posted on 11-12-2019

Certified Public Accountant (CPA)

Updated May 25, 2020

What is a Certified Public Accountant (CPA)?

The certified public accountant (CPA) designation is a professional designation granted by the American Institute of Certified Public Accountants (AICPA). It is given to individuals who pass the Uniform CPA Examination and meet additional education, experience, and state licensing requirements that allow them to provide accounting services to the public.

The CPA designation is a certification of accounting expertise that helps to enforce professional and ethical standards in the industry. CPAs must adhere to the AICPA’s Code of Professional Conduct and are required to maintain independence to provide unbiased judgement.

*Note: Other countries have different designations for the CPA qualification. Examples include chartered professional accountant (CPA) in Canada and chartered accountant (CA) in other English-speaking countries.

Types of CPAs

Though it is not required, many CPAs choose a specialized field after earning their designation. There are four main types of accounting to choose from:

Corporate Accounting

CPAs who work in corporate accounting organize and maintain a company’s consolidated financial statements, ensure compliance with laws and regulations, and interpret financial information. They are hired by non-accounting firms to assist with accounting and other financial-related business. Some of their responsibilities may include:

  • Basic Bookkeeping

  • Report Creation

  • Financial Analysis

  • Budget Planning

  • Business Forecasting

  • Payroll Processing

  • Expense Management

  • Receivables Tracking

Government Accounting

CPAs who work in government accounting are in charge of recording and managing all financial transactions (i.e. income and expenditures) incurred by the government. They are hired by municipal, county, state, or federal government entities to oversee the allocation of resources across various programs. Some duties may include:

  • Creating financial statements

  • Interpreting financial data

  • Buying and selling assets

  • Managing funds or accounts

  • Ensuring compliance with tax and business codes

  • Communicating financial information

  • Settling liabilities

  • Conducting audits on businesses or individuals

Public Accounting

CPAs who work in public accounting work for accounting firms that serve external clients like businesses, individuals, non-profits, and government organizations. These clients outsource various accounting functions to the accounting firm, allowing for unbiased interpretations and analysis of financial data. Common responsibilities of public accountants include:

  • Preparing, reviewing, verifying and managing financial statements

  • Performing tax work (e.g. estate planning, tax returns)

  • Providing accounting consulting and financial advice

  • Conducting audits

  • Assessing financial records and operations

  • Analyzing budgets and planning finances

  • Monitoring compliance

  • Inspecting accounting systems

Forensic Accounting

CPAs who work in forensic accounting collect, analyze, and report financial data to provide an accounting analysis that is suitable for use in a court of law. They combine accounting, auditing and investigative skills to uncover information about financial irregularities, fraudulent activities, and negligence. They are often hired by insurance companies, financial institutions, lawyers, and public accounting firms to: 

  • Provide business valuation

  • Examine business records

  • Analyze historical statements

  • Review journal entries

  • Gauge exposure to vulnerabilities 

  • Identify irregularities in financial statements

  • Analyze trends

  • Trace the flow of funds

  • Compile and provide financial evidence

  • Serve as a witness

Requirements for CPA Certification

In order to receive the CPA designation, individuals must meet a number of requirements. While exact requirements can vary from state to state, most require that candidates meet the following core qualifications:

  • Be at least 18 years old

  • Be a US citizen

  • Complete a bachelor's degree/120 credit hours from an accredited college or university (Usually in accounting or another business-related field)

  • Complete at least 30 additional credit hours in accounting and business coursework

  • Pass the Uniform CPA Exam and score at least 75 on each of the 4 sections

  • Have up to 2 years of accounting experience

What Does a CPA Do?

CPAs are state-certified accountants who are capable of performing any accounting-related tasks. Like regular accountants, CPAs record, track, analyze, and report financial data in order to help businesses, individuals, and other entities manage their finances while complying with laws and regulations. They have a fiduciary duty to act in the best interest of their clients, making them trusted financial advisors that provide unbiased interpretations of financial data.

Difference Between Bookkeeper, Accountant, and CPA

All of these professions deal with financial data, but there are key differences that separate them:

Bookkeeper

Bookkeepers are in charge of recording financial data, which involves keeping track of a business’ money inflow and outflow. They perform basic accounting functions like recording purchases and sales, tracking accounts payable and accounts receivable, paying bills, and managing payroll. Bookkeepers generally have some college education, but it is not always required.

Accountant

Accountants provide a more comprehensive analysis of a company's finances, offering actionable information and insights that the business may benefit from. This includes reviewing financial reports, providing tax advice and planning, performing financial forecasting, overseeing budgeting, and more. While a college degree is an asset for many accounting positions, an accounting degree is not mandatory to join this field. 

CPA

CPAs are accountants that have passed the CPA exam and meet additional and ongoing licensing requirements. They are capable of performing any of the above tasks but are the only ones allowed to write audit opinions on financial statements (required by companies that sell shares on public stock markets). Since CPAs are allowed to perform audits, they can represent clients in front of the IRS for tax-related matters.

Why We Use Certified Financial Experts to Verify Our Content

By demonstrating exceptional knowledge, certified financial experts (like CPAs) are certified finance and accounting professionals that have passed rigorous exams and licensing requirements. Backed by the expertise of InvestingAnswers’ certified financial experts, our millions of readers depend on trustworthy, valuable financial information. 

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