CPA Certificate vs License: What's the Difference?

CPA Certificate vs License: What’s the Difference?

cpa certificate vs license

Readers are often confused about the CPA certificate vs license. So, I am going to highlight the differences below. But, bear in mind that CPA certificates are becoming less relevant because most state boards have stopped issuing them. Therefore, it’s important to understand how CPA licensing is changing and how that might affect you.

Here is a video that explains the difference:

Please find below the text version of this video.

CPA Certificate vs License: An Overview

Each state has its own laws and rules governing the CPA profession. And, each has its own Board of Accountancy that monitors the CPAs it licenses.

In most states, the term “CPA certificate” and “CPA license” is colloquially inter-changeable, even though there is a legal difference. However, for “two-tier states,” there is a distinction between the two. So, let’s review how these terms are used and the differences between a one-tier and a two-tier jurisdiction.

One-Tier Jurisdictions

Each Board of Accountancy in the 55 U.S. states and territories can have slightly different certified public accounting license requirements. In so-called “one-tier” jurisdictions, the Boards have established a relatively simple path to the CPA license. In these states, you get both the CPA certificate and license by passing the CPA Exam and gaining a certain amount of education and experience.

Two-Tier Jurisdictions

In a two-tier jurisdiction, you must pass meet the requirements of two levels to finally become a licensed CPA. First, you receive a “CPA Certificate” when you pass the CPA Exam. Even though you’re a certified CPA, you still need to complete a minimum of one year of experience (more in some states) before you can apply for the CPA accounting license. According to NASBA (National Association of State Boards of Accountancy), only seven jurisdictions in the US are two-tier states:

  • Alabama
  • Connecticut
  • Hawaii
  • Illinois
  • Kansas
  • Nebraska
  • Oklahoma

Let’s use Illinois as an example. As a two-tier state, you will deal with two different state agencies to get your CPA accountant license. To pass the first tier, you’ll need to pass the CPA Exam and an ethics exam. According to the Illinois Board of Examiners, once you pass the CPA Exam and meet Illinois’s ethics exam requirement, you will be issued the “Illinois Certificate of CPA Exam Completion” from the Illinois Board of Examiners. Then, once you’ve met your experience requirement needed for the second tier, you’ll apply for your CPA license with the IDFPR (Illinois Department of Financial and Professional Regulation).

FAQs of CPA Certification vs Licensure

CPA Certificate

  • The CPA certification is awarded after candidates pass the CPA Exam.
  • Most jurisdictions do not require work experience.
  • No CPA CPE (continuous professional education) hours are required to remain CPA certified.
  • Your potential scope of work is limited as certificate holders cannot own a CPA firm (either as a sole owner or partner) or sign audit reports.
  • Cannot normally hold yourself out as a CPA.  However, some states allow you to refer to yourself as a “CPA but not in public practice.” But still, others simply don’t allow you to use the title in any way.

CPA License

  • Typically requires 1-2 years of working experience that must be supervised and/or verified by a CPA licensee.
  • CPE hours are required to maintain your license. Typically, most states require at least 120 hours every 3 years.
  • You can use the CPA title on business cards, own a CPA firm, and sign audit reports.

Implications for International Candidates

Because the CPA certificate is easier to get, many candidates consider the certificate as the “first level” to pass. It doesn’t really matter if you’ll be working in a one-tier or a two-tier jurisdiction: you’ll receive your CPA certificate after you pass the CPA Exam. Therefore, it’s the first hurdle. The license, or permit to practice, is the “second level.” In fact, many international students aim for certificates only because the CPA qualification is mainly used to enhance their credentials.

Due to confusion and some abuses in the system, most states have switched from a two-tier system to a one-tier system.

Other Types of CPA Licenses

Most states use several different terms to describe the status of your CPA license. Terms used include active, active certificate, practicing, registered, inactive, inactive with experience, non-practicing, expired, and lapsed. Let’s review these broad categories of restricted licenses that you can consider in addition to an active license.

