CPA FAR Exam | Exam Format, Tips and How to Pass

With its primary focus being financial accounting and reporting, several topics and concepts covered on the FAR CPA exam carry over nicely to the AUD CPA exam. Many candidates choose to take FAR before sitting for AUD, an approach I recommend as well.

For this post, I’ve compiled everything you need to know about the FAR CPA exam, including the content covered, the format and structure of the exam, the types of questions you’ll see, time management and other helpful tips you’ll need to knock the FAR exam out of the park on your FIRST TRY! Let’s dive in!

FAR CPA Exam Topics and Skills Tested

Which Topics are Tested on the FAR CPA Exam?

The FAR CPA exam covers four key financial accounting concepts, referred to as “content areas”, as follows:

1. Conceptual Framework, Standard-Setting and Financial Reporting (25-35%)
2. Select Financial Statement Accounts (30-40%)
3. Select Transactions (20-30%)
4. State and Local Governments (5-15%)

With 85-95% of the exam content coming from Areas 1 – 3, it’s tempting to overlook the State and Local Governmental accounting content. Don’t let this be you! The Governmental accounting tends to trip up candidates and can easily be the difference between passing and failing!

To learn more about these content areas check out the CPA exam blueprints for yourself.

What CPA Exam Skills are Tested on FAR?

The CPA exam also tests range of higher order skills as opposed to simple memorization of facts and rules. There are three skill levels tested on the FAR CPA exam, as follows:

As of July 1, 2021 the skill-level weightings for the FAR CPA exam are:

• Evaluation – 0%
• Analysis – 25-35%
• Application – 50-60%
• Remembering and Understanding – 10-20%

FAR CPA Exam Question Types

You’ll see two types of questions on the FAR CPA exam:

1. Multiple-choice questions, and
2. Task-based simulations

While each question type is graded slightly differently (more on this below), MCQs and TBSs each make up 50% of your overall FAR exam score, so you’ll want to prepare thoroughly for each type of exam question.

FAR CPA Exam Format and Structure

The FAR CPA exam consists of 5 testlets. The first 2 testlets include a total of 66 multiple-choice questions while the remaining 3 testlets include a total of 8 task-based simulations. See below for how the FAR CPA exam is structured:

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FAR CPA Exam Testing Process

FAR Testlet Selection

The CPA exam uses a multi-stage adaptive testing approach for all of their multiple-choice testlets, which means your performance on the first MCQ testlet impacts the difficulty level of questions you’ll see on the second testlet.

Here’s an illustration of how this model works in practice:

Source: AICPA

As noted above, the first MCQ testlet will always be rated as “medium” difficulty, whereas the second MCQ testlet will be rated “difficult” or “medium” based on your testlet 1 performance. Also, the multi-stage adaptive testing approach only applies to the MCQ testlets and not the TBS simulations. The AICPA establishes the difficulty of task-based simulation testlets ahead of time so all of the TBS testlets will be the same difficulty level.

Operational vs. Pretest Questions

Another interesting aspect of the CPA exam is their use of “pretest” questions during the CPA exam. While most of the questions and simulations on the CPA exam are “operational” and count towards your exam grade, the AICPA also includes a handful of “pretest” questions on each exam that DO NOT count towards your exam score.

Why does the AICPA do this?

The AICPA is constantly developing new questions to keep up with new laws and accounting rules and needs a reliable way to determine whether new questions are fairly written or need improvement. Including these “pretest” questions within the live CPA exam and seeing how candidates perform allows them to gauge whether these new questions are too easy or too difficult. Questions and simulations that pass a successful “pretest” trial period will eventually become “operational” questions on future exams.

How Long is the FAR CPA Exam?

The FAR CPA exam is 4 hours long, with an optional 15-minute break between the third and fourth testlets that doesn’t count towards your exam time. You can take a break at any other point during the exam, but the clock will be running!

FAR CPA Exam Grading

How is the FAR CPA Exam Graded?

There’s a lot of confusion around how the CPA exam is graded so hopefully I can clear things up.

While MCQs and TBSs each make up 50% of your overall FAR CPA exam grade, your final score isn’t simply the percentage of each question type you answered correctly. Here’s how each type of question is scored:

FAR Multiple-Choice Questions

MCQs are graded as pass-fail, meaning there’s only 1 correct or “best” answer for each question and 3 incorrect ones. There’s no opportunity for partial credit on MCQs and no penalty for incorrect answers.

Due to the multi-stage adaptive approach on the MCQ testlets, your MCQ score depends on whether your second testlet was “difficult” or “medium” difficulty. In other words, MCQs from the “difficult” testlets are worth more than MCQs from “medium” difficulty” testlets when it comes to calculating your exam score.

