If you’re at the point where you must choose on which elective to take as part of your CPA PEP, this means you have successfully completed Core 1 and 2. Congrats!
With no clear guideline on which elective module to select, it can be a daunting decision impacting your CPA journey. With both Core 1 and 2 exams behind you, you should now have some idea if you prefer Financial Reporting (FR), like in Core 1, or Management Accounting (MA), like in Core 2. This is a great way to narrow down the electives you should choose.
In this Part 1 of two-part series, I will discuss which elective to take as part of your CPA Canada PEP program. In Part 2, I discuss which role to take for CFE.
Here are the pros and cons of each of the four electives.
- This elective is required for public practice licensing and will prepare you for choosing Assurance as your Day 2 role for the CFE. Make sure check your provincial CPA website for specific licensing requirements, for example BC’s is available here.
- There are a limited number of topics under Assurance that you can be tested on. For example, you’ll often see the following topics:
- Audit Planning Memo (APM) – CAS 315, 320, 330
- Assertions (B/S, I/S)
- Audit evidence – CAS 500
- Procedures – CAS 510
- Analytical Procedures – CAS 520
- Special Reports – CAS 805, CSRS 4400, CSAE 3000/3001, CSAE 3530/3531
- Reviews – CSRE 2400
- Compilations – S9200
- Going Concern – CAS 570
- Control deficiencies (WIR)
- Data analytics and information services (DAIS)
- If quants and long calculations are not your strong skills, this elective offers little quant analysis
- This elective pairs well with Financial Reporting, because topics such as materiality and procedures are closely linked to FR issues.
- Both FR and Assurance standards are available in the exam in the Handbook. This means you don’t have to memorize so much content as with PM or Finance, because you can look them up during the exam.
- Most of the AOs can be answered in a template format, helping you both write faster and achieve depth. I’ve written more about templates, such as WIR, SAPPY and RAMP here.
- Assurance is a qualitative heavy exam. Most AOs will require clear, concise, and well-structured written responses to achieve competent (C) grade. If you have not worked in Assurance or English is not your first language, this elective may not be suitable for you.
- Those who work in public practice will have practical day-to-day exposure to Assurance topics. Since PEP and CFE exams are marked on a curve, you’ll be competing with candidates working in public practice, so the passing standard will be higher.
- This elective is required for public practice licensing.
- Good for candidates that work with personal or corporate tax, because the technical topics will be known to you through practical job experience.
- Good balance of quantitative and qualitative.
- Very few individuals take this on the CFE. This creates a small group of candidates that you will be marked against if chosen as Day 2 role.
- You are provided with the Income Tax Act (ITA) on the exam, which means you can look up topics that you are not sure about. I’ve written more Tax elective tips here.
- This elective is heavy on the technicals. The CPA Canada Competency Map has 90 topics for Tax (compared with 25 topics for Assurance). This requires a lot of review on specific criteria, rates, formulas, etc.
- Unless taken as your Day 2 role on CFE, this elective will not prepare you for CFE, because Tax is tested at Core level in CFE (similar to the Core 1 Tax AOs). It will help you with CFE Day 3, but it is not required to successfully pass it.
- Very few individuals take this on the CFE. This means there will be fewer resources and study partners as support.
- Although the cases will focus on Taxation (minimum 50%), all prior learnings are also testable, i.e. Entry column, Cores 1 and 2 which makes the coverage of topics much broader.
- While you are provided with the ITA, this is often difficult to interpret and hard to rely on, which will require much more to memorize.
- Tax elective has the lowest pass rate among the four electives.
Performance Management (PM)
- Because you’ve just taken Core 2, many calculations are similar and still fresh in your mind. PM topics also have a similar quant and qual components as Core 2.
- Taking this elective will significantly help with Day 1 on the CFE. The CFE Day 1 has similar quants, like CM, NPV, breakeven, IRR, cash flows, etc.
- Good for individuals that are strong with Strategy & Governance AOs (can make up to 50% of the exam).
- Well-rounded exam with both quantitative and qualitative AOs.
- You won’t be competing with writers in public practice.
- Because this elective contains several calculations, time management and depth are often struggles for candidates.
- This elective does not prepare you as well for FR AOs on CFE (compared with Assurance elective). However, to pass CFE, depth in either FR or MA is sufficient. This means you can clear the CFE with depth in MA using your PM elective knowledge.
- Similar to PM, taking this elective can significantly help with Day 1 on the CFE, as the exams have common calculations and AOs.
- Because you would have just taken Core 2, some calculations are similar (though less than PM).
- This elective is a great to teach you how to perform financial statement analysis on a case.
- Could be helpful if you are interested in future plans to pursue the CFA designation.
- Suitable for candidates that are strong with calculations as the exam is quants heavy.
- Because this elective can contain several calculations, time management and depth are struggles for most.
- Few individuals take this (compared to PM and Assurance), which means there could be fewer resources and study partners for support.
- There are lots of calculations and quants involved. I listed the full list of examinable topics for Finance elective here.
Which Elective to Take?
I suggest Assurance and Tax for candidates working in public practice. These align with your work experience, the template formats are easy to apply, and you’ll find the AOs more intuitive.
I suggest PM and Finance for candidates in corporate/industry. You won’t have to compete with writers in public practice, the AOs are well-rounded with quants/qual, and it’ll prepare you well for Day 1 of the CFE. You can also take the combination of Assurance and PM, if you are not comfortable with Tax or Finance.
If you work in corporate/industry and decide to take Assurance, I recommend to time it so that you take it in the Winter term. Since Winter term is the busy season for writers in public practice, you’ll be competing with corporate writers, not public practice writers, so your chances of passing are higher.
Due to the varying factors and conditions that are unique to individuals, you should also consider your personal circumstances. For example, consider your professional experience, career goals, strengths, weaknesses, comfort with quants vs quals, and what you scored well on in the Core exams (Core 1 vs Core 2). If you did well in Core 1, then Assurance and Tax are better suited for you. If you did well in Core 2, then PM and Finance are better for you.
If you decide to take Tax and Assurance electives, refer to the following article in terms of which elective is best to take first.
In Part 2 of this blog series, I discuss which role in CFE Day 2 is best to choose.