In Part 1 of this two-part series, I discussed which elective to take as part of your CPA Canada PEP program. In here, I’ll speak about which role to take for CFE Day 2.
Understand the CFE
The CFE contains 3 separate exam days, with Day 2 requiring you to select a “role” of your choice. Day 1 and Day 3 don’t have roles.
Day 2 of CFE focuses on depth in Financial Reporting (FR), Management Accounting and your role area. Everyone is given the same case which has a common section (Financial Reporting and Management Accounting) and role section.
There are four roles you can select for CFE Day 2:
- Performance Management (PM)
You are not required to choose a role that was one of your electives (eg. if your electives were PM and Finance, you can choose Assurance as your role). However, it’s not a smart idea to do that; it will be very hard for you to score Cs on a role that’s not one of your electives.
Here are factors to consider and my recommendation.
- This role is required for public practice licensing. If you are thinking of opening your practice down the road, this will be required when applying for the license with a few exceptions (check your provincial CPA website for specific requirements, for example Ontario’s is available here).
- It’s closely linked to Financial Reporting so it will help you prepare for Day 2 FR as well. For example, in recent CFEs there were FR issues in the Assurance role. Students who took Assurance as their role got extra practice from those FR AOs.
- Because of high volume of candidates that select this role, there will be more study material available as well as more potential study partners.
- There are a limited number of topics under Assurance role that can be tested, often less than other roles. For a list of sample topics, check out Part 1 of this blog series.
- There is little quant analysis.
- The Assurance standards are available to you in the exam in the Handbook, which means you don’t have to memorize as much as with other roles.
- Most of the AOs can be answered in a template format, which makes it easier to get a C.
- If you don’t have audit work experience, the complex nature of assurance will make it difficult for you to get full understanding of topics. For example, writing procedures is a challenge for most candidates who have never worked in audit.
- Due to the high volume of candidates selecting this role (typically the default role for candidates in public practice) there will be more writers to compete against for depth. Since CFE is marked on a curve, you have a higher bar to pass.
- Assurance is a qualitative heavy exam. Most AOs will require clear, concise, and well-structured written responses to achieve C grade. If you have not worked in Audit or English is not your first language, this role may not be suitable for you.
- Similar to Assurance, this role is required for public practice licensing. Check your provincial regulations for specific rules.
- If you like “concrete answers” (eg tax payable calculation, employee benefits rules, tax formulas), as opposed to subjective answers (eg procedures, strategy, performance evaluation), you’ll succeed in this role because it will be clear what you are doing right or wrong.
- If you are currently working in tax (personal or corporate), you will have a better understanding of this role during Day 2.
- 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.
- If you have intentions to grow in a tax-related role in your career, this is a good opportunity to learn many technical subjects.
- Not a common role that students select. This means those who do select it are confident in their expertise, so you’ll have strong competitors to beat. There will also be fewer resources and study partners available as support due to low volume of students taking this.
- While you are provided with the ITA, this is often difficult to interpret and hard to rely on, which means there will be much more to memorize.
- You need to be very detail-oriented. You’ll find it takes longer to study Tax and perfect the Tax AOs than with other roles.
- Even if you have experience in either personal tax or corporate tax, it is unknown which AOs will come up on the exam, due to breadth of topics, so your experience may not be that useful.
- This role is heavy on technicals. You’ll have a lot to study and memorize for the CFE.
Performance Management (PM)
- You won’t be competing with writers in public practice.
- If you are working in corporate and/or industry type role, you will have a better understanding of this role. For example, you probably had exposure to Excel quants analysis, like cash flows, DCF, contribution margin, break-even analysis, etc. This experience will help you solve AOs during the CFE.
- Taking this role will significantly help with Day 1. The CFE Day 1 has similar quants, like CM, NPV, breakeven, IRR, cash flows, etc.
- Taking this role will also help with Day 2 common area MA AOs, because PM has lots of MA AOs. This means you can study for both your role and MA AOs at the same time.
- Well-rounded with both quantitative and qualitative AOs.
- This role is less criteria-focused compared with Tax and Assurance. It will be easier for you to get Cs if memorization is not your strong skill.
- Most find the calculations to be more intuitive compared with a Finance role.
- Qualitative components are ambiguous and subjective. You’ll find it challenging to achieve depth and write at C level. For example, if you are asked to discuss the pros/cons of outsourcing, you need to provide specific factors and answer “so what”, “why” and “how,” which is difficult for most writers.
- You will not be provided with resources during the exam, such as the ITA/Handbook for Taxation and Assurance, so there is less to rely on and more to memorize.
- Common misconception that you will be tested just on qualitative AOs (such as pros/cons and SWOT). PM role includes several quant AOs, so time management and depth are often struggles for candidates who are not strong with quants.
- If you are currently working in finance type role, you will have a better understanding of this role for Day 2 and certain topics will be more intuitive for you.
- Similar to PM, taking this role can significantly help with Day 1 on the CFE, as the exams have common calculations and AOs.
- Could be helpful if you are interested in future plans to pursue the CFA designation.
- Suitable if you are strong with calculations because Finance role is quants heavy.
- There are lots of calculations and quants involved. It’s more technical than PM.
- Similar to PM, you will not be provided with resources during the exam, such as the ITA/Handbook for Taxation and Assurance, so there is less to rely on and more to memorize.
- Because this roles has several calculations, time management and depth are struggles for candidates. You will need to be very proficient with Excel and quants.
- Few individuals take this role (compared with PM and Assurance), so there could be fewer resources and study partners for support.
Which CFE Role to Choose?
I recommend Assurance or Tax for candidates working in public practice. Between the two, Assurance is preferred. It’s less technical, you can apply templates, there are more study partners available, and it will help you with FR AOs.
I recommend PM or Finance for candidates in corporate/industry. Between the two, PM is preferred because it’s less technical, more balanced with quant/qual, and prepares you better for Day 1.
You can also think back to your electives and choose the one you did better. For example, if you took PM and Finance, and did better in PM, then you should choose PM.
According to CPA Canada CFE Reports, Assurance and PM roles make up 90% of all writers. You can now see why more writers choose Assurance and PM compared to other roles. If you need coaching with the CFE, check out my CFE Review course which has 90%+ pass rate on the CFE.