Inactive or Non-Practicing CPA License

Some states issue inactive or non-practicing licenses for CPAs who are not actively engaged in practice. Depending on the jurisdiction, these non-reporting or inactive licensees may or may not be required to fulfill CPE requirements. Plus, inactive CPAs often don’t need to pay license fees on a regular basis. In most states, if you have an inactive license, you need to denote that status in your title.

For example, Ohio has an inactive CPA license. According to the Accountancy Board of Ohio, “If you are not engaged in the practice of public accounting and you do not perform regulated services, you may obtain a non-practicing Ohio registration and use the title ‘CPA Inactive.’”

Guam has a slightly different kind of inactive license without the need to reach 150 credit hours and accumulate the relevant experience. The applicant must be an accounting major and must fulfill the exam requirements including a 4-year bachelor’s degree.

Massachusetts used to have a non-reporting license as long as you fulfilled their exam requirements (including 150 credit hours) had a graduate degree. No experience was required. In turn, the non-reporting license allowed you to use the CPA title without the privilege of signing audit reports. However, Massachusetts did away with the non-reporting CPA license in 2017.

But People in My Country Said I Can Be a CPA without Getting the License…

I think it’s necessary to clear up some confusion about the CPA license. I’ve had many questions—and even a few challenges—from readers who insist that a license is not necessary to use the US CPA title, because “everyone” said so in their country. But here is the truth: If you don’t go through the 3 E’s to get your license (education, exam, and experience), you’re not a Certified Public Accountant. And legally, you can’t use CPA in your title, on your resume, and certainly not in your practice.

I would like to quote Chee Kin Tang’s excellent response to one of the readers on my Facebook page on this topic:

The reason why people say you do not need to be “licensed” as a CPA outside the US is because most people think of a “license” in UK/commonwealth terms. License in those terms refers to getting an audit license or qualification after one has already been certified/admitted to membership as a CA or ACCA.

This concept of licensing in the US does not typically arise in the US because state CPA boards are statutory bodies whereas UK bodies are not and therefore their authority to issue licenses are either derived from an act of parliament or the license is issued by a governmental ministry. If one is licensed as a CPA with the right experience, one can perform public accounting services and be a reporting/signing accountant. There is no additional step of obtaining an audit license.

Therefore, if you want to be a CPA, you ought to be licensed (or certified). The issue is getting 21 more credits and then choosing the right state.

If you are still not convinced, please look up the rules and regulations of your chosen state board. On the NASBA website, you can find a full list of all 55 Boards of Accountancy. They usually have the full regulation publicly available, either online or in PDF format on their websites. Also, you can also send an email to the state board to confirm.

We cannot force anyone to comply with the regulations. Please understand that it is the candidate’s responsibility to find out the facts and understand the rules.

Conclusion

Nowadays, I strongly recommend that all candidates regardless of origin to go for the full CPA license. If you have difficulties fulfilling the educational or experience requirements, I may have some insights into how to solve these issues. Please check out these pages for possible solutions:

For Your Further Reading

Any Questions?

If you like this post and would like to learn more about the CPA Exam, check out my mini-course that is completely free. I have two versions designed for candidates with different backgrounds:

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For US Candidates
(Those with US degrees or
graduate/live/work in the US)
For Intl Candidates
(Those who study abroad or
graduate/live/work outside of the US)

About the Author Stephanie Ng

I am the author of How to Pass The CPA Exam (published by Wiley), and I also passed all 4 sections of the CPA Exam on my first try. Additionally, I have led webinars, such as for the Institute of Management Accountants, authored featured articles on websites like Going Concern and AccountingWeb, and I'm also the CFO for the charity New Sight. Finally, I have created other accounting certification websites to help mentor non-CPA candidates. I have already mentored thousands of CPA, CMA, CIA, EA, and CFA candidates, and I can help you too!

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