Passing the CPA Exam - Is It Easier or Harder Now?

By William Parrott, Ph.D.
Reprinted from Florida CPA Today magazine with permission of the Florida Institute of CPAs.

Many CPAs who took the exam before it became computer-based believe that it is easier to pass now because all four parts do not have to be taken together at one time, but rather are taken separately over a period of up to 18 months. While this is true, there are several other factors that make the whole process of scheduling, preparing for and passing the CPA exam more difficult today than when it was a paper-and-pencil exam. Significant differences between the CPA exam today and what it was like in the past are discussed below. While some support the view that the current exam format is easier, others do not. All of these differences provide an historical perspective on how the CPA exam has evolved over the past several decades. This issue should be of interest to all practitioners, no matter when they took the CPA exam, as well as to current and prospective CPA exam candidates.

Length of the CPA Exam
For many years, the CPA exam was a 19-and-a-half -hour long, two-and-a-half day, paper-and-pencil exam that older practitioners will remember as both a physical and mental challenge. Then, in 1994 the exam became “easier.” Its total length was shortened to 15–and-a-half hours, spread over “only” two days. With the advent of computer-based testing in 2004, the length of the CPA exam was reduced again. All four parts now total 14 hours. Thus, the exam is definitely less of a physical ordeal than in years past.

Knowledge Tested
There is no question that the breadth of knowledge required to pass the CPA exam has grown substantially. For example, CPA candidates now devote significant amounts of study time to reviewing economic, finance and information technology topics, most of which never were tested before the exam became computer-based. Another example is not-for-profit accounting. This material was not tested at all for many decades, and was tested only lightly until fairly recently. Not-for-profit accounting now represents 8 to 12 percent of the financial accounting component of the CPA exam, while governmental accounting constitutes another 8 to 12 percent. The total number and variety of accounting and auditing topics that can be, and are, tested are continually growing because of the ever-increasing frequency of new accounting and auditing standards. Current CPA Review texts and software include topics such as derivatives and fair value accounting that past candidates did not have to study. This increases the difficulty of preparing for the CPA exam.

Fixed vs. Flexible Scheduling
Until 2004, all CPA exam candidates took all four parts of the exam together. Everyone knew that the exam was given in the first week of May, and again in the first week of November. There was no flexibility in scheduling individual parts or the entire exam. Candidates taking the exam for the first time had to prepare for everything that potentially could be tested. Now each part (Financial Accounting and Reporting, Auditing and Assurance, Business Environment and Concepts and Regulation) can be scheduled separately during each of four “testing windows” per year. Exams can be scheduled in the morning or afternoon (and some evenings) during any weekday within a testing window (the first two months of each quarter). This clearly is an advantage of computer-based testing over the paper-and-pencil exam.

Applying to Sit for the CPA Exam
It used to be very straightforward. All Florida candidates had to apply by Feb. 1t to sit for the May exam, and by Aug. 1 to sit for the November exam. Now, first-time CPA candidates must do much more planning. The key initial decision is when to take the first part of their CPA exam. Then, candidates have to allow approximately 90 days for Florida to process their application and receive their Notice to Schedule (NTS), which permits the scheduling an actual exam date. For security reasons, only a limited number of exams can be administered through a testing center at any one time, so candidates need to allow up to 45 days in order to get the time and location they desire. Also, decisions must be made as to when to schedule each of the remaining three parts.

Studying for the Exam
Given the increased breadth of knowledge now required to pass the CPA exam, more preparation time generally is recommended than in the past, perhaps 50 to 100 hours more on average. Also, the CPA exam has been a “non-disclosed exam” since 1995, meaning that old exam questions are no longer publicly available, except for a few that are “released” by the AICPA each year. Older practitioners may remember when entire past exams and “unofficial answers” were provided by the AICPA. This is no longer true, so many exam questions in CPA Review texts and software are actually rather old, and have simply been modified to reflect current accounting, tax and auditing rules. Today’s candidates would be amazed that, before 1996, candidates actually could walk out of the CPA exam with their exam booklets in hand.

Taking the CPA Exam
With a paper-and-pencil exam, decent penmanship was required, especially in writing essay answers. This is obviously not an issue with the computer-based exam. Likewise, the CPA exam now has a four-function, on-screen calculator for making computations. For several years prior to computer-based testing, the AICPA also provided a basic calculator. Before that, all computations had to be done by hand. Thus, one can argue that the current format of the CPA exam requires less math and penmanship skill than in the past. On the other hand, there is no partial credit given for computations anymore. With a hand-graded paper-and-pencil exam, scratch paper showing supporting computations were reviewed when problems were being graded. Partial credit was undoubtedly a reason many past CPA exam candidates earned a passing score. Scratch paper is provided for all parts of the current computer-based test, including so-called “simulation” questions, but it plays no role in the actual grading of the exam.

