Studying and Succeeding at the CPA Exam (Part 1)
In this episode, Ron Premuroso and Phil walk through a few tips on task based simulations on the CPA exam. Ron & Phil passionatly talk about their desire to aid and help students pass their exam no matter how many times they've failed. Tune in next week for the rest of the episode, critiquing the AICPA and the pep talk you didn't know you needed.
Hello, and thank you for tuning in to another episode of CPA Review and More. We are pleased to bring you the #1 podcast for CPAs and CPA candidates. If you'd like to learn more about how Yaeger CPA Review can help you, find us on our website at https://www.yaegercpareview.com. Now, here's your host, Phil Yaeger.
Hello everyone, this is Phil Yaeger, and welcome to the podcast that we do every week called CPA Review and More than CPA review. Today, because people have asked right about now the CPA exam. We're going to cover today a complete 45 minute session on different areas as far as CPA review goes.
And I'm here with Ron Premuroso. Today, Ron and I are going to be talking about various subjects, and basically it's just going to be—you know—well, we have some idea of what we want to speak about.
And actually, I'd like to just start, if I can Ron, there seems to be always a question of how does one prepare for these task-based simulations. Let's take each one of them. Auditing has task-based simulations, and I looked it up on Google, and they basically call them “case studies”.
Now, when you sign up to take the auditing part of the exam, do they give you automatic six-month access to the pronouncements?
I thought they did, but I have my doubts recently. I know they do give access for the codification for FAR so that you can practice. But if you go to the exam, there's a drop-down when you're taking the exam, which gives you access to the AICPA auditing pronouncements and the PCAOB auditing pronouncements—auditing standards they call them now.
So I'm not sure, Phil. I have to check with one of our candidates, because how would you be able to practice, for example, a simulation on the auditing exam where they're asking you to lookup in the auditing standards a standard or addressing a particular audit issue like contingencies or subsequent events or these types of things.
So to be honest, I'm not really sure. We had correspondence, right, recently from a candidate, and I don't remember if he said...
Yeah, I mean, I don't really know. Unless your working at a CPA firm where they access to the standards...
If you work for a corporation, they don't necessarily have access, so
I'm going to send a question to the AICPA. I think that's a good question, Phil. But, I would imagine they must, right, I mean you're preparing for the exam. They should give you all the resources even though it may be a little bit limited on what you can access.
Alright, well let's assume they give you access.
I think they do.
Alright, well, then how do you practice? Where do you find questions to practice?
Well, you left me a very good voicemail yesterday on this. Basically you're right, the blueprints are the source for all examination questions including on auditing. So if you were a candidate getting ready for the auditing exam, and you're a little concerned about practicing for a research simulation, I would say you go to the auditing exam and look up the blueprint items that could be construed as simulation questions where you have to look it up in the standards with keywords.
So I just gave you one example on contingencies, subsequent events, something like this. So you kind of have to mock yourself up a question. I don't think it's difficult, in my opinion, to look up a subject area using the auditing standards—either one of them, either PCAOB or AICPA. I mean, it's not going to be that difficult, okay. But, you've got to budget your time, as usual, 10 or 15 minutes is your maximum. You've got to get to your keywords quickly that you're going to look up and then you've got to formulate your response also very quickly.
There is one practice one on the practice auditing exam, Phil. So there is one there for candidates to practice on. But, in general, it's related to the blueprints.
If you go to the blueprints, how do you know that those areas are—if I go to AICPA.org and look at the ?????? blueprints for the auditing, they have captions on there—understanding, that type of thing. Which ones could be areas of task-based simulations? What's the keyword you want to look for in the blueprints to say that topic could be tested as a task-based simulation?
I don't remember what the wording is.
Yeah, I'm going there right now, Phil, to look at it. That's a good point.
Yeah, and then let's talk about the types of task-based simulations in the auditing, making ??????.
So candidates, AICPA.org is your website, and then, once you're in the homepage, you go to “career guidance”—here we go, then click “Learn about the CPA Exam” [which is at the bottom of the left-most column of the drop-down menu]. The third box down from the top is titled “CPA Exam Overview”. At the bottom-left of that box, you want to click on “CPA Exam Study Materials”—that's where you find the blueprints that Phil was just talking about. And then, [under “Exam Sections”, click to expand] “Auditing and Attestation (AUD)”, then click on “AUD Section Blueprint (effective July 1, 2019)”.
