Certified Public Accountant
Certified Public Accountant is the title of qualified accountants in numerous countries in the English-speaking world. It is generally equivalent to the title of chartered accountant in other English-speaking countries. In the United States, the CPA is a license to provide accounting services to the public. It is awarded by each of the 50 states for practice in that state. Additionally, almost every state has passed mobility laws to allow CPAs from other states to practice in their state. State licensing requirements vary, but the minimum standard requirements include passing the Uniform Certified Public Accountant Examination, 150 semester units of college education, and one year of accounting related experience.
Continuing professional education is also required to maintain licensure. Individuals who have been awarded the CPA but have lapsed in the fulfillment of the required [|CPE] or who have requested conversion to inactive status are in many states permitted to use the designation "CPA Inactive" or an equivalent phrase. In most U.S. states, only CPAs are legally able to provide attestation opinions on financial statements. Many CPAs are members of the American Institute of Certified Public Accountants and their state CPA society.
State laws vary widely regarding whether a non-CPA is even allowed to use the title "accountant." For example, Texas prohibits the use of the designations "accountant" and "auditor" by a person not certified as a Texas CPA, unless that person is a CPA in another state, is a non-resident of Texas, and otherwise meets the requirements for practice in Texas by out-of-state CPA firms and practitioners.
The CPA demand globally is driven by the market cap of $8,563 billion of dominant American companies present across the world with a growth of 236% between 2008 and 2018.
CPA in other countries
In the US, CPA means Certified Public Accountant which is a designation given by American Institute of Certified Public Accountants, whereas other countries around the world have their own name for its designation that is equivalent to CPA in the US, for example:In Australia, the term “ CPA” means Certified Practicing Accountant.To obtain a CPA Australia, it also requires a certain amount of education and experience to be eligible working in some specific areas in the accounting field.
In Canada, the word “CPA” which is Chartered Professional Accountant, is for someone who would like to be a Canadian CPA. In order to be qualified for this certificate, candidates who major in accounting will get accepted to enter CPA Professional Education Program.Provinces in Canada also allow non-accounting majors and international candidates to meet the requirements if they get into the CPA Prerequisite Education Program.
People in the Philippines register for the CPA have to follow some rules in the act provided which is known Philippine Accountancy Act of 2004 then. Unlike other countries, just asking for education and experience, the requirements needed to be able to take the Philippine exam is more complicated in which candidates need to have a good reputation and never do anything wrong related to crime.
History of profession
In 1660, the first person who would conduct an audit was chosen in order to be able to manage the money that was raised by England in Virginia, United State. With the help of chartered accountants from England and Scotland for training Americans to learn the procedures of accounting, many firms were established in America. The first American one was in 1895.On July 28, 1882, the Institute of Accountants and Bookkeepers of the City of New York became the first accounting corporation which supports the need of people in the accounting field and for educational purposes. With the accountancy and industry started growing in the world, the need of looking for services from professional accountants who had higher standards and were recognized had been considered. In 1887, the American Association of Public Accountants was created to set moral standards for the practice of accounting. In 1896, the title “Certified Public Accountant” was created and passed in New York including the requirement to become a Certified Public Accountant.
Services provided
One important function performed by CPAs relates to assurance services. The most commonly performed assurance services are financial audit services where CPAs attest to the reasonableness of disclosures, the freedom from material misstatement, and the adherence to the applicable generally accepted accounting principles in financial statements. CPAs can also be employed within corporations in finance or operations positions such as financial analyst, finance manager, controller, chief financial officer, or chief executive officer. These CPAs do not provide services directly to the public.Although some CPA firms serve as business consultants, the consulting role has been under scrutiny following the Enron scandal where Arthur Andersen simultaneously provided audit and consulting services which affected its ability to maintain independence in its audit duties. This incident resulted in many accounting firms divesting their consulting divisions, but this trend has since reversed. In audit engagements, CPAs are required by professional standards and Federal and State laws to maintain independence from the entity for which they are conducting an attestation engagement. Although most individual CPAs who work as consultants do not also work as auditors, if the CPA firm is auditing the same company that the firm also does consulting work for, then there is a conflict of interest. This conflict voids the CPA firm's independence for multiple reasons, including: the CPA firm would be auditing its own work or the work the firm suggested, and the CPA firm may be pressured into unduly giving a positive audit opinion so as not to jeopardize the consulting revenue the firm receives from the client.
CPAs also have a niche within the income tax return preparation industry. Many small to mid-sized firms have both a tax and an auditing department. Along with attorneys and Enrolled Agents, CPAs may represent taxpayers in matters before the Internal Revenue Service. Although the IRS regulates the practice of tax representation, it has no authority to regulate tax return preparers.
