Hi! Welcome to this exciting blog post on the differences between the CPA certificate and license.
In this piece, you’ll learn how the CPA certificate differs from a CPA license and why you must strive for the latter.
Specifically, the major thrusts of this CPA Certificate vs License article include:
Without further ado, let’s get the ball kicking!
An Overview of CPA Certificate and License
Perhaps all that you know is that the American Institute of Certified Public Accountants (AICPA) awards the CPA credentials.
Many people also assume that they can interchangeably use a CPA license and certificate.
The assumption isn’t correct, and that is the purpose of this piece.
The CPA certificate differs entirely from the CPA license.
A CPA certificate is an acknowledgment slip that a candidate has met the certification requirements and has passed the CPA exam.
On the other hand, a CPA license means a candidate has fulfilled all the requirements stipulated by a state board of accountancy to allow them to practice public accounting.
Beyond taking the uniform CPA examination conducted by the AICPA in conjunction with the National Association of State Boards of Accountancy (NASBA), there are still other requirements a candidate must fulfill before being awarded a license.
Hence, the most accurate answer to the question: “What is a CPA license?” is that it’s the only designation you need to use the CPA title.
The CPA Certification Requirements
As said earlier, the CPA certification is evidence that a candidate has completed the first stage of the licensing process.
A bachelor’s degree is the prerequisite in all states to sit the certification exam.
A candidate must also have 150 semester hours of coursework, but some states allow candidates with 120 credit hours to take the exam.
However, you must complete the remaining 30 study hours before applying for the CPA license.
The jurisdictions that allow this flexible approach is called two-tier states.
For instance, Minnesota allows candidates with 120 semester hours or those who are 3 months away from achieving the threshold to take the exam.
The state boards also list the specific number of accounting courses a candidate must take to qualify for the certification exam.
For instance, candidates must have at least 30 hours of accounting at Illinois before taking the certification examination.
The accounting coursework should include tax, managerial, financial accounting, and auditing.
However, a candidate must meet more comprehensive accounting requirements in California before taking the exam.
Almost all the states require candidates to register for a CPA review course to prepare well for the exam, as almost half of participants usually fail.
Alternatively, you may choose self-study as a preparatory method for the exam.
Below is an overview of the significant differences between a certificate and a license:
You don’t need work experience for a CPA certificate, but almost all states require 1-2 years of experience under a registered CPA for a license.
You also don’t have to meet continuing professional education (CPE) requirements for a certificate.
Still, many state boards of accountancy require candidates to have a minimum of 40 credit hours of continuing professional education annually for a license.
An accountant with a CPA certificate cannot own or be a partner of a public accounting firm, but a licensed CPA is allowed to own a CPA firm.
A public accounting certification doesn’t give you the authority to sign audit reports, tax returns, or use the CPA title in an official setting.
Conversely, a public accounting license allows you to sign tax returns, audit reports, and use the CPA title.
While you need a nominal fee for certification renewal, you need a huge amount for license renewal annually.
The Differences between CPA Certificate and CPA License
Now that you’ve understood the significant differences between a certified public accountant certification and a license, let’s discuss some crucial issues further.
It will amount to a lazy intellectual exercise to discuss the differences on a surface and drop the curtain immediately.
Every state board of accountancy has its rules for using CPA designation in different contexts.
They mostly have similar education and work experience requirements, but they still differ in form or shape.
In the past, most states had a two-tier system.
That is, after meeting the education requirements for the uniform CPA examination and passing it, you’d earn a certificate.
It shows that a candidate had successfully scaled the first hurdle of becoming a registered CPA.
But CPA candidates still had to meet work experience requirements and pass the professional ethics exam before being awarded the license.
Then, many states allowed certified professionals to use the CPA appellation on their resumes and unofficial instances to show that they had passed the exam and were on their way to being licensed.
A certified CPA isn’t given the opportunity of public practice.
You can only enjoy all the designations rights after meeting the licensing requirements.
No one will question your public practice after being CPA licensed.
However, most states have abandoned the two-tier system due to its attendant abuses and confusion.
According to the NASBA, seven jurisdictions in the US are still operating this system.
They include Hawaii, Oklahoma, Kansas, Connecticut, Nebraska, Alabama, and Illinois.
You will deal with two agencies to become a registered CPA in two-tier states.
Let’s illustrate this point with Illinois.
Candidates need to pass the CPA and ethics examinations at the first tier.
The Illinois Board of Examiners states that a candidate would be issued an “Illinois Certificate of CPA Exam Completion” after meeting the two exams requirements.
Then, you have to meet the experience requirements before applying for the license.
At this point, you’ll be dealing with the Illinois Department of Financial and Professional Regulation (IDFPR).
But many states have simplified the approach by adopting the one-tier system.
In such jurisdictions as Georgia, New York, and Florida, you’ll earn the certificate and license simultaneously after satisfying the exam requirements and gaining at least one year of accounting experience.
Levels of CPA Licensure
States use different terminologies to portray the status of the CPA license.
Some of the terms are active, inactive, practicing, registered, lapsed, non-practicing, inactive with experience, and expired.
The best and most acceptable form is an active license.
It means you’ve consistently met the CPE requirements and paid applicable dues.
Let’s briefly discuss the broad divisions of the restricted ones:
Inactive or Non-Reporting License
The title is somewhat misleading because it shows that an accountant can be partially licensed.
