Introduction to the CPA Ethics Exam
Passing the Uniform CPA Examination means that you have conquered one of the toughest professional licensing tests around. You studied long hours to join the ranks of the CPA elite. You worked hard to earn the certification, and you deserve a lot of praise.
But wait before you hang up that shingle! There’s one more hurdle to clear before you can tell family, friends and, most importantly, clients that you are licensed to practice as a Certified Public Accountant. While it is certainly not the highest hurdle you face on the road to CPA, this particular requirement takes a lot of candidates by surprise because it does not get a lot of attention during the arduous journey.
You are now ready for the CPA Ethics Exam, an important step toward obtaining your CPA license if you live in the United States.
Here are 7 Things to Know about the CPA Ethics Exam:
1. What is the AICPA Ethics Exam?
The exam focuses on professional ethics questions that arise in the accounting profession. It tests your understanding of the conduct required of CPAs who serve the financial integrity of businesses and individuals.
The CPA Ethics Exam is one of four standards that the state where you live and practice requires you to complete before awarding you a license. The four E’s are exam, education, experience and ethics. Only the CPA Exam is uniform and accepted by all U.S. jurisdictions.
Generally, the education requirement of many states is 150 semester hours of education for certification in addition to a least a bachelor's degree for CPA licensure. Many states require one or two years of work experience under the supervision of a CPA.
You can find out more about state CPA Exam requirements.
2. States Vary in Their CPA Ethics Test Requirements
The ethics requirement for a CPA license changes from state to state, just as the requirements for the CPA Exam vary across jurisdictions. About 35 state boards require CPA candidates to pass a course and take the Ethics Exam. Some jurisdictions, such as California, Texas and New Jersey, administer their own Ethics Exam through their State Society of CPAs. New Jersey requires candidates to pass an examination on the state’s code of ethical conduct, laws and regulations. Texas requires candidates to pass the Texas Rules of Professional Conduct exam.
Other jurisdictions, such as New York, Georgia, Pennsylvania, Arkansas and Kentucky, require neither an ethics course nor an ethics examination for a license. Just as you researched your state’s CPA Exam requirements, you should check with your own state board of accounting and state society to determine whether you need to take an Ethics Exam. Your state may be one of many that do not make an ethics test a qualification for the CPA license.
Of the jurisdictions that do have the requirement, most use the AICPA’s Comprehensive Ethics Course and Exam. If your jurisdiction is one of these, you must take and pass an open-book, multiple-choice exam written and graded by the American Institute of CPAs. This exam covers the AICPA Code of Professional Conduct and Accounting Rules.
Your state may credit the Ethics Exam toward your Continuing Professional Education.
3. When You Should Take the CPA Ethics Exam
Although candidates are expected to pass the ethics exam within two years of applying for their CPA license, that does not mean they are required to wait until after passing the Uniform CPA Exam to take the ethics test. You are permitted to take and submit answers for the Ethics Exam any time during the licensure process.
Most candidates wait to confront the Ethics Exam until after they pass the Uniform CPA Exam simply because they want to get the CPA Exam out of the way first. The CPA Exam demands a lot more time, attention, study and money than the ethics test, and most CPA candidates set their priorities accordingly.
Don’t let others’ preferences stop you if you want to take the Ethics Exam before starting the CPA exam or between taking CPA exam sections. The choice is yours. You are not required to complete the Ethics Exam during the 18-month rolling window of the CPA Exam.
If you plan to practice in a two-tier jurisdiction, you can obtain a CPA certificate after you pass the CPA Exam. You can then apply for your full CPA license to practice in public accounting once you meet the additional requirements.
Most two-tier states require CPA applicants to finish at least some if not all of their education requirements before taking the CPA exam. Most of these jurisdictions allow ethics and experience requirements to be finished after the CPA Exam is completed. Two-tier states include Alabama, Hawaii, Kansas, Montana, Nebraska, Oklahoma and the District of Columbia.
Again, it is recommended that you contact your state board for information about applying for your CPA license in a two-tier state. Determining whether a jurisdiction is considered as one-tier or two-tier is just one of the factors about CPA licensure that can be confusing.
4. How the AICPA Ethics Test is Structured
The AICPA offers a self-study Ethics Course to help you prepare for the exam. You may take the course either online or through correspondence. The 11-hour course comes in a CD-ROM format and livens up the material with interactive elements such as slide shows.
The AICPA course covers principles of professional ethics for CPAs and provides examples of how to apply these concepts to the real world. Real-life scenarios are used to help students understand the AICPA Code of Conduct and the Sarbanes-Oxley Act’s new rules.
Topics covered also include legal and regulatory issues and important concepts such as maintaining independence from clients or employers.
You will also learn the material on these subjects in the AICPA course:
- Business relationships
- Employment relationships
- Financial relationships
- Prohibited relationships and services
- Non-audit services
- Securities Exchange Commission and Government Accounting Office independence rules
- Definitions include client, objectivity, and covered member
The exam itself is a take-home, open-book test of 40 multiple choice questions. You are required to make a score of 90 or above to pass. The exam allows only four question errors, so you must read the questions carefully. Also, be careful in choosing your answer.
You will be allowed three attempts to pass the exam online. If you fail, you must submit a paper version.
Candidates who have conquered the CPA Uniform Exam will not find the ethics exam difficult. The key to passing the ethics exam is to remember that you can make only four mistakes. Approach with caution and exercise care.
5. How to Submit Your Answers
You may submit the test electronically or through traditional mail. If you submit your answers online, you’ll see the results of your test immediately.
If you are using the text version, you’ll find the answer sheet gives you a serial number that begins with CPE for online access. The package gives you full instructions on submitting your answers.
The traditional paper format calls upon you to fill in bubbles on answer sheets to solve the 40 MCQs. You’ll also mark the bubble that requests AICPA to send the result to your state board.
In order to mail in your answers, send your answer sheet to the AICPA by following the directions on the package. Accidents happen, and mail can go astray. You may need to submit your answers again. Before you put your answer sheets in the mail, make and keep a copy. Send your answers by certified mail and hold onto the receipt.
AICPA will mail a copy to you as well as your state board. If you choose this method, you may see your results within six weeks.
6. Where to Go For Help
If you have questions concerning the CPA Ethics Exam, you can contact the AICPA Service Center Operations through either email email@example.com or by phone at (888) 777-7077.
The National Association of State Boards of Accountancy (NASBA) gives you some helpful information.
NASBA also offers the Accountancy Licensing Library (ALL) as a research tool that will help you identify the state where you want to obtain a CPA license. This website also discusses CPA licensing in a simplified manner. If you plan to practice internationally, you’ll find these resources helpful.
7. Hints on Taking the Ethics Exam
You can rely on one of the strategies that you used to pass the CPA Exam when you tackle the ethics test course materials. Take notes as you study, and you will retain the ethics concepts more effectively.
Even though you know the material is not difficult, do not take this test lightly. You only get three tries to score a 90% on the CPA Ethics Exam.
Next Step: Read The 28 Things You Need To Know About The CPA Ethics Exam
- Overview of the AICPA Ethics Exam
- The process for taking the exam
- Who has to take the CPA Ethics Exam and how to find which exam is required by each state
- Tips on when to take the ethics exam and how to prepare for it