We’ve now reached that special time of the year for those writing the upcoming CFE exam…study season!
What I find interesting about this time of the year is that emotions are really mixed among students: some of you are laid back because you took some vacation before Capstone 2, some of you are excited to get into case-writing mode and making study groups, and others are already pulling out their hair.
Back in July 2016, I was one of those people pulling out their hair. And one of the main reasons why was because, like many of you, I had a tendency to pay very close attention to what other candidates were saying. What bothered me the most was that there was very little consistency across the “words-of-mouth.” For example, I heard that some CFE Honour Roll student out there would recommend taking three months off to study, some other successful writer would recommend taking only three weeks off, others would say that I should take at least a month off, and so on.
The truth in all of this is that while you will all be writing the same standardized exam, you are all individually unique in your abilities. Coming from a guy who spent two full years in the CFE process, the best advice I can give you if you’re already doubtful on how to prepare for the exam is to focus on yourself: make a plan that’s tailored to your own performance level. And there are many good CFE tutors out there who can help you figure out your unique “performance level” at this stage in the game (I’d be happy to get you in touch with them if you feel you need the help).
The purpose of this article is to address 5 common myths I repeatedly hear from CFE candidates each year (related to my point above about the inconsistent “words-of-mouth” statements I just mentioned), hoping that it can ease the anxiety that some of you may be experiencing right now.
Myth #1: You automatically fail Level 1 on Days 2 & 3 if you score NA or NC on an assessment opportunity.
If CPA Canada were to do this, you would be looking at pass rates at less than 20%, if not less. I must stress again that this is a standardized exam, based on relative grading. Given how Day 3 is structured with very minimal time for each assessment opportunity across the cases, it is very common for candidates to run out of time to address an assessment opportunity, even at an RC-level. Even looking back at the 2017 CFE Board report myself (which was the year I passed), I can tell that there were a few assessment opportunities that I likely scored NA or NC.
With this being said, you still need to be very cautious about scoring NCs and NAs in your cases. You must keep in mind that Level 1 is still the most common level in which CFE candidates fail. CPA Canada assess passing level 1 as to whether “the aggregate competency was demonstrated sufficiently.” What this means is that you still need to achieve a certain number of RCs and Cs across Days 2 and 3 to pass this exam, and this number is based on how all other candidates score.
My recommendation: minimize the risk of failing. Still aim to score a C-level response in your practice cases and on the actual exam. However, do not beat yourself up (like I did) if you score NC or NA on an assessment opportunity here and there.
Myth #2: The markers care more about quantitative responses than they do qualitative responses for Days 2 & 3.
The CPA Board of Examiners is not interested in inviting strict number-crunchers to the profession. Their goal is to bring in people who are well-rounded both in technical abilities and in the enabling competencies. This is why they would only give an RC (at best) to candidates in an assessment opportunity that requires a qualitative discussion, even if the quantitative portion is excellent.
As you proceed with debriefing your Day 2 & Day 3 cases during the study season, you will often see in the simulated marking guides that you MUST have some qualitative discussion in your response to bring your response from an RC to a C. Sometimes, you may even see that the solutions carve out the qualitative discussion as a separate assessment opportunity, so missing out on qualitative discussions may increase the risk of you failing on Level 1.
My recommendation: allocate at least 40 to 50% of your time on each assessment opportunity to have a qualitative discussion, and make sure that you stick to this time allocation. This is a great thing to try as you attempt the practice exams. Furthermore, don’t be fooled by assessment opportunities that only ask you to calculate something; there’s always something qualitative that applies to a calculation (such as impact the result will have on your client’s operations), and including this in your response will help you bring it up to a C-level.
Myth #3: Practicing with old UFE cases is sufficient enough to prepare for the CFE.
I know this myth is going to raise some eyebrows.
