1. 1 CBTe - Launch on January 1, 2011 Update on Uniform CPA Exam APLG/FSA 2010 Annual Seminar February 14, 2010 Elaine Rodeck, Ph.D., CPA, CA, MBA Director of Examinations Strategy

2. Overview of Current CPA Exam 2 Section Time (Hours) ContentGeneral Description AUD4½ 90 MCQs 2 Simulations Knowledge of auditing procedures, generally accepted auditing standards and other standards related to attest engagements. FAR4 90 MCQs 2 Simulations Knowledge of generally accepted accounting principles for business enterprises, not-for- profit organizations, and governmental entities. REG3 72 MCQs 2 Simulations Knowledge of federal taxation, ethics, professional and legal responsibilities, and business law. BEC2½90 MCQs only Knowledge of general business environment and business concepts that candidates need to know to understand the underlying business reasons for and accounting implications of business transactions

3. Background – Protection of the Public Interest  Content Design for CPA Exam: Knowledge and skills required for entry-level CPAs for protection of 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 3

4. Background – Purpose of CSOs/SSOs  Content Specification Outlines (CSOs) and Skill Specification Outlines (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 4

5. Board of Examiners – Overview Board of Examiners Psychometric Oversight Committee Content Committee Audit Subcommittee Financial Accounting and Reporting Subcommittee Regulation Subcommittee Business Environment and Concepts Subcommittee IQEX State Board Committee 5

6. Practice Analysis - Background  In its oversight role, Board of Examiners must ensure the Exam is consistent with 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 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 6

7. Practice Analysis – Method  Survey developed using input from the prior survey (2000) and augmented based on contributions 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 7

8. Practice Analysis - Survey Process  Survey participants were presented with 45 knowledge, task, and skills statements and asked to indicate: Relevance to entry-level CPAs For relevant statements, importance and frequency were evaluated In total, over 450 statements were included on survey 8

9. Practice Analysis – Development of CSOs  Exam Subcommittees met in September 2007 to develop CSO recommendations - survey results and judgment  Content Committee met in October and November 2007 to: Review Subcommittee recommendations regarding CSOs and related weightings, and revise/finalize draft CSOs Develop draft SSOs based on survey data and research performed by cognitive scientists with input from CPAs  Content Committee presented CSO recommendations to BOE in January 2008  After modifications, revised CSOs were approved in March and released as Exposure Draft in May 2008 9

10. Exposure Draft  Draft CSOs exposed for comment during 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. 10

11. Exposure Draft – Inclusion of IFRS on CPA Exam  Of the 50 comments received for the Exposure Draft, 1/3 specifically discussed IFRS; 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 11

12. IFRS on the CPA Exam – Steps to Revised CSOs/SSOs  Content Committee and Exams Team have been monitoring the roll out of IFRS in US and assessing 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 inclusion of IFRS  Content Committee met in May 2009 to consider Exam Team’s recommendations re IFRS  Content Committee recommended to BOE at May 2009 meeting that the updated CSOs reflect inclusion of IFRS - BOE approved CSOs 12

13. 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 13

14. 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 14

15. 15 New CSOs/SSOs

16. 16 New CSOs - AUD AREA Summary of Current CSOs Summary of New CSOs I Plan the Engagement (22-28%) Auditing & Attestation: Engagement Acceptance & Understanding the Assignment (12-16%) II Internal Control (12-18%) Auditing & Attestation: Understanding the Entity & its Environment (including Internal Control) (16-20%) III Obtain and Document Information (32-38%) Auditing & Attestation: Performing Audit Procedures & Evaluating Evidence (16-20%) IV Review and Evaluate Work Performed (8-12%) Auditing & Attestation: Evaluating Audit Findings, Communications & Reporting (16-20%) V Communications & Reporting (12- 18%) Accounting & Review Service Engagements (12-16%) VI N/A Professional Responsibilities (including Ethics & Independence) (16-20%)

