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How to approach written communication in BEC?

Written communication is often referred to as the “essay portion” of the CPA exam. So why is that? Well, you basically are writing an essay or memo based on a specific prompt or scenario. Written communication (WC) is only applicable to the BEC section of the CPA exam. In fact, written communication accounts for 15% of your BEC score, so you can’t completely ignore written communication when preparing for BEC.

How many written communications are are there and how long will I have to complete them?

There are three written communications on the BEC exam, and they show up in testlet #5. Overall, you have 4 hours to complete the BEC exam, so it is up to you to leave plenty of time! I recommend leaving 25-30 mins for each written communication, so that means you need to leave at least 75-90 minutes to have enough time to draft a “well written response”.

How is the written communication graded?

Back in the day, the written communication responses were graded by humans. Fast forward to today, and the written communication responses are graded by computers. The computer will look for complete sentences, proper grammar, and the use of keywords and phrases that were included in the prompt.

So what types of prompts could you see for the written communication section?

Even though the written communication is included only in BEC, topics from BEC and the other sections are fair game. With that said, it seems like a majority of the prompts from the past related to BEC topics. I went ahead and reviewed the AICPA released simulations for written communications over the last 10 years and compiled the list below. I’ve included a bit more detail on the nature of the simulation. Here we go!

1) Pros and cons of debt vs equity financing: This prompt required you to help the CEO understand the impacts of debt vs equity financing on the business.

2) Pros and cons of inventory methods: This prompt required you to explain the pros and cons of different inventory accounting methods (e.g. FIFO, LIFO, etc.).

3) Risk associated with issuing credit to customers: This prompt required you to explain the risks associated with offering credit to customers for a company that is currently cash based.

4) Variable vs absorption costing and impact on profitability: This prompt required you to explain the differences between the variable and absorption costing methods and how the different methods impact a company’s overall profitability.

5) Job-order costing vs process costing: This prompt required you to explain the difference between the two costing methods.

6) Different types of economic indicators: This prompt required you to explain the different types of economic indicators and how those indicators could be used to make business decisions.

7) Overview of internal control components: This written communication prompt required you to put yourself in the role of the internal audit manager and you had to advise the CEO on how implementing technology could improve the company’s internal control framework.

8) Benefits of implementing internal controls: This prompt required you to explain the five components of the internal control framework.

9) Solutions to reduce risk from foreign currency fluctuations: Describe the impact on profitability from fluctuations in foreign currencies and how certain strategies can reduce the risk.

10) Benefits of budgeting and forecasting: This prompt required you to explain to the CEO the benefits of budgeting and forecasting and why both actions are important.

What is the winning strategy for written communication?

A lot of candidates ask us how they can prepare for written communication. While it is important to have an understanding of the topics that will be tested, the best way to prepare for written communications is to have a step by step approach on how to complete a written communication. When the written communication is scored, more emphasis is placed on “how well you can write” vs “what you wrote”.

Many candidates focus too much on the technical aspect of the prompt, as opposed to focusing on whether they have produced a well written response. We’ll dive into how to craft a “well written response” shortly, but for now, let’s understand the mental map for written communications.

The mental map for written communications consists of four steps that will guide you to creating a “well written response”.

Step 1) Evaluate prompt: This is the first step, and it is super important that you take the time to evaluate the prompt and fully understand the purpose of the prompt.

a) Identify your role: Are you playing the role of the CFO, Internal Audit Manager, shareholder, investor, etc. You might understand the technical content, but if you don’t understand your role, then your response won’t address the prompt.

b) Identify key phrases: Read through the prompt and identify key phrases. There will be multiple key phrases that you need to pull out to fully understand the topic that the prompt is addressing. The prompt could start by mentioning “net working capital”, but if you stopped there, you would likely miss the point of the prompt! I recommend looking for 2 to 3 key phrases in a prompt.

c) Identify the audience: You must identify and understand the audience that you will be writing to. You could be addressing the CEO or you could be addressing investors. Your response for the same topic could vary greatly depending on who the audience is.

