Densmore Blog


Good Intentions... Bad Advice

On April 12, 2016

Most of you work with or know at least one CPA. It’s a kind of secret club where membership is granted after passing the CFE or one of its predecessors, such as the UFE. No one who has survived the process ever forgets their experience and they wear their designation as a rightful badge of honour. So, after defeating the examination, whether it was a year ago or 30 years ago, the victors want to pass along their knowledge and experience to the next wave of writers.  Unfortunately, with those good intentions, sometimes (well… often) comes bad advice.


The CFE evaluation process is mind boggling to those of us who have spent the last few years navigating the transition… and we’re the experts! Many of those offering advice do not understand this new evaluation methodology. Many of those people haven’t even looked at the 2015 CFE to see how much the exam has changed from the UFE, let alone spent any time analyzing the 260-page 2015 CFE Report.

The CFE is really two distinctly different examinations and candidates are evaluated on Day 1 separately from the combination of Days 2 and 3, which are treated as their own evaluation unit. CFE Day 1 is a four-hour case-based examination that builds on the case work completed during the Capstone 1 module. Think of it as the sequel to the movie that candidates studied during Capstone 1. The Day 1 examination is designed to test strategic thinking and is assessed holistically on a Pass / Fail basis. There was nothing like it on the UFE.


CFE Day 2 is a five-hour case where candidates pre-select one of four roles (Assurance, Finance, Performance Management, or Taxation). Organized with common appendices and role-specific appendices, it reads like a “choose your own adventure” book (and, yes, I’m dating myself). It looks nothing like the UFE. The Day 2 case is used to test depth in the role area and also depth in financial reporting and/or management accounting. On the UFE, all levels of the evaluation methodology were tested on all three days of the exam. In contrast, depth in the role area is only tested on Day 2 of the CFE. The number of unsuccessful 2015 candidates who did not understand that key element of the evaluation methodology was staggering.


Day 3 of the CFE consists of three or four, 45 to 90 minute cases. We saw three 80-minute cases on the 2015 CFE. These Day 3 cases are used to test breadth in the six technical competency areas and depth in financial reporting and/or management accounting. At first glance, Day 3 of the CFE resembles Days 2 or 3 of the UFE. However, there are some stark contrasts that must be highlighted.


On the UFE, these cases would typically have three to five requireds, which would line up with three to five primary indicators. Within each indicator, there were typically more issues than could be written in the time allotted for the case, which forced candidates to rank and address the significant issues. For example, if there were eight financial reporting issues in a case, a candidate might have only needed to address four in sufficient depth to score Competent.


The 2015 CFE Day 3 cases each had four to seven requireds, which related to seven or eight assessment opportunities. There were fewer relevant issues to discuss within each assessment opportunity. For example, there were two financial reporting issues in a case and each issue was treated as a separate assessment opportunity. As a result, there was no ranking or selection required; you needed to address both.


Another example that highlights a key difference between the UFE and the CFE is the audit planning memo. In the old UFE world, an audit planning memo would be treated as a single primary indicator, which would include risk of material misstatement, materiality, and overall approach. If you discussed two of the planning areas in some depth, you could score Competent. In the 2015 CFE, risk assessment was treated as a single assessment opportunity. Materiality and overall approach were grouped together in a separate assessment opportunity, and addressing both was required to score Competent. In effect, you needed to discuss all three planning areas to score Competent.


I’ve highlighted just a few of the differences we’ve identified and there are many more that we covered during our CFE Prep course. The CFE is a brand new battle that has very different rules compared to its predecessor. Be wary of following advice from those who are past their best before date!


(Amie Lear – April 12, 2016)

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