However, there’s nothing like partial licensing; it’s either you’re licensed or not.
We’ll adulterate the CPA license meaning if we try to put some things in between.
But some states award inactive or non-reporting licenses.
The licenses are for the CPA licenses who aren’t into public practice.
Many states practicing the one-tier system allow non-practicing professionals to switch their licenses into certificates.
Hence, inactive CPAs don’t need to pay an annual license renewal fee.
They also don’t need to satisfy the continuing education requirements.
Yet, they can still use the CPA designation in informal contexts.
For example, a university accounting don may want to keep his professional title because it commands respect, honor, and authority in the industry.
Continuous licensing for such an individual isn’t necessary because he’s not into a public accounting practice.
He does not engage in tax calculations or auditing, which are the core duties of practicing certified professionals.
An inactive or non-reporting license is the best for the don.
While he can still bear a CPA in informal circumstances, he is relieved of the financial burden that comes with it.
Many states offering these “peculiar” licenses also leave the window open for certificate holders to activate their licenses at any time.
You will fill, submit vital documents, and pay the necessary dues.
It means that if the lecturer wants to be relicensed, he will sign up and pay his renewal dues.
He does not need further tests or qualification requirements.
In addition, most states mandate inactive licensee to signify it in their titles.
For instance, if you got your license from Ohio and you are not into public accounting, you need a non-practicing license to enable you to use the “CPA Inactive” title.
Ohio requires CPA professionals to signify their license status because the authorities don’t want them to mislead the public.
However, Guam offers a special inactive license.
The jurisdiction doesn’t require 150 semester hours and a year of experience in public accounting from a candidate with an inactive license.
Instead, the candidate should have at least a 4-year bachelor’s degree in accounting and meet other exam requirements.
Before Massachusetts canceled its non-reporting CPA license in 2017, candidates only needed a university degree and satisfied the exam requirements to earn the license.
There was no experience requirement.
Non-reporting licensee could use the CPA appellation but couldn’t sign audit reports.
It was more of an honorary title for such people.
The Implications for International Candidates
Many international candidates erroneously assume that they can earn a certificate to serve as a license.
The fact that you’re practicing outside the US doesn’t mean you shouldn’t measure up to standard.
There are no shortcuts to full licensure; you must tick all the requirements’ boxes (education, examination, and experience) to get your license.
If you have challenges meeting the requirements, mail the appropriate authorities, and they’ll help you out.
The licensing requirements for all US states are accessible on the NASBA website.
Carefully go through them to know the best for you because they’re different.
For instance, some states have minimal accounting requirements, while others emphasize accounting subjects in their requirements.
It doesn’t matter whether you’re in the Virgin Islands or Singapore; you can work hard to meet the requirements to be licensed.
Many international candidates are frustrated because they chose the wrong state.
Don’t assume you’ve met all the eligibility requirements of a state by merely checking the surface.
When you’re thorough with your background search, you’ll start the licensing process on a solid foot.
Also, don’t allow unauthorized or ignorant people to mislead you.
For instance, many international candidates have argued that “residents of their country” said they don’t need a license after earning the certificate.
The statement is misleading, and if you yield to it, you’re intentionally limiting your influence and relevance.
The license isn’t just a US thing; everyone who desires full-blown professionalism in public accounting must earn it.
The license has a global reputation.
Thus, being licensed becomes indispensable if you are thinking beyond your immediate environment.
Why You Should Get Your CPA License
There’s no gainsaying that the process of earning the CPA certificate is demanding and tiring, and this is why some people feel discouraged in going further.
However, you shouldn’t stop at the certification level because you can’t achieve much with it.
For instance, you can’t practice public accounting or add the CPA designation to your name with just the certification.
On the other hand, the license accords you respect and prestige within and outside the profession.
Having the license shows your commitment to the CPA profession and readiness to add excellence to your services.
The license is a trust-builder; it tells prospective clients that you can meet their needs.
It will open unimaginable doors for you because everybody wants to work with a distinguished professional.
For instance, top accounting firms and high-net-worth individuals prefer working with licensed accountants.
If you want to be a part of the top earners in the industry, earning a CPA license is indispensable.
The license also builds your confidence and ensures greater job security.
The US Bureau of Labor Statistics (BLS) has projected a 7% annual job growth for CPAs until 2030.
Thus, earning the license will launch you into a goldmine.
You may even have to reject offers in the nearest future!
The most demanding aspect of becoming CPA certified is passing the certification exam.
The examination pass rate is between 45% and 55%.
Invariably, almost half of the participants in every session fail the exam.
These figures shouldn’t frighten you; get the right CPA review course and start learning months before the exam to stand a good chance of succeeding in the test.
If you prefer self-study, you may go for this option, but you must be disciplined to get the desired outcome.
It doesn’t matter whether you want to be a public or chartered accountant; discipline is a constant factor in success.
Practice demo exams and simulations and take adequate rest before the examination.
Why should you not be licensed if you can endure the certification process?
The best career decision you can make is earning an active CPA license.
After your certification, you will do a take-home exam on professional ethics and meet the professional experience, which is a maximum of 2 years of experience in accounting.
There’s no cause for you to slack on these requirements.
Your place of origin doesn’t matter; the CPA license serves as a game-changer.
Ultimately, we believe that you can now distinguish between a CPA certificate and a license.
CPA Accounting Institute for Success