ARE - Architect Practice Management &
Professional Practice Exam Q&A,2026
Updated Study Guide.
"Design-Bid-Build -
CORRECT ANSWER -A project delivery method in which the owner holds two
separate contracts for design and construction. This method is often referred to as
the traditional project delivery method.
PROCESS
- owner hires architect, architect designs & prepares documents for bidding
- bid phase: GCs review & ask any necessary questions, confer with subs, bid with
their best price for the project, architect to review and select what best fits the
owners needs
- build phase: GCs team gets to work, architect oversees GC and subs"
"Limited Liability Partnership (LLP)
Who manages affairs?How do taxes work?
How does this contrast from partnerships and corps/s-corps? -
CORRECT ANSWER -hybrid of corporation and general partnership, LLP offers
owners limited liability and pass-through income tax, but can be run with formalities
generally required of a corporation
- LLP managed, operated and taxed on income like general partnership
- every LLP partner has equal right to participate in management and affairs -
CONTRASTS with corporation which is usually managed by a board of directors
elected by shareholders
- NOT REQUIRED to have officers and directors, hold annual meetings, or keep
formal records
-must file informational tax return, income is passed through to partners and taxed at
individual partner level, without any taxed at LLP entity level - CORPORATIONS
taxed at both levels unless S Corp which limits deductibility of certain expenses and
may therefore be undesirable
- partners personal assets will generally NOT BE AT RISK for another partner but
are for their own errors and omissions"
"Joint Venture -
CORRECT ANSWER -essentially a partnership but only for a specific and usually
limited purpose
,- one party assumes responsibility and liability for the other joint venturers as well as
themselves
- profits and losses pass through and reported on personal tax returns"
"Health Insurance Portability & Privacy Act (HIPPA) - CORRECT ANSWER
-specifies privacy of employee health data"
"Fair Labor Standards Act - CORRECT ANSWER -covers minimum hourly wage, OT
requirements, salaried employee qualifications for OT"
"Employee Retirement Income Securities Act (ERISA) - CORRECT ANSWER
-covers retirement and benefit plans"
"Family Medical Leave Act (FMLA) - CORRECT ANSWER -gives employees 12
weeks unpaid leave in case of serious health problems of employee or spouse or
addition of child"
"Income Taxes
Social Security Taxes
Medicare Taxes - CORRECT ANSWER -employers must withhold taxes for and
contribute to"
"Internal Revenue Code
Social Security Act
Mandatory Unemployment Insurance - CORRECT ANSWER -cover employment
taxes & payroll withholding"
"Fair Credit Reporting Act
Drug Free Workplace Act
Employee Polygraph Protection Act
Immigration Reform & Control Act - CORRECT ANSWER -cover how employee
personal information can be obtained and used"
"OSHA - CORRECT ANSWER -protection from unsafe working conditions"
"National Labor Relations Act - CORRECT ANSWER -right to unionize"
"Sarbanes-Oxley Act - CORRECT ANSWER -protects employee whistle-blowers"
"Jury Service & Selection Act - CORRECT ANSWER -time off for jury duty and
cannot be terminated due to jury time"
"Consolidated Omnibus Budget Reconciliation Act (COBRA) -
CORRECT ANSWER -addresses health benefits of employees"
,"Professional Liability Insurance - CORRECT ANSWER -protects architect in case
some action causes bodily harm, property damage or other damage (also called
malpractice insurance or ERRORS & OMISSIONS insurance)"
"Statute of Repose - CORRECT ANSWER -bar actions against architects and
engineers after a specified period of time following the completion of services or the
substantial completion of construction without a SOR, a designers professional
exposure to a claim could theoretically run indefinitely since an injury or the
discovery of a deficiency could occur at any time usually 3-10 years after substantial
completion"
"Statute of Limitations - CORRECT ANSWER -bar actions against architects and
engineers after a specified period of time following an injury or discovery of a
deficiency usually about 10 years"
"Cost Plus FIXED PERCENTAGE - CORRECT ANSWER -contractor compensation
for overhead and profit is based on a percentage of the actual cost"
"Cost Plus FIXED FEE - CORRECT ANSWER -Contractor compensation is based
on a fixed sum independent of the final project cost
- the customer agrees to reimburse the contractor's actual costs, regardless of
amount, and in addition pay a negotiated fee independent of the amount of the
actual costs"
"Corporation Member Duties - CORRECT ANSWER -Stockholders: owners of
corporation in proportion to number of shares they own directors: fiduciary duty to act
in best interest of the stockholders and responsible for broad policy decisions
officers: carry out day-to-day management of corporation"
"Professional Corporation - CORRECT ANSWER -Similar to other corporations
except that liability for malpractice is limited to the person responsible for the act."