Many states also allow unlicensed accountants to work as public accountants. For example, California allows unlicensed accountants to work as public accountants if they work under the control and supervision of a CPA. However, the California Board of Accountancy itself has determined that the terms "accountant" and "accounting" are misleading to members of the public, many of whom believe that a person who uses these terms must be licensed. As part of the California Poll, survey research showed that 55 percent of Californians believe that a person who advertises as an "accountant" must be licensed, 26 percent did not believe a license was required, and 19 percent did not know.
Whether providing services directly to the public or employed by corporations or associations, CPAs can operate in virtually any area of finance including:
- Assurance and attestation services
- Corporate finance
- Corporate governance
- Estate planning
- Financial accounting
- Governmental accounting
- Financial analysis
- Financial planning
- Forensic accounting
- Income tax
- Information technology, especially as applied to accounting and auditing
- Management consulting and performance management
- Tax preparation and planning
- Venture capital
- Financial reporting
- Regulatory compliance
CPA exam
Eligibility to sit for the Uniform CPA Exam is determined by individual state boards of accountancy. Many states have adopted what is known as the "150 hour rule", which usually requires an additional year of education past a regular 4 year college degree, or a master's degree. Some universities offer a 5-year combined bachelor's/master's degree program, allowing a student to earn both degrees while receiving the 150 hours needed for exam eligibility.
The Uniform CPA Exam tests general principles of state law such as the laws of contracts and agency and some federal laws as well.
Other licensing and certification requirements
Although the CPA exam is uniform, licensing and certification requirements are imposed separately by each state's laws and therefore vary from state to state.State requirements for the CPA qualification can be summed up as the Three Es—Education, Examination and Experience. The education requirement normally must be fulfilled as part of the eligibility criteria to sit for the Uniform CPA Exam. The examination component is the Uniform CPA Exam itself. Some states have a two-tier system whereby an individual would first become certified—usually by passing the Uniform CPA Exam. That individual would then later be eligible to be licensed once a certain amount of work experience is accomplished. Other states have a one-tier system whereby an individual would be certified and licensed at the same time when both the CPA exam is passed and the work experience requirement has been met.
Two-tier states include Alabama, Florida, Illinois, Montana, and Nebraska. The trend is for two-tier states to gradually move towards a one-tier system. Since 2002, the state boards of accountancy in Washington and South Dakota have ceased issuing CPA "certificates" and instead issue CPA "licenses." Illinois planned to follow suit in 2012.
A number of states are two-tiered, but require work experience for the CPA certificate, such as Ohio and .
Work experience requirement
The experience component varies from state to state:- The two-tier states generally do not require that the individual have work experience to receive a CPA certificate.
- Some states, such as Massachusetts, waive the work experience requirement for those with a higher academic qualification compared to the state's requirement to appear for the Uniform CPA.
- The majority of states still require work experience to be of a public accounting nature, namely two years audit or tax experience, or a combination of both. An increasing number of states, however, including Oregon, Virginia, Georgia and Kentucky, accept experience of a more general nature in the accounting area. In Texas, only one year of experience in accounting under the supervision of a CPA is required; such experience does not have to be in public accounting. This allows persons to obtain the CPA designation while working for a corporation's finance function.
- The majority of states require an applicant's work experience to be verified by someone who is already licensed as a CPA. This requirement can cause difficulties for applicants based outside the United States. However, some states such as Colorado and Oregon also accept work experience certified by a Chartered Accountant.
Ethics
Continuing professional education
Like other professionals, CPAs are required to take continuing education courses toward continuing professional development to renew their license. Requirements vary by state but the vast majority require an average of 40 hours of CPE every year with a minimum of 20 hours per calendar year. The requirement can be fulfilled through attending live seminars, webcast seminars, or through self-study. In general, state boards accept group live and group internet-based credits for all credit requirements, while some states cap the number of credits obtained through the self-study format. All CPAs are encouraged to periodically review their state requirements. As part of the CPE requirement, most states require their CPAs to take an ethics course at some frequency. Ethics requirements vary by state and the courses range from 2–8 hours. AICPA guidelines grant licensees 1 hour of CPE credit for every 50 minutes of instruction.Loss of licensure
A CPA license may be suspended or revoked for various reasons. Common reasons include these:- Allowing the license to lapse without renewing in a timely manner.
- Performing attestation services under an unlicensed/unregistered CPA firm or under a CPA firm permit which has expired.
- Continuing to hold out as an active CPA on an expired license, which includes continued use of the CPA title on business cards, letterhead, office signage, correspondence, etc. after the license has expired.
