Hi there, welcome to this insightful article about CPA.
By the end of today’s session, you’ll have a better understanding of the CPA credential.
And so, to help you grasp what is CPA, we’ll discuss:
So, buckle up.
This is going to be an informative read.
Understanding Certified Public Accountant (CPA)
A certified public accountant is an accounting designation awarded to accounting professionals who’ve met the ethical, experience, and education requirements dictated by their state board of accountancy and passed the Uniform Certified Public Accountant Examination (Uniform CPA exam).
The education and experience requirements to earn the CPA certification differ by jurisdiction, but the Uniform CPA exam is the same across the board.
Most states require CPA candidates to have a minimum of a bachelor’s degree in finance, business, or accounting.
However, the American Institute of Certified Public Accountants (AICPA) recommends at least 150 hours of university-level accounting courses.
When it comes to experience, many states require CPA candidates to have at least two years of work experience under the supervision of an active CPA.
Some states only require a year of experience.
More than that, candidates must pass the CPA exam, which has four sections: auditing and attestation, business environment and concepts, financial accounting and reporting, and regulation.
Now, let’s set the record straight from the onset.
The CPA exam is regarded as one of the toughest exams in the accounting industry.
CPA candidates take over 300 hours to study for the exam.
And lastly, when it comes to ethical standards, state requirements differ.
Some jurisdictions have ethical standards that CPA candidates must meet before earning the prestigious CPA certification.
Most of these states will require their candidate to take the AICPA code of professional conduct course or its equivalent and pass the exam.
Some states, however, have their unique ethics exam specific to the state, while others don’t have the ethics requirement.
CPA candidates can only earn a CPA license after meeting all these requirements.
One would think the battle stops there, but it doesn’t.
Accounting professionals with this prestigious licensure are required to maintain it annually through continuous education.
CPAs must meet 40 hours of Continuous Professional Education (CPE) annually.
We hope we are clear on what CPA is.
Hence, it shouldn’t be confused by accountants.
While CPAs are accountants, not all accountants are CPAs.
As we’ll see in a bit, the strict education, ethics, and experience requirement and the rigorous CPA exam prepare CPAs for more specialized accounting services.
Unlike accountants who keep, maintain, and interpret financial records and manage clients’ financial statements, CPAs not only offer general accounting services but also file tax returns, audit financial returns, and investigate financial crimes, just to mention a few.
The CPA credential sets up accountants for better job opportunities in various industries.
What Does a CPA Do?
Certified public accountants have a wide range of responsibilities.
Let’s cover the top eight:
If there’s one role that CPAs are known for, it is filing state, federal, and local tax returns.
Certified public accountants prepare and file a wide range of taxes, including but not limited to property taxes, estate taxes, payroll taxes, and income taxes.
They calculate the clients’ taxes and file the deduction forms.
CPAs ensure their clients pay taxes on time and their financial records align with the local, state, and federal laws and regulations.
They guide companies on tactics to minimize task obligations and advice on tax strategies that can help reduce their tax burden.
They also maintain clients’ tax records.
If there are any concerns about their client’s financial records, CPAs can represent their clients in case of questioning from the government or an IRS audit.
CPAs are often contracted to audit companies’ financial statements and give their opinion concerning the same.
As an independent third party, they are required to analyze a company’s financial statement and give feedback on whether there are any discrepancies before the statement is released to the public or shareholders.
The Securities and Exchange Commission (SEC) requires all public companies to have their finances reviewed by a CPA firm.
Time and again, embezzlement, fraud, and other financial crimes hit the headlines.
By the time these fraudulent activities are discovered, months, or even years, have gone.
CPAs specializing in forensic accounting are usually called upon to help unravel these frauds.
They dig through the financial records and analyze the financial reports to find any fraudulent activities.
In case of any criminal transactions, the CPA reports the same to the concerned body.
Sometimes, CPAs work with law enforcement offices to help resolve cases of financial crimes.
Given their competency in accounts, CPAs also offer financial planning services.
They analyze businesses’ financial data and help them plan for long-term financial goals.
Through this analysis, CPAs also prepare reports, recommend tactics to lower tax liabilities, and improve operations.
More than that, they ensure the financial documents and reports follow the standard reporting procedure.
Their analysis helps management make informed choices backed with data.
Additionally, certified financial planners guide clients on the right time to sell a business.
They work with clients from the planning stage to the evaluation stage till transferring the business.
