Appendix C

Cost Accounting in Professional

Examinations

This appendix describes the role of cost accounting in professional examinations. We use
professional examinations in the United States, Canada, Australia, Japan, and the United
Kingdom to illustrate the role. A conscientious reader who has solved a representative
sample of the problems at the end of the chapters will be well prepared for the professional examination questions dealing with cost accounting. This appendix aims to provide
perspective, instill confidence, and encourage readers to take the examination.

American Professional Examinations

Many American readers may eventually take the Certified Public Accountant (CPA)
examination or the Certified Management Accountant (CMA) examination. Certification
is important to professional accountants for many reasons:
1. Recognition of achievement and technical competence by fellow accountants and by
users of accounting services
2. Increased self-confidence in ones professional abilities
3. Membership in professional organizations offering programs of career-long education
4. Enhancement of career opportunities
5. Personal satisfaction
The CPA certificate is issued by individual states; it is necessary to obtain a states license
to practice as a Certified Public Accountant. A prominent feature of public accounting
is the use of independent (external) auditors to give assurance about the reliability of
the financial statements supplied by managers. These auditors are called Certified Public
Accountants in the United States and Chartered Accountants in many other Englishspeaking nations. The major U.S. professional association in the private sector that
regulates the quality of external auditing is the American Institute of Certified Public
Accountants (AICPA).
The CMA designation is offered by the Institute of Management Accountants (IMA).
The IMA has over 300 professional and student chapters worldwide and is an association
of accountants and financial professionals working in business. The major objective of the
CMA certification is to enhance the development of the management accounting profession. In particular, focus is placed on the modern role of the management accountant as an
active contributor to, and a participant in, management. The CMA designation is gaining
increased stature in the business community as a credential parallel to the CPA designation.
The CMA examination is given in a computer-based format and has two parts. The
questions are carefully constructed multiple-choice and written-response questions that
test all levels of cognitive skills. The CMA exam consists of the following:

Part 1: Financial Planning, Performance, and Control

Planning, Budgeting, and Forecasting

Performance Management
Cost Management
Internal Controls
Professional Ethics (ethical considerations for management accounting professionals)
C-1

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C-2 appendix CCost Accounting in Professional Examinations

Part 2: Financial Decision Making

Financial Statement Analysis

Corporate Finance
Decision Analysis and Risk Management
Investment Decision
Professional Ethics (ethical considerations for the organization)

Cost/management accounting questions are prominent in the CMA examination. The

CPA examinations also include such questions, although they are less extensive than questions regarding financial accounting, auditing, and business law. This book includes many
questions and problems used in past CMA and CPA examinations. In addition, a supplement
to this book, Student Guide and Review Manual [John K. Harris (Upper Saddle River, NJ:
Prentice Hall, 2014)], contains over 100 CMA and CPA questions and explanatory answers.
Careful study of appropriate topics in this book will give candidates sufficient background
for succeeding in the cost accounting portions of the professional examinations.
The IMA publishes Strategic Finance monthly. Each issue includes advertisements for
courses that help students prepare for the CMA examination.

Canadian Professional Examinations

Historically, three professional accounting designations have been available in Canada:
Designation

Sponsoring Organization

Certified Management Accountant (CMA)

Society of Management Accountants of Canada

(CMA Canada)
Certified General Accountants Association of
Canada (CGA)
Canadian Institute of Chartered Accountants (CICA)

Certified General Accountant (CGA)

Chartered Accountant (CA)

CMA Canada, which has 50,000 members and students, has oversight for setting
standards, certification, and the professional development of CMAs. In addition, CMA
Canada is responsible for the development of national and international branding initiatives and alliances, as well as support of management accounting research.
The CMA National Entrance Examination is a four-hour exam comprised of 100-120
multiple-choice questions. At least 80% of the examination emphasizes the following
five functional competencies: Corporate Finance, Financial Accounting, Internal Control,
Management Accounting, and Taxation. Some of the other topics covered are business
law, economics, information technology, marketing and statistics. After passing the exam
(or completing an accredited degree), candidates progress through a two-year Strategic
Leadership Program while working full-time. This professional development program has
several requirements, including written assignments, in-class interactive sessions, case exams, and group reports. Upon program completion, candidates earn the CMA designation.
In 2011, the three professional accounting bodies in Canada (CMA Canada, CGA
and CICA) undertook a unification initiative to work towards a merger. They have
designed a new professional designation, Chartered Professional Accountant (CPA), that
would replace their individual certifications. The CPA designation has already come into
effect in Quebec and is being discussed at the provincial level of all three organizations
for the eventual creation of a national accounting body, CPA Canada.

