Contents

Cover

Title Page

Copyright Page

Dedication

Introduction

I Understand the Frustration

It Is Mission “Possible”

How I Can Be Helpful

How You Can Be Helpful

Chapter 1: Why CPA?

What Is CPA?

Five Reasons to Become a CPA

Five More Reasons to Become a CPA for International Candidates

What Are You Waiting For?

Chapter 2: What Is the CPA Exam?

Exam Coverage

Exam Schedule and Location

Exam Qualifications

Exam-Taking Strategy

Exam Design and Navigation

After the Exam

Chapter 3: How to Get Qualified

An Overview

The Educational Requirements

The Experience Requirements

Citizenship and Residency Requirements

Taking Advantage of the Differences

Taking the Exam at International Sites: The Pros and Cons

CPA Exam Qualification Quiz

Final Thoughts

Chapter 4: Getting Ready

Budgeting

Submitting the Application

Scheduling the Exam

Travel and Accommodation

What to Bring on Exam Day

What to Expect at the Prometric Center

What to Expect after the Exam

Are You Ready?

Chapter 5: Creating a Study Plan

But I Can’t Afford to Plan. I Am So Busy!

Step 1: Aim to Complete the Exam within One Year

Step 2: Settle on the Sequence

Step 3: Estimate the Time Required for Study

Step 4: Plan to Complete Each Section in One Quarter

Step 5: Write It Down!

Chapter 6: How to Become More Efficient and Effective

Create 25 Hours in a Day

Transform Your Stress into Strength

Let’s Move On!

Chapter 7: Study Tips and Exam-Taking Strategies

Study Tips

Exam-Taking Strategies

Chapter 8: How to Overcome the Fear of Task-Based Simulations

Study Tips

Exam-Taking Strategies

Time Management

Chapter 9: How to Ace the Written Communication Tasks

What Are the Examiners Looking For?

Seven Tips for Writing Success

Seven Steps to Creating a Great Piece of Business Writing

Chapter 10: Audit and Attestation (AUD)

What Does AUD Cover?

Pass Rate History and Trend

Study Tips

Exam-Taking Strategies

Presenting the Outline

Module 1: Professional Responsibilities

Module 2: Engagement Planning and Assessing Risks

Module 3: Understanding Internal Control and Assessing Control Risk

Module 4: Responding to Risk Assessment

Module 5: Reporting

Module 6: Accounting and Review Services

Module 7: Audit Sampling

Module 8: Auditing with Technology

Reader’s Sharing

Chapter 11: Financial Accounting and Reporting (FAR)

What Does FAR Cover?

Passing Rate History and Trend

Study and Exam-Taking Tips

Presenting the Outline

Module 9: Basic Theory and Financial Reporting

Module 10: Inventory

Module 11: Fixed Assets

Module 12: Monetary Current Assets and Current Liabilities

Module 13: Present Value

Module 14: Deferred Taxes

Module 15: Stockholders’ Equity

Module 16: Investments

Module 17: Statement of Cash Flows

Module 18: Business Combinations and Consolidations

Module 19: Derivative Instruments and Hedging Activities

Module 20: Miscellaneous

Module 21: Government (State and Local) Accounting

Module 22: Not-for-Profit Accounting

Readers’ Sharing

Chapter 12: Regulation (REG)

What Does REG Cover?

Passing Rate History and Trend

Study and Exam-Taking Tips

Presenting the Outline

Module 23: Professional and Legal Responsibilities

Module 24: Federal Securities Acts

Module 25: Business Structure

Module 26: Contracts

Module 27: Sales

Module 28: Commercial Paper

Module 29: Secured Transactions

Module 30: Bankruptcy

Module 31: Debtor-Creditor Relationships

Module 32: Agency

Module 33: Regulation of Business Employment, Environment, and Antitrust

Module 34: Property

Module 35: Individual Taxation

Module 36: Transactions in Property

Module 37: Partnership Taxation

Module 38: Corporate Taxation

Module 39: Other Taxation Topics

Reader’s Sharing

Chapter 13: Business Environment and Concepts (BEC)

Passing Rate History and Trend

Study and Exam-Taking Tips

Presenting the Outline

Module 40: Corporate Governance, Internal Control, and Enterprise Risk Management

Module 41: Information Technology

Module 42: Economics, Strategy, and Globalization

Module 43: Financial Risk Management and Capital Budgeting

Module 44: Financial Management

Module 45: Performance Measures

Module 46: Cost Measurement

Module 47: Planning, Control, and Analysis

Reader’s Sharing

Chapter 14: What If I Fail?

