Chapter One
RESEARCH AND THE CPA EXAM
THE COMPUTER-BASED CPA EXAM
The computer-based CPA exam is here to stay. Over 100,000 candidates have taken the exam since its inception in April, 2004. The computer-based CPA Exam can test a candidate''s work-related skills by using small cases called simulations. These simulations are minicases that require multiple tasks including communications and research. The simulations component has replaced the old problems, other objective format questions, and essays on the old paper-pencil exam. Not to worry! In many ways, the newer simulations component is actually easier for the CPA candidate because candidates are no longer required to structure the problem. Candidates no longer create the schedules, tables, and disclosures. Instead, the answer formats are created, and the candidate fills in the blanks.
Since the simulations are machine-graded, the simulation is broken into parts. Some parts may require matching exercises, completing a table, or calculating values. Other parts may require selecting an answer from a list of choices on a drop-down menu. Simulation questions with drop-down menus are similar to multiple-choice questions. Near the end of each simulation is a communications component, which is similar to the essay component in the old paper-pencil exam. Again, the computerized exam is easier, because candidates can easily edit the essay and use a spell-checker.
The newest part of the CPA exam is the research component which is included in each of the simulations. In the paper-pencil exam, it was good enough to know the rules. Now the candidate must know the rules and find them!
RESEARCH COMPONENTS ON THE EXAM
There are three different research components on the computer-based CPA exam. Research is tested separately in the Financial Accounting and Reporting (FAR), Auditing and Attestation (AUD), and Regulation (REG) portions of the CPA exam. Therefore, candidates must be knowledgeable and skilled with each of these infobases.
In each of the three areas (FAR, AUD, and REG), the research requirements and the infobases are completely different. The infobases contain information from several sources: the Financial Accounting Standards Board, the Public Company Accounting Oversight Board, the American Institute of Certified Public Accountants, and the US Treasury Department. Because these products contain different information, it is important that you are familiar with each resource and infobase, as well as the CPA exam interface.
The Financial Accounting and Reporting (FAR) simulations require research in the financial accounting literature that is found in the Financial Accounting Research System, called FARS. The FARS infobase is a collection of accounting pronouncements and is copyrighted by the Financial Accounting Standards Board (FASB). Both the Original Pronouncements as Amended and the Current Text are available on the exam. In the FAR simulations, a candidate may be required to cite one paragraph or citation from the financial accounting standards to answer a question or research problem in each simulation.
In the AUD simulations, the infobases tested are the AICPA Professional Standards and/or the PCAOB Standards. Candidates may be required to complete one or two tasks within a given simulation. An audit simulation may include a research task to solve a case by finding a rule or rules from the auditing standards. An audit simulation may also require the candidate to copy up to ten paragraphs from the auditing standards for a reporting requirement.
In the REG simulations, research skills are tested in the tax area. The literature accessed in the REG simulations may include the Internal Revenue Tax Code and/or Publication 17 published by the US Department of Treasury. For REG, candidates will be required to find the applicable code section. Publication 17 may be required to complete a tax return.
STUDYING RESEARCH FOR THE CPA EXAM
It is important to outline a reasonable set of goals in preparing for the research component on the CPA exam. A candidate should develop a quick study strategy for attaining these goals. First, a candidate must become familiar with the commercial infobases or the hard copy of the professional literature. Second, it is essential to link this knowledge to already existing technical knowledge. Finally, every candidate must learn to use the interface of the CPA exam. Knowing the interface and search commands will save valuable time on the CPA exam.
As you study, think strategically about which questions are most likely to be asked. The current CPA exam does not require that you solve a challenging or complex case; the exam requires that you solve a minicase by locating a specific definition or rule in the literature. Keep in mind: The exam will not ask for a candidate''s opinion; it will ask a research question that has one correct answer.
Many candidates believe they can rely on keyword searches during the exam. The problem with keyword searches is that they produce too many results to sort through and read during the exam''s limited time. Therefore, success on the research component is more likely if one is familiar with certain standards, and the researcher knows approximately where to look for the answer. This text will explore the overview and organization of the authoritative literature for FAR, AUD, and REG so that candidates have a good understanding of where certain information is located in the literature.