17. New CSOs – AUD (cont.)  Key provisions in the AUD CSOs related to IFRS include the following:  Candidates are expected to demonstrate knowledge and awareness:  International Auditing & Assurance Board (IAASB) - role in establishing International Standards on Auditing (ISAs)  Differences between ISAs and US Auditing Standards  International Ethics Standards Board for Accountants (IESBA) - role in establishing International Federation of Accountants (IFAC) Code of Ethics for Professional Accountants.  Related independence requirements when auditing a U.S. company that supports an audit report based on auditing standards of another country, or ISAs 17

18. 18 New CSOs - FAR AREASummary of Current CSOsSummary of New CSOs I Concepts & Standards for Financial Statements (17-23%) Conceptual Framework, Standards, Standard Setting & Presentation of Financial Statements (17-23%) II Typical Items in Financial Statements (27-33%) Financial Statement Accounts: Recognition, Measurement, Valuation, Calculation, Presentation & Disclosures (27-33%) III Specific Types of Transactions (27- 33%) Specific Transactions, Events & Disclosures (27-33%) IV Governmental Accounting and Reporting (8-12%) Governmental Accounting and Reporting (8-12%) V Not-for-Profit Accounting and Reporting (8-12%) Not-for-Profit Accounting and Reporting (8-12%) VI N/A

19. 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 the reflect the inclusion of IFRS 19

20. 20 New CSOs - REG AREASummary of Current CSOsSummary of New CSOs I Ethics & Professional and Legal Responsibilities (15-20%) Ethics, Professional and Legal Responsibilities (15-19%) II Business Law (20-25%)Business Law (17-21%) III Federal Tax Procedures and Accounting Issues (8-12%) Federal Tax Process, Procedures, Accounting and Planning (11-15%) IV Federal Taxation of Property Transactions (8-12%) Federal Taxation of Property Transactions (12-16%) V Federal Taxation of Individuals (12-18%) Federal Taxation of Individuals (13-19%) VI Federal Taxation of Entities (22-28%) Federal Taxation of Entities (18-24%)

21. 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  REG CSOs may be modified in the future to reflect IFRS 21

22. 22 New CSOs - BEC AREASummary of Current CSOsSummary of New CSOs I Business Structure (17-23%)Corporate Governance (16-20%) II Economic Concepts (8-12%) Economic Concepts & Analysis (16-20%) III Financial Management (17-23%)Financial Management (19-23%) IV Information Technology (22-28%) Information Systems and Communications (15-19%) V Planning & Measurement (22-28%) Strategic Planning (10-14%) VI N/AOperations Management (12-16%)

23. 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 23

24. 24 New SSOs – Skill Specification Outlines Skills Category Weights AUD, FAR, REG Weights BEC Knowledge and Understanding (1) 50% - 60%80% - 90% Application of the Body of Knowledge (2) 40% - 50%N/A Written Communication (3) N/A10% - 20% (1)Expertise and skills developed through learning processes, recall and reading comprehension. (2)Including Analysis, Judgment, Synthesis, Evaluation and Research. Higher level cognitive skills that require individuals to act or transform knowledge in some fashion. (3)The various skills involved in preparing written communication.

25. 25 Recent BOE Decisions January 1, 2011 – CBT-e launch date and the date of implementation of new CSOs/SSOs (with IFRS) Section Lengths under CBT-e: AUD to be shortened by 30 minutes (to 4 hrs.) BEC to be lengthened by 30 minutes (to 3 hrs.) Total testing time for 4 sections to remain the same – 14 hours

26. BOE Decisions: Weighting AUDBECFARREG MCQsCurrent70%100%70% New60%85%60% SimsCurrent20%0%20% New40%0%40% WritingCurrent10%0%10% New0%15%0% CSO/SSO Targets Knowledge and Understanding 50-60%80-90%50-60% Application40-50%0%40-50% Writing0%10-20%0% 26

27. 27 Thank you! CPA Exam Information – www.cpa-exam.org Elaine Rodeck – erodeck@aicpa.orgerodeck@aicpa.org