- Using fraud or deceit in obtaining or renewing the CPA license, the most common occurrence being misrepresenting or falsifying compliance with or completion of the continuing education requirements as a condition for renewal.
- Being suspended or barred from practicing before another regulatory body such as the SEC or the IRS.
- "Discreditable acts", which can include 1) failure to follow applicable standards violation of felony or serious misdemeanor criminal laws
Other accounting designations sometimes confused with CPA
Many states prohibit the use of the designations "Public Accountant" or "Licensed Public Accountant" by a person who is not certified as a PA in that state.
In Australia the designation "Public Accountant" is used by members of the Institute of Public Accountants of Australia.
Practice mobility
An accountant is required to meet the legal requirements of any state in which the accountant wishes to practice.In recent years, practice mobility for CPAs has become a major business concern for CPAs and their clients. Practice mobility for CPAs is the general ability of a licensee in good standing from a substantially equivalent state to gain practice privilege outside of their home state without getting an additional license in the state where the CPA will serve a client or an employer. In today's digital age, many organizations requiring the professional services of CPAs conduct business on an interstate and international basis and have compliance responsibilities in multiple jurisdictions. As a result, the practice of CPAs often extends across state lines and international boundaries.
Differing requirements for CPA certification, reciprocity, temporary practice and other aspects of state accountancy legislation in the 55 U.S. licensing jurisdictions make the interstate practice and mobility of CPAs more complicated. By removing boundaries to practice in the U.S., CPAs are able to more readily serve individuals and businesses in need of their expertise. At the same time, the state board of accountancy's ability to discipline is enhanced by being based on a CPA and the CPA firm's performance of services, rather than being based on whether a state license is held.
The American Institute of Certified Public Accountants and the National Association of State Boards of Accountancy have analyzed the current system for gaining practice privileges across state lines and have endorsed a uniform mobility system. This model approach is detailed through the substantial equivalency provision of the Uniform Accountancy Act. The UAA is an "evergreen" model licensing law co-developed, maintained, reviewed and updated by the AICPA and NASBA. The model provides a uniform approach to regulation of the accounting profession.
Under Section 23 of the UAA, a CPA with a license in good standing from a jurisdiction with CPA licensing requirements essentially equivalent to those outlined in the UAA is deemed to be “substantially equivalent,” or a licensee who individually meets the requirements of:
- Obtaining 150 credit hours with a baccalaureate degree
- Minimum one year of CPA experience
- Passing the Uniform CPA Examination
As of October 2012, a total of 49 out of the 50 states and the District of Columbia have passed mobility laws and are now in the implementation and navigation phases. Only the Commonwealth of the Northern Mariana Islands, the Virgin Islands, Hawaii, Puerto Rico and Guam have not passed mobility laws. On September 20, California Governor Jerry Brown signed legislation that permits cross-border mobility for CPAs. The law went into effect July 1, 2013. The District of Columbia passed mobility laws that went into effect on October 1, 2012.
AICPA membership
The CPA designation is granted by individual state boards, not the American Institute of Certified Public Accountants. Membership in the AICPA is not obligatory for CPAs, although some CPAs do join. To become a full member of AICPA, the applicant must hold a valid CPA certificate or license from at least one of the fifty-five U.S. state/territory boards of accountancy; some additional requirements apply.AICPA members approved a proposed bylaw amendment to make eligible for voting membership individuals who previously held a CPA certificate/license or have met all the requirements for CPA certification in accordance with the Uniform Accountancy Act. The AICPA announced its plan to accept applications from individuals meeting these criteria, beginning no later than January 1, 2011.
State CPA association membership
CPAs may also choose to become members of their local state association or society. Benefits of membership in a state CPA association range from deep discounts on seminars that qualify for continuing education credits to protecting the public and profession's interests by tracking and lobbying legislative issues that affect local state tax and financial planning issues.CPAs who maintain state CPA society memberships are required to follow a society professional code of conduct, further reassuring clients that the CPA is an ethical business professional conducting a legitimate business who can be trusted to handle confidential personal and business financial matters. State CPA associations also serve the community by providing information and resources about the CPA profession and welcome inquiries from students, business professionals and the public-at-large.
CPAs are not normally restricted to membership in the state CPA society in which they reside or hold a license or certificate. Many CPAs who live near state borders or who hold CPA status in more than one state may join more than one state CPA society.
State Associations
- Missouri Society of Certified Public Accountants
- California Society of Certified Public Accountants
- Florida Institute of Certified Public Accountants
- Indiana CPA Society
- Maryland Association of CPAs
- Minnesota Society of Certified Public Accountants
- Tennessee Society of Certified Public Accountants
- Wisconsin Institute of Certified Public Accountants