Certified Public Accountant (CPA)
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:
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:
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
Conducting audits on businesses or individuals
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
Assessing financial records and operations
Analyzing budgets and planning finances
Inspecting accounting systems
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
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:
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.
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.
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.
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