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Certified Public Accountants (CPAs) are highly trusted in their industry, and for good reason. Becoming a CPA is a rigorous process that opens up career opportunities. As a CPA, you could work from home, building a network of clients and helping businesses prepare their taxes each spring. You could also be the CFO of a startup, helping to prepare it for acquisition or public trading.
No matter the scale of their work, CPAs are valuable because they are held to a high standard and code of ethics determined by the American Institute of Certified Public Accountants (AICPA).
If you’re wondering how to become a CPA, you must first meet stringent licensing requirements set by your state. This ensures that you have the analytical and technical skills required to perform this job. Read on to learn more about this career path.
What Do CPAs Do?
All CPAs are accountants, but not all accountants are CPAs. CPAs must meet education and experience requirements before they can take the Uniform CPA Examination®.
While accountants manage day-to-day financial tasks, CPAs are trusted with larger responsibilities. They can perform financial audits and represent their clients before the IRS. At the end of the day, they have to answer to AICPA’s standard of professional ethics.
Ultimately, CPAs help their clients reach their financial goals. They must understand complicated laws and translate those laws in a way people will understand. CPAs perform accounting tasks, such as tax preparation and financial planning. They may also assist in mergers and acquisitions or international trade.
CPAs are often responsible for audits. One aspect of this is forensic accounting—poring through financial history in search of misconduct. They may even work in environmental accounting. These CPAs perform compliance checks and develop systems to maintain that compliance.
Of course, CPAs are much busier during tax season. Many CPAs work at large public accounting firms, where the workload can double from Feb. 1 to April 15. Any accountants working with tax preparation should be prepared for that busy season.
How Much Does a CPA Make?
Accountants perform essential tasks across all industries, and their pay matches that responsibility. The U.S. Bureau of Labor Statistics (BLS) places accountants and auditors in the same category. The median annual wage for this group was $77,250 in May 2021, compared to a median salary of $45,760 for all workers.
Even the lowest-paid accountants and auditors matched the national median wage. The lowest 10% of these employees earned $47,970 per year or less. On the other hand, the highest-paid 10% made more than $128,970—a significant step up.
Job Outlook for Accountants
If you’re looking for job security, accounting is a fairly safe bet. The field is projected to grow by 6% from 2021 to 2031, according to the BLS. This exceeds the average projected growth rate of 5% for all occupations.
A growing economy creates a higher demand for accountants. They may be asked to handle financial documentation as companies go public or use their accounting expertise to assist with international trade and acquisitions.
Complicated tax laws also offer some job security for accountants. Whether they are helping individuals during tax season or managing complex regulations for large companies, accountants are essential to the U.S. tax system.
There is a definite need for more CPAs, especially in public accounting companies. AICPA performs a biannual survey of accounting firms of different sizes. In 2021, all firms with two or more employees listed “finding qualified talent” as one of their main concerns. If you are ready to earn certification and take on the busy season, there are firms ready to hire.
How to Become a CPA
There are three main components to becoming a CPA: education, examination and experience. The Uniform CPA Examination is consistent across all United States jurisdictions, but the education and experience requirements vary, according to the National Association of State Boards of Accountancy (NASBA).
CPA Education Requirements
The first step is to meet the CPA schooling requirements. These vary by state, so make sure to research the specific CPA requirements for the state in which you plan to take the exam. It’s important to note that you do not have to practice in the same state where you take the exam. Your CPA test scores can be transferred to another jurisdiction to get a license.
If you are already close to graduating, NASBA recommends looking through every state’s qualifications and picking one that matches your needs. Make sure that you meet the state residency requirements as well. NASBA also offers a research engine called the Accountancy Licensing Library, which generates a report of which states’ CPA schooling requirements best align with your education.
Is an accounting degree worth it? Though there is no specific CPA degree, it helps to get a bachelor’s degree in accounting or something business-related. California CPA requirements, for example, include a bachelor’s degree and 150 semester units of education. Those must include 24 units related to accounting and 24 units related to business.