Exam Day Differences
Before the exam became computer-based, literally hundreds of CPA exam candidates at a particular exam location were seated together, usually in a very large room. Everything was done in lock step on a fixed schedule. Today, only a few candidates (and sometimes only one) will take the exam at the same time at any one testing center. The biggest worry now is a computer malfunction, and/or the forced rescheduling of an exam time because of weather problems, such as a hurricane.

Exam Format Differences
Each part of the current CPA exam contains at least three “testlets” consisting of 24 to 30 multiple-choice questions each. Each “testlet” must be completed before going to the next part, so candidates do not have the option of returning to earlier exam questions at the end. Also, the exam is now “adaptive,” meaning that if a candidate does well in one testlet, the second group of multiple-choice questions will be slightly more difficult. Furthermore, writing skills are assessed and usually represent a significant portion of the score, something that was not generally true before 1996. Finally, every exam now contains “pretest questions” that make up at least 10 percent of the total questions (although the candidate does not know which ones), but are not graded. Prior to 1996, all questions were graded, although “Accounting Practice” allowed some choice of problems.

Exam Grading
The most common passing grade on the paper-and-pencil CPA exam was 75. No one got a grade between 69 and 75. Borderline exams were graded a second or even third time, and eventually a passing grade of 75 or a failing grade of 69 was assigned. The passing grade is still 75 with the computer-based CPA exam, but with one big difference — namely, candidates can, and do, receive failing grades of, say, 73 or 74. Failing by only one point seems more devastating to some of them than receiving a lower failing grade, such as 69.

CPA Exam Pass Rates and Release of Exam Results
Pass rates per part are higher now, averaging in the mid to upper 40th percentile, compared to the low 30s with the paper-and-pencil exam. Overall pass rates on all four parts are now around 20 percent, compared to the low teens before the exam became computer-based. These results are not unexpected, given that candidates have the “luxury” of preparing for one part at a time, and can focus solely on that one part, instead of trying (over a period of several months) to learn everything that could be tested over a single two to two-and-a-half day period of time. Higher pass rates support the view of many older CPAs that the exam is easier now. However, part of the reason for the increase in pass rates may be that more states now require completion of a fifth year. Today’s students routinely take two auditing courses, two tax courses and courses in advanced financial accounting and governmental/nonprofit accounting. One final note: Past candidates had to wait three months to receive their exam scores; now results are available in a matter of a few weeks.

Cost, “Conditioning” the Exam, Exam Location
The cost to take the computer-based exam is significantly higher than the paper-and-pencil exam, typically running around $800. CPA Review programs are also more expensive, since the texts keep getting longer and software must be factored into the price. In addition — and this is a very important difference — paper-and-pencil candidates had to pass at least two parts (or Accounting Practice) and score at least a 50 on the other parts to “condition” the exam, i.e., receive credit for the parts passed. Thus, first-time candidates had to prepare, at least to some extent, for all four parts of the exam at the same time. This is no longer true. One final difference worth noting: Before the exam became computer-based, if you were a candidate of another state, you had to physically travel to that state to take the exam. Now, you can choose your exam location no matter what state approved your application, so taking the exam locally can save on travel, lodging and food costs, and probably reduce stress levels.

CPA Review Options
Before the 1970s, there were few options for preparing the take the CPA exam, except self-study. Gradually, CPA Review textbooks and live programs became available. Current CPA candidates have a wide array of choices, including texts and software, Internet-based programs, live CPA Review programs, and/or audio and videotapes and CDs. CPA Review software is no longer an option, given that the exam is computer-based and that the exam includes “simulations,” which the software (but not review texts) can faithfully mimic. “Simulations” are basically short cases involving electronic database research, writing a memo or report and other types of questions. Paper-and-pencil exams always had essays, but no research component, and required no computer skills.

Conclusion
In some important ways, the CPA exam can be correctly viewed as easier since it became computer-based. However, there are also significant hurdles facing current CPA exam candidates that were not issues for past candidates, from the scheduling of the exam to the breadth of knowledge being tested to differences in the exam itself. Suffice it to say that no one will likely forget his/her own experience, and that almost everyone will eventually say that the exam was harder when they took it than it is for newer candidates.

William Parrott, Ph.D., is an associate professor of accounting at the University of South Florida, where he has taught for more than 30 years. He teaches both intermediate and advanced financial accounting courses at USF. In addition, he coordinates and teaches in the USF CPA Review Program, and also serves as coordinator of the USF Master of Accountancy Program.