Certified public accountant (CPA) is a designation awarded by a state or other governmental jurisdiction to individuals to practice as a licensed certified public accountant. The candidate for the CPA must meet education, examination, and experience requirements.

Examinations were used as early as 1884 to test the qualifications of accountants and to issue certificates of proficiency upon passage of the examination. In the 1880s two competing organizations, the Institute of Accounts and the American Association of Public Accounts [the predecessor to the current American Institute of Certified Public Accountants (AICPA)] were issuing certificates based on satisfactory completion of an examination or years of experience as an account ant. Neither organization was able to effectively control the practice of accounting by nonmembers. Consequently, the two rival organizations cooperated to introduce legislation in New York to regulate the practice of public accounting. In 1896, New York State passed the first accountancy law, which required testing the qualifications of those who wished to practice as public accountants. The first examination was administered in December 1896. This led to the issuance of a state license to practice as a CPA and the emergence of accounting as a profession with education requirements, professional standards, and a code of professional ethics. Other states followed this lead, and eventually fifty-four jurisdictions in the United States (fifty states and four territories) enacted legislation requiring an examination of candidates for licensing as CPAs. The Boards of Accountancy of each jurisdiction are responsible for administering compliance with the public accountancy laws. Efforts are underway to make the requirements more uniform among the various jurisdictions. This would make it easier for a CPA to be licensed in multiple states, an important consideration in the interstate practice of public accounting.

By the 1960s, all the jurisdictions in the United States required CPA candidates to pass a Uniform CPA Examination that is prepared by the AICPA and graded by its Advisory Grading Services, a service it has provided since 1917. The objective of the examination is to provide reason able assurance to the boards that candidates passing the examination have the level of technical knowledge, skills, and abilities necessary to protect the public interest. The examination insures the public that CPAs entering the profession have met appropriate minimum requirements and that they have passed an examination that has uniform content, coverage, difficulty, and grading methodology.

THE CURRENT EXAMINATION AND REQUIREMENTS

The current examination is a two-day, fifteen and-one-half-hour examination that is given twice each year-in May and November, on a Wednesday and Thursday-in the jurisdictions using the examination. The examination is a paper-and-pencil linear examination with questions in a predetermined sequence that candidates answer manually on paper answer sheets. The questions include four-option multiple-choice questions, other objective question formats, and essay questions or problems. The examination is given and graded only in English.

The examination covers four sections:

1. Auditing (AUDIT): Generally accepted auditing standards and procedures
2. Accounting and Reporting (ARE): Federal taxation, managerial accounting, and accounting for governmental and not-for profit organizations
3. Financial Accounting and Reporting (FARE): Generally accepted accounting principles for business enterprises
4. Business Law and Professional Responsibilities (LPR): Professional responsibilities and the legal implications of business transactions as they relate to accounting and auditing

The AUDIT, FARE, and LPR sections consist of 50 to 60 percent four-option multiple-choice questions, 20 to 30 percent other objective question formats, and 20 to 30 percent essay questions or problems. The ARE section is completely objective, consisting of 50 to 60 percent four-option multiple choice questions and 40 to 50 percent other objective formats. The candidates' writing skills are evaluated in selected essay questions in the AUDIT, FARE, and LPR sections of the examination. Calculators are provided to the candidates for the ARE and FARE sections, but not the AUDIT and LPR sections, which require minimal calculations.

Since May 1996, the examination has been nondisclosed, meaning that the candidates are no longer allowed to retain or receive their question booklets after taking the examination or to reveal questions on the examination in any manner. Prior to 1996, AICPA published the complete test with the unofficial answers following each examination, and these copies were available for purchase.

In addition to the two-day examination, several jurisdictions require a separate examination in professional ethics, which is given at a different time than the certifying examination.

All jurisdictions use the same examination, but the requirements and procedures for applying to take it differ among the jurisdictions.

Candidates must complete an education requirement, which varies among the jurisdictions. Most require at least a bachelors degree with a concentration in accounting, but a majority of the jurisdictions have legislated an education requirement of at least one hundred and fifty semester hours. Normally this includes a bachelor's degree plus thirty semester hours of advanced coursework. The date when this requirement becomes effective varies among the jurisdictions. Some jurisdictions specify the number of required semester hours or courses in accounting and related business subjects. Candidates may sit for the examination in some jurisdictions before the education requirements are completed.

Other requirements for taking the examination vary among the jurisdictions as to residency, place of employment, and U.S. citizenship.

Candidates should contact the board in the jurisdiction where they plan to sit for the examination or plan to practice for the most current education, residency, and citizenship requirements as such requirements are subject to modification.

EXAMINATION ADMINISTRATION AND PREPARATION

The board of each jurisdiction is responsible for administering an examination as part of the requirements for conferring a CPA certificate. Today, all the jurisdictions use the services provided by the AICPA to prepare and grade the examination.

A Board of Examiners (BOE), a twelve-member senior committee of the AICPA, is responsible for the preparation of the examination and issuance of grades to the boards. The BOE oversees subcommittees that are responsible for each of the four examination sections. The boards, or its appointees, are responsible for administering AICPA-prepared examinations to the candidates in their jurisdiction.

The National Association of State Boards of Accountancy (NASBA), as part of its mission to assist boards in meeting their regulatory responsibilities, provides examination administration and grade-reporting services to its member boards. The CPA Examination Services Division of the NASBA administers the CPA examination for the majority of the jurisdictions. The other boards either administer the examinations or use some other service.

The Advising Grading Services of the BOE grades the examinations for all of the fifty-four boards. The objective is to grade the examination papers fairly and uniformly. Grading bases and guidelines are developed for each examination and approved by the BOE and the section subcommittees.

Each section of the examination is graded separately and reported on a scale ranging from 0 to 100 percent, with a minimum grade of 75 percent required to pass each section. The grading process may include as many as two subsequent reviews of each examination paper. A candidates who receives a passing grade on at least two sections with a minimum grade in the failed sections may receive conditional credit for the sections passed. Candidates are allowed a limited number of additional opportunities to pass the remaining sections. A candidate who does not pass the remaining sections within a specific time must retake the entire examination. Requirements for retaking the examination vary among the jurisdictions.

The grades are mailed by the boards to candidates approximately ninety days after the examination is administered, referred to as the Uniform Mailing Date. The boards may include information on how the candidate performed on each content area of the examination in a Candidate Diagnostic Report. A review of a candidate's examination papers is provided for a board that requests such a review.

The objective of the examination is to test the knowledge and skills that a candidate needs to practice as a CPA in planning and implementing a public accounting engagement. The examination requires candidates to display evaluation, judgment, presentation, and decision-making abilities related to accounting and auditing information.

The content of the four sections of the examination is based on studies of public accounting practice. Each major content area is assigned a percentage that represents the weight assigned to that topic or content area. Candidates' technical knowledge and skills are assessed in the examination's objective sections, and their writing skills are evaluated on the essay questions.

The examination questions are obtained from a number of sources, including members of the BOE, section subcommittees, in-house examination team members, practitioners, and educators. The BOE offers question writing workshops for each examination section to train practitioners and educators interested in writing examination questions.

The AICPA made the examination non disclosed beginning with the May 1996 exam, thus permitting the BOE to build a large database of examination questions. The nondisclosed nature of the exam also assists the BOE in pretesting and revising exam questions, maintaining a consistent level of difficulty, and enhancing reliability by discouraging the study of prior examinations.

At present the examination is a paper-and-pencil examination, but future examinations may be a computer-based test that a candidate would be able to take by appointment throughout the year rather than only twice a year at a set date.