One challenge for you as a CPA exam candidate is that you must switch gears as you move through the tests. With multiple-choice questions, you need to have a plan to eliminate incorrect answer choices. Writing a memo or a set of directions, on the other hand, requires you to put your thoughts in a logical order.
You may shift gears more smoothly if you know the skills you need to succeed on the exam.
Apply a body of knowledge to an accounting issue
Some questions move beyond asking you to define a concept. Simulations require you to apply a body of knowledge to an accounting issue. You’re given a variety of tools, which may include a calculator, a spreadsheet, or some authoritative literature, and you have to figure out how to use those resources to complete a task.
Every CPA must apply knowledge to a particular type of business or industry. This skill is used by a CPA firm auditing a client and by the CPA who works for a particular corporation. The exam tests your ability to assess a company’s business environment. That assessment may include the following skills:
Evaluation of a business process: In this case, evaluation means the ability to use information to understand a business process. For example, a CPA working in a manufacturing firm needs to understand the flow of manufacturing costs as a product moves through production.
Research: All CPAs must perform research from time to time. You may be asked to identify an appropriate research question to address an accounting topic. The exam may also ask you to select a key search term to pull important information from a database.
Application of technology: Today’s CPAs work with a great deal of technology. The exam requires you to perform calculations and analysis using electronic spreadsheets like Microsoft Excel. You need to apply technology to your accounting process. In addition, you’re asked how to use hardware and software to manage data.
Analysis: Accountants must be able to both create financial statements and analyze them. The exam may ask you to identify trends and patterns. You may also be asked to point out a variance. In accounting, a variance is a difference between budgeted and actual amounts.
Complex problem-solving and judgment: This question type first requires some generic problem-solving skills. You’re asked to identify a problem and then gather information to determine the best course of action. Accounting, however, requires you to apply professional skepticism, which means critically assessing any information gathered. In other words, you take a hard look at the data and then come up with a solution.
You’ll assess a variety of solutions based on their relative strengths and weaknesses. The solution you select must fit within the regulatory and ethical framework required of a CPA. All banks, for example, are required to set aside funds to pay for potential losses from loans that default. Funding this “reserve account” requires judgment and critical analysis.
Decision-making: This skill relates to problem-solving, but it includes some different factors. For example, you must consider the company’s goals as well as constraints that limit the firm’s choices, such as financial constraints or regulatory limitations. You consider alternatives and risks, and then you select the best course of action.
Organization, efficiency, and effectiveness: This is the skill of performing a task well, without wasting time or using too much of your available resources. The term organization refers to storing information so that data can be easily located. The faster you can locate information, the more efficient you become.
You need to organize tasks, deciding on an order for performing tasks and assigning each task to a particular person. You also need to prioritize tasks based on their relative importance. Any company that operates efficiently probably has an operations manual. This document, which explains how all work is performed, is a how-to manual — and it’s something that a CPA needs to create and maintain for his or her business.
Written communication
CPAs, like other business professionals, must be effective in written communication. The exam assesses your writing skills by having you write. The communication questions evaluate basic skills, such as grammar and punctuation, that are required of any effective writer. You also need to be able to organize your thoughts, so consider whether the reader can follow your argument as he or she moves through your work.
Before you start writing, jot down an outline. Consider the points you want to make and put them in a logical order. Your outline will ensure that your essay has a logical flow.
Business writing also requires some additional skills:
Providing context for your audience: You may need to explain accounting terminology to readers who aren’t accountants. On the other hand, you may need to explain jargon used by coworkers in other fields, like engineering or human resources. Your goal is to write a document that anyone within the organization can understand.
Describing data and processes: You may need to explain documents, reports, and charts. Or you may need to explain work performed by other professionals, such as outside auditors.
Recommending solutions: Accountants often write memos to explain an issue, present alternatives, and recommend a course of action. In this role, the CPA must be able to persuade the reader that the recommended solution is the best one.