA exam is, as we speak, and what exactly the AICPA and NASBA is looking to evolve to? What's the ideal?
[Zigman] Currently, it's a four-part exam. Each part lasts four hours. Candidates have an 18-month rolling window to pass all four parts. Now, the current sections are auditing and attestation, financial accounting and reporting, regulation, and business environment and concepts. Every exam is a mix of multiple-choice questions and task-based simulations, the latter being longer problems, such as revising a memo, preparing journal entries, or adjusting a company's incomplete trial balance. That's the current model.
But when soliciting feedback from stakeholders, like employers and professors, the AICPA found that accounting firms and other organizations are increasingly hiring non-CPAs for accounting-type roles. They're doing so because they feel they have to fill certain skills gaps in areas like data analytics, predictive analytics, cybersecurity, IT audit, IT risk, etc. In other words, if CPAs generally aren't able to handle the current technology needs of clients, employers are going to hire other professionals that can.
Accounting enrollment and graduate hiring rates, they've dipped a little bit, too, as a result. The purpose of the evolution is really to ensure that newly licensed CPAs have all the skills and knowledge needed in a technology-driven marketplace and, just in general, are more equipped to handle the changing tech nature of accounting jobs.
Looking at the 2024 exam, it'll be similar to the current structure in that it'll still be a four-part exam, four hours per exam, and, as far as we know, still a mix of multiple-choice and task-based questions. The new structure called the core-plus-discipline model is as follows. Three of the sections will test candidates on core skills and accounting, audit, and tax. Technology and data analytics will have a much greater emphasis and be embedded into each of these three exams. All students will have to take each core exam.
A major difference, however, is that candidates will also select another discipline to demonstrate more in-depth knowledge. These are business analysis and reporting, or BAR, tax compliance and planning, or TCP, and information systems and controls, or ISC. Students will only have to take one of these three disciplines but can decipher themselves which one to take.
From what you've seen of the changes that AICPA and NASBA are driving toward, what's your feeling as to how on target they are and their ability to better prepare exam takers for the profession that's obviously evolving?
[Zigman] Taking a step back and ignoring the specific changes of 2024 for a minute, it's important to remember this isn't the first time the CPA exam has changed. For example, format-wise, candidates used to have to take all four parts in one sitting. Now they just have to take one part at a time. But content-wise as well, the exam has to evolve, too, mainly to remain a relevant metric of the knowledge and skills required of the profession.
For instance, in July 2021, international financial reporting standards and most defined benefit pension plan questions were removed from the BAR exam. These are large and complex topics that were on the CPA Exam for a pretty long time. But you may notice that very few private companies still offer defined benefit plans. The prospects of U.S. GAAP and IFRS convergence was once a really hot topic, but it's appeared less and less likely. The AICPA solicits feedback and recognizes that mastering this content wasn't actually benefiting a majority of newly licensed CPAs once they got into the workforce. They have to ask themselves, "Why should they keep testing them on it?"
Circling back to 2024, bear with me, I think the AICPA is philosophically moving in the right direction, in my opinion. I'm not saying the new license model and proposed exam content will be perfect. To be honest, no one can really make that assessment without having the draft blueprints. That being said, I think the effort to better align CPA Exam candidates with the exam demands of the market is certainly a worthwhile one.
Just to give a really quick example, when I started at EY, 50% of my training was on tax concepts. The other 50% was just learning tax compliance and provision software. We had entire days of training going through sample tax return case studies and working within the software to produce the deliverables. As I went on in my career, the more software I was exposed to, the better equipped I was to handle new or different technology and client engagements. If students can get that tech exposure even earlier on than I did, the better off they'll be.
Are there any benefits of the new proposed model that basically jump out to you immediately, as far as being beneficial for people entering the profession?
[Zigman] I think the proposed model just gives more assurance to employers that upcoming candidates are masters of big data and technology, which, right now, are some of the most sought-after skills in the profession. Then, from a shared volume perspective, more material can sit into six exams in the four currently. That doesn't mean students are responsible for all six parts. But it generally means they'll be exposed to content that's more relevant to them for their future or current job. Think of it like taking advanced electives in college. It's no longer surface-level material required for everyone to learn, but it's content that's more complex and, hopefully, more interesting to that individual student.
