ACCOUNTING CERTIFICATION PROGRAMS
2.1 ACCOUNTING CERTIFICATION PROGRAMS
The CPA (Certified Public Accountant) exam is the grandparent of all the professional accounting examinations. Its origin was in the 1896 public accounting legislation of New York. In 1917, the American Institute of CPAs (AICPA) began to prepare and grade a uniform CPA exam. It is currently used to measure the technical competence of those applying to be licensed as CPAs in all 50 states, Guam, Puerto Rico, the Virgin Islands, the District of Columbia, and an ever-expanding list of international locations.
The CIA (Certified Internal Auditor), CMA (Certified Management Accountant), and EA (IRS Enrolled Agent) examinations are relatively new certification programs compared to the CPA. The CMA exam was first administered in 1972 and the first CIA exam in 1974. The EA exam dates back to 1959. Why were these certification programs begun? Generally, the requirements of the CPA designation instituted by the boards of accountancy (especially the necessity for public accounting experience) led to the development of the CIA and CMA programs. The EA certification was created for persons specializing in tax.
The primary purpose of professional exams is to measure the technical competence of candidates. Competence includes technical knowledge, the ability to apply such knowledge with good judgment, comprehension of professional responsibility, and ethical considerations. Additionally, the nature of these examinations (low pass rate, broad and rigorous coverage, etc.) has several important effects.
- Candidates are forced to learn all of the material that should have been presented and learned in a good accounting program.
- Relatedly, candidates must integrate the topics and concepts that are presented in individual courses in accounting education programs.
- The content of each examination provides direction to accounting education programs; i.e., what is tested on the examinations will be taught to accounting students.
Should you become certified?
Certification is important to professional accountants because it provides
- Participation in a recognized professional group
- An improved professional training program arising out of the certification program
- Recognition among peers for attaining the professional designation
- An extra credential for the employment market/career ladder
- A higher salary (CPAs may earn up to 10% more than non-CPA peers!)
- The personal satisfaction of attaining a recognized degree of competency
These reasons hold particularly true in the accounting field due to wide recognition of the CPA designation. Accountants and accounting students are often asked if they are CPAs when people learn they are accountants. Additionally, one or more designations is often required to obtain employment in the accounting field. Thus, there is considerable pressure for accountants to become certified.
A newer development is multiple certifications, which is important for the same reasons as initial certification. Accounting students and recent graduates should look ahead and obtain multiple certifications to broaden their career opportunities. The table of selected CIA, CMA, EA, and CPA examination data below provides an overview of these accounting examinations.
The content of certification examinations is specified by the respective governing boards with lists of topics to be tested. In the Gleim CIA, CMA, EA, and CPA review materials, the content tested is divided into subtopics we call study units. A study unit is a more manageable undertaking than an overall part of each exam. The listings of study units below provide an overview of the scope and content of these exams.
THE CIA EXAM
LISTING OF CIA REVIEW STUDY UNITS
Part 1: Internal Audit Basics
Part 3: Internal Audit Knowledge Elements
- Mandatory Guidance
- Independence, Objectivity, and Due Care
- Control: Types and Techniques
- Control Frameworks and Fraud
- Data Gathering and Data Analysis
- Reporting, Work Papers, and Evidence
- Risk Management
- Organizational Structure and Processes
- Business Processes and Risks
- Structural Analysis within an Industry
- Industry Evolution and Environments
- Strategic Decisions
- Organizational Behavior
- Leadership and Conflict Management
- IT Security and Application Development
- IT Systems
- IT Systems and Business Continuity
Basic and Intermediate Concepts of Financial Accounting
Advanced Concepts of Financial Accounting and Financial Statement Analysis
- Managerial Accounting I
- Managerial Accounting II
- Global Business Environment
- Legal, Economic, and Regulatory Issues
Part 2: Internal Audit Practice
- Strategic and Operational Roles of Internal Audit
- Establish Risk-Based Internal Audit Plan
- Assurance and Compliance Engagements
- Financial, Environmental, and Consulting Engagements
- Plan and Supervise Engagements
- Communicate Results and Monitor Outcomes
- Fraud Risks and Controls
According to The IIA, the CIA is a “globally accepted certification for internal auditors” through which “individuals demonstrate their competency and professionalism in the internal auditing field.” Successful candidates will have gained “educational experience, applicable knowledge, and business tools that can deliver a positive impact in any organization or business environment.”
Passing this exam validates and confirms your accounting education and professional work experience and requires your complete dedication and determination. The benefits include higher salary, increased confidence and competence, and recognition as a member of an elite group of professionals.
The CIA exam is computerized to facilitate testing. Part 1 consists of 125 multiple-choice questions and lasts 2.5 hours, while Parts 2 and 3 each contain 100 multiple-choice questions and last 2 hours.
The first two parts of the CIA exam focus on the theory and practice of internal auditing. The body of knowledge of internal auditing and the auditing skills to be tested consist of
- The typical undergraduate auditing class as represented by auditing texts
- Internal auditing textbooks
- Various IIA (Institute of Internal Auditors) pronouncements
- Reasoning ability, communications and problem-solving skills, and dealing with auditees in an audit context (i.e., the questions will cover audit topics but test audit skills)
Part 3 of the exam ensures that internal auditors are conversant with topics, methodologies, and techniques ranging from individual and organizational behavior to economics.
