The Certified Public Accountant exam evaluates candidates' financial acumen and analytical skills. Although CPA licensing requirements vary by state, the exam is the same throughout the United States. Licensing criteria generally include passing the exam, holding at least a bachelor's degree in business, possessing at least two years of practical experience and abiding by ethical requirements.
Financial Accounting and Reporting
The Financial Accounting and Reporting, or FARE, section of the CPA exam tests candidates' knowledge of accounting concepts and standards. These include generally accepted accounting principles and international financial reporting standards. Accounting concepts also relate to specific financial documents, such as ledgers, which are two-faceted accounting forms that bookkeepers use to debit and credit financial accounts. FARE also measures applicants' familiarity with assets, liabilities and equity capital. Assets are economic resources that an organization relies on to operate. Liabilities are debts a borrower must repay on time. Equity capital consists of investments that corporate owners, or shareholders, make in a company.
Auditing and Attestation
Auditing and Attestation ensures that future CPAs understand the professional standards that external reviewers must follow. These include generally accepted auditing standards, U.S. Securities and Exchange Commission rules and Public Company Accounting Oversight Board's directives. The Auditing and Attestation section tests applicants' knowledge of the auditing process, particularly methodologies used to plan the engagement. Equally important, this exam section makes sure candidates know test internal controls, which are directives that senior leadership puts into place to prevent irregularities and fraud in financial statements.
Regulation
The Regulation section of the CPA exam covers Internal Revenue Service rules applicable to individual and corporate taxpayers. This section also probes candidates on IRS directives related to property transactions and the responsibilities of tax professionals, such as enrolled agents. Regulation also touches on legal aspects of the CPA occupation, especially laws and regulations that affect business transactions. Specifically, this exam section covers contracts, debtor-creditor relationships and the concept of property. Candidates must also demonstrate their dexterity in topics such as the Uniform Commercial Code and government regulation of businesses.
Business Environment and Concepts
The Business Environment and Concepts, or BEC, section of the CPA exam tests candidates' familiarity with topics ranging from business structure and financial management to budgeting and cost measurement. Business structure refers to legal forms that a company selects at inception and includes partnerships, corporations, estates and trusts. Budgeting topics touch on the methods that a firm uses to rein in waste and improve corporate profitability in the long term. Financial management consists of techniques a company uses to analyze its cash needs and fund its operations.
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