A certified public accountant (CPA) holds a public accounting license and has additionally passed the CPA exam. The exam is privately offered and is not governmental licensure. The path to becoming a CPA is a bit arduous, but you’ll earn more in dollars, respect and trust if you pursue it. Holding a CPA license is a highly esteemed distinction.
There were more than 665,000 actively licensed CPAs in the United States as of August 2022, according to the National Association of State Boards of Accountancy.
What Does a CPA Do?
A CPA is a titled professional with the professional designation of a certified credential in the field of accounting. The University of the People indicates that a CPA is authorized to handle and prepare various financial reports such as public and governmental documents and financial statements. This includes income tax returns at the federal, state and local level. A CPA often works in tax preparation and is authorized to represent you before the Internal Revenue Service (IRS) and other government agencies if necessary.
CPAs work in external and in-house audit services to ensure that a business’s books are on the up-and-up. Insurance, financial planning, forensic accounting, risk management, preparing tax returns and consulting services are common fields for CPAs.
How Much Does a CPA Earn?
CPAs enjoy greater earning potential than accountants because of the title’s education and certification requirements. They out-earn other financial accounting professionals, who had a median annual wage of $77,250 in 2021, according to the U.S. Bureau of Labor Statistics. This is the most recent year for which comprehensive statistics are available. “Median” means that half of all wages were above this benchmark while half fell below.
However, this figure can vary upward or downward depending on the area of the country in which you practice. University Headquarters points out that accounting professionals earn a median salary of more than $93,000 in San Francisco, but this drops to about $63,000 in Hattiesburg, Mississippi.
The BLS also points out that achieving that CPA certification improves job prospects.
Is a CPA the Same as an Accountant?
The duties and responsibilities of accountants and CPAs are similar in some respects as both work in accounting services and deal with financial information and financial records. However, the CPA designation is much more prestigious and opens more doors. CPAs can work in various fields that are off-limits to those without a CPA license. Further, only a CPA has the authority and legal ability to handle and file regulatory and governmental paperwork and filings.
Accountants usually hold bachelor's degrees, which require 120 credits to achieve, but the CPA license requires at least 150 credits. Accountants aren’t licensed, while CPAs must earn a license by meeting not only educational requirements but examination and experience requirements as well. They’re licensed and governed by a professional body, so they’re held to a professional code of ethics. They must meet continuing education requirements.
According to Franklin University, only about half of all accountants in the U.S. are actively licensed CPAs.
How Do You Become a CPA?
You’ll have to meet your state’s licensing requirements to become a CPA. These can include rules for residency and experience as well as varying educational requirements. You’ll need a bachelor's degree in business, accounting or a related field at a minimum. The Association of International Certified Public Accountants (AICPA) suggests that CPA candidates join their association as Student Affiliate Members while they’re still in school to help them make the best use of their time there.
Next up is applying to take the Uniform CPA Examination, and this isn’t just a single step. You must first be declared eligible. The National Association of State Boards of Accountancy recommends first passing a “Pathway to CPA Exam” quiz to get yourself on the right track. You must also familiarize yourself with “The Candidate’s Bulletin” since the CPA exam includes a disclosure where you must attest that you’ve read this.
You must score at least 75 on the CPA exam on a scale from zero to 99 in each of four sections. You have 18 months to take the last three sections after you pass the first, and then you must pass an ethics exam. All this is followed by a requirement for actual work experience for a period that's typically between one to two years, depending on your state.
Assuming all goes smoothly, you should receive your CPA certificate after you pay your state board its required licensing fee. And don’t forget that continuing education requirement.
- National Association of State Boards of Accountancy: How Many CPAs Are There?
- Association of International Certified Public Accountants: Join the AICPA
- National Association of State Boards of Accountancy: CPA Exam
- University of the People: What Is a CPA and What Do They Do? A Complete Guide
- Franklin University: CPA vs. Accountant – Answering 5 Questions for Future Accounting Professionals
- U.S. Bureau of Labor Statistics: Accountants and Auditors
- University Headquarters: Accounting Salaries by State
Beverly Bird has been writing professionally for over 30 years. She is also a paralegal, specializing in areas of personal finance, bankruptcy and estate law. She writes as the tax expert for The Balance.