More importantly, they educate clients on the tax laws and regulations about selling or transferring a business.
Licensed CPAs may also offer their services as expert witnesses in a courtroom.
Often, attorneys use accountants with CPA designation to analyze financial matters.
They may be valuable in cases of bankruptcies, business disputes, divorce, business acquisitions, splits, or mergers.
Earning a CPA designation opens up doors in different financial consulting services.
Here, certified public accountants can help enhance bookkeeping.
They may also uncover business problems, give recommendations to resolve them, and guide the business in better managing its operations.
Consulting may also mean helping companies with internal control design, internal audit, installation of accounting information systems, or simply advising on tax strategies.
CPAs work with companies on a daily basis to ensure operations run smoothly.
Their job includes financial planning, budgeting, and cash management.
When working for businesses, they track expenses and profits and develop reports on earnings.
They are also involved in risk management and insurance coordination.
Other times, they offer guidance on investment, prepare financial statements and documents, and assess accounting procedures.
CPAs liaise with the management to help them make wise business decisions.
Information Technology Accounting
Certified public accountants review the technological infrastructure in an organization.
Their goal is to ensure the systems are highly secured, accurate, and comply with regulations.
Besides, they review financial controls for computing systems.
CPA Career Paths
Meeting the CPA licensing requirements open up many opportunities.
Since there are many options, the only factor determining the route one takes is their passion and career trajectory.
From common public accounting to education to self-employment, the choices are diverse.
Let’s dig in and find out what the different career paths entail.
This is where CPAs work for companies.
In corporate accounting, CPAs focus on business accounting.
Given their expertise in finance, accounting, operations, and business profitability, they help businesses grow.
When working in corporate accounting, certified financial planners prepare business accounts and cash flow statements.
They may also take care of bookkeeping and analyze, interpret and give reports on financial statements.
They help the company with controlling expenditure.
That’s why all departmental expenditure usually goes through the finance department first.
Other times, they take a supervisory role and oversee other accountants’ work.
CPAs also take up executive roles.
They end up being the chief financial officer (CFO), chief operation officer (COO), or even the chief executive officer (CEO).
As CFOs, CPAs are tasked with advising the CEO and the board of directors on financial plans and business strategy, growth, and stability.
In most cases, CFOs are part of the board of directors.
Hence, they play a major role in policy development, approving financial plans, and implementing the board’s decisions.
CPAs also work for public accounting firms where they offer their services to the public.
They may work for international firms or small local firms.
Whichever the case, CPA firms are often contracted to conduct audits and reviews, file tax returns, conduct forensic investigations, prepare financial documents, examine financial records, or advise clients on financial decisions.
Since the firm is contracted in different industries, CPAs working in public accounting amass a wealth of experience as they work with a wide variety of clients.
Additionally, they may find themselves traveling a lot, depending on where the clients are.
CPAs work for the local, state, or federal government.
They also work for government agencies such as the IRS, military, or even the FBI.
Like in other industries, they help with auditing, accounting, and management accounting.
CPA opportunities in the government are many.
Non-profit organizations need the services of CPAs in financial management.
These professionals help NGOs with tax issues, budgeting for resources, internal control systems, and planning for fundraising.
Certified public accountants guide NGOs in the best ways to use their resources for maximum benefits.
They manage the day-to-day operations and ensure the NGO doesn’t exceed the revenues.
In the NGO setup, CPAs can work as staff members or in an advisory capacity on the board.
Certified financial planners may also open their own practice, where they may choose to specialize in one service or be a jack of all trades.
A CPA may choose to offer tax, financial management, and audit services or pick one of these and specialize.
Additionally, they may niche in a specific industry.
Specializing in a particular field sets a CPA apart as they become an expert in that industry.
It also makes it easy to market their firm as an industry expert for a specific group of people.
Many universities and colleges require their educators to have higher education, say, a master’s degree.
But more than that, accounting professionals have an edge in the industry if they have the CPA credential.
As educators, CPAs can teach various courses, from professional ethics to auditing to financial accounting.
Besides teaching, they can also research or write books to add even more value to the accounting world.
CPA is a prestigious certification in accounting that many accountants contend for.
The licensure is the gold standard in the industry.
And so, to earn it, an accountant will have to go over and above to meet the state requirements and pass the exam.
But once one has earned the certification, they can be sure to have an edge in the job market.
Furthermore, CPAs are highly respected.
Employers will pick a CPA over a general accountant, where accounting and tax services are required.