The 4 Sections of the CPA Exam: Core & Discipline

The Certified Public Accountant (CPA) designation represents a high standard of expertise in the accounting profession. Achieving this credential demonstrates a comprehensive understanding of accounting principles, auditing standards, business law, and taxation. The CPA Exam serves as a rigorous assessment designed to ensure individuals possess the necessary knowledge and skills to practice public accounting effectively. This challenging test is structured into four distinct sections, each focusing on different areas of accounting practice.

Auditing and Attestation (AUD)

The Auditing and Attestation (AUD) section evaluates a candidate’s understanding of auditing standards and procedures in various attestation engagements. It requires knowledge of the principles and practices governing independent financial statement audits. Candidates must comprehend the audit planning process, risk assessment, internal control evaluation, and gathering appropriate audit evidence.

Professional responsibilities, including adherence to the AICPA Code of Professional Conduct, are also covered. The exam includes engagement types beyond financial statement audits, such as reviews, compilations, and agreed-upon procedures. Candidates must also be familiar with standards issued by the Public Company Accounting Oversight Board (PCAOB) for public company audits, distinguishing them from standards applicable to private entities.

Business Environment and Concepts (BEC)

The Business Environment and Concepts (BEC) section assesses a CPA candidate’s understanding of the broader economic and business environment where accounting functions. This section covers topics from corporate governance and internal control frameworks to economic concepts relevant to business decisions. Candidates grasp principles of financial management, including capital budgeting, working capital management, and financial risk management.

Information technology forms a substantial part, focusing on its role in business operations, data management, and security. Operation management principles, such as supply chain management and process improvement, are also included. This section combines elements of business, economics, and technology, reflecting the varied knowledge needed to navigate complex organizational structures and market dynamics.

Financial Accounting and Reporting (FAR)

The Financial Accounting and Reporting (FAR) section delves deeply into U.S. Generally Accepted Accounting Principles (GAAP). This section requires a thorough understanding of financial statement preparation for various entities, including business enterprises, not-for-profit organizations, and governmental entities. Candidates must demonstrate proficiency in the recognition, measurement, valuation, and presentation of diverse financial transactions.

Key topics include complex areas such as consolidated financial statements, accounting for leases, pension accounting, and derivatives. The exam tests a candidate’s ability to apply GAAP to specific scenarios, providing the core accounting knowledge necessary for preparing and analyzing financial statements in accordance with established standards.

Regulation (REG)

The Regulation (REG) section of the CPA Exam focuses on U.S. federal taxation, business law, and professional ethics pertinent to accountants. This segment covers individual taxation, including gross income inclusions, deductions, and credits. It also examines various forms of entity taxation, such as partnerships, S corporations, and C corporations, along with the tax implications of property transactions.

The REG section is dedicated to professional ethics and responsibilities, emphasizing the CPA’s role in maintaining integrity and objectivity. Candidates must also understand relevant aspects of business law, including contracts, agency relationships, and debtor-creditor laws. This section ensures that CPAs possess the necessary legal and tax knowledge to advise clients and comply with regulatory requirements.