Perform a Self-Evaluation

Review the Diagnostic Report

Recharge and Get Back the Momentum

The CPA Exam Is Not Rocket Science

Chapter 15: Final Words

Appendix A: Countdown Plans

After Getting Your NTS

One Month before the Exam

One Week before the Exam

One Day before the Exam

Appendix B: Packing for the Exam Trip

Items to Bring to the Prometric Center

Items to Bring for the Trip

Glossary

Acknowledgments

About the Author

Index

Cover image: © Jane Ng
Cover design: Wiley

Copyright © 2013 by Stephanie Ng.

Published by John Wiley & Sons Singapore Pte. Ltd.
1 Fusionopolis Walk, #07-01, Solaris South Tower, Singapore 138628

All rights reserved.

No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning, or otherwise, except as expressly permitted by law, without either the prior written permission of the Publisher, or authorization through payment of the appropriate photocopy fee to the Copyright Clearance Center. Requests for permission should be addressed to the Publisher, John Wiley & Sons Singapore Pte. Ltd., 1 Fusionopolis Walk, #07-01, Solaris South Tower, Singapore 138628, tel: 65-6643-8000, fax: 65-6643-8008, e-mail: enquiry@wiley.com.

Limit of Liability/Disclaimer of Warranty: While the publisher and author have used their best efforts in preparing this book, they make no representations or warranties with respect to the accuracy or completeness of the contents of this book and specifically disclaim any implied warranties of merchantability or fitness for a particular purpose. No warranty may be created or extended by sales representatives or written sales materials. The advice and strategies contained herein may not be suitable for your situation. You should consult with a professional where appropriate. Neither the publisher nor the author shall be liable for any damages arising herefrom.

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Library of Congress Cataloging-in-Publication Data

ISBN 9781118613221 (Paperback)
ISBN 9781118613238 (ePDF)
ISBN 9781118613245 (Mobi)
ISBN 9781118613252 (ePub)

To my parents, and Jane, John, Megan, and Max

Introduction

Dear Aspiring CPAs,

I am Stephanie and I have been running a popular CPA exam preparation site called IPassTheCPAExam.com since January 2010.

I originally set up the site to help candidates pick the most suitable CPA review course, but quickly realized that my readers were looking for something else.

They could not even get past the application. They were highly educated and successful accountants in their respective countries, but somehow, the U.S.-centric system made things very difficult.

I Understand the Frustration

Why? Because I have been there. I was an international candidate myself and spent countless hours of research to come up with a way that I thought would work, but it turned out that a new law had passed and I was back to square one.

Five weeks later when I figured out another path that looked workable for me, it was a hassle to go through the application process, such as getting the transcripts evaluated by what is known as the foreign credential evaluation agencies, and the nightmare of missing deadlines here and there . . .

I burned out before the studying began.

But I was determined to get it done—and, in fact, once I got approved for the exam, I studied hard, took the four parts in one go and passed the four sections of the exam on my first attempt (FAR: 92, REG: 84, AUD: 88, BEC: 87).

It Is Mission “Possible”

The CPA exam requirements are getting stricter since I became a CPA, but every year more than 10,000 international candidates go through the maze and get approved to sit for the exam.

If they can do it, I am sure you can, too.

How I Can Be Helpful

I have been answering readers’ questions through my site for the past three years, and I am thankful for all the email, notes, blessings, gifts (I got a gift mailed to me from Pakistan) . . . but the best part is to hear the success stories from my readers.

Hi Stephanie, I passed BEC in Jan with an 80, REG in April with a 91, and FAR in August with another 91, I scheduled AUD in 10/18, just wait for my good news! . . . and don’t forget: CPA Exam is passable! Thanks for my family and all my friends to keep me running!

—Yan Tan

(Yan passed AUD with yet another 91 in October.)

This book is an extension of what is offered on my website. You can find tips on every single step, pitfalls that you should avoid during the application process, what to expect along the way, as well as a new section on how to study for the CPA exam for candidates with an international background.

Throughout the book you can read stories of my readers in different parts of the CPA journey, from those contemplating whether to make the jump, those in the middle of studying, to those who have passed the exam and got their licenses. I hope these personal accounts make this book a more enjoyable read.

You will also find three icons that highlight the text in the form of definitions, notes, and tips.

How You Can Be Helpful

I understand that many of my readers are highly educated and experienced finance professionals in your respective countries. Being a CPA is not only about getting a better job and making more money; it is also about how you can make good use of your expertise to give back to the community.

For me, I am going to donate all the royalties from this book to two worthy causes:

CHAPTER 1

Why CPA?

First of all, I applaud your decision to take on this difficult challenge—to study for and pass the Certified Public Accountant (CPA) exam.

Everyone has a reason to become a CPA. Some aspire to become a Big 4 partner, some strive to earn recognition from peers and colleagues, while others want to enhance their credentials, or simply get a secure job that is well paid with a decent work-life balance.

Whatever your reasons might be, I can assure you that passing the CPA exam is going to be one of the most celebrated moments in your life.

What Is CPA?

