Audit Risk Model
Audit Risk = Inherent Risk × Control Risk × Detection Risk. Auditors use it to determine how much substantive testing is needed to keep overall audit risk at an acceptably low level.
Full AUD breakdown →Materiality
The threshold at which a misstatement could reasonably influence a financial statement user's decisions — sets the scope and depth of audit testing.
Full AUD breakdown →ASC 606 (Revenue Recognition)
The five-step revenue recognition model: identify the contract, identify performance obligations, determine the transaction price, allocate the price, and recognize revenue as obligations are satisfied.
Full FAR breakdown →Goodwill
The excess of consideration paid for a business over the fair value of its identifiable net assets acquired, under ASC 805's acquisition method.
Full FAR breakdown →Deferred Tax (ASC 740)
A balance sheet item arising from temporary differences between book and tax treatment of income and expenses — a deferred tax liability means more tax will be paid later; a deferred tax asset means less.
Full FAR breakdown →QBI Deduction (§199A)
The Qualified Business Income deduction allows eligible pass-through business owners to deduct up to 20% of qualified business income, subject to income thresholds and W-2 wage limitations.
Full REG breakdown →Capital Gain
Profit from selling a capital asset. Long-term (held over one year) gains are generally taxed at preferential rates; short-term gains are taxed as ordinary income.
Full REG breakdown →Like-Kind Exchange (§1031)
A provision allowing deferral of capital gains tax when real property held for business or investment is exchanged for similar real property, rather than sold for cash.
Full REG breakdown →DuPont Decomposition
Breaks Return on Equity into three drivers — net profit margin, asset turnover, and financial leverage — to identify which lever is actually responsible for a company's ROE.
Full BAR breakdown →Degree of Operating Leverage
Contribution margin divided by operating income — measures how sensitive operating income is to a change in sales volume. Higher fixed costs mean higher operating leverage.
Full BAR breakdown →Quality of Earnings
An assessment of how sustainable and cash-backed a company's reported earnings actually are — high accrual-based earnings with weak cash flow backing are a red flag of lower earnings quality.
Full BAR breakdown →SOC Report
System and Organization Controls reports. SOC 1 covers controls relevant to a user entity's financial reporting; SOC 2 covers security, availability, and related Trust Services Criteria. Type II reports test operating effectiveness over time; Type I only tests design.
Full ISC breakdown →CIA Triad
The three core objectives of information security: Confidentiality, Integrity, and Availability of data and systems.
Full ISC breakdown →COBIT
A framework for IT governance and management, distinguishing governance (setting direction, monitoring) from management (planning, building, running IT processes).
Full ISC breakdown →GILTI
Global Intangible Low-Taxed Income — a category of income under §951A that US shareholders of controlled foreign corporations must include currently, designed to discourage shifting profits to low-tax jurisdictions.
Full TCP breakdown →Entity Selection
The analysis of which business structure (sole proprietorship, partnership, S corp, C corp, or LLC) minimizes total tax burden for a given owner and business, factoring in self-employment tax, QBI eligibility, and double taxation.
Full TCP breakdown →18-Month Rule
Once you pass your first CPA section, you have 18 months (a rolling window) to pass the remaining three — only the oldest passed section is ever at risk of expiring.
Full CPA Exam Guide →CPA Evolution
The current CPA exam model (effective 2024): every candidate takes the same 3 Core sections (AUD, FAR, REG), then picks one Discipline (BAR, ISC, or TCP) matching their career direction.
Full CPA Exam Guide →Core Section / Discipline Section
Core sections (AUD, FAR, REG) are mandatory for every candidate. Discipline sections (BAR, ISC, TCP) — choose exactly one — let candidates specialize, without restricting what they can practice as a licensed CPA afterward.
Full CPA Exam Guide →NASBA
The National Association of State Boards of Accountancy — coordinates CPA exam administration and scheduling across US state boards, which each set their own specific licensure requirements.
Full CPA Exam Guide →