2021 CPA Exam Changes

The 2021 CPA exam changes are almost here! The CPA exam is constantly adapting to meet the real-world demands of the profession, and the changes coming up on July 1, 2021 do exactly that.

Since these changes will impact how you should be preparing for the CPA exam, I’ll break down the 2021 CPA exam changes by each exam section and give you my recommendation on what changes you should make to your CPA exam schedule.

Overview of CPA Exam Changes

Before we dive into each exam section, here’s a summary of major changes coming to the 2021 CPA exam.

1. Greater emphasis on business processes and IT systems

As the accounting profession becomes increasingly reliant on technology, CPAs need to understand how business processes are designed and how transactions flow through them.

As such, NEW CONTENT over these topics is being added to the AUD and BEC exams.

2. Greater need for a digital and data-driven mindset and use of data analytics

Similarly, technology is quickly enabling CPAs to analyze businesses better and faster than ever. To push the profession forward, the CPAs of the future will thus need to be comfortable with a range of digital analysis skills and tools.

As such, NEW CONTENT over these topics will be added to the AUD and BEC exams.

3. Increased emphasis on SOC 1 reports

Companies of all sizes are increasingly becoming reliant on an effective internal control environment to support the integrity of their financial statements and their audits.

As such, NEW CONTENT over these topics will be added to the AUD and BEC exams.

4. Reduced focus on several topics deemed to be less relevant to today’s CPAs

Notable topics being removed (yes, removed!) include:

  • IFRS to US GAAP differences,
  • Defined benefit pension plans
  • Derivative accounting
  • Alternative Minimum Tax (AMT)
  • Estate taxation
  • Many more

CPA Exam Changes
Celebrating CPA exam content removal like…

CPA Exam Changes by Section

2021 AUD Changes

There are 20 total changes being made to AUD

Most of the changes will remove content, but there are some additions and other revisions being made.

Here’s a rundown of what’s being added, revised, or removed altogether:

  • NEW content related to:

    • Obtaining an understanding of the IT systems used for financial reporting
    • Use of audit data analytic techniques to identify transactions that may have a higher risk of material misstatement
    • Use of automated tools and audit data analytics in audit sampling
    • Identifying data needed to complete audit data analytics and analyzing results and outputs

  • Expansion / broadening the scope of content related to:

    • Technology’s impact on an entity and its environment
    • Control environment, IT general controls and entity-level controls, Business processes and the design of internal controls, IT systems, and Implications of an entity using a service organization
    • Determining the sources of sufficient appropriate evidence and identifying procedures to validate the completeness and accuracy of data
    • The use of professional skepticism and judgment in analyzing contradictory evidence

  • Revisions to group topics related to:

    • A firm’s system of quality control of the internal audit function
    • Testing of inputs and assumptions relating to the fair value of investments

  • Removal of various content deemed less relevant than remaining AUD subject matter, including:

    • Independence rules and ethical requirements of the Government Accountability Office
    • Certain engagement level planning procedures, including:

      • Preconditions for an engagement, Communications with component auditors, Developing a detailed audit plan, Use of the internal audit function, Defining and identifying related parties, and Opening balances

    • Engagement procedures relating to:

      • Derivatives; Litigation, claims, and assessments; Assessing management’s evaluation and conclusion on an entity’s ability to continue as a going concern; Identifying the necessary written representations; Subsequently discovered facts; Preparation of draft compliance reports; and Single statements, Letters for underwriters and filings with the SEC, and Alerts that restrict the use of written communication

My Recommendation for AUD

Given all of the new content being added, I suggest you plan to sit for the AUD exam BEFORE the July 1, 2021 changes go into effect.

If you can’t take AUD before July 1, 2021, then make sure your CPA review course provides you with the necessary content updates and before scheduling the exam. That way you’ll be able to gauge how much extra study time to devote to this material.

2021 BEC Changes

There are 7 total changes being made to BEC

Here’s what’s being added, revised, or removed from BEC:

  • NEW content related to:

    • Understanding of business processes and the technology that enables those processes
    • IT and understanding the need for SOC 1 reports for outsourced IT functions
    • Data management, data governance and data relationships

  • Updates to existing topics, including:

    • Greater focus on how economics, business cycles and market influences more directly impact industries and business entities
    • Revise System Development and Maintenance content to emphasize recalling concepts related to controls over software changes
    • Revise Continuity and Recovery Plans content to emphasize business resiliency, integrated with crisis management and business continuity

  • Removal of various content deemed less relevant than the remaining BEC subject matter, including

    • Non-SOX regulatory frameworks
    • General macroeconomics
    • Capital structures

My Recommendation for BEC

Given all of the new content being added, I suggest you plan to sit for the BEC exam BEFORE the July 1, 2021 changes go into effect.

