What Is a CPA?

Reviewed by Zoran Stojanovski B. Com, CPA

A Certified Public Accountant (CPA) is a trusted financial adviser who helps individuals, businesses, and other organizations plan and reach their financial goals.

Becoming a Certified Public Accountant has many advantages—including increased salary, increased job security, professional reputation and travel opportunities.

The program has been summarized by the American Institute of Certified Public Accountants (AICPA) below:

“These professionals offer financial statement audits and other attestation services to help inform investors about the financial health of organizations. They provide individuals and families with valuable knowledge and advice on taxes and financial planning.

In business and industry, CPAs offer organizations around the world tax, financial reporting and advisory services to drive strategic decision-making and foster growth and success.”

What You Need to Become a CPA

As the AICPA states, the three E’s are required to become a licensed CPA:

  • Education
  • Exam or Uniform CPA Examination
  • Experience

Education Requirements

You’re required to have an education of at least 150 semester hours to become a licensed CPA in the United States. You must also meet one of the following requirements:

  • Combine an undergraduate accounting degree with a master’s degree at the same school or at a different one;
  • Combine an undergraduate degree in some other discipline with a master’s in accounting or an MBA with a concentration in accounting;
  • Enroll in an integrated five-year professional accounting school or program leading to a master’s degree in accounting.

Many states also require you to have worked for 1-2 years under a CPA.

CPA Exam

In this section I will provide you with a rundown of the CPA exam.

CPA Exam Sections

The CPA exam consists of four sections:

  1. Auditing and Attestation (AUD)
  2. Business Environment and Concepts (BEC)
  3. Financial Accounting and Reporting (FAR)
  4. Regulation (REG)

CPA Exam Facts

  • In the USA, the CPA exam is the same, no matter where it is taken.
  • You are scored on a 0-99 scale and need a score of 75 or higher to pass.
  • Questions seen in the CPA exam include multiple choice, simulation and written communication.
  • Your eligibility to sit the exam depends on state requirements.

CPA Exam Pass Rates

I have listed the CPA exam pass rates for Q4 of 2018 for each of the four sections:

  • AUD: 48.54%
  • BEC: 60.13%
  • FAR: 44.57%
  • REG: 50.22

CPA Licensure 

The Certified Public Accountant license gives you the right to practice public accounting.

Public accounting is the branch of accounting by which an accountant works with clients to review and prepare financial documents to be disclosed to the public.

Contrarily, private accountants typically prepare and analyse reports for an internal manager. Their work is often then reviewed and audited by a public accounting firm. Public accounting firms can then provide a “stamp of approval” to verify that their private accounting practices meet reporting standards.

For more info on public vs private accounting, visit here: Public vs. Private Accounting: Your Guide to Choosing a Side

Maintaining Your CPA License

There are tasks that you have to complete to keep your CPA license, as I explore below.

Continuing Professional Education (CPE)

Continuing Professional Education is required for CPAs to maintain their level of competence, ensuring they continually provide professional services. CPE will typically only require a commitment of 20-40 hours a year and may be computer based or group/classroom based.

CPE varies by jurisdiction, with 1-3 years being a typical renewal period for your CPA license.

You may also need ethics training and compliance. Which again, varies by jurisdiction.

CPA Career Paths

As a Certified Public Accountant, you will likely work in one of the following areas:

I have provided a brief description of a few entry level Certified Public Accountant positions below. I have also included their estimated median salaries in USD where applicable. Their descriptions are seen on the AICPA website.

Public Accounting

As mentioned above, public accounting is the branch of accounting by which an accountant works with clients to review and prepare financial documents to be disclosed to the public.

Some jobs in the Public Accounting field include:

Staff Auditor – $52,916
Performs the detail work of a financial audit under the supervision of a Senior. Staff Auditors will often start to direct small audits at the two-year level.

Tax Staff – $55,672
Prepares tax returns, researches tax questions, and counsels clients on tax problems under the supervision of a Tax Senior and/or Tax Manager.

Management Services/Consulting Staff – $85,539
Provides a variety of consulting and management advisory services and reviews the integrity of client systems under the supervision of a Senior or Manager.

Academia

There are fewer positions listed in the academia field, as seen below.

Audit Committees: Positions are available as an Audit Committee Chair or Audit Committee Member for public companies, private companies, not-for-profit organizations and government organizations.

Internal Auditor – $56,869
Internal auditors work as an internal checkers for companies, as their findings and evaluations are primary tools for identifying strengths and weaknesses within an organization.

Corporate Accounting

Some entry level CPA positions in corporate accounting include:

Management Accountant – $59,181
Works under the direction of a Senior or Manager in collecting detailed cost data. May be responsible for preliminary cost analyses and report preparation.

Staff-Tax Accountant – $49,268
Works under the direction of a Senior or Manager in preparing returns or various schedules for review.

Staff Auditor – $52,916
Performs the detail work of a financial audit under the supervision of a Senior. Staff Auditors will often start to direct small audits at the two-year level.

Government

CPA’s in government, like their private industry counterparts, have responsibilities in the areas of auditing, financial reporting and management accounting.

Performance Auditing: Performance auditing is an independent evaluation of an organization’s operation with an eye towards making it work better, faster, and more efficiently. Along with these streamlining efforts, a performance audit may also determine whether management is fulfilling its promises to the taxpayers by effectively providing services intended to meet its goals and objectives.

Types of Audits include:

  • Financial
  • Compliance
  • Investigative

Audit Committees: Positions are available as an Audit Committee Chair or Audit Committee Member for government organizations.

Non-Profit

Not only do CPA’s work for Fortune 500 companies and family owned businesses, they also work for non-profit organisations. As I explore below.

Staff-Financial Accounting & Reporting: works under the direction of a Senior Accountant performing detailed work assignments in one or several of the following areas: receivables, payables, payroll, property, general ledger and financial statements.

Staff Auditor – $52,916
Performs the detail work of a financial audit under the supervision of a Senior. Staff Auditors will often start to direct small audits at the two-year level.

AICPA Student Affiliate Membership

Joining the American Institute of Certified Public Accountants as a Student Affiliate Member is free and provides you lots of useful tools to help you in your college years.

The AICPA is the largest professional association for CPAs in the United States and has over 400,000 members. Joining allows you to grow your network exponentially while you’re studying.

It’s Free
Joining as a Student Affiliate member is completely free. Membership includes special discounts and exclusive scholarship opportunities.

Oversees Your Important Milestones
The AICPA writes and scores the CPA Exam. It also sets ethical standards for the industry and can provide specialty credentials.

Summary

I will now summarize the preceding points to clearly describe what is expected of you when obtaining a CPA license.

Education
Many states/jurisdictions require you to have 150 semester hours of education to obtain the CPA license.

Exam
You will have to apply to sit the CPA exam based on state requirements.

Experience
You will typically need 1-2 years of work experience under a Certified Public Accountant to sit the exam.

License
You must meet your jurisdiction’s three E requirements. Which are education, experience and exam, or successful completion of the Uniform CPA examination.

Tips

Below are some tips to help you obtain your CPA license.

  • Research and understand your state/jurisdictions requirements, as each state typically has different rules regarding CPA licensure.
  • The AICPA also recommends that you focus on the education requirement before worrying about subsequent tasks.

Now that you know what it takes to become a Certified Public Accountant, visit my What Is a CFA? post where I explore the CFA Charter. 

A CFA Charter is a professional accreditation given by the CFA Institute to financial and investment professionals.

In the words of the CFA Institute: “The charter gives a strong understanding of advanced investment analysis and real-world portfolio management skills.”