(Posted October 2023)

To pass the CFE, you need to understand how the exam is marked. Similar to playing a game, you will not win the game if you do not understand the rules of the game.

The CFE is two distinctly different exams and candidates are evaluated on Day 1 and also on Day 2 and Day 3 combined.  You can pass or fail Day 1, and you can pass or fail Day 2 and Day 3. 

CFE Day 1:

Day 1 is assessed independently from Day 2 and Day 3 of the CFE.  The Day 1 papers are evaluated on a holistic basis to determine clearly passing and clearly unsuccessful candidates.  More extensive evaluation is then applied to candidates not falling into the clearly passing or clearly unsuccessful categories.

Day 1 of the CFE will assess your enabling skills, such as critical thinking, decision-making, professional judgment and integration.  You will also be evaluated on your ability to evaluate links to your Capstone 1 case.

CFE Day 2 and Day 3:

The Day 2 case and each of the Day 3 cases have assessment opportunities. Assessment opportunities are designed to answer the question, “What would a competent CPA do in these circumstances?”  You will score one of the following rankings for each assessment opportunity:

  • Not addressed (NA)
  • Nominal competence (NC)
  • Reaching competence (RC)
  • Competent (C)
  • Competence with distinction (CD)

The CFE Day 2 and Day 3 evaluation methodology has 4 levels and 10 separate tests:

  • Level 1 – Sufficiency
  • Level 2 – Depth in Financial Reporting
  • Level 2 – Depth in Management Accounting
  • Level 3 – Depth in Role (Assurance, Finance, Performance Management or Taxation)
  • Level 4 – Breadth in Audit and Assurance
  • Level 4 – Breadth in Taxation
  • Level 4 – Breadth in Strategy and Governance
  • Level 4 – Breadth in Finance
  • Level 4 – Breadth in Financial Reporting
  • Level 4 – Breadth in Management accounting

Level 1

Level 1 is an assessment of overall sufficiency.  Translated that means did you score enough marks on an overall basis.  No marks are awarded for NA or NC ratings.  Scoring starts at RC and historically an RC rating was worth about half as many marks as a C or CD rating.  C and CD ratings historically are worth the same amount of marks and the CD rating is only used to determine honour roll candidates.  The assessment opportunities on the Day 2 case are weighted such that each of Day 2 and Day 3 are weighted equally. Level 1 rewards consistency of scoring (your role is to eliminate as many NAs/NCs as possible). 

Level 2

Level 2 assesses depth in Financial Reporting or Management Accounting.  Think of depth as whether you scored enough C rankings in either of those technical competency areas.  RC ratings help at Level 1 and Level 4 but do not help you here.  You need enough C or CD rankings to meet the Level 2 standard.  Level 2 is an “OR” test.  You only need to meet the standard in one of the two depth areas.  You do not need to meet the depth standard in both technical competency areas.  There will be Assessment Opportunities on Day 2 and Day 3 that will help you to pass Level 2.

There is one quirk to the Level 2 assessment.  For public licensure, you must select the Assurance role on Day 2 of the CFE.  Then, you must pass Level 3 and pass Level 2 for Financial Reporting.  That has led to the scenario of candidates passing Level 2 depth in Management Accounting (sufficient to pass the CFE) but not being able to practice public accounting despite being a CPA because the candidates did not meet the depth in Financial Reporting standard at Level 2.  There is an option to qualify for a public accounting license through the Post Designation Public Accounting (PDPA) program, whereby participants complete the mandatory education and examination requirements.

Level 3

Level 3 assesses depth in the chosen role.  Again, remember that depth is a function of scoring a C or CD rating.  What is absolutely crucial to understand is that the only assessment opportunities for Level 3 are found on the CFE Day 2 case.  You cannot pass Level 3 on Day 3 of the CFE.  You really need to nail the CFE Day 2 assessment opportunities for your chosen role. 

Level 4

The Level 4 breadth tests whether you scored enough times in each of the six technical competency areas.  Remember that scoring starts at the RC level so NAs/NCs are your enemy with the breadth assessment.  Level 4 rewards consistency of scoring so your role is to eliminate as many NAs and NCs as possible. Assessment Opportunities to pass Level 4 for Finance, Audit and Assurance, Strategy and Governance, and Taxation will be on Day 3 of the CFE.  There will be Assessment Opportunities in Financial Reporting and Management Accounting on Day 2 and Day 3 of the CFE, depending on what is tested in the common component on the CFE Day 2 case. 

You must pass all 4 levels and all 10 tests to pass Day 2 and Day 3 of the CFE.

As you can see, the CFE evaluation process is complicated and each day of the CFE has very different testing objectives.  Understanding the rules of the game is crucial for CFE success.  As part of our CFE Prep course, we provide a more detailed explanation of how the CFE Evaluation Methodology works for each day of the CFE.