Report from the Board of Examiners NASBA Annual Meeting October 28, 2008 Douglas E. Warren, CPA

2 I’m Doug Warren Past Chair of the Tennessee State Board of Accountancy Chair-elect of the BOE

3 Today’s Topics Practice Analysis update BOE strategic initiatives CBT-e Operational update

4 Practice Analysis Foundation of the validity of the CPA Exam. Based on entry-level practice. Determines the content and skills to be tested. Surveys last year Exposure draft May, 2008 Revisions based on comments Recommendation presented to BOE this month

5 New SCOs/SSOs The Exposure Draft of proposed new CSOs/SSOs was available for comment from May 1 through July 31, responses were received, including 10 from state boards. Content Committee considered the comment letters and recommended several changes to the proposed outlines as a result.

6 Practice Analysis Oversight Group (PAOG) Formed to ensure that all stakeholders could have visibility into the process Provided assurance that the practice analysis was conducted in accordance with best practice Monitored throughout the practice analysis and developed the technical documentation

7 PAOG (cont’d) Linda Biek (Exec. Dir.) Gary Fish (Illinois Board) Michael Henderson (State Board Cmte.) John Katzenmeyer (NASBA Board) Nina Kavich (Regulation subcommittee) Janice Wilson-Marcum (CLEC)

8 BOE Strategic Initiatives Skill Assessment Pipeline Global Issues

9 BOE - Strategic Issue #1 Skill Assessment – How much should the CPA Exam assess the ability to apply information correctly? – How can we test skills better than we do today? Task-based Simulations Application of cognitive research

10 BOE - Strategic Issue #2 Pipeline – Is the CPA Exam or the administrative requirements presenting inappropriate barriers to some individuals or groups? – Why do people stop taking the CPA Exam? Studies of candidate test-taking patterns and behaviors are under way. Cohort studies have been introduced to follow cohorts (groups of candidates) through the entire examination process. A survey of candidates who have stopped testing for more than a year was recently sponsored by the AICPA, NASBA and Prometric.

11 Cohorts 05Q306Q2 Total N10,3149,279 Passed All47%40% Dropout?35%32% Passed Last Failed Last 11% 24% 5% 27% Active18%28%

12 BOE Strategic Issue #3 Global Issues – IFRS -IFRS and entry-level practice -Recommended changes to content outlines -Item writing procedures – General business environment – International administration of the CPA Exam

13 CBT-e Six months after BOE approval, work on CBT-e is well under way in content, systems, and psychometric areas. Major CBT-e changes to come: – Task-based simulations (TBS) – Written communication testing in BEC only – Implementation of these changes at the same time as introduction of new CSOs/SSOs

14 CBT-e (cont’d) TBS and BEC written communication items are being developed Plans are being made for a standard-setting process to set new passing scores. (CBT-e changes will be significant enough to require that new passing scores be established.)

15 CPA Examination Status Successful and growing. New research task format was introduced on July 1, 2008 to candidate acclaim. (To prepare candidates for the new interface, new Tutorial and Sample Tests were posted on the CPA Examination website in May 2008.)

16 When the candidate navigates to a document, the Table of Contents displays the document title… …and all possible responses in that document are automatically displayed in the answer pane …the document pane displays the content... 16

17 Candidate Comments AUD 7/1/08 – The improvement in the research/authoritative literature portion makes a huge difference. Thank you for hearing us. REG – 7/12/08 – The new format of the simulation regarding research is great. Thank you for the improvement.

18 Annual Volume Growth

19 Thank you It’s been a pleasure to speak to you today.