For the financial accounting standards, the text will take an historical perspective to look at the pronouncements. It is easier to find information if you have an overview of when certain standards were issued, and when certain topics were hot issues in the business environment. This book will also look at the structure of the different accounting pronouncements. Knowing the structure of the standard is important for moving through the pronouncement quickly.
Finally, this text will give special attention to vocabulary. Candidates can capitalize on knowing certain accounting jargon that may help find the answer quickly. Practicing research skills will also help strengthen a candidate''s knowledge of the various accounting topics. Therefore, studying research is great for preparing for the exam!
OBTAINING THE AUTHORITATIVE LITERATURE
Financial Accounting and Reporting Literature
The financial accounting and reporting literature is the property of the Financial Accounting Standards Board (FASB). The FASB posts the Statements of Financial Accounting Standards online at www.fasb.org. Although these pronouncements can be downloaded in .pdf format, the original pronouncements have not been updated to show amended or superseded materials. In addition, the FASB Statements are not formatted in a way that allows keyword searches. Although the FASB Web site''s .pdf files are helpful in learning a new pronouncement, the site is not the optimal location for studying amended or updated material for the CPA exam.
The updated version of the FASB''s literature is published by John Wiley & Sons, Inc. The Original Pronouncements as Amended and the Current Text are available in hard copy format and can be ordered from any bookstore. In addition, two electronic versions of the standards are available. These electronic versions are referred to as infobases because they are a database of information.
One version of the electronic infobase is a CD-ROM product titled Financial Accounting Research System (FARS). The FARS CD product uses a Folio search engine. Although the search program is loaded on the computer''s hard drive, the FARS CD must remain in the CD drive to access the infobase. The FARS CD is available as a stand-alone product directly through John Wiley & Sons, Inc. at www.wiley.com. To find the CD-ROM product on the Wiley Web site, type in capital letters FARS CD and look for the 2007 edition. The CD can also be ordered from www.amazon.com. Generally, the new version of the CD is available in August, and it costs approximately $35 before taxes, shipping, or handling charges. The 2007 edition is current through June 1, 2007, and contains all the FASB pronouncements through FAS 159.
The other electronic version of the financial accounting literature is an infobase called FARS Online. FARS Online is available for use with a one-year subscription from John Wiley & Sons, Inc. FARS Online subscriptions are listed with Wiley''s Higher Education Division. Go to the Web page www.wiley.com/college/farsonline and follow the instructions to subscribe. FARS Online can also be found at http://he-cda.wiley.com. As of November 1, 2007, the subscription rate for FARS Online is $29.95 for 12 months.
Although FARS Online contains the same information as the FARS CD-ROM product, the FARS Online search engine, menus, and commands look slightly different. The best feature of FARS Online is that its menus and commands are similar to the interface used on the CPA exam.
FARS BOOK, CD, OR FARS ONLINE-WHICH IS BEST?
Many people ask, "Which version of FARS is best?" The answer to that question depends on personal preference and the kind of work being done. For me, all three versions work because I love to do research.
The paperback books work well for writing class materials and casually reading the standards. It also provides a topical index in the back of the book. The book indicates superseded material by shading the text in gray. The book also identifies amended material by incorporating the new material into the appropriate standard with underlining or special notation. The paperback is excellent for reading the standard from front to back and high-lighting important information.
For research purposes, the FARS CD is more efficient than the paperback version. The FARS CD provides a Folio search engine that is powerful and fast. The FARS executable program loads onto the hard drive of a computer, and the FARS CD must be in the CD drive to access the infobases. The FARS CD does not require an Internet connection. The CD-ROM product is perfect for learning the standards and doing professional research. One of the best features of the FARS CD is that the Folio search engine produces detailed results in chronological order. Having the results in chronological order is extremely helpful in learning the organization and content of the standards.
Of course, the FARS Online version contains the same information as the CD product, but there are three major differences. First, as its name implies, the user must be online to use FARS Online. Second, the search engine is different from the CD product. And third, the search results are presented in a different order from the results on the CD product. The FARS Online version provides results that look like Internet search results. The advanced search results are not listed in chronological order of the pronouncements. Instead, the FARS Online program prioritizes the results by an algorithm based on the relevance and frequency of key words. The results are then displayed based on the priority given by the search engine. Some researchers may find a jumbled list of results disorienting and more time-consuming to sort through. However, the important advantage to FARS Online is that its navigation and search commands are similar to the search interface on the CPA exam.