"Teaming Agreement - CORRECT ANSWER -Defines the roles, responsibilities and
contractual relationships that will be established if the firms are awarded the project
and the joint venture is formed. (Aka Memorandum of Understanding)"
"Moonlighting How can it be prevented? - CORRECT ANSWER -Policy of accepting
work from outside firms adding moonlighting to formal employee contract"
, "Employment at Will - CORRECT ANSWER -used when there is no contract
between employee and employer and means firing or leaving can happen with no
restrictions"
"Two Primary Financial Reports - CORRECT ANSWER -Profit-Loss Statement and
Balance Sheet"
"Two essential components of a financial management system - CORRECT
ANSWER -Annual Budget & Profit Plan"
"Firm's Accounting System 2 Reports - CORRECT ANSWER -Accounting Reports:
responsibility of a firm's accounting personnel and outside tax consultant focus
primarily on cash-flow management, accounts payable and defining firms quarterly
and annual tax liability identified in cash-basis reports Financial Management
Reports: responsibility and realm of the firm's leaders even though others might
develop and compile these reports firm's leaders focus will be on reviewing &
monitoring key indicators from financial data provided in accrual-basis reports"
"Accrual-Basis Accounting (Modified) - CORRECT ANSWER -revenue earned and
billed from fees and expenses, including outside project consultant fees and
expenses, plus all other direct and indirect expenses INCURRED.
Revenue based only on invoiced fee and expense amounts sent and/or received
Most firms use for profit-loss statement and balance sheet development"
"Cash-Basis Accounting - CORRECT ANSWER -income received and all salaries
and expenses paid (a checkbook approach)
most commonly used for filing and paying quarterly and year-end taxes"
"Net Operating Revenue (NOR) - CORRECT ANSWER -represents the net dollars
remaining after deducting the invoiced consultants fees and expenses, and all
reimbursable and non-reimbursable project-related expenses"
"Direct Labor - CORRECT ANSWER -represents time CHARGED to projects,
whether invoiced or not"
"Indirect Labor - CORRECT ANSWER -time charged to non-project related activities"
"Reimbursable Expenses - CORRECT ANSWER -Project-related expenses that are
invoiced to the client in addition to fees. These would also include a markup
percentage on those expenses. The markup dollars are a form of revenue and are
included in net operating revenue."
Professional Practice Exam Q&A,2026
Updated Study Guide.
"Design-Bid-Build -
CORRECT ANSWER -A project delivery method in which the owner holds two
separate contracts for design and construction. This method is often referred to as
the traditional project delivery method.
PROCESS
- owner hires architect, architect designs & prepares documents for bidding
- bid phase: GCs review & ask any necessary questions, confer with subs, bid with
their best price for the project, architect to review and select what best fits the
owners needs
- build phase: GCs team gets to work, architect oversees GC and subs"
"Limited Liability Partnership (LLP)
Who manages affairs?How do taxes work?
How does this contrast from partnerships and corps/s-corps? -
CORRECT ANSWER -hybrid of corporation and general partnership, LLP offers
owners limited liability and pass-through income tax, but can be run with formalities
generally required of a corporation
- LLP managed, operated and taxed on income like general partnership
- every LLP partner has equal right to participate in management and affairs -
CONTRASTS with corporation which is usually managed by a board of directors
elected by shareholders
- NOT REQUIRED to have officers and directors, hold annual meetings, or keep
formal records
-must file informational tax return, income is passed through to partners and taxed at
individual partner level, without any taxed at LLP entity level - CORPORATIONS
taxed at both levels unless S Corp which limits deductibility of certain expenses and
may therefore be undesirable
- partners personal assets will generally NOT BE AT RISK for another partner but
are for their own errors and omissions"
"Joint Venture -
CORRECT ANSWER -essentially a partnership but only for a specific and usually
limited purpose
,- one party assumes responsibility and liability for the other joint venturers as well as
themselves
- profits and losses pass through and reported on personal tax returns"
"Health Insurance Portability & Privacy Act (HIPPA) - CORRECT ANSWER
-specifies privacy of employee health data"
"Fair Labor Standards Act - CORRECT ANSWER -covers minimum hourly wage, OT
requirements, salaried employee qualifications for OT"
"Employee Retirement Income Securities Act (ERISA) - CORRECT ANSWER
-covers retirement and benefit plans"
"Family Medical Leave Act (FMLA) - CORRECT ANSWER -gives employees 12
weeks unpaid leave in case of serious health problems of employee or spouse or
addition of child"
"Income Taxes
Social Security Taxes
