To prepare successfully for the CPA exam, candidates must honestly assess their strengths and weaknesses. Physical, mental, and technical preparedness should be considered. Through this post I am trying to assists you in assessing all three areas, beginning with your technical abilities. Read on…
There is no doubt that your technical ability is the most important element in passing the exam. The required technical knowledge encompasses many areas. Take some time to think back to your college days. Ask yourself if you even remember a discussion of these areas. Use the following checklist to evaluate how much you remember. Admit that if you can’t recall anything about the area, you must be weak. If you took the course many years ago, more than likely you are weak for two reasons: (1) The longer the time between the coursework and the CPA exam, the more you are likely to forget. (2) The content probably has changed greatly over time.
Checklists to Identify Overall Strengths and Weaknesses by CPA Examination Section
Complete the checklists by answering the questions yes or no. A “yes” response indicates a possible strength. A “no” response indicates a possible weakness. Work to correct weaknesses. Believe in your strengths.
[A]. Auditing and Attestation (AUDIT)
- Did you take at least one semester of auditing?
- Did your auditing course include coverage of audit sampling?
- Did your auditing course include coverage of reviews and compilations of nonpublic entities?
- Did your auditing course require you to understand the various types of audit reports?
- Were you responsible for knowing the key elements of internal control for the major systems areas of: Revenue recognition and accounts receivable, Purchasing and accounts payable, Investment purchases and dispositions, Payroll accounting, Production and inventory systems?
- Were you required to prepare audit working papers to document the audit procedures performed?
- Did you learn to compute and analyze various ratios and trends?
- Did you learn how to use the AICPA Professional Standards database research tool?
[B]. Financial Accounting and Reporting (FAR)
- Were you required to prepare the following financial statements: Balance sheet, Income statement, Statement of Cash Flows, Statement of Changes in Stockholders’ Equity, Statement of Other Comprehensive Income?
- Were you required to prepare journal entries?
- Did you learn about derivatives and other forms of financial instruments?
- Were you required to compute the present and future value of money using table factors and formulas instead of using a financial calculator?
- Did you study deferred taxes?
- Do you know how to account for capital lease transactions?
- Did your financial accounting class include coverage of pension accounting?
- Do you remember how to compute earnings per share?
- Did your professor provide complete coverage by teaching all of the material included in the textbook?
- Did you spend time learning the accounting methods for both bonds payable and bonds receivable?
- Do you know how to compute, analyze, and compare certain financial ratios?
- Did you learn how to account for governmental entities?
- Did you learn how to account for not-for-profit entities?
- Were you taught how to use the financial accounting and research system (FARS) database research tool?
[C]. Regulation (REG)
- Did you study corporation taxation issues?
- Did you study partnership taxation?
- Did you study taxation issues for trusts and estates?
- Did you study taxpayer responsibilities?
- Did you learn how to use a tax research database tool?
- Did you write tax memos to clients?
- Did you complete tax returns and forms online?
- Did you study the AICPA Code of Professional Conduct in your auditing or business law class?
- Did your business law class contain coverage of commercial paper?
- Did you study bankruptcy law?
- Did you learn about real estate and property laws?
- Business Environment and Concepts (BEC) (Two and one-half hours in length)
- Did you study microeconomics?
- Did you study macroeconomics?
- Did you study how to legally form, operate, and dissolve both a partnership and the corporate form of business entity?
- Did you study accounting information systems?
- Did you take a finance or a managerial course that included coverage of: Balanced score card, Capital budgeting, Cost volume profit analysis, Regression analysis, Activity-based costing, Variances, Cost of capital?
Overall Changes By CAP Exam Section
Auditing and Attestation (AUDIT) is always changing – In just five years, about 30% of the content has been revised. Be careful if your audit knowledge is out of date. Admit your weakness. Many college graduates complete only one audit course. Consider yourself fortunate if you took two courses. Even with two courses, areas such as review and compilation services, auditing governmental entities, and assurance and attestation standards are not covered. Statistical sampling is seldom covered in enough detail. The Sarbanes-Oxley Act of 2002 is scheduled for testing regulary. This is a huge addition to both the Audit and the Regulation (REG) law area.
You may be weak in the Financial Accounting and Report (FAR) section if they have never studied governmental and not-for-profit accounting – Skipping this area could cost you over twenty points. New financial accounting standards are issued frequently. The Financial Accounting Standards Board (FASB) is not shy about changing accounting principles. In recent years we have seen the addition of a new financial statement, the statement of other comprehensive income, a change in segment reporting, and many changes dealing with investments and financial instruments. Candidates who do not know what a derivative is will have great difficulty in passing FAR.
