As an occupant of the world of accounting, you probably know that the letters CPA stand for Certified Public Accountant. You may also know that such individuals possess unparalleled expertise in accounting, auditing, and other areas of finance due to their fulfillment of the CPA requirements. And with this expertise comes impressive career advantages, as the CPA benefits include increased salary, more job opportunities, and heightened respect. But what you may not know is what the role of a CPA is and what their responsibilities are. So, if you want to learn about the life of a CPA, use this information to get the answers to the questions, “What is a CPA?” and “What does a CPA do?”
Of course, to answer the question, “What is a CPA?”, you’ll need a basic definition of a CPA.
A CPA is a Certified Public Accountant who holds the CPA license. The boards of accountancy in each of the 55 U.S. jurisdictions grant the CPA to accountants after these accountants meet a set of requirements specific to their state board.
The state boards hold CPA candidates to the highest of standards because CPAs are accounting experts entrusted to protect the public interest. CPAs must demonstrate significant depths of knowledge and aptitude to fulfill the position, so earning the CPA places you in an elite group of greatly respected professionals.
Understanding the difference between an accountant and a CPA allows you to see just how prestigious the CPA certification is.
Essentially, a CPA differs from an accountant in 2 ways:
Above all, a CPA is a trusted advisor. These professionals work with individuals, businesses, schools, non-profits, and government agencies to help them navigate their financial goals and needs.
The scope of a CPA’s responsibilities can vary widely depending on their area of focus and industry. In fact, one of the greatest advantages of the CPA license is choice. With the title, you have greater flexibility in determining your own career path.
To help make sense of what CPAs do and where they work, we can divide their roles into 2 categories: CPAs who work for public accounting firms and those who do not.
Often, CPAs are employed by public accounting firms to conduct client-based work in the following areas:
Some CPAs specialize in tax preparation and other services. As part of this focus, they may prepare and sign tax returns for clients including individuals and businesses. Furthermore, CPAs can advise clients on a range of tax matters. For example, they can provide guidance on how to reduce future tax burdens.
CPAs can also help clients in rather sticky or complex tax situations. Specifically, CPAs can represent clients in front of the IRS as well as in front of state or local tax boards. Again, CPAs have unlimited representation rights before the IRS. Consequently, they can represent clients in matters related to payments and collections, audits, and appeals. And remember, CPAs only share similar representation privileges with EAs and attorneys.
CPAs perform objective audit services for business clients. Specifically, they review and analyze a client’s financial statements and then prepare an unbiased report on their findings. The goal of the audit is to determine if the client’s financial statements are accurate and in accordance with financial reporting standards.
The SEC requires that all public companies have a CPA firm audit their financial statements before the information is given to shareholders and the public. So, if you choose to focus on auditing with your CPA license, you can expect to be in demand.
As a second piece of the audit, CPAs are often called on to explain their findings to a company’s executives and/or board. Therefore, they assure that these individuals can understand the report and act if needed.
You’re likely familiar with at least 1 or 2 stories of an employee or executive who embezzled money from their company. In many of these cases, the company didn’t catch on to the fraud until after the money went missing. But when the red flag does go up, CPAs are asked to conduct forensic or investigative accounting.
When a company believes they may be the victim of fraudulent activity, they can hire a CPA to comb through their books and determine if any funds have disappeared. In these circumstances, CPAs act as investigators and collect and evaluate evidence. As such, CPAs who specialize in forensic accounting may be called upon to share and interpret their findings in a court of law.
Remember, CPAs are trusted advisors. As such, they often consult with business clients on a depth of financial matters. For example, CPAs can advise business clients on their control systems, long-term planning, and operational activities. In any case, the CPA is responsible for making informed recommendations to improve some aspect of the business.
Similarly, CPAs also work closely with individual clients on personal business matters. For starters, they can provide guidance on when to sell a company or transfer ownership with minimum tax repercussions. Often, these types of conversations go hand in hand with helping a client conduct estate planning. Moreover, CPAs can assist clients with setting and meeting financial goals, planning for retirement and other major life events, and determining sound investment strategies.
