THE SMOKE DETECTOR: Critical Thinking Part of the New CPA Exam

By Dennis Hickle posted 09-06-2016 15:13


As has been widely reported, the CPA Exam has undergone the first major revision since 2011.  The revised exam will be administered for the first time in April 2017. There was an excellent article in the September edition of the Journal of Accountancy explaining the methodology behind the process of revising the exam.

The new version of the CPA Exam will emphasize critical thinking skills. These skills will be assessed using an expanded array of task-based simulation questions. These new questions are designed to give the candidate a scenario that reflects what they might experience as a new staff accountant. They’re expected to interpret information from a variety of sources and make strategic decisions about the proper accounting treatment of activity.

These changes have been made to reflect the current expectations of new staff accountants. Interesting, an article titled “Employers Find ‘Soft Skills’ Like Critical Thinking in Short Supply" in The Wall Street Journal last week discussed just that. Two recent surveys found that employers report the lack of soft skills in candidates. Critical thinking is important because it enables CPAs and other financial professionals to add value that automation can’t replace. An executive from Robert Half was quoted as saying that “soft skills are more important than ever before at the lower end of the org chart, and that the focus is earlier on in one’s career.”

There is no disputing the fact that technology and outsourcing have changed the expectations placed on all CPAs, but even more so on new CPAs. It’s not enough for the new CPA to focus on accumulating data. Typically, the data needed to evaluate accounting activity is readily available or easily obtained using software tools. New CPAs must be able to evaluate data, assimilate information from a variety of sources, and exercise professional judgment. Traditionally this professional judgment would have been the responsibility of staff accountants with more experience.

Because the new exam reflects these expectations being placed on new staff accountants, it raises several questions concerning how you are preparing new staff.

  • How do you communicate expectations to new staff?
  • Do you tell them you expect them to use professional judgment to determine the proper course of action?
  • Do you provide new staff with example that demonstrate how professional judgment has been exercised in the past?
  • Do you provide guidance on documenting the rationale behind the decisions made by staff accountants?
  • How do you empower staff to make decisions and utilize professional judgment?

By helping new staff develop the critical thinking skills they need to effectively exercise professional judgment, you are not only making them a more valuable employee, you are also preparing them for the CPA Exam.

If you want to get familiar with the exam, the current JoA issue also includes a brief quiz about the new changes. I encourage you to test your knowledge about the new exam in order to be better prepared for the launch next spring.

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