Most bachelor’s degree programs only comprise 120 semester credits. To help you earn those extra 30 credits to meet the 150-credit requirement, many schools offer five-year bachelor’s-to-master’s programs. You could also meet those requirements through a double major or elective courses. However, candidates with master’s degrees have higher pass rates on the CPA exam, so you may benefit from the extra coursework.
Pass the CPA Exam
The next step—though not an easy one—is to pass the CPA exam. First, you must apply for the Uniform CPA Examination through NASBA’s website. Once your application is approved, you will receive a notice to schedule your exam. This notice is valid for six months.
The Uniform CPA Examination is rigorous. Pass rates for each section in 2022 ranged from around 45% to 60%, according to AICPA. Be sure to take your time studying and practicing for the exam, and review the CPA test blueprints offered by AICPA.
Each section of the test costs $238.15. Every state has its own application and registration fees on top of that, which could add up to over $200. And if you choose to enroll in a CPA test prep course, that could add another $1,000 to $3,000 to your total.
We delve into the CPA test format in a later section.
Obtain and Maintain CPA Licensure
The final component of the CPA certification is experience. Candidates need a minimum of one year of experience in accounting, auditing, taxation or attestation, AICPA says. In total, this is approximately 2,000 hours, and the experience must be Checked by a licensed CPA. Again, check the specific requirements for your state.
Some states also require an ethics exam. Once you’ve met the qualifications for your jurisdiction, you can apply for licensure through your state board of accountancy.
CPAs are required to maintain their license through continuing education courses, including ethics.
CPA test Format
There are four sections to the exam, and you have 18 months to pass all of them with a minimum score of 75. Each section takes four hours and includes multiple-choice questions and task-based simulations. The scores are weighted based on difficulty, but they are not curved.
Auditing and Attestation (AUD)
The AUD section covers knowledge of auditing, attestation and accounting and review service engagements, with an emphasis on whether candidates have the analytical skills to become a CPA. The test tests for ethics, independence and professional skepticism, which is an iterative process that requires a critical eye when questioning audit evidence.
The four content areas of the AUD test are ethics, professional responsibilities and general principles; assessing risk and developing a planned response; performing further procedures and obtaining evidence; and forming conclusions and reporting.
Business Environment and Concepts (BEC)
The BEC portion is focused on business principles involving auditing, accounting, financial reporting, tax preparation and more. Unlike the others, this section includes a written communication section.
There are five subjects covered in the BEC exam: enterprise risk management, internal controls and business practices; economics; financial management; information technology; and operations management.
Financial Accounting and Reporting (FAR)
In the FAR exam, candidates must demonstrate their knowledge of financial accounting and reporting frameworks. The four content areas of the test are conceptual framework, standard-setting and financial reporting; select financial statement accounts; select transactions; and state and local governments.
Regulation (REG)
The REG section assesses candidates’ understanding of federal laws and ethics principles. It includes five subjects: ethics, professional responsibilities and federal tax procedures; business law; federal taxation of property transactions; federal taxation of individuals; and federal taxation of entities.
Frequently Asked Questions (FAQs) About CPAs
What is the difference between a CPA and an accountant?
CPAs are accountants who have achieved licensure through a rigorous certification process. Candidates need to meet specific CPA requirements: a bachelor’s degree with a focus in accounting and business classes, at least one year of accounting experience, a passing score on all four parts of the Uniform CPA Examination and, in some states, an ethics test. In return, CPAs are allowed to perform different tasks than accountants.
What skills do CPAs need?
One of the most important skills for a CPA to have is critical thinking. They must be able to think independently and maintain their standard of ethics in all situations. They also need to have excellent math and communication skills, as well as strong attention to detail.
Is a CPA better than an MBA?
A master’s degree can be valuable while going through the CPA licensure process, but the two are not interchangeable. CPAs are legally allowed to perform different tasks than other accountants, even those who have a master’s degree in accounting. CPAs are the most trusted in their field because they are held to a higher standard of ethics and expertise.