If you take only one income tax class most probably have learned only individual taxes – Estate and trust taxation concepts are most often taught in the corporate tax class. Completion of two semesters of income taxation is preferred. The US Congress changes tax laws frequently. If your knowledge is over one year old, you are probably out-of-date. Knowledge of corporate and partnership taxation issues is a must-know! The REG exam also requires the preparation of certain tax schedules that are included in a tax return. Don’t fool yourself into thinking it’s just individual taxation. It’s all types of returns.
Business law issues, usually taught over two semesters, comprise forty points of the total REG exam – Did your college course include a detailed discussion of commercial paper? Negotiable instruments are difficult to understand.
Legal concepts have changed the least of any topical exam area – Although there has been little change, some areas have been added. For example, the government regulation of business has been expanded to include environmental and employment laws. Federal securities acts are a must-know. It is difficult to pass the exam without knowledge of the Securities and Exchange Commission (SEC) 1933 and 1934 Acts, including the Private Securities Reform Act of 1995. Property issues now deal with the rights to computer technology, a new area within the last year. Changes abound.
Business Environment and Concepts (BEC) – One semester of managerial accounting should be enough. Very few changes have occurred in the cost accounting area. A solid understanding of such basic issues as variances, process costing, and activity-based costing is sufficient. Two semesters of economics at the sophomore level—one finance principles course and one accounting systems course—is enough.
How will you ever know if you are strong or weak in an area? In addition to the assessment of your strengths and weaknesses listed above, why not attempt some real CPA exam questions? Be cautious, as your question bank must be current. Using current materials, go ahead and preview your knowledge.
To preview your knowledge, you simply go to an area [e.g., bonds] and work some, perhaps ten to fifteen, multiple-choice questions. Skip around, doing some of the first questions listed in the area and some of the later questions. For example, if your review materials contain forty questions on bond accounting, you might work every fourth question. You may want to go to a bookstore and use the review manuals on the shelves to do your previewing. Of course, when you answer the questions, you can’t write in the book. Use a few different manuals to see which one you prefer.
Detailed answer explanations help you learn why a particular answer is incorrect. The next time through, you will know how the examiners trick you and what words they use to distract you. Don’t let your knowledge preview scare you. It is natural to forget technical subject matter such as accounting. The whole idea behind CPA exam preparation is to do just that: prepare. If you knew everything already, there wouldn’t be anything to improve. Admit your weaknesses and begin correcting them. Don’t fear them.
The total extent of our weaknesses is not evident until we begins the study process. It is by listening to lectures, working software questions, and answering questions in review manuals that the you will become painfully aware of weaknesses. It is one thing to identify weaknesses; it is another to correct them. The whole focus of the study and review process is to correct weaknesses.
Take your time to correct your weaknesses to the best of your ability. Perhaps you will never totally understand foreign currency hedges and translation. However, at least you will have studied the area so that you can define terms, do some accounting, and recite the financial statement disclosure issues. If you ignore weak areas, you might be sorry; areas you ignore always seem to be highly tested. Work to correct your weaknesses and utilize your strengths.
Using Your Strengths
Yes, there will be many content areas where you remember the material and can demonstrate, work, and discuss the area. This is wonderful news. It is especially exciting to know that your knowledge remains in your brain, ready for use. Still, candidates seem to continue to study what they know.
Stop! This is a major mistake. There is no time to waste studying what you already know. If you know it today, you will know it several weeks from now when you take the test. Candidates like to study their strong areas because it makes them feel good about their progress. It is a comfort zone. Instead, study to correct your weaknesses and use your strengths to build a greater technical knowledge base.
It is not necessary to be a famous bodybuilder to pass the CPA exam :). What’s important is that you take some time to think about what physical attributes can be improved during the study process. Improve what you can, deal with the other problems later. Here are some questions that you may ask yourself:
- Smoking – Do you smoke? If you do, then physically you are damaging your body. No, this is not a sermon about the perils of smoking. I mention smoking because smoking is not allowed during the CPA exam. For the entire fourteen hours of the CPA exam experience, you must be smoke-free. The longest section is Auditing and Attestation (AUDIT), at four and one half hours. Is this going to bother you? If it is, begin dealing with the problem now, as you prepare for the exam. Cut back on your smoking or, better yet, go to the doctor for help. Wouldn’t it be wonderful if you could quit smoking while you were studying for the big event? 🙂
- Alcohol – You can’t study while you are under the influence of alcohol or other drugs. If you need guidance in helping to eliminate drugs, seek professional help. The pressure and stress of the CPA journey is likely to increase your reliance on chemical substances. Take care of these problems before you begin the study process.
