CPA (not CFA) Exam

CFA General
#1

A while back, I posted my opinion about the different careers in “Accounting or Finance?”. Don’t want to rehash that argument, but thought I’d muse about the exams.

A colleague at my new job asked me about the CPA and CFA exams–all the standard questions, like which is harder, what’s the difference, etc. Since I have passed the CPA exam, and have studied extensively for Level 3 of CFA, I feel qualified to opine about it.

Without a doubt, the CFA exam is harder. In fact, I’d say each level of the CFA exam is as hard as the whole CPA exam combined. (Well, at least Levels 2 and 3 are. Level 1 might not be.) I have never met anyone who has taken both exams who does not agree with me. For those who have taken the CPA exam, I tell them, “Imagine you have to take the entire exam at once. That’s a third of the exam. There are two more exams to take after you pass the first one.” Not surprisingly, most CPA’s don’t believe that the CFA exam is that hard.

I think the main difference between the exams is this: Most states require 150 hours of college to be eligible to sit for the exams. In other words, most people go to school and get a BBA in Accounting. Then they go back for another year and get another 7-8 classes in accounting. As such, by the time the typical student is eligible to take the exam, they have already studied every single topic that could possibly be tested on the CPA exam. In other words, studying for the CPA exam is much like a review–you don’t have to learn anything new.

The CFA, on the other hand, is almost 180 degrees from that. Very few finance grads take an extra year of class, and certainly none would do so just to be eligible for the CFA exam. Level 1 is a review of all the undergrad finance material (plus a little advanced accounting material–mainly business combinations and pensions). However, at Levels 2 and 3, most of the information is not learned at an undergrad in university, and not much more is learned at the grad level (at least not in my experience, and I have an MS in finance). So most of what you learn at Level 2 and 3 is self-taught.

So there you have it–there’s my two cents on the CFA and CPA exams. Which one is harder and by how much, and why the CFA exam is harder. Whether the CFA exam has a better ROI (both in terms of time and money) remains to be seen.

#2

By the way–unlike CFA, the CPA exam requirements differ by state. For example, California only requires 120 hours to take the CPA exam. However, that’s the notable exception and not the rule. I think 46 of the 50 states require 150 hours, among other requirements.

#3

I’m curious to know what people think about the CA vs CFA in Canada.

CA in Canada:

  1. From what I’ve heard, the CA might be as hard or even harder. This would be due to the fact that you need to have minimum B- on all acco and other classes, which for a few, the average is a D+(at my uni)… not too big of a deal if you repeat(allowed 4 repeat max). But still.

  2. CPAs told me that close to 20-30% of the students entering the graduate program that leads to the CA get kicked out after performing poorly. Then some fail the UFE.

Salary:

  1. It also seems quite difficult to make a clear comparison between CFA and CA. This is mostly due, to my understanding, because of the substancial differences between:

  • Male vs.Female ratio- in Canada, more or less 80% male for CFA and close to 50% for CA, this brings the salary for CA down. if you check male vs. female for the CGA, you’d notice there’s significant differences between both.

  • The fact that it takes 4 years of experience to get the charter vs about 2 for CPA if I’m not mistaken. It brings the average salary of the CPA down.

  • Cost of living, the fact that there are many CPA that live in rural areas vs CFA tends to live more downtown because of the nature of their work. This is bad for CFA as they may earn more to cover for a higher cost of living.

  1. Then other factors, which are based on stories that I hear, and so I may be very wrong:

  • it seems to me like CPA are more employable and the job market is less competitive.

  • CFAs have longer working hours.

You guys can get the report on salaries on the order of both the CA and CFA, long read but good read.

Either way, in Montreal, the median was about $140K vs. 100K, CPA being the latter.

#4

I’ve never done the CPA, but I highly doubt it’s easier than CFA level 1. Level 1 was a walk in the park.

#5

That’s because I keep getting asked about it. Maybe not on the forum, but a lot of people are interested in it, and I can speak about it intellectually.

If you notice, I never comment on FRM or CAIA because (1.) I’m not interested, and (2.) I don’t know anything about them.

#6

It’s difficult to compare the two.

If you’re eligible to take the CPA exam, then you’ve already taken at least ten upper-level accounting courses. Most people have taken 15-20, and are working in the accounting industry when they take their exams.

The CFA exam has no such eligibilty requirement. So you could have a guy with a Theology Major/Piano Performance minor, working as a youth minister in a church taking Level 1. He would be at a severe disadvantage to the guy who has a Finance and Accounting double major working at Goldman Sachs.

For example, I never took Business Combinations, Advanced Accounting, or Business Tax, which are all relatively heavily tested. So I struggled quite a bit with the CPA exam. I breezed through the Level 1 of the CFA exam, because I had an MS in Finance. Another guy I knew with his Master’s in Accounting barely studied for the CPA exam, then failed Level 1 of CFA twice. (He put in significant study time both times.)

#7

I was so sure I passed level 1, I purchased my Schweser materials for level 2 before I received my L1 results (true story). I did l1 in Dec and wanted a head start for the L2 exam in June.

#8

I thought the CPA exams were a piece of cake relative to the CFA exams. I passed all 4 parts on the 1st try in a 5 month span.

Reasons why, like Greenman said, I had seen probably 90% of the material in class already so it was mostly review and practicing the nitty gritty calculations and memorizing arbitrary facts and %s (on the tax section). Also by the time I took my CPA exams I had already taken the CFA exam and had my studying tactics down really well.

Plus the CPA exam is 4 bite size pieces compared to CFA L2 which is like trying to devour a buffet in one sitting. The field of questions on the CPA exams is also much more narrow than the range on the CFA exam. Like on a CPA exam you may have ~100 +/- 20 questions from a book the size of 1 CFAI textbook and thats the whole exam, where CFA you will have double the number of questions from 5x the amount of material.

The two tests are an apples and oranges comparison. Not anywhere near each other in difficulty. Plus if you fail a CPA exam you can take it again easily and soon after you fail the first time.

#9

Yeah, I agree. The first test is the most difficult, because you’re trying to figure out where to study, when to study, how to study, etc. After the first test, you learn what study methods fit you the best.

This is true. For CFA-ers, it’s like taking FRA/Corp. Fin/Quant/Econ in one test, then Equity/Fixed/Derivatives in another test, then Port. Mgmt and Ethics in a third test. If you break it up, it’s a whole lot easier.

This is true, but I think that the questions are somewhat more complex on the CPA exam. That is, the content is more difficult, even though it’s less broad.

I think that’s what makes the CFA exams so daunting and so artificially hard. If I fail a part of the CPA exam, I can keep studying for another month and take it again for ever and ever until I pass. If you fail CFA, you have to wait another year, and the material changes.

I feel like the CPA exam is trying to establish that the candidate has a minimum level of competence, while the CFA is artificially making the exam difficult just to keep the charter prestigious, and protect their brand.

#10

Krazykanuck’s icon and Greenman’s look very similar.

And of course, the fact that Greenman’s symbol is blue makes my brain spin (though I get that he’s a Cowboys fan).

#11

The star of America’s Team is infinitely superior to any lesser star.

#12

America’s team no more. It’s been 2 decades.