That doesn’t mean one type of MCQ testlet is better than the other though. Mathematically speaking, you’re likely to get fewer “difficult” MCQs correct than “moderate” ones, so don’t worry if you think your second MCQ testlet is only a “medium” difficulty.

Many candidates get flustered on exam day because they think they did poorly on the first MCQ testlet, which ends up affecting their performance on later testlets. Don’t let this happen to you! Instead, keep a level head throughout the exam and just take whatever questions the exam throws your way.

Also, remember that the FAR exam includes several pretest questions that don’t count towards your exam grade. If you’re caught off guard by several questions and feel like you’re bombing the exam, chances are they’re just pretest questions and they won’t impact your score.

FAR Task-Based Simulations

TBSs don’t vary in difficulty like the MCQs, so each one is scored equally. Also, one TBS is a pretest simulation and doesn’t count towards your exam grade.

Given how the TBSs are structured you have the opportunity to earn partial credit on non-research TBSs, so try to follow the same advice here and answer each one completely and as best as you can, even if you’re unsure of the answer.

What is a Passing Score on the FAR CPA Exam?

As with all CPA exam sections, a passing score for FAR is 75.

Is the CPA Exam Graded on a Curve?

No. All grading for the FAR CPA exam is performed electronically and automatically based on the weightings of the operational exam questions. There’s no bell curve or any other type of curve applied to the exam results.

FAR CPA Exam Tips

What are the FAR CPA Exam Pass Rates?

FAR has fairly consistent pass rate of 40-50%, making it historically the lowest pass rate among the four CPA exam sections.

How Much Do I Need to Study for FAR?

I’ve written a whole separate article on this topic, but the TL:DR is this:

Most candidates should plan to spend at least 100-120 hours studying for FAR. Assuming you study ~15 hours each week, this translates to roughly 6-10 weeks of studying.

If you have work experience in corporate account or an auditor then you may be on the lower end of this spectrum. Either way, FAR tends to take the most amount of prep time out of the four exams.

FAR CPA Exam Study Tips

1. Set Aside Plenty of Time to Study – The FAR exam generally takes the most amount of time to prepare for. Most most candidates spend anywhere from 8-12 weeks preparing for the exam while working a full-time schedule. Depending how comfortable you are with the exam content going in you may need even more time than that.
2. Practice Explaining Topics and Rules Out Loud – Many accounting rules and standards are logical and make perfect sense when you’re watching a lecture or reading the text, the challenge comes once you need to recall them in an exam environment. Practice your recall of the material by explaining the concepts out loud like a teacher would, and pay attention to any areas where you struggle to do so. This often means you more studying to do on these topics.
3. Practice T-Accounts and Recording Journal Entries  – Journal entries are foundational to financial reporting and tell the story of what transactions took place during the period being presented. The FAR exam tests your knowledge of what the proper accounting treatment should be, so understanding transactions at the journal entry level will be the best way to make sure you can answer the exam questions correctly.
4. Take Frequent Progress Quizzes – FAR covers so much material that it’s easy to lose your edge on topics you studied just a few weeks prior. Try to dedicate 1 study session each week to taking a progress quiz and brushing up on any topics where your performance dropped.
5. Crush as Many MCQs as Possible – MCQs are the quickest and most efficient way to test your knowledge of the material. Make it a habit to incorporate MCQs into most if not all of your study sessions and take the time to understand the explanations for your answers, especially the incorrect ones!

How to Avoid Failing the FAR CPA Exam

There are lots of reasons why people fail FAR, but here are a few pitfalls you should avoid if you want to pass the FAR exam:

1. Study Inconsistently or Only When It’s Convenient –  Consistency is critical to effectively studying for FAR. It’s hard enough to add studying on top of a busy work schedule, the last thing you can afford is to waste time going back through lessons and topics just because you decided to take a week off.  Yes, studying becomes tedious and you’ll need to schedule in breaks to re-charge, but taking more than 2 days off between study sessions drastically reduces your study momentum and increases the chance you’ll forget things.
2. Rely on Your Work Experience – If you’re a few years into your career then it becomes tempting to cut corners in your study sessions. Don’t fall into this trap and give FAR the respect and time that it deserves. FAR is totally manageable for anyone that studies properly, so don’t let your ego get in the way or take shortcuts when you study just because you have some work experience.
3. Hope and Pray That Difficult Topics Won’t be Tested –  It’s true, the FAR exam can’t possibly cover every single topic from the study material. Unfortunately there’s just no way to know what will be tested on exam day, so you should prepare to know every topic reasonably well.

When Should I Take FAR?

I suggest taking FAR as either your first or last exam.

Given that it covers more content than the other exams, there’s a huge advantage to taking your time with the material and PASSING before your 18-month window even starts. Remember, your 18-month window starts once you pass your first exam.