Australian Professional Examinations

CPA Australia is the largest body representing accountants in Australia, and one of the
largest worldwide, with a membership of over 150,000 accounting, finance and b
usiness
professionals. Its professional designation is termed a CPA (Certified Practicing Accountant).

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United Kingdom Professional Examinations C-3

The basic entry requirement for Associate membership in the society is having an a pproved
bachelors degree or completing a set of foundation-level exams in subjects such as Financial
Accounting, Management Accounting, Business Finance, and Economics and Markets.
Associate members can advance to CPA status by passing the CPA professional program
and having the required amount of work experience. There are four compulsory core segments in the program: Ethics and Governance, Financial Reporting, Strategic Management
Accounting, and Global Strategy and Leadership. Candidates must also take two of four
elective subjects, from among Advanced Taxation, Advanced Audit and Assurance, Financial
Risk Management, and Contemporary Business Issues. Topics in the required Strategic
Management Accounting segment include the following:
1.
2.
3.
4.
5.

Introduction to strategic management accounting

Creating organizational value
Performance measurement
Techniques for creating and managing value
Project management

INTHEBLACK, published monthly, includes advertisements for courses that help students
prepare for the CPA examination.
The Institute of Chartered Accountants in Australia (ICAA) offers the Chartered
Accountant (CA) certification that has membership requirements including passing
four modules: Audit and Assurance, Financial Accounting and Reporting, Management
Accounting and Applied Finance, and Taxation. The Management Accounting and
Applied Finance module includes topics such as activity-based costing and management,
pricing decisions and models, budgeting and forecasting, risk management, organizational structure and control, performance analysis and performance reporting.

Japanese Professional Examinations

The Japanese Institute of Certified Public Accountants (JICPA) is the organization of the
CPA profession in Japan. The CPA exam, conducted by the Certified Public Accountants
and Auditing Oversight Board, consists of two stages. The first stage (multiple choice questions) and the second stage (essays) both cover managerial accounting, as well as financial
accounting, auditing, and business law. To eventually obtain a CPA, candidates must also
complete two years of professional audit (or similar business) experience, a three-year long
professional accountancy education program and a final assessment conducted by the
JICPA in fields such as accounting, auditing, ethics, and taxation.

United Kingdom Professional Examinations

The Chartered Institute of Management Accountants (CIMA), based in the United
Kingdom, is the worlds largest professional body of management accountants. CIMA provides a wide range of services to members in commerce, education, government, and the
accounting profession. The syllabus for the CIMA Professional Qualification examination
consists of three pillars:

Enterprise Pillar: includes papers on enterprise operations, enterprise management,

and enterprise strategy
Performance Pillar: includes papers on performance operations, performance management, and performance strategy
Financial Pillar: includes papers on financial operations, financial management, and
financial strategy

Currently, all examinations are paper-based. All of the operational and management level
subject examinations must be successfully completed before attempting strategic level
exams (the three of which have to be taken simultaneously).

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Financial Management, published monthly by CIMA, includes details of courses

a ssisting students in preparing for their examinations. Management accounting topics are
also covered by several other professional bodies. The syllabus for the examinations of the
Association of Chartered Certified Accountants (ACCA) has two levelsFundamentals
and Professional. The Fundamentals focus on both financial and management accounting
technique and cover the main technical areas all accountants are expected to master. Skills
examined include management accounting, financial accounting, corporate and business
law, performance management, taxation, financial reporting, audit and assurance, and
financial management. At the Professional level, students build on that knowledge and
explore advanced skills and techniques. Emphasis is also placed on the exercise of professional judgment in carrying out the role of the accountant relating to governance, internal
control, compliance and risk management in the context of an ethical framework.
Other accounting bodies include the Institute of Chartered Accountants in England
and Wales (ICAEW), which administers the ACA chartered accountant qualification, and
the Institute of Chartered Accountants of Scotland (ICAS), the worlds first professional
body of accountants. Both institutes have certification requirements that cover proficiency
in general management topics as well as professional accounting topics.

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