What Is A CPA And What Do They Do? A Complete Guide

If you have any interest working in the financial field and having the top-most qualification, then you may want to become a CPA. While you probably have heard the acronym thrown around before, you may be wondering, what is a CPA and how is a CPA different than an accountant?

We will tell you everything you need to know about what it means to become a CPA and how the title
differs from an accountant and bookkeeper.

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What Is A CPA?

A CPA stands for Certified Public Accountant. They are accounting professionals who have earned both their public license and also passed the privately-issued CPA exam. Although it may be easily confused with an accountant, a CPA is not a synonym for the role.

A CPA has earned their license to file public documents and government paperwork like audits and tax returns.

A CPA is both:

1. A credentialed professional who has earned their title from the American Institute of Certified Public Accountants by passing the four-part exam, and
2. An accountant who has been licensed in their respective state

To earn the designation of CPA, there are specific requirements that are compounded by a state’s licensing requirements. Such requirements may involve: state residency, education requirements, and/or experience in accounting or a minimum amount of training, for example.

Understanding Certified Public Accountants: What Do They Do?

When employed by a CPA firm, a CPA generally fulfills these roles:

• Tax Services: A CPA can prepare and file state, federal, and local tax returns. They can do this for either organizations or individuals. CPA firms can also represent their clients in the event of an IRS audit.
• Management Services: A CPA may manage a business or individual’s daily operations and overall strategy. This may be in the form of: budgeting, financial planning, insurance coordination, risk management, etc.
• Audit Services: A CPA can provide audit services to ensure that proper accounting and financial information is being recorded and reported.

CPA Vs. Accountant Vs. Bookkeeper — What’s The Difference?

In the field of finance, there are three broad categories of professionals. Here’s a breakdown of who they are and what they do.

Bookkeeper

Professionals who manage the financial records of a business. They record sales, payments received, debts, purchases and the like. In this way, they can keep track of an organization’s cash and collect payments. They basically deal with cash flow. There are no legal requirements or exams to pass to become a bookkeeper.

Accountant

An accountant manages their client’s finances. From financial statements and forecasts to regulatory compliance advice, they could also prepare taxes. However, a general accountant cannot file taxes. They can’t conduct any outward-facing business processes like audits or government documentation.

Certified Public Accountant

A CPA is the type of accountant that has the necessary certification to conduct governmental and regulatory paperwork and filings. A CPA can file tax returns, audit financial statements, and submit statements to regulatory agencies.

What Positions Can CPAs Hold?

With their high qualifications, a CPA can hold a myriad of positions. Some include:

• Tax And Finance Planning: CPAs give financial advice to individuals and businesses about their investments, taxes, mergers, etc.
• Consulting: A CPA can offer advice to individuals and businesses regarding their finance and strategy.
• International Accounting: For those who need help with international trade and regulations, CPAs can serve as the expert.
• IT Services: For CPAs with a strong knowledge of technology and computer systems, they may even enter the IT field to help a business organize its data and security needs.
• Environmental Accounting: As regulations change around environmental protection, CPAs can specialize in this field to ensure that businesses adhere to environmental regulations.
• Assurance Services: There are niches within assurance and auditing that CPAs can manage on behalf of a business.

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How To Become A CPA (In The US)

If you feel like this is the right career path for you, here’s how you can become a CPA in the United States.

1. Fulfill Educational Requirements

Educational requirements vary by state. In order to take the exam, most states first require that a student earns their bachelor’s degree. The degree should be in accounting, business, or a related field.

2. Apply For The CPA Exam

Once your educational requirements have been verified by the state board of accountancy. Upon approval, you can apply to take the exam. When the board approves you, you receive a Notice to Schedule (NTS) and can then take one section of the exam. Each section requires its own NTS.

3. Study

Before you even apply for the exam, you’ll want to start studying. This is a crucial step especially when you’re scheduled to take it. It’s recommended to study at least 6 weeks per section.

4. Pass The Exam

If all goes well, you pass the exam. Candidates must earn a score of 75 or higher (on a scale of 1-99) to pass each section. Once you pass the first section, you must pass the remaining three within 18 months.

5. Pass AICPA Ethics Exam

After passing the four exam sections, there is an ethics exam. You’ll receive an ethics textbook in the mail. You can read the book and then take the exam online. While not all states require this ethics exam, you should check if yours does.

6. Earn Work Experience

Like the educational requirements, work experience also varies by state. This could mean that you have to fulfill work duties for 6 months to 2 years.

7. Pay Dues And Get License

As your final step in this long process, you’ll have to pay your state board for the licensure fees. Finally, you’ll receive your CPA certificate in the mail.

The Bottom Line

While the path to becoming a CPA is filled with many requirements, the rewards are of high satisfaction. Once you become a CPA, you have the utmost power when it comes to performing financial duties.

Some people choose to start as a bookkeeper or accountant first.  Others may know that becoming a CPA is their calling, so they get right to work on getting certified. A certificate in accounting can be potentially helpful in navigating transitions and for augmenting the CV in the process. No matter how or when you decide you want to be a CPA, the career is one that offers many opportunities for growth.