THE CMA EXAM
LISTING OF CMA REVIEW STUDY UNITS
Financial Reporting, Planning, Performance, and Control
External Financial Statements and Revenue Recognition
Measurement, Valuation, and Disclosure: Investments and Short-Term Items
Measurement, Valuation, and Disclosure: Long-Term Items
Cost Management Concepts
Cost Accumulation Systems
Cost Allocation Techniques
Operational Efficiency and Business Process Performance
Analysis and Forecasting Techniques
Budgeting -- Concepts, Methodologies, and Preparation
Cost and Variance Measures
Responsibility Accounting and Performance Measures
Internal Controls -- Risk and Procedures for Control
Internal Controls -- Internal Auditing and Systems Controls
Financial Decision Making
Ethics for Management Accountants
Profitability Analysis and Analytical Issues
Investment Risk and Portfolio Management
Financial Instruments and Cost of Capital
Managing Current Assets
Raising Capital, Corporate Restructuring, and International Finance
CVP Analysis and Marginal Analysis
Decision Analysis and Risk Management
The CMA exam consists of two parts: (1) Financial Reporting, Planning, Performance, and Control and (2) Financial Decision Making. Both parts consist of 100 multiple-choice questions and two 30-minute essay questions. A total of 4 hours is allowed for the completion of a part (3 hours for the multiple-choice, 1 hour for the essays).
According to the IMA, the “CMA is the advanced professional certification specifically designed to measure the accounting and financial management skills that drive business performance.”
In their Resource Guide, the ICMA explains that through the certification test, “the requirements of the CMA Program . . . recognize those who can demonstrate that they possess a sufficient degree of knowledge and skills in the areas of management accounting and financial management. In this way, the ICMA helps identify practitioners who have met certain predetermined professional standards.”
We have arranged the subject matter tested on the CMA examination into manageable study units for each part. Each part is presented in a separate book. Both of these books contain review outlines; prior CMA exam questions, answers, and answer explanations; and essay questions.
The CMA exam has broader coverage than the CPA exam in several areas. For example:
- CMA topics like risk management, finance, management, and marketing are covered lightly, if at all, on the CPA exam.
- The CMA exam focuses very heavily on internal decision making, such as special orders and capital budgeting, whereas the CPA exam is concerned with external reporting.
- The CMA exam tests business ethics but not business law.
Also, CMA questions are generally more analysis-oriented than CPA questions.
THE EA EXAM
LISTING OF EA REVIEW STUDY UNITS
Part 1: Individuals
Part 2: Businesses
- Gross Income
- Business Deductions
- Above-the-Line Deductions and Losses
- Itemized Deductions
- Filing Requirements
- Tax Credits
- Adjustments to Asset Basis and Capital Gains and Losses
- Business Property, Related Parties, and Installment Sales
- Nonrecognition Property Transactions
- Individual Retirement Accounts
- Gift Tax
- Estate Tax
- Accounting Methods and Periods
- Income and Property Transactions
- Business Expenses
- Other Deductions
- Credits, Losses, and Additional Taxes
- Contributions to a Partnership
- Partnership Operations
- Disposition of a Partner’s Interest
- Corporate Formation
- Corporate Income and Losses
- Corporate Deductions
- Corporate Distributions
- Corporate Liquidations and Redemptions
- S Corporations
- Decedent, Estate, and Trust Income Tax Returns
- Retirement Plans for Small Businesses
- Exempt Organizations
Part 3: Representation, Practices, and Procedures
- Practice before the IRS
- Tax Preparers and Penalties
- The Collection Process
- Examination of Returns and the Appeals Process
- Tax Authority
- Recordkeeping and Electronic Filing
Enrolled agents are individuals who have demonstrated special competence in tax matters and professional ethics and have been enrolled to practice before the IRS as taxpayers’ agents or legal representatives. Practice before the IRS includes all matters connected with presentations to the IRS relating to a client’s rights, privileges, and liabilities under laws or regulations administered by the IRS. Such presentations include
- Preparing and filing documents;
- Communicating with the IRS; and
- Representing a client at conferences, hearings, and meetings.
The examination covers federal taxation and tax accounting and the use of tax return forms for individuals, partnerships, corporations, trusts, estates, and gifts. It also covers ethical considerations and procedural requirements.
