When talking about the hurdles to obtaining your CPA license, most people know about the three "E's" for licensure - Education, Examination, and Experience. However, since Sarbanes-Oxley in 2002, a fourth "E" has had increasing importance to not only continuing education, but also initial licensure. That fourth "E" is Ethics.
What is the Ethics Exam?
Designed to prepare an entry-level CPA for ethical dilemmas that they may face during a career in public and industry accounting, the ethics exam consists of 40-50 multiple-choice questions (depending on the state). It covers topics such as the basics of ethical and professional conduct, ethical principles, and why ethical codes of conduct are essential for CPAs and accountants to have.
The ethics exam differs from the CPA Exam in three distinct ways:
- You can take the test from home. Or your office. Or really anywhere that you want to, either online or written.
- You can get your score immediately. All online tests provide immediate pass / fail feedback. If you are taking the AICPA-administered exam paper test, it must be mailed to the AICPA and may take up to a few weeks to get your results back.
- A passing score is 90. Usually. Some of the state BOAs (boards of accountancy) have differing requirements. We've seen 90, 85, and 82 as minimum passing scores.
It is important to note that the ethics exam can be retaken as many times as needed to pass. However, with the AICPA ethics exam, you can only take the exam online three times; after that, you must take the exam and submit your answers via paper.
Who Has to Take the Ethics Exam?
Currently, 35 of 55 jurisdictions (including all 50 states, Guam, Puerto Rico, the U.S. Virgin Islands, Northern Mariana Islands, and Washington D.C.) require an ethics exam prior to licensure. Of those 35, all but 12 have chosen to utilize the AICPA-designed ethics exam, titled Professional Ethics: The AICPA's Comprehensive Course (see here). The others have chosen to require a state-specific ethics exam (or require both AICPA and state-specific ethics exams).
We recommend that you check the requirements for your state to see if
- you are required to take an ethics exam prior to (or after) licensure,
- the exam is administered by the AICPA or the state board.
The AICPA also offers ethic exam courses for CPE credit that are named similarly. Make sure that the course you are purchasing is the ethics exam for LICENSURE.
When Should I Take the Ethics Exam?
Under most circumstances, candidates can take the ethics exam at any point during the CPA licensure process. We recommend that you wait until after all four CPA Exam sections are passed to take the ethics exam, for two reasons. One, there is no reason to add more studying to your to-do list, and two, state BOA rules are specific and vary widely from state to state. As an example, in New Jersey you have six months after licensure to take the four credit hour, NJ-specific "New Jersey Laws and Ethics" class, while in North Carolina you are required to take the eight credit hour course on the North Carolina Accountancy Statutes and Rules within one year prior to licensure.
If using the AICPA's materials, you have one year from purchase to pass the ethics exam. As mentioned previously, the state BOAs have varying timelines, so make sure to check your state requirements before scheduling or taking your ethics exam.
State board of accountancy rules are specific and vary widely from state to state. Always check with your state board to make sure you are completing their requirements.
How Much Does the Ethics Exam Cost?
The AICPA ethics exam's current cost is $189 for non-members and $149 for members, while the state-specific ethics exam ranges from $40 to $200.
How Should I Study for the Ethics Exam?
First, take a deep breath. The ethics exam is not like the CPA Exam sections that you just finished taking. You can use the materials provided to look up answers if necessary while taking the exam.
Second, you are provided review materials after purchasing the exam. Utilize those review materials, take notes, and make sure you feel prepared for the exam. While you can use the materials to look up answers, you are also timed, which is why it is important to study ahead of time.
Ethics Exam Tips
Verify that your state requires an ethics exam, and which exam is required, before purchasing the materials and taking the time to study.
- Take the ethics exam after you pass the CPA exam sections.
- Study the materials. Just because the ethics exam is known to be easier than the CPA exams, doesn't mean you won't still need to spend time studying for it. And just as with the CPA exams, each retake costs you additional money.
- Read the questions and the answers carefully. Getting an answer incorrect means a direct reduction in your score, and with a minimum passing score requirement ranging from 80-90%, you can't afford to miss many questions.
- Send your paper answers in via certified mail, and keep a copy of your answer sheet in case something happens to your letter in transit. This only applies to the AICPA paper exam.