CPA stands for Certified Public Accountant in the United States. It is a designation granted to individuals who pass the Uniform CPA Examination and have met the educational and working experience requirements.

In most parts of the United States, only licensed U.S. CPAs can sign audit opinions on financial statements. This statutory right differentiates U.S. CPAs from Chartered Accountants and CPAs from other countries, as well as professional designations such as Chartered Financial Analyst (CFA), Certified Management Accountants (CMA), and Certified Internal Auditor (CIA).

Unlike some other professional accounting certifications such as Association of Chartered Certified Accountants (ACCA), CPA does not have a syllabus for which candidates can sign up, take the coursework, and expect to obtain the designation on completion of the coursework.

Instead, candidates must find a way to meet the educational requirements to become eligible for the exam. We cover the educational requirements extensively in Chapter 3, “How to Get Qualified.”

Five Reasons to Become a CPA

The U.S. CPA exam is considered to be one of the most challenging with a low passing rate, yet tens of thousands of candidates jump in and take the challenge every year. Why?

Increasing Demand

After the recent corporate scandals and failures, governments and the business communities have stepped in to scrutinize the corporation, pouring considerable resources to hire and train accounting professionals.

The Sarbanes-Oxley Act is believed to have increased the demand for accountants and CPAs by double-digit percentage points. The U.S. Bureau of Labor Statistics predicts that the number of jobs for accountants and auditors “is expected to grow by 22 percent between 2008 and 2018, which is much faster than the average for all occupations.”

The constant demand for CPAs makes this an ideal profession for those looking for a stable and rewarding job.

Hi Stephanie, I am a Psychology major who just graduated from college. Starting from junior year, I decided I want to become a CPA. I wanted to be able to provide my family with financial stability after seeing the stress my family went through when my mom passed away following my dad's unemployment during my sophomore year. I wasn't able to get into the accounting minor at my school but I took an equivalent amount of accounting classes and I enjoyed them. Indeed, the knowledge I gained is very practical and I found the learning process very rewarding.

Right now, I am finishing up my last few online classes and getting ready to take the CPA exam.

—Ying

Decreasing Supply

An intriguing national survey by the American Institute of Certified Public Accountants (AICPA) shows that 75 percent of its members are retiring in 10 years. The situation in major financial hubs is equally acute: More than 50 percent of the practitioners at the New York Society of CPA are more than 50 years old. Even in academia, the supply of accounting professors is getting tight: The average age of the accounting faculty is 55; the most common age is 63.

It takes 10 to 15 years to reach the senior positions in public, governmental, and corporate accounting, so this is the time to jump in and catch this golden opportunity.

The Value of Getting Recognized

Besides the demand-supply imbalance, becoming a CPA is a personal achievement. Your family, friends, and business partners will be proud of you with this globally recognized qualification.

Becoming a CPA is also a demonstrated commitment to the accounting industry. Accounting firms and companies recognize professionals who put in the investment of time, money, and effort to achieve this goal. You will get the reward when it comes to recruiting and promotion.

Hello Stephanie. Merry Christmas! Well, almost.:) I'm writing to you because I have decided that I want to embark on this long and grueling journey towards my CPA license. I live in California, and graduated two and a half years ago. I have been working in private accounting, but feel I need my CPA license to help me move up and make more money. I feel that obtaining my CPA license will help open new opportunities or make me qualified for better paying positions.

—Edgar De La Torre

At the same time, getting the CPA designation could be a matter of survival. I got many emails from readers asking for help to pass the CPA exam as soon as possible, because they had received an ultimatum from the management to get it done. Most of these readers are seasoned finance professionals with many years of practical experience; yet for one reason or another, they procrastinate until it becomes almost too late. Learn from my readers' experience and take the exam as soon as you can.

The Door to Career Change or More Interesting Career Paths

Accounting is much more than bookkeeping and auditing. There are many interesting niches once you reach a level of expertise. Forensic accounting is an exciting field. Finance and risk management careers within biotechnology and environmental engineering are options with great potential. As the economy recovers, your CPA designation will be a valuable asset when new opportunities emerge in promising industries.

If you are looking for career change, the CPA designation can help you get into accounting even though you have no prior experience.

Hi Stephanie, my name is Donna, and I am a mere eight weeks away from completing my Master's of Science Degree in Accounting. I actually never really thought I would be interested in accounting. I obtained my Bachelor's Degree in Elementary Education way back when and taught for a few years. My husband moved around for his job (with me in tow), and after our first move I never got back into teaching. I've been in administrative roles for the last fifteen years and ended up doing some financial work in city government. I decided to utilize the city's educational assistance program to pursue my Master's Degree and decided that accounting seemed interesting (go figure . . . I usually get blank stares or comments like “Wow . . . better you than me. . . . I could never be an accountant”).

