New Eligibility Requirements for CPA Exam Candidates Now May Sit at 120 Hours

By Dr. Lynn Clements, Florida Southern College and
Dr. Will Quilliam, University of South Florida, Sarasota-Manatee

Preparing for the CPA exam is a major undertaking. In addition to learning the material needed to pass the exam, candidates must understand and comply with the certification rules. The task is overwhelming! This article provides guidance to Florida’s CPA exam and certification candidates as they navigate the recent changes to Florida’s laws and rules.

In this article, we first provide the motivation for change. Next, we summarize important recent changes and answer some common questions. Finally, we provide a curriculum guide of relevant coursework we believe candidates should complete before each section of the exam. The authors are long-time Florida accounting educators who understand the candidates’ perspectives and hope to help candidates successfully pass the exam.

The Florida Legislature made most of the changes to attract more Florida candidates with the hope of keeping them in the state. The accounting profession in Florida faced three problems that motivated change.

First, the profession was concerned about losing CPA candidates to other states. Second, the profession recognized that many students who graduated with accounting degrees chose not to take the exam. A third problem was Florida’s lack of compliance with the American Institute of CPAs’ (AICPA) Uniform Accountancy Act (UAA), which is the model law for state boards of accountancy.

Changes Concern Sitting for Exam and Certification
The laws and rules regarding a candidate’s permission to sit for the exam, and the laws and rules for certification (which are two different issues) have undergone major changes during the last two years. These requirements once were combined in a single process, but now are two separate processes. The changes include when a candidate can take the exam (i.e., academic requirements); the additional requirements for licensure; a requirement for one year of experience supervised by a CPA; and the elimination of the law and rules exam.

If you are a CPA candidate, you probably are wondering how these changes will affect you. Here are answers to some questions you may have.

When can I take the exam?
You are eligible to take the exam when you have completed 120 semester hours, provided you have the proper coursework, which we’ll discuss later in the article. Before July 1, 2008, 150 semester hours were required to sit for the exam. The additional 30 hours often are termed “the fifth year.”

It is no longer necessary to take the exam under the authority of another state’s board of accountancy in order to sit before completing the fifth year. The new 120-hour requirement is the equivalent of a bachelor’s degree in accounting in most schools.

What coursework is required in order to take the exam?
The 120 semester hours must include at least 24 hours of general business courses and 24 hours of upper-division accounting. Upper division is defined as the junior level or higher. There are some very specific requirements in the general business and accounting categories.

Business Coursework May Not Include Principles of Accounting
The general business hours must include at least six hours of business law courses, which includes coverage of the uniform commercial code, contracts and torts. This is a problem for some candidates, because most schools require only three hours of business law to graduate with a bachelor’s degree. At least three of the six hours must be at the upper division. A candidate who has taken two business-law courses at the community-college level must take three additional hours at the junior level or above.

The general business hours may not include principles of accounting. In fact, any accounting course with the terms “principles,” “fundamentals” or “introductory” will not count, regardless of the level (even graduate classes).

General business hours may include additional upper-division accounting hours (beyond the 24 that are required).

No more than nine* of the 24 general business hours may be from computer courses, and no more than six* of the 24 general business hours may be from upper division statistics courses. Written or oral communications courses* will count if they have an accounting or business prefix, or if they relate directly to the school’s business or accounting requirement.

*Up to three hours taken at the lower level (freshman- and sophomore-level classes) count toward the 24 general business hours required to become exam eligible.

Accounting Coursework Must Include Five Subjects
The 24 hours of upper-division accounting must be beyond the principles level. This coursework must include auditing, cost/managerial accounting, financial accounting, accounting-information systems and taxation. No more than three hours may be from internships. Hours earned above the required 24 upper-division accounting may be substituted as part of the 24 required hours of general business courses

We strongly advise candidates not to attempt any exam section without completing all the coursework that is tested in that section, even if that coursework goes beyond Florida’s eligibility requirements to take the exam. We include a list of curriculum guidelines later in this article.

What is the additional coursework required for licensure?
The traditional “fifth-year” of 150 total hours still is required for licensure. The 150 hours must include 39 hours of general business courses and 36 hours of upper-division accounting. Again, there are some very specific requirements.

The 39 hours of general business courses must include at least six hours of business law (the same as that required to sit for the exam). At least 21 of the total general business hours must be upper-division courses. The only lower-division courses (freshman- and sophomore-level classes) that are specifically allowed are introductory courses in macroeconomics* and microeconomics,* computer information systems,* statistics* and any written or oral communication courses* that relate directly to the school’s accounting or business requirements.

Advanced Placement (AP) courses are acceptable, but courses that were waived because of standardized testing, such as the College Level Examination Program (CLEP) are not. There still are the limits of nine hours of computer courses and six hours of upper-division statistics (the same as that required to sit for the exam).

*It should be noted that up to three hours taken at the lower level (freshman- and sophomore- level classes) count toward the 39 general business hours needed to become eligible for licensure.

The 36 hours of upper-division accounting must include coverage of the same five subjects that were required in the 24-hour requirement to sit for the exam. No more than three hours may be from internships, but candidates may apply extra internship courses toward the general business hours.

Do I need to complete my bachelor’s degree prior to sitting for the exam?
No, you do not. However, you still need 120 hours with 24 hours of upper-division accounting and 24 hours of general business courses. In fact, you may wish to postpone your graduation until you have completed the fifth-year requirements if you are on financial aid. Eligibility for most financial aid ends on graduation. Check with your school’s financial-aid office.