Medicare Taxes - CORRECT ANSWER -employers must withhold taxes for and
contribute to"
"Internal Revenue Code
Social Security Act
Mandatory Unemployment Insurance - CORRECT ANSWER -cover employment
taxes & payroll withholding"
"Fair Credit Reporting Act
Drug Free Workplace Act
Employee Polygraph Protection Act
Immigration Reform & Control Act - CORRECT ANSWER -cover how employee
personal information can be obtained and used"
"OSHA - CORRECT ANSWER -protection from unsafe working conditions"
"National Labor Relations Act - CORRECT ANSWER -right to unionize"
"Sarbanes-Oxley Act - CORRECT ANSWER -protects employee whistle-blowers"
"Jury Service & Selection Act - CORRECT ANSWER -time off for jury duty and
cannot be terminated due to jury time"
"Consolidated Omnibus Budget Reconciliation Act (COBRA) -
CORRECT ANSWER -addresses health benefits of employees"
,"Professional Liability Insurance - CORRECT ANSWER -protects architect in case
some action causes bodily harm, property damage or other damage (also called
malpractice insurance or ERRORS & OMISSIONS insurance)"
"Statute of Repose - CORRECT ANSWER -bar actions against architects and
engineers after a specified period of time following the completion of services or the
substantial completion of construction without a SOR, a designers professional
exposure to a claim could theoretically run indefinitely since an injury or the
discovery of a deficiency could occur at any time usually 3-10 years after substantial
completion"
"Statute of Limitations - CORRECT ANSWER -bar actions against architects and
engineers after a specified period of time following an injury or discovery of a
deficiency usually about 10 years"
"Cost Plus FIXED PERCENTAGE - CORRECT ANSWER -contractor compensation
for overhead and profit is based on a percentage of the actual cost"
"Cost Plus FIXED FEE - CORRECT ANSWER -Contractor compensation is based
on a fixed sum independent of the final project cost
- the customer agrees to reimburse the contractor's actual costs, regardless of
amount, and in addition pay a negotiated fee independent of the amount of the
actual costs"
"Corporation Member Duties - CORRECT ANSWER -Stockholders: owners of
corporation in proportion to number of shares they own directors: fiduciary duty to act
in best interest of the stockholders and responsible for broad policy decisions
officers: carry out day-to-day management of corporation"
"Professional Corporation - CORRECT ANSWER -Similar to other corporations
except that liability for malpractice is limited to the person responsible for the act."
"Teaming Agreement - CORRECT ANSWER -Defines the roles, responsibilities and
contractual relationships that will be established if the firms are awarded the project
and the joint venture is formed. (Aka Memorandum of Understanding)"
"Moonlighting How can it be prevented? - CORRECT ANSWER -Policy of accepting
work from outside firms adding moonlighting to formal employee contract"
, "Employment at Will - CORRECT ANSWER -used when there is no contract
between employee and employer and means firing or leaving can happen with no
restrictions"
"Two Primary Financial Reports - CORRECT ANSWER -Profit-Loss Statement and
Balance Sheet"
"Two essential components of a financial management system - CORRECT
ANSWER -Annual Budget & Profit Plan"
"Firm's Accounting System 2 Reports - CORRECT ANSWER -Accounting Reports:
responsibility of a firm's accounting personnel and outside tax consultant focus
primarily on cash-flow management, accounts payable and defining firms quarterly
and annual tax liability identified in cash-basis reports Financial Management
Reports: responsibility and realm of the firm's leaders even though others might
develop and compile these reports firm's leaders focus will be on reviewing &
monitoring key indicators from financial data provided in accrual-basis reports"
"Accrual-Basis Accounting (Modified) - CORRECT ANSWER -revenue earned and
billed from fees and expenses, including outside project consultant fees and
expenses, plus all other direct and indirect expenses INCURRED.
Revenue based only on invoiced fee and expense amounts sent and/or received
Most firms use for profit-loss statement and balance sheet development"
"Cash-Basis Accounting - CORRECT ANSWER -income received and all salaries
and expenses paid (a checkbook approach)
most commonly used for filing and paying quarterly and year-end taxes"
"Net Operating Revenue (NOR) - CORRECT ANSWER -represents the net dollars
remaining after deducting the invoiced consultants fees and expenses, and all
reimbursable and non-reimbursable project-related expenses"
"Direct Labor - CORRECT ANSWER -represents time CHARGED to projects,
whether invoiced or not"
"Indirect Labor - CORRECT ANSWER -time charged to non-project related activities"
"Reimbursable Expenses - CORRECT ANSWER -Project-related expenses that are
invoiced to the client in addition to fees. These would also include a markup
percentage on those expenses. The markup dollars are a form of revenue and are
included in net operating revenue."