Practicing old UFE cases should definitely be part of your study plan, as there is a lot you can learn from them – not only case writing techniques but also technical content (assuming you are debriefing well, which I’ll elaborate on below). Even for Capstone 2, most of the cases that CPA will provide you are derived from these old UFE cases.
However, I strongly believe that practicing old UFE cases alone is insufficient preparation. For CFE Day 1, the exam response format you’re expected to use, and method of evaluation, is nothing like what was offered in the old UFE (as it was derived from the former CMA exam program). For CFE Day 2, the exam question structure on the former Day 1 “comp” cases is somewhat similar if your elected depth role is assurance; however, the difference lies in the fact the old UFE comp-cases focused on all technical competency areas rather than just financial reporting, management accounting & your selected depth role. Lastly, for CFE Day 3, the old UFE “multi” cases generally had fewer assessment opportunities (i.e. 3 to 4 per case) compared to the CFE Day 3 cases, which have anywhere between 6 to 8 assessment opportunities per case. Ultimately, this means that you need to be a lot more careful with time allocation across the assessment opportunities.
My recommendation: to minimize the “shock” factor when writing the actual CFE, try to include cases from the prior CFE offerings (i.e. year 2015 & onwards) throughout your study period. You may also be able to obtain decent “mock Day 3” cases from third party CPA prep program providers. Whether you want to try these types of cases at the beginning, at the end, or spread evenly across your study period, that’s up to you. My personal preference is to spread these across your study period.
Myth #4: You need to work in audit & assurance to be successful on the CFE with assurance as your depth.
While I was going through the CFE process, I was working in audit at a public accounting firm. The depth role I chose was assurance because I still wanted to pursue public accounting after getting my CPA, and I felt there were a lot more resources available from the old UFEs pertaining to assurance.
However, throughout the study period, I felt that the work experience that I was able to apply to the assurance assessment opportunities contained in the cases was limited. This was due to my limited involvement with planning assurance engagements on the job, contrary to the cases which usually ask you to perform planning work (whether it be a RAMP audit plan, control assessments, or what kind of assurance engagement to pursue). Instead, I found my resources to lie much more heavily on prior exam cases & technical content provided by my CPA mentor.
There may be some of you who do have a more senior-role at your job and are involved in the planning process. If so, then I’m sure that there are some things that are transferable to the actual exam. However, I want to stress that it is not a requirement for you to do very well on the CFE if assurance is your depth role.
My recommendation: If you see yourself working in public accounting later on in your career, choosing assurance as your depth role will open that door for you. If you do not see yourself doing this later on, I would still strongly consider assurance as your depth role, due to the many resources available from prior UFE & CFE exams in which assurance was tested frequently.
Myth #5: Writing more cases increases your chances of passing the CFE.
Truth: (partially) false.
I am a strong believer that for the CFE, practice makes perfect. However, it’s important to understand what “practice” really means.
I do not consider practice to be simply writing a lot of cases. By doing this, you are unable to gauge your performance. If anything, it may help you with time management, but even this benefit is questionable as you would not know if you perhaps missed assessment opportunities. The important piece missing in this is the DEBRIEFING.
Over time, I discovered that a proper debrief involves not only reading the solution after writing a practice case, but also comparing the solution to what you wrote, rewriting parts of your case response to bring it to a C-level, researching technical areas you are not comfortable with that came up in the case, and tracking your progress.
As you start in the study season, you will find that your debrief sessions take a lot of time. You may even find it takes twice or three times as long to debrief than to write the actual case – do NOT rush through this at the beginning! It’s a lot better to debrief one case thoroughly than to just write two or three cases in the same amount of time. I would reserve the strict case-writing near the end of the study season as you practice moving from case to case for Day 3.
My recommendation: Practice writing cases, but make sure your study plan allots a sufficient amount of time for debriefing each case you practice.
I really hope that this blog post helps you navigate through the complexities of the CFE study process. If you want to reach out to me, please give me a shout at firstname.lastname@example.org.
All the best, and good luck!