 Hello, and welcome to the session in which I will discuss CPA exam changes. First, I'm gonna discuss why those CPA exam changes are important. And the reason I do this is because you need to know this as a future accountant, as a future CPA, you need to know why the CPA exam is changing. It's gonna affect you as much as it's gonna be affecting the AI CPA and NASBA. But before we start, I would like to tell you about my website if you are a CPA candidate. And obviously you are either a CPA candidate or a potential CPA candidate down the road. Please check out my website, farhatlectures.com. What I do is I help you prepare for the CPA exam. No, I don't replace your CPA review course. I can't, I cannot replace them. I don't have that capability. I am a useful addition to your CPA review course. Think of my material as a vitamin pill that's going to add 10 to 15 points to your CPA exam. And here's the risk. If you are taking the CPA exam, why don't you check out my website? 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You can connect with me on Instagram and Facebook. So let's talk about why the exam changes are taking place. Well, hopefully this is no surprise for you. The AI CPA is at the end of the day, it's a business and a business will need to stay relevant. What happened if you're not relevant? If you're not relevant, you lose your ability to influence anything. You lose your income ability. So because of technology changes, they need to change the exam. Otherwise, maybe another profession, who knows who maybe one of their competitors will come in and they will give potential candidate an exam that's gonna make them more relevant to the workplace. Therefore, there are new demand for services, especially in technology in terms of type and delivery, like cybersecurity, software functionality, social media, deep fakes, continuous reporting, business intelligence, et cetera. And a lot of the services that we used to do as accountant and CPA are now automated. A classic example will be confirmation of a count receivable and bank balances. Back in the old days, when I was in practice, I will need to literally have an envelope, have a piece of paper, take the paper, fold it, put it in the envelope, seal the envelope, put a stamp on it, take it to the mailbox to mail those confirmation. Those confirmation are now automated, okay? Also, you don't need to write a complete contract. Maybe the software now can read the contract for you and kind of focus on certain keywords. You have data analytics, machine learning, et cetera. So the exam is not the exam. The environment is changing. Therefore, the exam will have to keep up with the environment. And by the way, if you go to all this information, most of the information from this recording is from the evolution of CPA.org, just FYI. But the most threatening piece of information for the AI CPA and NASBA is this graph here. It's from the AI CPA trends and hiring. And here's what this trend is showing. Notice this is the non-accounting line. And I believe this is 2007, yeah, 2007. 2007 through 2018. So this is 2007 and this is 2018. So notice what's happening to this trend line. This trend line is trending upward. This line is trending upward. What does that mean? It means CPA firm are hiring, the same amount of hiring throughout this period. However, they're hiring non-accounting students and they're hiring less. And notice what's happening to the non-accounting line. And notice what's happening to especially the masters. That's why I don't suggest people go for their masters. And that's the reason why they're hiring less masters, as students with masters degree in accountancy. Bachelors are less as well in comparison to non-accountant. So the point is they're hiring non-accountant. And why? Although overall hiring is the same. Maybe accounting firm are looking for new sets of skills like data science analytics, people that knows about the internet of things, social media, cybersecurity, I'm not really sure. But there's, I mean, we know why, but the point is they're non-accountant, okay? So accounting graduate, they need new skills to stay relevant. How do they get those skills? Well, through education and from the education through the CPA exam, you will be tested on those skills. So expect in the next two to three years at accounting education to change. And it's starting to change. Most likely your accounting program now they have a data analytics course and maybe they will have two of them down the road. So maybe we're gonna be teaching cybersecurity as it relate to accounting and finance. Right now I am taking myself a CPA course with the AI CPA about cybersecurity. So the environment is changing. Therefore the exam will have to change. And if it does not change, think about it. Let's assume the CPA does not change. Maybe another professional organization will introduce an exam that's more relevant. And rather than taking the CPA you will be taking that other exam. And this is the fear that the AI CPA and NASBA want to avoid. They don't want to lose their relevancy because at the end of the day they are businesses. They want to make money just like every one of us. Okay, so they floated the idea early on maybe not early January, 2018, maybe a little bit earlier and they send this information to various stakeholders and they receive 3000 plus feedback from state CPA societies, board of accountancies, general membership, I have a membership, I'm a college professor, federal regulators, students. They also survey students, CPA firms, large and small, technology expert, committees, not committed, young professionals and others. And what they did, they asked them what do you think we should change? What do you, if any? Well, what was the responses? So the responses, why do we need to change? The first thing the emphasis was on technology. You need new candidate that are comfortable and competent with technology. Those are basically the new skills. But all the feedback, they still said the core should stay the same. So we should still teach tax audit and accounting. That does not change. The only thing we're gonna be adding is something to do with technology about the core. And we're gonna talk about the CPA format in a moment. This is not the new format. This is just basically an idea about it. So what's happening is the body of knowledge is growing and accounting in terms of accounting, auditing standards, accounting standards, IRS code, traditional services like manual check-in-off invoices, footing and cross-footing are either automated, offshore or done by a paraprofessional. Therefore, CPA don't need to have skills in those areas. Now they need skills in critical thinking, in technology, they need to use judgment, professional skepticism and that's gonna, that's happening earlier in their career than later on. Now, staff accountant are expected to solve problems rather than doing manual work because the manual work either done by the computer or by someone who's a paraprofessional, okay? No basic tasks is needed. And this is what the CPA exam was preparing and college education was preparing students to do, okay? So that's why it's important. However, the CPA exam did not change to keep up with all these demands. So that's why the exam is changing. So when the exam was changing, they discuss few options. I'm gonna go over these options very quickly just to kind of let you know