CPAs are not lawyers, but they work closely with them by focusing on litigation services. Often, lawyers need a financial expert to assist with certain cases. Perhaps, they’ll call a CPA in to analyze financial records or even act as an expert witness in court. Commonly, CPAs provide litigation services in fraud, bankruptcy, merger and acquisition, and divorce proceedings.
So, CPAs don’t have to work directly for accounting firms. They can find employment in other venues and industries. I’ve outlined some of the more common employment options below.
Not surprisingly, CPAs can find themselves in public and private companies holding management and executive positions. These positions can include Chief Financial Officer (CFO) and Chief Operations Officer (COO). CPAs are accounting experts with advanced knowledge of the field. Because of this, organizations seek out CPAs to lead teams, minimize inefficiencies, and maximize profitability.
Similarly, non-profit organizations need strong financial management and leadership. When working for a non-profit, CPAs are called on to help the organization practice responsible spending and money management.
However, CPAs can still work for non-profits without directly showing up in their office every day. Non-profits like to appoint CPAs to their boards to ensure fiscal compliance and smart operating strategies.
CPAs can find numerous positions at the local, state, and federal government levels. If you aspire to work for the highest ranks of government, you may be able to put your CPA license to use in the FBI, IRS, or the General Accounting Office.
Obviously, your specific responsibilities in any government job are dependent on that job. However, you can expect many government jobs to focus on auditing, financial reporting, and investigative accounting.
CPAs can find work as educators in major universities as well as business and community colleges. In this type of role, you’d likely teach classes related to taxation, auditing, cost and managerial accounting, and business ethics. As part of such a role, you may also spend time writing books and articles on topics that are relevant to the CPA license.
Clearly, the CPA license provides you with choices. So, if you’re thinking about pursuing the certification, then you should start by learning more about the CPA process. To become a CPA, you must do the following:
Unlike other professional certifications and licenses, you won’t find a single administrative body that oversees the CPA title. Rather, each U.S. state and jurisdiction sets its own requirements for the CPA license. More specifically, the state board of accountancy leads the charge. However, the CPA requirements tend to be similar across these state boards.
So, to begin the CPA certification process, you must investigate the specific qualifications for your state or jurisdiction. While there are commonalities among the state CPA requirements, there are also plenty of subtle differences.
What’s more, you can earn your CPA license in more than one state. CPAs are like attorneys and teachers in that they can practice in more than one state thanks to reciprocity laws.
To earn your CPA license, you must accumulate a great deal of accounting knowledge. In other words, you need to meet state-designated education standards.
Every state board maintains a strict CPA education requirement. As a baseline among these requirements, you need to have 120 credit hours of education (equivalent to a bachelor’s degree). However, most states require even more education in the form of 150 credit hours (equivalent to a bachelor’s and a master’s degree). Furthermore, state boards may also dictate that your degree, or at least some of your coursework, is in a field related to the CPA license.
Although state boards have varying requirements to earn the CPA license, they all administer the same exam: the Uniform Certified Public Accountant Examination. The CPA Exam has 4 parts:
You must pass each CPA Exam part within an 18-month rolling period. So, once you take your first exam part, your state board will officially start your clock. You’ll then 18 months to take and pass the remaining exam parts.
The passing score for the CPA Exam is 75. How hard is this to achieve? Well, according to the American Institute of Certified Public Accounts (AICPA), CPA Exam pass rates usually fall somewhere between 45-55%.
As you can see, you have limited time to sit for and pass the CPA Exam. Plus, the exam presents some difficulty for candidates. Therefore, I highly recommend that you invest in a CPA review course. These courses provide study materials and expert support to ensure you can pass the exam on the first try.
Finding the right course for you can be overwhelming. But my expert analysis of the most popular and best CPA review courses will help you do just that. Then, once you choose the best exam prep for you, you can use my exclusive CPA review course discounts to save big.
The CPA experience requirement also differs across state boards. But in most instances, you’ll need to accumulate 1- 2 years of relevant work experience before you can earn your license. Typically, an actively licensed CPA must supervise and verify this experience.
If you want to learn more about the CPA program, you can do so with my free CPA e-course. It tells you how to pass the CPA Exam on your first attempt, so sign up now!
I am the author of How to Pass The CPA Exam (published by Wiley) and the publisher of this and several accounting professional exam prep sites
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