It might also be worth saving for later when you have more exam experience under your belt and can potentially afford multiple retakes without having any other exams to worry about. If you’re thinking of taking FAR last, just make sure you have at least 6-8 months left in your testing window to save enough room for a few retakes before losing credit on your earlier exams.

Who is the FAR CPA Exam Easiest For?

There’s no way around it, FAR is BEAST of an exam for almost anybody! That being said, the FAR CPA exam content may be more familiar to candidates with experience in corporate accounting or as an auditor.

Unfortunately, most candidates taking the exam don’t have more than a few years of career experience so they’ll still have to buckle down and grind through this exam!

Who is the FAR CPA Exam Hardest For?

The FAR CPA exam tends to be more difficult for candidates who struggled with their accounting courses during college and/or who fail to set aside enough time to study, as FAR generally requires the most amount of prep time among the four exam sections.

If you struggled with your accounting courses in college and/or don’t have much practical experience working as an accountant then plan to take several extra weeks to prepare for this exam and master the material.

Time Management for the FAR CPA Exam

Effective time management is a critical to passing the CPA exam, and FAR is no exception.

You only have four hours to complete all 5 testlets, so you’ll need to work through the exam at a brisk pace and not get stuck along the way, especially on the multiple-choice testlets. Trust me, not saving enough time for task-based simulations is a recipe for disaster!

Here’s how much time I recommend you spend on each testlet for FAR:

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These numbers are just my guidelines. You must complete an entire testlet before moving on to the next one, but you can complete individual questions or simulations within a testlet in any order.

To manage your time effective, aim to spend as little time as possible on the questions that you’re most confident about and more time on more difficult questions. To do this, try to stick with my four-step process:

Effective FAR MCQ Strategy

1) Carefully read each question to make sure you understand what’s being asked. To work as efficiently as possible, read last sentence first, then re-read the entire question from start to finish.

2) Make a first pass through each testlet with the goal of answering each question in 30 seconds or less.

The first testlet is at a moderate difficulty level, so if you really know the material then this will be more than enough time. If you’re unsure of the answer then flag it or leave it unanswered and move on to the next MCQ.

This approach lets you to make a first pass through the whole testlet in about 20 minutes, giving you plenty of time to go back to the more challenging MCQs.

3) Revisit and try to answer each flagged or unanswered question, this time within 1 minute. 

If you truly don’t know the material then there’s no sense in spinning your wheels, just make your best guess and move on. For any MCQs that you’re still a little uncertain of, make your best educated guess but flag the question to revisit again.

Plan to spend no more than 20 total minutes on this step. Assuming you have about 12 questions to work through here, this step should only take another 10-15 minutes.

4) Make a third and final pass through flagged or unanswered questions, giving yourself up to 2 minutes on each question if you need. 

This is when you need to wrap things up and make your best educated guess on any remaining questions in the testlet. Assuming you have 5-10 questions to work through this step can take another 10-20 minutes.

The above approach should allow you to complete each MCQ testlet in 35-50 minutes. You can then decide if you want to spend a few extra minutes revisiting and triple-checking a few MCQ answers or bank the time and move on to your next testlet.

Remember, if you perform well on the first MCQ testlet then the second MCQ testlet may be more difficult and you may need a little more time to complete it.

Effective FAR TBS Strategy

Dominate your FAR TBSs with these three simple steps:

1) Before starting the TBS testlets, note your total remaining exam time and divide it by 8. This is roughly how much time you have to complete each simulation. 

Ideally you should have at least 15 minutes for each TBS, but pan to spend a bit more time if it’s a Document Review Simulation (DRS).

2) Complete each TBS before moving on to the next one.

Unlike the MCQs, task-based simulations include several questions and calculations that revolve around an overarching scenario and fact pattern. Switching back and forth between simulations only increases the chances that you’ll mix up or forget key details.

3) As you approach your budgeted time on each TBS, assess how you’re doing and decide whether it’s worth completing or if you should make your best educated guesses and move on. 

Simulations ultimately come down to time management. The worst thing you could do on the CPA exam is spin your wheels and take time away from later simulations, so don’t be afraid to cut bait and move on if you’re starting to struggle.

Just remember to fill out the entire simulation, as there’s no penalty for incorrect answers and you may even get partial credit!

Other CPA Exam Sections

Learn more about the other CPA exam sections here:

• AUD CPA Exam
• BEC CPA Exam
• REG CPA Exam

Still Need a CPA Review Course?

Whether you’re just starting to prepare for FAR or you already took it and failed, having the right CPA review course by your side will work wonders for your exam prep.

All of the CPA prep courses featured on this site are top notch and you can pass the CPA exam with any of them. I suggest going with the one that best fits your learning style and how you learn best. Check out which CPA review course is best for you and get to cracking on FAR as soon as you can!