What is a CPA?

What is a CPA?

The CPA designation stands to be "Certified Public Accountant."

 A "Certified Public Accountant" (CPA) is an accountant who has fulfilled state licensing requirements and earned the CPA designation (and license) by completing education requirements, experience requirements, and passing the CPA Exam.

A CPA designation is a professional designation that allows accounting professionals greater flexibility and mobility. CPAs are typically only licensed in one state. However, reciprocity laws will enable them to become certified in other states.

CPAs are highly sought after in all industries for their industry knowledge, reliability, and credentials. What can a CPA do professionally? These are the five most popular areas that CPAs work in, according to the American Institute of Certified Public Accountants:


  • Public accounting
  • Industry and business
  • Government
  • Education
  • Non-profit

This list is by no means all-encompassing. CPA certification/ license can open doors to almost every industry.


What is a CPA License?

A CPA license is a quality assurance that an accounting professional has met the highest standards of competence, achievement, and professionalism.

When an accountant has completed a state's licensing board requirements, a CPA license will be issued.

These are the top five reasons that CPAs take the National Association of State Boards of Accountancy's CPA Exam to become a Certified Public Accountant.

  • Prestige and respect

After completing the CPA Exam, and other requirements, CPAs are part of a distinguished group and one of the most respected professions.

  • Client Growth

The potential for practice growth is endless for Certified Public Accountants in the accounting industry.

  • Demand

CPAs are in high demand, and retiring CPAs are leaving the market. There is an increasing number of job openings for newly licensed CPAs.

  • Specialization

CPAs are more likely to do highly specialized tasks after earning the CPA designation.


What Steps do Professionals Need to do Before Earning the CPA Designation?

To be a Certified Public Accountant (CPA) depends on your location.

  • Formal Education

For a professional to acquire the CPA designation, all states require completion of some accounting education. This requirement includes 150 hours of college-level accounting courses and is completed by some CPA candidates as undergraduates.

A master's degree is not required to fulfill the educational requirement. However, some 150-credit hour programs can lead to a graduate-level degree. 

  • Work Experience

Some states have requirements for real-world work experience that applicants must meet, such as one year of work experience with a licensed CPA.

  • Examination

Some candidates find passing the CPA Exam very challenging.

The CPA exam has four different sections: Auditing and Attestation; Business Environment and Concepts; Financial Accounting and Reporting; and Regulation. 

  • Adherence to Code of Ethics

CPA licensure may be subject to specific requirements in some states. 


History Behind the CPA (Certified Public Accountant) Designation

Thirty-one accountants founded the American Association of Public Accountants in 1887 to establish moral standards in the accounting industry. It also sets the standards for U.S. auditing standards. The American Institute of Certified Public Accountants (also known as the AICPA), which also offers CPA certification exams, has been renamed many times. In 1896, the first CPAs were granted licenses.

1934 saw the Securities and Exchange Commission (SEC), which required publicly traded companies to submit periodic financial reports approved by the accounting industry. The AICPA established accounting guidelines until 1973 when the Financial Accounting Standards Board was created to set standards for private companies.

Large accounting firms expanded their services to include consulting in the late 1990s, which helped make the accounting industry flourish. In 2001, the Enron scandal resulted in significant changes to the accounting industry. Arthur Andersen, one of the country's most respected accounting firms, was forced out of business. The Sarbanes–Oxley Act was passed in 2002. This law placed stricter restrictions on accountants' consulting assignments.


CPA vs. Accountant - What is the difference?

Although all Certified Public Accountants can be considered accountants, not all accountants can be called CPAs.

Any person who interprets and keeps financial records is an accountant. What is the difference between being a CPA?

CPAs can work in any industry or for any job function. CPAs can perform many services, including keeping and interpreting financial records. This work flexibility stems from the fact that they have the necessary knowledge and skills to pass exams and continue professional education (CPE).

According to AICPA, the following are five areas of expertise that CPAs have access to:

  • Auditing and reviewing
  • Consulting and tax preparation
  • Consulting services
  • Financial planning
  • Consulting in litigation

It takes patience, planning, and time to earn a CPA license. CPAs must also commit to continuing education after earning their CPA designation. CPAs must complete 40 hours of continuing education (CPE) every year, depending on the state board requirements.

Many professionals in finance and accounting consider the CPA License one of the most highly regarded designations they can obtain.


Public Accounting: What Can a CPA Do Other Accountants Cannot?

Public accounting covers a broad range of auditing, tax, consulting, and accounting tasks that can be done for individuals, corporations, governments, small businesses, and non-profit organizations. A qualified public accountant can perform most of these tasks.

A CPA, on the other hand, can do two things that an unlicensed accountant cannot.

  1. File a report to the Securities and Exchange Commission (SEC) if you have prepared audited financial statements. All publicly-traded companies are required to file audited financial reports with the SEC.
  2. Represent clients before the Internal Revenue Service. However, clients can be represented by a non-CPA, who can be an attorney, enrolled agent, or enrolled retirement plan administrator, as well as an enrolled actuary.

Most states also limit non-CPA ownership to CPA firms at 49 percent. 


CPA Firms: What does a CPA do when working for an accounting firm?

CPAs working for CPA firms usually work in one of these three areas.

  1. Tax services: These services include the preparation and filing of federal, state, and local tax returns, as well as working with individuals, companies, and organizations throughout the year to reduce their tax obligations. A CPA firm may represent clients in the event of an IRS audit or questions from state and local tax authorities.
  2. Audit/assurance services: These are independent professional services that enhance the quality and context of financial and non-financial information to decision-makers. Auditing is the objective evaluation of financial or economic data to ensure that it meets specific criteria, such as GAAP.
  3. Management services: These services assist with the supervision and management of an individual or organization's day-to-day activities and provide long-term and strategic planning. These services include financial planning, cash management, budgeting, and financial planning. They also prepare financial statements, insurance coordination, risk management, investment guidance, and estate planning.