You must have the 150 hours (which includes a bachelor’s degree) prior to applying for licensure. Your bachelor’s degree does not need to be in accounting, but must be from an accredited college or university and the coursework must include the equivalent of a major in accounting. A previous bachelor’s degree is acceptable, and it need not be from the school at which you completed your accounting and business coursework.

Is experience required for licensure?
Yes, one year of experience is required to become licensed as a CPA. Full- and part-time work are allowed, as long as the experience totals at least 2,000 hours during a period of no less than 52 weeks and no more than 104 weeks. The experience does not have to be in public accounting, but it must be under the supervision of a CPA who is licensed in any jurisdiction.

The experience requirement may be met only after completing the educational requirements to sit for the exam. No prior experience will count.

It is critical to note that Florida’s Board of Accountancy must receive all documents and fees for licensure within 36 months of passing the exam. The official passing date is the date of certification of exam scores by the National Association of State Boards of Accountancy (NASBA). This certification is sent to each candidate after passing the final section.

This means the experience requirement must be completed in time to submit the licensure documents to the state. The licensure documents include a certification of work experience that the employer must complete.

Do I need the experience if I completed my educational requirements before the law changed?
There is a transitional rule that may apply to you. If you completed the 150-hour requirement no later than Dec. 31, 2008 and pass all four sections of the exam by June 30, 2010, you will be exempt from the experience requirement. If you do not pass all four sections by then, you will need to complete the work experience.

Do I need to take another exam prior to becoming licensed?
No, you do not. Another recent change in Florida is the elimination of the “law and rules exam.” Before 2008, all CPA candidates were required to successfully complete the exam, and CPAs had to take this exam every two years for continued licensure.

Should I aim for the CPA license if I don’t plan to practice public accounting?
Yes! The CPA designation is a major signal of your accomplishment, and all types of employers value it highly. It will give you a definite advantage over those who don’t have it. Also, it will open networking opportunities, such as membership in the Florida Institute of CPAs, for you.

Exam Has Four Sections
Since the start of the computer-based testing (CBT) version of the exam in 2004, candidates take one exam section at a time, and they may take the four sections in any order. Candidates may take each section only once per quarter. Credit for each passed exam section is valid for 18 months. Plan the timing of your sections carefully! You don’t want to lose credit for sections you’ve passed!

A major part of your timing is to make sure you have completed the relevant undergraduate coursework before each section. Otherwise, you may have great difficulty passing. Here is the usual coursework for each exam section.

Auditing/Attestation (AUD)
This longest section of the exam lasts 4.5 hours. We recommend that you complete your school’s accounting information and auditing courses before taking this section. If your school has two undergraduate external auditing courses, take them both and do it before sitting for the exam. Internal/operational auditing courses will not directly provide information for the CPA exam, but they will for the Certified Internal Auditor (CIA) exam.

AUD focuses on external auditing, including the Statements on Auditing Standards. Other authoritative guidance includes the Attestation Standards and the Statements on Standards for Accounting and Review services.

This section tests accounting-information systems and related internal-control issues, including standards of the Committee of Sponsoring Organizations (COSO). You should have some knowledge of assurance services, governmental/not-for-profit auditing and employee pension-plan auditing. You also will need to know the reporting differences between issuers and non-issuers.

Financial Accounting and Reporting (FAR)
FAR is almost as long as AUD, with an allotted time of four hours. We recommend that you complete intermediate accounting, advanced accounting and any governmental/not-for-profit coursework your school offers before taking FAR.

FAR includes accounting principles for business enterprises, governments and not-for-profit entities. In particular, you should be familiar with the new Accounting Standards Codification by the Financial Accounting Standards Board.

Regulation (REG)
REG is scheduled for three hours. We recommend that you complete the two required business-law courses and two tax courses. These courses normally are entitled Business Law I and II and Tax I and II.

REG thoroughly tests taxation and business-law concepts. Also included in REG is the subject of ethics, including the AICPA Code of Professional Conduct for auditors, and the Sarbanes-Oxley Act. Accounting educators normally teach both of these in auditing courses.

Business Environment and Concepts (BEC)
This is the shortest section, with only 2.5 hours allowed. We recommend that you complete two undergraduate cost-accounting courses, as cost-accounting concepts are heavily tested. BEC also tests general business knowledge. You should complete at least one principles course each in macroeconomics, microeconomics, management, marketing, finance and business strategy in preparation for BEC.

In this article we provided the motivation for change. We then summarized the changes in the timing and academic requirements to sit for the exam; the timing and additional academic and experience requirements for licensing; and the elimination of the law and rules exam. We also provided a curriculum guide for each of the four sections of the exam, and we recommend strongly that a candidate finish those courses before taking each part.

Obtaining your CPA license will be one of the best accomplishments of your life, and it will open many doors for you. We wish you the very best in your career as you complete your studies and the CPA exam.

Dr. Lynn Clements, CPA is a professor of accounting at Florida Southern College. She is a certified management accountant (CMA), a certified forensic accountant (Cr.FA), a certified fraud examiner (CFE) and is certified in financial management (CFM). She is a member of the FICPA, the AICPA, the Institute of Management Accountants (IMA), the American Accounting Association and the Association of Certified Fraud Examiners.

Dr. Will Quilliam, CPA is a senior lecturer of accountancy at the University of South Florida Sarasota-Manatee. He teaches auditing and cost accounting and has won several teaching awards. Dr. Quilliam is past president of the FICPA’s Gulf Coast Chapter and currently is the chapter’s CPE coordinator. He has served on several FICPA committees and currently serves on the FICPA Board of Governors.