Step 2) Prepare outline: Once you have finished evaluating the prompt, you can then being to draft your outline. This is a crucial step as you need to fully understand the introduction paragraph, the main body paragraph, and the conclusion paragraph. By outlining what you will cover in these 3 sections, you can visualize the flow of your response.

a) Introduction: In the introduction paragraph, you need to start by directly addressing the prompt. What is your response about and what are you going to convey to the reader. Include keywords or phrases from the prompt in this paragraph! The introduction paragraph is critical and sets the stage for the rest of your response.

b) Main body: The main body is where you provide the details to your response. Depending on the prompt, this could be one to several paragraphs. Typical business writing suggests 3 main body paragraphs, but if you only need one, then you only need one! The main body is where you must be concise or direct, otherwise, you will lose your reader!

c) Conclusion paragraph: The conclusion paragraph summarizes the purpose of the prompt and the message you are trying to convey to the reader. Include the same keywords or phrases that you used in the introduction paragraph.

Step 3) Draft response: Once your outline is complete, you are ready to start drafting the actual response. There shouldn’t be any big questions on where you are going with your response as those questions should have been flushed out while drafting the outline.

a) Stay on topic: A well written response addresses the topic. Stick to your outline. Every sentence should address the topic or prompt.

b) Relevant information: Similar to staying on topic, only include relevant information in your response.

c) Be direct & concise: A lengthy response or high word count does not equate to a well written response. Bring the mindset of “less is more”. If there is a quicker way to get your point across, then take it. There shouldn’t be any sentences that need further explanation. Business writing is short and sweet and there is no reason to draft a lengthy response.

Step 4) Quality review: Remember how I mentioned that a well written response is more important than the technical content in your response? Well, this is addressing the fact that your response should adhere to the following rules:

a) Complete sentences: Don’t use incomplete sentences. Sounds simple, but using complete sentences is crucial. Avoid run-on sentences as well. Do not use bullets, numbering, etc.

b) Grammar/spelling: Using proper grammar and avoiding slang phrases is important. Additionally, ensure that there are no spelling errors in your response. There is a spell check feature, so use it!

c) Avoid jargon/acronyms: With the response being computer graded, you need to avoid jargon (slang phrases) and acronyms (unless explained) that that the computer may not recognize.

Example Prompt

Your client, a nonissuer, is considering voluntary adoption of Section 404 of the Sarbanes-Oxley Act (SOX), which involves management assessment of internal controls and independent attestation. Mrs Smith, the client’s CFO, has asked you for advice regarding the benefits of voluntary compliance with the requirements of Section 404. Write a memo to the CFO discussing the benefits of adopting these requirements.

AS A REMINDER, THE AICPA WILL GRADE YOUR RESPONSE BASED ON YOUR WRITING SKILLS AND THE ABILITY TO INCLUDE TECHNICAL CONTENT. FOCUS ON INCLUDED TOPICS YOU HAVE LEARNED THROUGHOUT BEC AND NOT INFORMATION SPECIFIC TO THIS MODULE. MAKE SURE THAT YOU HAVE A CLEAR INTRODUCTION THAT ADDRESSES THE QUESTION, FOLLOWED BY SEVERAL PARAGRAPHS THAT RESPOND TO THE PROMPT. IT IS CRITIAL THAT YOU DO NOT USE BULLETS, LISTS, NUMBERING, OR ABBREVIATIONS (UNLESS YOU DEFINE THEM). 

Example Draft Response to Prompt

Dear Mrs. Smith (CFO),

By voluntarily complying with Section 404 of the Sarbanes Oxley Act, you are demonstrating that you and the entire organization are committed to creating a strong internal control environment. Since public companies are required to comply with Section 404, your organization will be better prepared to transition to being a public company in the future.

To get started, I recommend that you review the Internal Control Framework that is published by the Committee of Sponsoring Organizations (COSO). The COSO internal control framework will assist you and the rest of the management team in effectively designing and implementing internal controls relevant to the organization.

As a private company, there are a number of benefits from implementing an internal control framework and complying with Section 404. Your organization will better understand the current controls in place, as well as the types of controls that can be implemented to create a stronger internal control framework. Your organization will focus on the key components of the COSO framework, which include the control environment, risk assessment, information and communication, monitoring, and existing control activities.

Additionally, if your external auditors issue an opinion on the internal control framework, that will provide additional confidence to external stakeholders, vendors, and other 3rd parties that the company transacts with.

While voluntary compliance with Section 404 is a big undertaking, there are a number of future benefits and I believe you will not regret your decision.

We are happy to assist you and answer any questions you may have.

Sincerely,

Your Advisor


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