While I'm not certain where my hat will hang after I get my degree, I do know that the sky is the limit if I am able to get my CPA license. I'll be 44 this November, so I am anxious to get on the career ladder. With that being the case, my goal is to have all four sections of the exam passed successfully by the end of 2013.

—Donna

The Route to Financial Freedom

The salary range of accountants depends on education, geography, and market condition among other factors. In general, however, CPAs can expect to earn up to 10 percent more than their peers without the professional designation. If you take into account the cumulative effect as well as the potential for CPAs to get more frequent promotions, the difference can be substantial over the lifetime of your career.

You may not become a millionaire strictly as a CPA, but you will likely pay off the mortgage, retire early, and enjoy life earlier with the help of this designation.

Five More Reasons to Become a CPA for International Candidates

As an international candidate, you may have an even greater desire to obtain the U.S. CPA designation.

It Could Be Easier Than the Local CPA Exam

It may be hard to believe, but in some parts of the world, the professional accounting examination is even tougher to pass.

In China, for example, the equivalent exam administered by the Chinese Institute of Certified Public Accountants (CICPA) has a passing rate of well below 20 percent. The exam comprises seven papers with exam topics constantly changing as the local accounting and auditing standards converge with the international standards. In comparison, the U.S. version is considerably more lenient with passing rates around 50 percent.

It is interesting to note that with the growing Chinese economy, the demand for accountants is higher than in the United States: There are currently 180,000 CICPA members but the institute aims to increase this number by almost 40 percent to 250,000 by 2015.

With this extreme demand-supply imbalance, it is logical for Chinese accountants to take the U.S. CPA exam for higher success rates and speedier processes, as long as their employers recognize non-Chinese qualifications. These U.S. CPA–qualified accountants in China are in high demand in international accounting firms and multinational corporations.

It Could Take Less Time to Become a CPA

The U.S. CPA exam consists of four sections totaling 14 hours, involving multiple-choice questions, task-based simulations, and written communications. Candidates can take the sections separately or in one go. They can also sit for the exam any time during the testing windows, which are offered in the first two months of each quarter.

In other parts of the world, the equivalent professional accounting exam often consists of several papers with long calculations and essays. Each paper is offered once or twice a year. Because of the different arrangements, a U.S. CPA candidate can technically complete the exam within a few months, while the non-U.S. counterparts have no choice but to tackle each paper one at a time.

If you want to become a CPA on a fast track, this is a great reason for you to get started.

It Allows More Flexibility

As you embark on the CPA journey, you will appreciate the flexibility offered by this exam when compared to its overseas counterparts.

First of all, the exam is 100 percent computerized, which enables low-cost delivery of the exam in a more customized and user-friendly format. By scheduling the exam on any Monday to Friday (even Saturday and Sunday for some sites) during the test windows, you can set your own pace and take the exam at a time convenient for you.

The computerized format has led to the proliferation of practice test questions offered on computers. Guided review courses are available with full offerings of videos, lecture notes, and flash cards on computer and mobile devices.

The test preparation software often comes with a study planner and diagnostics to help schedule and analyze your study process in a systematic manner. This makes self-study much easier, more efficient, and more effective.

Candidates outside the United States used to have little choice when it came to CPA review courses. Nowadays, the availability of online self-study courses has created the same level playing field. With dedication and hard work, international candidates have an equal chance to successfully pass the CPA exam.

It Could Increase Your Job Mobility

Many readers of my website are chartered accountants and their memberships span many accounting professional organizations. When they realize that these qualifications cannot be fully recognized in other parts of the world and especially in the United States, they find the need to take the U.S. CPA exam.

I also have readers who are university students with the aspiration to go abroad and work in a foreign country. They have not decided on the destination but after recognizing the global acceptance of the U.S. CPA designation, they are determined to focus their efforts on the CPA exam.

The U.S. CPA Exam Is Going International

The greatest news is that the AICPA and the National Association of State Boards of Accountancy (NASBA) want you to join! The stakeholders of the CPA exam spent two years studying the international exam delivery program. In August 2011, the first international sites were open in Japan, Bahrain, Kuwait, Lebanon, and the United Arab Emirates, followed by another site in Brazil in February 2012.

U.S. citizens living abroad and citizens of the above countries can take advantage of these international testing locations. Long-term residents of Egypt, Jordan, Lebanon, Oman, Qatar, Saudi Arabia, UAE, and Yemen can take the exam in one of the Middle Eastern locations. Long-term residents of Argentina, Colombia, and Venezuela can take the exam in Brazil.

Candidates should be aware of the restrictions involved (discussed in Chapter 3) but all in all this is an excellent sign that international candidates are welcome to join the community.

What Are You Waiting For?

This is the best time to make up your mind and take up the challenge! I guide you on how to achieve this goal in the most efficient and cost-effective way in later chapters.