One specific example that I'll mention is I'm really pleased to see the emphasis on analytics and handling big data. I think mastering this skill is already a requirement in most accounting jobs. When I worked in public accounting, I had anywhere from five to 10 clients at one time because I was in tax. Every client has unique processes, systems, and data. When data was sent to us by the client, it came from a variety of sources, programs, and formats. It was our job to process, clean, and transform it in a manner that was usable and compatible with our firm's proprietary software. While big data skills can certainly be learned on the job, it would be much preferred if students get that exposure before they even start working. I like to think about it like learning a second language. The earlier in life you start it, the easier it is to learn.
Is there anything you see as a possible detriment or drawback, or at least something that will take test takers some getting used to?
[Zigman] In the short term, there's definitely going to be some trepidation from candidates. I think as there always is when it comes to big changes, UWorld's expectation is that there's going to be a flood of examiners trying to finish it all prior to 2024, and that, for some time after, it's going to slow down a lot. This is totally normal as nobody really wants to be the guinea pig in this scenario.
Educators might be anxious about the changes as well. Many have been teaching the same material for a really long time. Moving forward, we expect it to incorporate technology in nearly every lesson. UWorld's working with educators right now and providing them with tools so they can expose their students to this new content very early on in their academic careers.
Taking a step even further back and looking at it from a 30,000-foot view, changing the profession and the public's perception of the profession could also be difficult. When the average person thinks of accountants, they still think of exhausted people in suits, scrambling in shoeboxes of clients' paper receipts on April 15. But the truth is the accounting industry is large and diverse. It requires very different skill sets depending on the job someone has. Some accountants might become data scientists on audits, while others might be unofficial therapists when advising their clients on their estate plans. But I think no matter the road the CPA travels, the goal remains the same: keep the certification relevant, sure, but more importantly just guarantee that when anyone sees those three letters after someone's name, they know they're working with the highest caliber professional who will maintain the public's trust.
You say that the new examination structure is going to benefit those who are looking to get into certain specializations. Can you explain why that is?
[Zigman] I would just say the new model gives more autonomy to students. If they want to know what type of accounting they want to do, they can delve into more complex topics, the more likely they see in their first two years as a CPA. This also means they can forego some topics that will be completely irrelevant to them.
Just for a quick example, tax accountants can dive into topics like personal financial planning for individuals on the TCP exam. Auditors, however, they won't have to worry about this. But they'll be responsible for knowing everything about stock reports and the nitty-gritty of IT internal controls. I think a deeper exposure can really help reinforce a student's desire to pursue a certain area of accounting, or, on the other hand, maybe it's a red flag. They find out they don't enjoy that particular specialization and maybe they should switch gears before they start their careers. In either scenario, getting exposure to that specialization, it's a really good thing, in my opinion.
If we just take the CPA Exam changes out of the equation for a moment, can you tell us what the advantages are of pursuing the CPA certification in general? Would you say it still provides the leg up for accounting professionals that it has in the past?
[Zigman] Although we discussed accounting firms hiring more non-CPAs, obtaining the certification, it still absolutely makes sense and provides a leg up in a lot of accounting jobs. I'll explain for a little bit. Most employers will choose a CPA with the same skill set as a non-CPA based on that extra layer of assurance that the CPA candidate will be more prepared for the responsibilities needed to be effective on the job.
The certification shows employers that the candidate is bright, can handle a lot of information at one time, has great time management, and can be effective in stressful situations. These are all critical skills needed in the profession. Also, it doesn't hurt that you'll probably make more money. According to the AICPA, CPAs, on average, make 10 to 15% more than non-CPAs who are in accounting jobs and have the potential to make $1 million more over the course of their careers.
From a public accounting standpoint, many firms still require the certification in order to be promoted from senior associate to manager. Anecdotally, I would challenge anyone to just browse some accounting jobs on LinkedIn or Indeed. More often than not, you'll see "CPA required" or "preferred" in the job description. At the end of the day, if you're due for promotion or you're the most qualified candidate for your dream job, you just don't want a lack of a CPA to be the thing that holds you back. I've seen both of these scenarios happen to coworkers and candidates since I started my career.