So, which version of the standards should a CPA candidate use to study for the exam? The answer to that question depends on an individual''s personal budget and access to the professional infobases at his or her university or workplace. If the university or an employer has site licenses to the infobases, use those. If not, a candidate should purchase a version of FARS to learn the infobase.
Sometimes the FARS CD is adopted with a textbook in intermediate or advanced accounting classes. If you purchased a previous version of the FARS CD in an earlier accounting class, check to see if that version has expired. If not, you can use that older version to study the standards and learn the content and organization of the standards. However, if you are using an older version of the standards, be sure to get familiar with the most recent standards before the CPA exam.
If a candidate has the extra money to buy FARS Online, then buy FARS Online. Again, the CPA exam interface is similar to the FARS Online product, and it is helpful to practice with that product before the exam. Go to he-cda-wiley.com and get online with FARS!
After a candidate is familiar with the accounting standards and the infobase, it is easy to practice with the CPA sample exam interface, located on the AICPA Web site. Keep in mind, though, that the CPA sample exam has a very limited and abbreviated version of the infobase. There are not enough standards posted on the sample exam to learn the standards. The CPA sample exam is only useful to learn how to navigate on the research component.
No matter which version of the FARS infobase a candidate uses, it is important to know the organization of the financial accounting literature. In addition, it is essential that every candidate practices on the sample exam in each research area, FAR, AUD, and REG, before sitting for the CPA exam.
Auditing and Attestation Literature
The auditing and attestation literature, AICPA Resource, is produced and copyrighted by the AICPA. Unfortunately, AICPA Resource is more costly to obtain than the FASB literature. It is available for a subscription in CD-ROM format, with quarterly updates. AICPA Resource is also available in an online subscription for AICPA members for approximately $425 per year. In addition, the AICPA Web site offers a special subscription rate to AICPA members who are CPA Candidates.
Many universities obtain a site license with quarterly updates. Also, most accounting firms subscribe to the AICPA professional literature, so many candidates have access to this infobase at their workplace. Check with your university library, computer lab, or employer to determine if the AICPA infobase is available to you without charge.
AICPA Resource can also be licensed directly from the AICPA at the AICPA Web site at www.aicpa.org. There is a special student subscription rate for student members of the AICPA. The student rate requires a candidate to join the AICPA as a student member and then subscribe to the AICPA Professional Standards for an additional fee. The membership requirements, dues, and subscription rates are posted on the AICPA Web site at www. aicpa.org.
Another source for some of the AICPA standards can be found at the Public Company Accounting Oversight Board''s Web site at www.pcaob.org. There are two sets of standards at the PCAOB Web site. The PCAOB standards are labeled as Auditing Standard No. 1, Auditing Standard No. 2, up through Auditing Standard No. 5. The PCAOB standards (AS1 to AS5) relate only to the audits of publicly traded companies. However, in 2003, the PCAOB adopted the AICPA standards as its interim standards. These interim standards are to be used until superseded or amended by newer PCAOB standards. Therefore, the PCAOB has posted the interim standards for auditing, attestation, quality control, ethics, and independence.
Please note that the interim standards posted by the PCAOB are only a portion of the AICPA Professional Standards. For example, only two ethics standards are posted, ET 100 and ET 191. The AICPA Web page indicates that the Code of Professional Conduct is numbered from ET 50 through ET 500. Although the interim standards posted at the PCAOB Web site are not a complete list of the AICPA standards, and are not in keyword searchable format, enough standards are posted to help the candidate learn the structure and organization of the AICPA standards. The interim standards are posted in a drop-down menu format similar to the table of contents used in AUD research on the CPA exam.
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Excerpted from Mastering Accounting Research for the CPA Examby Anita L. Feller Copyright © 2008 by Anita L. Feller . Excerpted by permission.
All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.
Excerpts are provided by Dial-A-Book Inc. solely for the personal use of visitors to this web site.
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