What does it take to pass the CFE? Understanding Levels 1, 2, 3 and 4

The pass/fail system on the CFE is not just mark X passes and mark Y fails. On the CFE, you need to demonstrate enough depth and enough breadth in order to pass.

Day 1 of the CFE is a pass/fail mark only while Days 2-3 are marked using the level 1-4 system described below. To completely pass the CFE you must pass Day 1 and then pass Days 2-3 under the level 1-4 criteria below.

Let’s explore what the level 1-4 criteria are.

 

Level 1 – Your response is sufficient in scope (your overall score is high enough)

Level 1 takes your overall score and compares it to other scores and what was expected from the Board of Evaluators (BOE). This is how you might expect your average exam to be marked. At level 1 on the CFE, if you fall below the cut-off you will not pass and if you are above the cut-off then you do pass… level 1 that is. That’s great but you aren’t out of the woods yet. Your response will need to also pass at level 2.

Don’t forget, not all marks are worth something. Make sure you understand how to score on the CFE.

Bottom line: Your goal is to score high enough that your overall CFE score is above the cut-off to pass level 1.

Most people fail at level 1 (historically on the UFE – we will see if this trend continues on the CFE).

 

Level 2 – Demonstrate depth in Financial Accounting/Reporting and Management Accounting

This level applies to Financial Accounting (FA) and Management Accounting (MA) ONLY.

This level requires that you demonstrate depth on enough FA or MA assessment opportunities. Assessment opportunities to tackle FA and MA are provided on Day 2 and 3.

What does depth mean?

It means the number of Competent (C-level) responses you give on FA and MA indicators. Therefore, if you score only RC on all FA and MA indicators you will not pass at level 2.

Bottom line: Score enough Cs in either FA or MA.

Alright, so you’re having a good day, you’ve survived the level 1 cut-off and you’ve got enough Cs in FA or MA. Can you walk away with that coveted CFE success letter? No, you’ve got two more hoops to jump through.

 

Level 3 – Demonstrate depth in your elective ROLE competency

All CPAs are expected to demonstrate sufficient competency in their elective ROLE competency.

This level requires that you demonstrate depth in your elective competency (Assurance, Finance, Taxation or Performance Management). Opportunities to do this are provided on Day 2.

What does depth mean?

It means the number of Competent (C-level) responses you give on elective role response indicators.

Bottom line: Score enough Cs in your elective competency.

If you’ve survived the level 1, 2 and 3 cut-offs there is still one final level you must pass to successfully complete Days 2 and 3 of the CFE.

 

Level 4 – Demonstrate breadth

This level applies to all six competency areas and essentially means that you cannot skip any single competency.

You must score sufficiently on each and all six of the above indicators in order to be successful at level 4. What does sufficiently mean? It means you have to score RC or higher enough times on each of the six competency areas. Opportunities to do this are provided in Day 2 (sometimes) and 3 (always).

Again, we don’t know how many RCs that means but I suspect it’s at least one each.

Bottom line: Don’t skip any competencies. You must score at least enough RCs in the remaining competencies.

 

In conclusion

The key takeaways:

Level 1 – Score well enough overall

Level 2 – Get enough Cs in either Financial Accounting or Management Accounting

Level 3 – Get enough Cs in your elective role

Level 4 – Don’t skip any single competency and get enough RCs in all six competencies

 

You can learn more about this from CPA Canada here.

Anything still confusing you about how the CFE is marked? Ask your questions in the comments below!

14 comments

  1. Level 2 is FA OR MA. You only need depth on one of them for Level 2.

    • Thanks very much for the catch Cassandra. The original CFE presentation implied it was both but either the requirement was changed or it was just mis-communicated there. I have now adjusted the article to reflect the model as presented in the last CFE Report. Thanks again!

  2. I really appreciate this site. I’ve read a handful of articles so far and it seems like it will be a nice resource!

    I’ll be writing the CFE in Sept 2017 and am looking for advice on whether I should choose assurance or tax as my elective role.

    Reasons why I would choose tax:
    – I’ve worked in tax at a firm for 2.5 years, whereas I’ve never worked in audit
    – I feel confident in my technical knowledge, although I need to improve in how I approach tax cases (how I structure my responses, etc.).
    – I was able to score an overall CD on the tax elective.

    Reasons why I would choose assurance:
    – Someone gave me advice that if I choose assurance, I’m competing against a larger pool of candidates. If I choose tax, I’d be competing against a smaller (potentially tougher) pool of candidates. Would you agree? Based on your article, I believe this would factor in at Level 1?
    – I feel my weakest area is financial accounting. If I choose assurance, I’m thinking I could focus more of my energy on becoming proficient in FR and audit. Whereas if I choose tax, I’d have to study hard for tax AND FR/audit.
    – Everyone else at my firm will be choosing assurance this year. I would be able to study with them, whereas I might be more isolated if I choose tax.

    Now that I write it all down, I’m probably over-thinking it… I’d really appreciate any advice you can give though. Thanks!

  3. Say for example i do poorly in FR but ace MA, I can pass at level 2.
    but doing poorly in FR could be a risk at level 4, and I’d still fail at level 4?

  4. I wrote the September 2017 CFE and passed Level 1, Level 2 (both FR and MA), and Level 4 (all), but failed Level 3 (assurance). Should I appeal?

  5. I failed level 1 and passed all else. Should i appeal

    • What is your decile ranking. If it’s a 1 or a 2, they recommend you do, but if it is more than that, then don’t.

    • Monika, what is your decile ranking. If it is a 1 or 2, they recommend you do appeal, but if it is over that, it is a waste of money.

      • Same with me. Wrote 2017 CFE and passed all others except level 1 and decile ranking is 1. Was told from the CPA to appeal on results. She said I’m very close to pass. Is it really worth to do it? If I’m that close, why they just pass me? Don’t know what to do.

      • Neha, what does decile ranking mean?

  6. I failed level 1 and level 3, with a ranking of 2- should I appeal

  7. Passed cfe. Should I be getting a decile ranking?

  8. I failed level 2 but passed all other levels. They never me an N/A decile rank. Should I appeal?

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