So there are four skill levels, Phil, that they're testing: evaluation, analysis, application, and remembering & understanding. My guess, as an auditing person, is that most of the simulation questions where you have to use the professional pronouncements would be either on analysis or application of those four different skill levels. It could also be evaluation, but that might be in a bigger context for a larger simulation which is not just looking up a pronouncement.
So, the types of simulations you do have in auditing is they ask you to look up the standard or the pronouncements, right?
Okay. How would you do that?
Okay, so let me give you an example. Let's assume they give you a scenario where there's an audit client who has a subsequent event after the balance sheet date, and they want you to find in the professional standards, based on the information you're given for that subsequent event, whether it requires an adjustment to the financial statements and/or it requires disclosure in the footnotes for the financial statements.
Okay, so you would then look up in the auditing pronouncements subsequent events, and then align what the auditing standards say about subsequent events to the scenario that you're given on the simulation. And once you have found the two that match it—whatever that scenario is—you would then put either the PCAOB section that addresses it or the AICPA auditing standards that addresses it.
Do they show that on the AICPA.org website?
What I just said?
They don't. Okay.
This is what I've been told by people who have taken the exam.
So once again, how do you know—or to show the student what they're looking for? Are they looking for a standard number, and then what, a paragraph sub-unit
Oh they do also.
Yup. Yes they do. They want a standard, so either a PCAOB auditing standard or an AICPA auditing standard, and they may also ask you to summarize it as part of your answer. So first you gotta get the right section of one of those two documents or things that you can look up that are right on your screen when you're taking the exam. And then they may also ask you to explain it. So that's basically it.
Alright, so that's one type of simulation. What's another type, they can ask?
The ones you'll see on the practice exams ask you to go through a series of transactions. For example, it might be inventory transactions at the end of the year that's under audit. And they'll give you FOB shipping and destination scenarios. They'll give you—for materials that the company is buying—FOB and FOB shipping scenarios. So you have revenue recognition possibilities there that you have to address. You have recording of inventory on your books. They can also then give you reconciling items between the physical inventory and the general ledger balance for inventory and test whether or not you understand when you need to make an adjustment to the books or not when the physical inventory differs from the general ledger balance for inventory.
And then they can mix those scenarios, Phil, where they report to you that there's a difference between the books and the physical inventory, but then there's another transaction in there that accounts for that and maybe you don't need to make an adjustment for it because it's already been recorded by the client in the books.
So for all of these, these are not situations where you have to look up the accounting rules or the auditing rules, right. They're asking you as an auditor, which one of these types of transactions require an adjustment to be made in the books of records—an audit adjustment—or not, based on the information that you're given.
And a lot of that you learn in financial accounting, correct?
Yes, and that's why we always strongly recommend candidates take FAR first, because you're going to get exposed to some of what I just went through in my inventory example. Then you take auditing after you pass FAR, because they feed each other.
So I would say, Phil, a lot of the sims in auditing involve concepts that the candidate has studied for to pass FAR—receivables, inventories, fixed assets, right, all of these traditional items, subsequent events, statement of cash flows, could be anything. Right, Phil?
Right. And we actually wrote the book where we're integrating the blueprints in the notes. We did take a blueprint and we tried to give an example of what that blueprint might be.
Might be, yes. And of course, we can't cover every eventuality. Right, Phil? But that's the way our books are designed. They're designed around the blueprints to give the candidate an example of what they might face when they take the exam.
How about a course that says, you're only going to pass this exam if you do thousands of multiple choice questions, hundreds of simulations that we create? Because most of those simulations that they create, they created it. It didn't come from the AICPA. And you and I know that for some reason there's a big contest there about who has the most task-based simulations.
...about who has the most multiple choice questions. And you know I personally don't think that you need to do thousands of multiple choice.
You just need to do, you know, an overall representation of the different areas. And once again, if you follow the blueprints, that is telling you what they're going to test you on.
So Phil, one of the things you and I do a good job at is we try to tell the candidate:
Listen, you go through each content section. You read it. You do the tapes. You listen to the tapes. You do the multiple choice questions. Then you honestly assess yourself and say, you know, on this topic I think I could handle it if I got it on the exam. But here are the topics I don't have, yet, the expertise to handle if it was a full-blown simulation—like business combinations, like consolidations. And then Phil, those are the ones the candidate should focus on. Okay, you gotta focus on your major weak areas.
Well, you and I have a list—right, Phil?—of the major topics in FAR (I have one in auditing) where you just have to know certain materials because there is a high probability it's going to be on the exam, and it's going to be a simulation question. And if you're totally unfamiliar with it or you don't have any confidence going into that sim, you know, you're going to be in trouble. Because you don't want to get a zero, right, on a simulation question. That's a disaster on the exam.
