What is a Certified Public Accountant and What Do They Do?

A CPA, or certified public accountant, is an accounting professional who has passed the CPA exam and fulfilled different qualifications for licensure set forth by the state board of accountancy in the state in which they have applied.

One CPA put it this way: “A CPA is a highly respected license, it opens the door for new roles, adds a level of credibility to your name, and gives you preference in certain situations.”

As financial experts who provide critical services such as auditing, tax planning, and financial advising, they ensure compliance with financial regulations, help optimize tax strategies, and offer insights to improve financial decision-making for businesses and individuals.

Because the CPA designation is the most sought-after and used credential in the world of accounting, it’s not easy to obtain. Becoming a CPA was one of the greatest accomplishments of my life and one that allowed me to grow as an accountant. But it’s not just me that has grown. The path to designation has changed significantly over the years, as has what it means to work as a CPA.

Key Takeaways

• Credentials: A CPA is a highly respected license that opens doors to new roles, adds credibility, and provides preference in certain situations.
• Core Functions: CPAs provide critical services such as auditing, tax planning, and financial advising, ensuring compliance with financial regulations and optimizing tax strategies.
• Educational Requirements: Becoming a CPA requires completing 150 credit hours of college-level education, typically including a bachelor’s degree in accounting or a related field.
• Examination and Experience: Candidates must pass the CPA exam and gain relevant work experience, usually one to two years, under the supervision of a licensed CPA.
• Emerging Trends: CPAs are now involved in sustainability accounting, cybersecurity, blockchain technology, and data analytics, expanding their roles and enhancing their professional expertise.

What is a Certified Public Accountant?

Becoming a CPA requires a combination of education, examination, and experience. To earn this prestigious credential, candidates must fulfill specific requirements set by their state’s board of accountancy. Here’s an overview of what it takes:

• Educational Requirements: Complete 150 credit hours of college-level education, typically including a bachelor’s degree in accounting or a related field.
• Examination: Pass the CPA exam, which consists of three core sections, Auditing and Attestation (AUD), Financial Accounting and Reporting (FAR), Regulation (REG), and a choice between three Discipline Sections (BAR, TCP, ISC).
• Experience: Gain relevant work experience, usually one to two years, under the supervision of a licensed CPA.
• Ethics Exam: The requirement for an ethics exam varies by state. Some states mandate it as an additional step after the CPA exam, while others do not. Candidates should check with their state board to understand specific requirements, as they differ significantly by location.

What Does a CPA Do?

Certified Public Accountants have many different career paths and options available to them. That’s why this certificate is so popular. However, the main two career paths include public accounting and industry accounting.

Let’s look at both:

What Does a CPA Do in a Public Accounting Firm?

A CPA performs various jobs at a CPA firm in the public accounting industry. Here are a few.

Auditing and Review

One of the main jobs a certified public accountant performs in public accounting is auditing client financial statements and issuing an opinion of the statements. Basically, the auditor is recognized as an unbiased third party who reviews and evaluates the financial statements prepared by management. Based on the audit, the CPA gives an opinion of the financial statements, disclosing whether any material misstatements were found.

Ultimately, all public companies are required by the SEC to have a CPA firm audit their financial statements before they are issued to shareholders and the public.

Tax Preparation and Services

One of the most popular and well-known career paths for a CPA is in the tax preparation industry. This includes preparing all different types of client tax forms, from property taxes to income taxes. This also includes advising clients on tactics and strategies for how to structure their affairs to minimize tax burdens.

Consulting Services

CPAs provide many different types of consulting services to help their clients identify business problems and run their operations more effectively. Some consultations include evaluating internal controls and identifying possible operational improvements.

Forensic Accounting Services

Embezzlement and financial fraud can often go undetected for months or even years, especially in complex schemes. In these cases, CPAs are brought in to conduct forensic examinations of financial records, track down discrepancies, and identify signs of financial misconduct. They use their expertise to uncover stolen funds, document fraudulent activities, and provide clear, detailed reports, which are often critical in legal proceedings or internal investigations.