- Eyesight – How’s your eyesight? Has it been a while since you tested and upgraded your glasses or contacts? Contact lenses are not recommended for the study or exam process. Long and late hours of study can cause dry eyes that may make you rub them. Infections can spread from your hands. Get new glasses well before the exam, and practice wearing them when you do your homework. Be assured that you are reading the numbers properly. Staring at a computer screen for four and one-half hours will dry your eyes out. You are not allowed to bring eye drops into the testing area. You must leave such items in a locker located in the Prometric center reception area. During breaks, you may enter your locker and use your eye drops, lip gloss, and take a pill. But no such items are allowed in the examination area.
- Prescriptions – Are your prescriptions current? Prepare in advance by renewing all prescriptions. Make your doctor appointments before you begin the CPA journey. Later you will be too busy, and you don’t want the risk of having an allergic reaction to new medication. Experiment well before the exam dates.
- Extra weight – What about that extra weight? Candidates can easily gain five to ten pounds over the preparation period, as chips, cookies, and ice cream seem to be the preferred study snacks. Overeating can make you drowsy. Try eating assorted fresh vegetables and fruits instead. Drink eight to ten glasses of water every day.
It is not necessary that you become a new person to pass the exam, but it is helpful to spend a few minutes reflecting about your physical well-being. If you can easily correct the weakness, do it right away. You will benefit by your actions.
There is no need to get a psychiatric evaluation. Mental preparedness involves clearing your mind by resolving as much conflict in your life as you possibly can. Are you going through a divorce? Do you have a medical problem that causes you discomfort? Does someone you know need your help? Think about the situations in your life that could distract you. Try to resolve these conflicts before you begin the study process. The human brain is ready to help you as long as you aren’t constantly sending out signals asking for help. Contemplate postponing one or more sections. Sometimes delaying the exam is a wise idea. Proper preparation requires focus. If you are preoccupied with many thoughts, wait until some of these issues have been resolved. Keep in mind the eighteen-month limitation—you must successfully complete all sections within eighteen months of the day you sat for the first section that you passed.
Child care is often a concern – It’s almost impossible to study while children need your care and attention. Work with a family member or trusted friend to establish a schedule of child care that will meet the demands of a lengthy and time-consuming study process. Tell it like it is—you will need a great deal of babysitting assistance. Arrange for day care well before you begin studying.
Attempting the CPA exam isn’t going to simplify your life—quite the contrary. The pressures will only fuel any existing fires. Get yourself ready by clearing your mind to the best of your ability. Ignoring mental pressure, or believing that the stress will lift once you begin studying is very dangerous. Face reality, admit your weaknesses, and correct what you can.
Final Words; Small Changes Yield Big Results
When it comes to correcting weaknesses, practice and effort to learn what you don’t know will yield huge results. If you work to correct some areas, you will see benefits in other ways. Each time you conquer another technical area, you are not only adding to your technical base, you also are increasing your confidence level by decreasing the number of subjects that you fear. A confident person is willing to take risks. The more confident you are, the more willing you are to take a risk and write down concepts for the graders to grade. I always say you can’t win the lottery until you buy a ticket. You can’t earn points on an exam section until you begin answering the multiple-choice questions in testlet one. Don’t be afraid. Keep on studying. Every weakness you correct is another point for you.
Don’t give up too early. I remembered I ask my lecturer question about a large area the night before I plan to take an exam section. He spent a few minutes explaining some of the basic concepts, I went off to study, and later I came back to inform him that I understood the area. The greatest payoff comes when the area is heavily tested the next day. Just if I had given up and said that I just couldn’t absorb any more knowledge, I would have missed a great opportunity and many points. Some weaknesses take only a minute to correct, while others may take several hours of study. If you have the time, why be lazy? Utilize every minute to make progress toward correcting your weaknesses, and continue to believe in your strengths.
Trying to be the perfect person while you are preparing for a difficult event, such as passing the CPA exam, is a tough task. I can talk all I want about nourishing your body by eating carrots and drinking water, but as I wrote this post, I found I could think more clearly when I ate chocolate covered raisins and drank gallons of coffee. You don’t need the extra pressure of trying to be perfect. Relax and admit your shortcomings. Do your best to cope with the stress.
Technically, the best tips I can give you is to study current materials. Study to learn something about everything. Follow a detailed study plan to correct your weaknesses, not to reinforce your strengths. Study to be your best, not to be perfect. With practice, what you learn today you will remember in the future as you complete each CPA exam section. Take some time to analyze your strengths and weaknesses. Admit that you are not perfect. Work to correct as many weaknesses as possible.