I think you and I, our philosophy of people teaching the CPA review is: they should know how to teach CPA review.
It's not college teaching.
And college teaching is different. And then these courses say, “just memorize things—memorize, memorize, memorize”. Where Mike Decker (the executive director) says, “We want you to understand what's going on”.
Alright, now, I think there are certain areas you do have to memorize. Don't you have to memorize the audit report, how it might look? Is that still necessary to memorize?
No, no, no. They've taken that out, thank god. But you have to know, especially for the newly designed report, that there are certain sections now that address audit procedures specifically and material weaknesses and internal controls.
What is your famous—the OWNS criteria, right?
Right. For the leases.
For leases—that, right Phil, you should go in with that on the tip of your tongue.
And in our materials, you have designed that, right, into a number of the different areas...
Oh, most definitely. Yes, yes.
It's not a lot of it, but some of that. But those courses that say you have to memorize everything: it's not going to help you when they give you a question on the exam or a sim that really tests your understanding and application of the problem. That's not going to help you: memorization. It will help you to a certain extent, but I don't think it's going to get you through the entire exam.
And one of the things our competitors try to do is to say, “Hey, we have great people teaching. They teach the CPA review. They know it.” And you know what, I find out that the people who are supposedly teaching, they don't know the first thing about the exam.
And a lot of times, the support lines that these courses say they have people answering questions: they're not even manned by an accountant.
Because, you know, it's unfortunate that all we care about today in this society—and not what I believe in—is let's see how we can make the quick buck off of the students.
And you know, it just really angers me, because the students, for some reason, don't see that. Do you think they're naive? I don't know what it is. I mean, if you fail the exam, and you need to go over certain topics—it's amazing—these students blame themselves!
If you point it out to them that, hey, you have to study the blueprints. Often, they don't even know what the blueprints are. You say, “Did you study the blueprints?”, and they respond, “What are the blueprints?”. Every time I hear that, it just gets me so angry. What gets me angry is that these competitors of ours don't even mention the blueprints. And people keep coming back to them, thinking, “Oh, I just didn't study enough. I'm going to use the same materials over and over and over”.
Now I grant you, we're in a really bad pandemic here. And last night I was hearing about the stock markets coming down.
You know, all this positive news...
People are starting to become afraid of spending, but you have to decide: can you afford a CPA review course if money is becoming an issue? The answer is: yes, you can.
Because a lot of you out there, you go and spend on these other courses one thousand, three thousand dollars, and then, when the time is up, you buy them again. You keep renewing them, and I don't understand you. Come on. I try to be an advocate for the students and sometimes it's very frustrating when you say to them, “Why are you paying $500 to renew this course that you've taken three times?” And they just say, well, I didn't study enough. And I'll say, “You studied probably, but you didn't study the right material”.
We try to tell the people what to look at. You are a pigeon, as far as I'm concerned.
There's a whole bunch of pigeons: the CPA candidates. And the minute one of our competitors sees, “hey, this is a good pigeon”, they take out their ????? and they go after you. Please, we have courses and I want people to be able to take them, and I will do anything—we'll put you on a payment plan that works for you. Hey, I've always believed this: there's more to life than actually robbing people, okay.
I guess some people can sleep at night, even though they are the way they are. And I know you [Ron] really want to help people.
How can you get the message across if the organization that we actually get our certificate—to whom we pay dues—is from the AICPA, and their answer is, “Well, we can't get involved with being an advocate for the students”?
I'm trying to think—I mean I'm not a lawyer—but isn't the American Bar Association an advocate for the people taking the bar exam?
Yeah, I think so in general, but Phil, let me also point out that no matter who wins the presidential election coming up, the demand for accountants is not going to decline next year. If Trump wins there's going to be revisions in the tax area. If Biden wins there's going to be revisions in the tax area. So the demand for Certified Public Accountants is not going to decline, Phil, in the next year. As a matter of fact, everything I'm reading says it's increasing still, as of today.
So, for the candidates listening to this, you need to dedicate your time and effort now to passing the exam. Next July, there could be the implementation of a lot of new blueprints on the exam, which is only going to expand all of the studying that you need to do to pass it.
And as Phil mentioned earlier, the AICPA is getting ready for a massive revision to the exam in a couple of years, and you don't want to get caught up in that either.
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ease rate and review on iTunes or your preferred listening platform.
Again, thank you so much for listening, and we look forward to you tuning in next time.