Financial Planning and Business Valuation

CPAs are often engaged in advising clients when the best time to sell a business is and how to transfer it to another person.

During the evaluation process and planning stages, they also inform their clients of the tax ramifications of selling or transferring a business. This is common in estate and succession planning.

Litigation Services

Although CPAs are not licensed to practice law, they are often used by attorneys to find and prove evidence as an expert witness in the courtroom. This is common in divorce proceedings, bankruptcies, and business mergers/acquisitions/splits.

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What Does a CPA Do in the Accounting Industry?

CPAs perform several different jobs outside of public accounting. Here are a few of them.

Company Management

CPAs make great managers because they understand finance, operations, and how to improve profitability.

Company Executives

Along the same lines, CPAs make great CEOs, CFOs, and COOs because they understand the inner workings of a company. It’s not uncommon for a company to hire a certified public accountant as the CFO or COO.

Non-Profit Organizations

Just like for-profit companies, non-profit organizations need leadership and financial managers who can advise and guide them on how to use their funds effectively.

CPAs are often appointed to the board of non-profits and help manage the day-to-day operations.

Government

The government employs CPAs for a variety of different jobs. The IRS, FBI, military, and Congress itself use CPAs in different capacities. There are a ton of different opportunities for accountants at every level of government, from local to federal.

Education

Most accounting professors at major universities are certified. Although this isn’t a requirement, it is important seeing as they will be telling students to go become a CPA.

Emerging Industry Trends for CPAs

In recent years, CPAs have expanded their roles to include several emerging areas that were not traditionally part of their responsibilities. One significant trend is the involvement of CPAs in sustainability accounting, where they help companies measure and report on their environmental and social impacts. This field requires CPAs to integrate non-financial metrics into traditional financial reporting frameworks, providing a more holistic view of an organization’s performance.

Key areas where CPAs are making strides include:

• Cybersecurity: As digital transactions become more prevalent and the risk of data breaches grows, CPAs are crucial in establishing robust internal controls, conducting risk assessments, and developing strategies to protect sensitive financial information. Their expertise ensures that organizations can safeguard their assets and maintain trust with stakeholders.
• Blockchain and Cryptocurrencies: The rise of blockchain technology and cryptocurrencies has opened new avenues for CPAs. They provide guidance on accounting for digital assets, ensuring compliance with evolving regulations, and leveraging blockchain for more transparent and efficient financial reporting. This area requires CPAs to stay abreast of technological advancements and regulatory changes to offer relevant advice to their clients.
• Data Analytics: Data analytics and business intelligence have become game-changers in accounting. CPAs today use advanced tools to sift through massive amounts of data, uncovering insights that help companies make smarter strategic moves and streamline operations. This data-driven approach marks a shift in the profession, enabling CPAs to offer deeper insights and play a more active role in shaping business success.

What Can a CPA Do that an Accountant Can’t Do?

There are a bunch of different things that CPAs are legally allowed to do that a non-certified accountant is unable to do. Here are a few examples.

Auditing

Non-certified accountants are not allowed to audit public companies, issue audit reports or opinion letters, or review public company financial statements for the SEC. The SEC only allows a CPA firm to perform these services.

Taxation Services

The IRS gives certified public accountants (and enrolled agents) special privileges that non-certified accountants don’t get. A CPA is allowed to sign a client’s tax return as a paid preparer and represent the client in front of the IRS. These privileges are also awarded to enrolled agents and attorneys.

Conclusion

Choosing to become a CPA is a significant commitment that offers numerous professional benefits and opportunities. With a respected credential that opens doors to diverse roles, CPAs play a vital role in auditing, tax planning, financial advising, and more. The educational and examination requirements ensure that CPAs possess a high level of expertise and dedication to their field.

As the accounting profession evolves, CPAs are also at the forefront of emerging trends like sustainability accounting, cybersecurity, and data analytics, making this career path both challenging and rewarding. If you aspire to excel in the accounting world and take on critical financial responsibilities, pursuing a CPA designation can be one of the most impactful decisions of your career.

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