that they did not just selected one thing. One of the things that they thought about doing is covering more material, less in depth. The idea was rejected because if you cover more material and less in depth, you water down the knowledge. So you're not good at anything. So this idea was out because it didn't really give you any specialty. Another option was the fifth, add a fifth section or require more education. I remember when I was in my PICPA meeting, I rejected this idea strongly because it's a slippery slope because if you keep on adding more sections then two, three years down the road or five years down the road, you're gonna have more information than what will you do? Would you have a sixth section now? And it will increase the barrier to entry. Now the fifth section, it's taken longer people to complete the exam. You need more education. The cost of getting the licenses will go up and it would reduce the CPA pipeline. Less people will be interested and willing to go for their CPA. Therefore, this option was out. Special certification, for example, you're a CPA but you only specialize in tax. You're a CPA but you only specialize in audit. That idea was rejected because it split the profession. They wanted one CPA designation for all. They wanted to follow an international model which is called the ACCA model. It's another international certification and you'll have basically two-tire model. Basically like a full person, like have a full certification and another person that's ACCA but it's not specialized. Also, they don't want to do two-tire basically a form of discrimination in a sense. One is a higher than the other. Therefore, the idea was out. They thought about following other profession like the law or medicine. Again, you need more education. It was a barrier to entry because if you want to study law, you have to go to law school. Well, we don't want to have something like law school for accounting. So that's why. Other models like the engineering model was the closest but we're gonna talk about the new model in a moment. So the point I'm trying to make is the idea was discussed in depth and I still remember when I rejected the fifth section because that was my rejection because when it was brought up, I said, no, that's not a good idea. Not a good idea at all. I believe, I believe your fifth section is your first year as an accountant. Your first year, when you work that first year, that's really whether you pass that first year or not. That's your fifth section, okay? That was my argument. That if you pass that your first year of staff accountant and you do well, you passed your fifth part of the exam. So this is the new model, by the way. The new model is composed of a core section. Notice the core section here and a specialized section. So a core section and a specialized section. Why this model? We still need to teach the old knowledge. So accounting, audit and tax, we still need to teach that core model. Well, we add to the technology, okay? So the core, the strong core would still be there. Now, what's gonna happen is you're gonna select one competency. So the core, the core is three-part exam. So the core is three-parts. Although you see here four accounting, audit, tax and tax, it doesn't mean four-part exam. It's a three-part exam, the core. And the core would include most of the knowledge that's on the exam now, most of the knowledge. Then what you would do after you get your core, you would select one specialty. What would be that specialty? It will be something in your interest, in your area, more competency and a particular interest. And now the names of these competencies might change because this is, I mean, they finalized the idea but the names might change down the road. Remember, this doesn't take place until 2024. Business analysis and reporting. This is basically like, I would say more like financial reporting and business or information system and control. I would say this is if you want to do IT and audit, tax compliance and planning. And this is basically tax, wealth, advisory. That's what you want to do. So you will take your core, which is three-part exam, then the core plus one. So it's the core plus one. What is that one? You will choose one of the three specialty. And what's the idea behind this? Well, it reflect what actually happened in the real world. When you are hired, you might be hired to do either IT or audit, you might be hired to do financial reporting or you might be hired in tax or any related specialty for these specialties. So this gives you more options and flexibility. Options and flexibility. And down the road, if there's any more specialty that arises due to technology, maybe you can add, maybe you can eliminate one, replace it or add more specialty without changing the exam overall. So in this will need the firm need because if they're hired and you remember, you're gonna be hired as a staff tax, staff audit. Now in some firms, you have to do everything. But the point is it will have one CPA. So the designation would still be the same CPA. You'll be the same CPA. You'll still have to take four-part exam. Three will be the core, one is specialty. And this will start January 2024. So simply put the four section would still be four sections, four sections, three the core plus one discipline. Remember, you have six sections in total. But, and by the way, you can only take one discipline by the way, so you cannot take more than one discipline as of today. Now this could change because remember, this doesn't take effect until January 2024. The reason they're talking about this because you as a student, you're still, you are still a student now. You should be thinking about this. Also as a CPA candidate, you may not be taking the exam in the next couple of years. You may wanna wait. I don't know. Or you may not want to wait. You want to take the exam and get done with it. The point is you need to be aware of these changes because it's gonna, it's going to affect you, whether you are a student or a CPA candidate. So when will the exam be ready? January 2024. I wouldn't say before, but always there's always a chance that things will be delayed. You know, questions after I take the core, am I a CPA or the discipline optional? Well, completing a discipline is not optional. So you have to take a discipline. All candidate will be required to pass the three sections and one discipline to meet the exam requirement for licensors. These questions and answers and other questions and answers can be find at evolutionofcpa.org. I suggest you look at it. Once again, at the end of this recording, if you're a CPA candidate or you're planning to be a CPA down the road, I am, I can be your mentor, your guidance, whatever you want to call it. And I can help you pass the exam for havelectures.com. We'll have plenty of resources to help you pass the exam. Lectures, multiple choice, through-falls, exercises, that's what I do for a living. Check out my website. Once again, if not for anything to find out, how well is your university preparing you and expect if you are a college students, expect your curriculum to change and reflect those changes. So you need to be familiar, incompetent in technological areas because that's the future, okay? Forget about your masters in accountancy. Get something in technology. That's what I always say. Anyhow, good luck, study hard and I will see you online.