The exam consists of three parts, with 3.5 hours for each part (4 hours total seat time to include tutorial and survey). The questions on the examination are directed toward the tasks that enrolled agents must perform to complete and file forms and tax returns and to represent taxpayers before the Internal Revenue Service. Each part of the examination consists of 100 multiple-choice questions and covers the following tax topics:
Representation, Practices, and Procedures
THE CPA EXAM
LISTING OF CPA REVIEW STUDY UNITS
Business Environment and Concepts
- Corporate Governance
- Financial Risk Management
- Forecasting Analysis
- Corporate Capital Structure
- Working Capital
- Short-Term Financing and Capital Budgeting I
- Capital Budgeting II and Corporate Performance
- IT Roles, Systems, and Processing
- IT Software, Data, and Contingency Planning
- IT Networks and Electronic Commerce
- IT Security and Controls
- Strategic Planning and Budgeting Concepts
- Budget Components
- Performance Measurement and Process Management
- Costing Fundamentals
- Costing Techniques
- Costing Systems and Variance Analysis
- Ethics and Professional Responsibilities
- CPAs and the Law
- Individual Taxation and Gross Income
- Self Employment, Farming, and Adjustments
- Deductions from AGI, Credits, AMT, and Limitations
- Property Transactions
- Corporate Taxable Income
- Corporate Tax Computations
- Corporate Tax Special Topics
- S Corporations
- Partnerships and Exempt Organizations
- Estates, Trusts, and Wealth Transfer Taxes
- Federal Tax Legislation, Procedures, Planning, and Accounting
- Noncorporate Business Entities
- Agency and Regulation
- Sales and Secured Transactions
- Negotiable Instruments and Documents
- Debtor-Creditor Relationships
Auditing and Attestation
Financial Accounting and Reporting
- Engagement Responsibilities
- Professional Responsibilities
- Planning and Risk Assessment
- Strategic Planning Issues
- Internal Control Concepts and Information Technology
- Internal Control – Sales-Receivables-Cash Receipts Cycle
- Internal Control – Purchases, Payroll, and Other Cycles
- Responses to Assessed Risks
- Internal Control Communications and Reports
- Evidence – Objectives and Nature
- Evidence – The Sales-Receivables-Cash Cycle
- Evidence – The Purchases-Payables-Inventory Cycle
- Evidence – Other Assets, Liabilities, and Equities
- Evidence – Key Considerations
- Evidence – Sampling
- Reports – Opinions and Disclaimers
- Reports – Other Modifications
- Related Reporting Topics
- Review, Compilation, and Attestation Engagements
- Governmental Audits
- The Financial Reporting Environment
- Financial Statements
- Income Statement Items
- Financial Statement Disclosure
- Cash and Investments
- Property, Plant, Equipment, and Depletable Resources
- Intangible Assets and Other Capitalization Issues
- Payables and Taxes
- Employee Benefits
- Noncurrent Liabilities
- Leases and Contingencies
- Business Combinations and Consolidated Financial Reporting
- Derivatives, Hedging, and Other Topics
- Statement of Cash Flows
- Governmental Accounting
- Governmental Reporting
- Not-for-Profit Concepts
The CPA examination is designed to measure professional competence in auditing, business law, taxation, accounting, and related business topics, including
- The command of adequate technical knowledge
- The ability to apply such knowledge skillfully and with good judgment
- An understanding of professional responsibilities
Passing this exam validates and confirms your professional accounting education and requires your complete dedication and determination. The benefits include higher salary, increased confidence and competence, and recognition as a member of an elite group of professionals.
The CPA exam is administered the first 2 months of every calendar quarter (i.e., January/February, April/May, July/August, and October/November) at Prometric testing centers throughout the U.S. and at select international locations. The exam is divided into four sections: Auditing and Attestation (AUD), Business Environment and Concepts (BEC), Financial Accounting and Reporting (FAR), and Regulation (REG). Each section consists of a series of testlets.
You will have three multiple-choice testlets followed by one task-based simulation testlet in Auditing, Financial, and Regulation. For Business, you will have three testlets of multiple choice and one testlet with written communication essays.
- Multiple-choice testlets: There will be three groups of 30 multiple-choice questions given as testlets on Auditing and Financial. On Business and Regulation, there will be 24 instead of 30 multiple-choice questions.
- Task-based simulation testlets: Auditing, Financial, and Regulation will each have six or seven task-based simulations. These simulations will account for 40% of the grade in each exam section.
- Written communication testlets: Business will have one written communication testlet with three essay questions (two graded, one pretest). These questions will account for 15% of the total grade on this section.
STEPS TO PASSING CERTIFICATION EXAMS
- Become knowledgeable about the exam you will be taking, and determine which part you will take first.
- Purchase the complete Gleim Review System to thoroughly prepare yourself. Commit to systematic preparation for the exam as described in our review materials.
- Communicate with your Personal Counselor to design a study plan that meets your needs. Call (888) 874-5346 ext. 498 or email email@example.com.
- Apply for membership in the exam’s governing body and/or in the certification program as required.
- Register online to take the desired part of the exam.
- Schedule your test with the testing center in the location of your choice.
- Work systematically through each study unit in the Gleim Review System.
- Sit for and PASS the exam while you are in control. Gleim guarantees success!
- Email or call Gleim with your comments on our study materials and how well they prepared you for the exam.
Enjoy your career, pursue multiple certifications (CIA, CPA, EA, CMA, etc.), and recommend Gleim to others who are also taking these exams. Once you are certified, stay up-to-date on your Continuing Professional Education requirements with Gleim CPE.