CPA Exam Pass Rates Are Rising: What Are Your Chances …?

The uniform CPA (Certified Public Accountant) exam is one really tough exam. Less than 50% of the students who sit for it make the grade. And not just anyone can sit for the exam either. Most states require a minimum of 150 credit hours for anyone wanting to take a shot at it. And the typical bachelor’s degree requires only 120 credit hours. No wonder it’s not easy to pass!

Roughly 16000 candidates sit for the CPA exam each year, but typically less than 2800 new licenses are issued. Remember that just about every one of these 16000 candidates have 150 or more credit hours,  have a 4 year bachelor’s degree in accounting or business, with many having graduate degrees as well.

Here are the statistics for exam candidates for the past few years by exam section …

These are statistics for the computer based exam. The computer based exam was launched in April 2004. You wouldn’t want to compare these statistics with those of the  paper and pencil format exams prior to April 2004.

While the statistics may not seem very encouraging, you may want to note that things are actually easier than they used to be in the past. With the computerized exam format, you can schedule your testing appointment anytime within 8 months of the year, and also choose to take only one section at a time.

The CPA exam uses the multi-stage adaptive testing model to asses a candidates proficiency using fewer questions than would otherwise be necessary. What this means is that if you get the first few questions wrong, your final score might end up being fairly low. On the other hand, if you perform very well on the first few questions, the exam starts getting progressively more difficult, and your final score may be higher.

This also means that you cannot review your responses. If you made a mistake and chose an obviously wrong response, there’s no possibility that you can go back and change it. This might also mean that the software assumes you are less skilled than you actually are and grades you as it deems appropriate.

The Nitty Gritty : Structure Of The Exam

The exam has 4 sections to it:  Business Environment and Concepts (BEC), Auditing and Attestation (AUD), Regulation (REG) and Financial Accounting and Reporting (FAR). Each of these sections have multiple choice questions. In addition to these, BEC has a portion on written communication and the other three have one portion each on task based simulations.

Operational and Pretest Questions
The multiple choice questions in each of the 4 sections consist of 3 blocks of “testlets”. Each candidate has to work their way through 3 testlets in a section. Every testlest has questions of two kinds – operational and pre test questions. Operational questions are scored while pretest questions are “dummy” questions that are not scored. But if you taking the test, you will not be able to tell one apart from the other. The pretest questions are not identified as dummy questions. Many of the pretest questions are used as operational questions in subsequent exams. The majority of questions in a testlest are of the operational kind.

Difficulty Levels
All testlets are not created the same. Some are of “medium” difficulty level and some “difficult”. Obviously, a “difficult” testlet has harder questions and a “medium” testlet will have easier ones.

Every candidate receives a medium testlet to start with. If the candidate performs very well on the initial testlet, they will get a difficult testlet. On the otherhand if the performance on the initial teslet is poor, they will get another medium testlet. A candidate getting 3 medium testlets is not very likely to pass the exam – unless the performance on the 3rd testlet is exceptionally good.

The AUD, REG and FAR sections also have task based simulations in addition to multiple choice questions. These sections allow candidates to demonstrate their proficiency by researching literature or using spreadsheets and generating responses to simulations of real life scenarios they are likely to encounter in the workplace.

The BEC section has no task based simulations. Instead, it has 3 questions that require the candidate to write a letter, a short memo or a passage.

Unlike the testlets, the task based simulations and the written communication portions are not “difficult” or “medium”.  They are pre-assigned, regardless of how a candidate performs on the multiple choice questions.

What Is The Passing Score On The CPA Exam – How Exactly Is It Scored?

The scores for each section are reported on a scale that ranges from 0 to 99. The passing score for each section is 75. You may want to note that this is not a percentage. This is NOT the same as 75%. The score is a weighted combination of the multiple choice questions, task based simulations or written communication tasks and it also factors in the difficulty level of each question in every testlet a candidate answered correctly – or did not.

Here’s how the score is computed …

For each section, multiple choice questions, task based simulations (for FAR, AUD and REG) and written communication (for BEC) are treated distinctly. The scaled score for every type of question is calculated using Item Response Theory. The scaled scores are then mapped to scores on scales that have been designed for each kind of question. The policy weights defined by the Content Specification Outlines (or CSOs) are combined with the mapped scores. The policy weights are 40% for task based simulations, 60% for multiple choice questions and 15% for written communication. Finally, the aggregate score obtained by combining the mapped score with the policy weights is mapped to a score on the 0 to 99 scale and this is the final score.

What Are The Job Prospects For CPAs?

Before you wonder whether you will be able to find a high paying job after getting certified, you might want to pay a bit of attention to exactly what a CPA does. A CPA helps businesses and individuals make very good financial decisions. And this involves quite a bit of number crunching, data analysis, a thorough understanding of laws and regulations. As you might have guessed, this involves a lot of interaction with people. So a CPA has to be extremely good at interacting with people -  business owners, directors, share holders, government officials or other professionals. This is definitely not a desk job and very strong communication and interpersonal skills are required as CPAs work in teams and rarely – if ever – alone.

For a qualified CPA who fits the bill, the sky is the limit. The number of oportunities for CPAs are expected to grow very significantly in 2014. This is expected to be driven by establishment of new businesses, ever changing financial regulations and increased government scrutiny into the financial affairs of businesses. Also, retiring CPAs and accountants will need to be replaced by new hires.

Candidates with a Master’s degree in accounting / business administration and a CPA certification should have an edge. Additional certification like the CMA or CIA could mean increased chances of securing a position in management accounting. Candidates with only a bachelor’s degree and CPA certification might be limited to public accounting.

Also, certain positions require deep expertise in specific areas like international business, accounting or auditing software. Expertise in these areas come only with on the job experience.

 

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