If you can’t take BEC before July 1, 2021, then make sure your CPA review course provides you with the necessary content updates and before scheduling the exam. That way you’ll be able to gauge how much extra study time to devote to this material.

2021 FAR Changes

There are 6 total changes being made to FAR

Most of these changes will REMOVE or revise content from FAR. Here’s a summary of the topics being updated or removed:

  • Updates to existing topics, including:

    • Remove Discontinued Operations as a topic and instead include it as an example to the multiple-step income statement
    • Combine various topics into a new topic titled “Fund financial statements”

  • Removal of various content deemed less relevant than the remaining FAR subject matter, including

    • Going concern
    • Statement of changes in net assets and statement of net assets available for defined benefit pension plans
    • Compensated absences
    • Retirement benefits
    • Derivatives and hedge accounting
    • US GAAP to IFRS differences
    • Government-wide financial statements

My Recommendation for FAR

Given that most of the changes to FAR will remove content and nothing is being added, I suggest you wait to sit for FAR until AFTER the July 1, 2021 changes go into effect.

2021 REG Changes

There are 7 total changes being made to REG

Most of these changes will REMOVE or revise content from REG. Here’s a summary of the topics being updated or removed:

  • Updates to existing topics, including:

    • Remove Trust income, deductions and determination of beneficiary’s taxable income as separate topic and instead focus on recalling basic concepts related to different trust types (e.g. simple and complex)

  • Removal of various content deemed less relevant than the remaining REG subject matter, including

    • Bankruptcy, solvency and secured transactions
    • Federal securities regulation
    • Estate taxation
    • Alternative Minimum Tax (AMT)
    • Operating losses and capital loss limitations
    • Obtaining and maintaining tax-exempt status

My Recommendation for REG

Given that most of the changes to REG will remove content and nothing is being added, I suggest you wait to sit for REG until AFTER the July 1, 2021 changes go into effect.

Other Changes to the 2021 CPA Exam

Aside from the changes mentioned above, the AICPA is also tweaking the target content allocations on the AUD and BEC exams, as follows:

AUD Content Weighting Changes

Impact and Section Before July 1, 2021 After July 1, 2021
Increase Area II – Assessing Risk and Developing a Planned Response 20 – 30% 25 – 35%
Decrease Area IV – Forming Conclusions and Reporting 15 –  25% 10 – 20%

AUD Skill Weighting Changes

Impact and Section Before July 1, 2021 After July 1, 2021
Increase Analysis (AN) 15 –  25% 20 – 30%
Decrease Remembering & Understanding (RU) 30 –  40% 25 – 35%

BEC Content Weighting Changes

Impact and Section Before July 1, 2021 After July 1, 2021
Increase Area I – Enterprise Risk Management, Internal Controls and Business Processes 17 – 27% 20 – 30%
Decrease Area II – Economics 17 – 27% 15 – 25%
Decrease Area III – Financial Management 11 – 21% 10 – 20%

What’s Not Changing on the 2021 CPA Exam?

The CPA exam will still consist of 4 sections (AUD, BEC, FAR and REG) with each being 4 hours in length. No changes are being made to the number of questions you’ll see on the exam or the score weighting.

As always, the CPA exam will aim to test higher-order skills such as critical thinking, problem solving, and analytical ability, among other things.

Conclusion

I hope this helps you as you prepare for the CPA exam. Even though it’s one more thing to prepare for, the upcoming CPA exam changes should be manageable. Of course if you want more details over the changes being made, be sure to check out the AICPAs new blueprints and changes yourself here.

Also, make sure your CPA review course is preparing for these changes and updating their course content be prepared on exam day.

Best of luck on the exam!

Featured image courtesy of Paul Skorupskas on Unsplash

About the author

Colin is a practicing CPA with over 14 years of experience in various accounting and finance roles. After reaching the Sr. Manager level at a Big-4 firm, he now works as a freelance consultant while helping others pass their professional exams.

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