| Good accountants should know basic accounting | | | | Understand of exchange rate fluctuations on financial |
| debits and credits. But a CPA needs to have a | | | | position and operations. |
| broader view of business and that's why the AICPA | | | | Point out the economic circumstances giving rise to |
| along with each state Boards of Accountancy decided | | | | inflation, deflation, expansion and recession. |
| to add a new segment of the CPA exam called | | | | Determine the effect on an entity's net income and |
| Business Environment and Concepts. This section | | | | financial position from changes in supply and demand. |
| replaced in part the less relevant Business Law | | | | Understand economic events and the effect on the |
| segment. | | | | business cycle on an entity's financial position and |
| The new section tests awareness of the general | | | | business operations. |
| business environment and business constructs that | | | | Financial Management |
| exam candidates need to understand in order to | | | | The exam will test a candidate's ability to: |
| interpret the underlying business causes for and the | | | | Apply capital budgeting tools to make appropriate |
| accounting implications of business transactions. What | | | | business decisions. |
| is more, the new section tests for skills needed to | | | | Demonstrate an understanding of inventory |
| apply that awareness in performing financial statement | | | | management techniques, such as just-in-time and |
| audit and attestation work and other functions usually | | | | economic order quantity. Calculate the effective |
| performed by certified public accountants that bear on | | | | interest rate. |
| the public interest. | | | | Identify and define various business risks, such as |
| The profession accepted the need for testing in this | | | | credit risk or interest rate risk. |
| area of business knowledge because most look to | | | | Utilize capital budgeting tools such as net present value, |
| certified public accountants to interpret business | | | | internal rate of return, payback method, discounted |
| concepts. As is true for the entire CPA exam, these | | | | payback and discounted annual cash flows, including |
| concepts are tested in the context of entry-level | | | | performing calculations. |
| accountant practice. | | | | Project periodic cash flows given certain facts and |
| There are five specific areas of Business Environment | | | | circumstances. Recognize the objectives and |
| and Concepts that may be tested in detail on the CPA | | | | limitations of capital budgeting tools. Compute current |
| exam.o Business Structureso Economic concepts | | | | and working capital ratios. |
| essential to understanding the entity's business and | | | | Differentiate between and determine when |
| industryo Financial Managemento Information | | | | appropriate to use different forms of financing. |
| technology and how it affects the businesso Planning | | | | Analyze the trade-offs between risk and return. |
| and measurement | | | | Information Technology |
| Below is summary by section that a CPA candidate | | | | Each applicant will be tested on their ability to: |
| will be asked to know: | | | | Point out basic data validation or editing techniques and |
| Business Structures | | | | recognize basic security controls. Understand the role |
| A CPA examination candidate should be able to: | | | | IT plays in financial reporting systems. |
| Identify the general characteristics of various business | | | | Point out the major players involved in a disaster |
| forms such as Limited Liability Corps or Corporations. | | | | recovery plan and determine how to set one up. |
| Determine the recommended business form based on | | | | Describe & evaluate risks, limitations, and |
| given facts and circumstances. | | | | advantages of electronic commerce applications. |
| Determine income available for distribution or be able | | | | Apply the traditional concept of segregation of duties |
| to allocate profit and losses to the owners. | | | | to IT functions. |
| Identify the advantages and disadvantages of various | | | | Distinguish risks associated with the use of an |
| business forms such as S-Corps or Limited Liability | | | | electronic business information system. |
| Corps. | | | | Planning And Measurement |
| Distinguish the factors supporting a fiscal vs a calendar | | | | A CPA examination candidate should be able to: |
| year end for financial reporting and federal taxation | | | | Define and calculate joint and by-product costing, |
| purposes and List circumstances indicating when a | | | | variable and absorption costing. |
| business should be closed. | | | | Define and determine appropriate circumstances for |
| Differentiate between the rights, duties, legal obligations, | | | | using performance measures. |
| and authority of owners and that of management. | | | | Differentiate between cost-volume-profit analysis, |
| Business Economic Concepts | | | | target costing, and transfer pricing. |
| The CPA exam candidate should be able to: | | | | Perform cost-profit-volume analysis. |
| Recognize the effect of Federal Reserve Board | | | | Define and differentiate among job costing, process |
| actions on the national economy. | | | | costing, and activity-based. |
| Determine the purpose of transfer pricing. | | | | List the appropriate analytical tool in given |
| Differentiate between real, nominal, and effective | | | | circumstances. |
| interest rates. | | | | Calculate the effect of depreciation in operating and |
| Distinguish the components of the business cycle and | | | | capital budgeting. |
| recognize circumstances affecting economic cycles. | | | | Identify and calculate the components of a master |
| Recognize circumstances giving rise to changes in | | | | budget. |
| exchange rates. | | | | Define calculate, and explain budget variances. |