What Is a Certified Public Accountant (CPA)?

Whether you’re running a business or simply handling your personal finances, accounting is a necessary practice. And sometimes, we can feel in over our heads when it comes to complicated aspects of it, like taxes. If this is you, it’s critical to find a qualified professional, such as a certified public accountant (CPA) to help you.

CPAs are individuals who’ve passed state licensing requirements to practice accounting. They’re more than capable of handling all aspects of the field, such as reporting and tax filing. In this article, we’ll define the role of a one, what makes them qualified, and look at situations where you might need one.

CPA Definition

In the United States, a certified public accountant (CPA) is a person who has a state license to practice accounting. However, keep in mind that not all accountants are certified. To obtain their license, they must meet various education, experience, and exam requirements. Every state, except for Hawaii, allows one to provide services in other states, no matter where they received their certification.

What Services They Provide

CPAs primarily serve as accountants for individuals, businesses, and other organizations. This encompasses a wide array of services, including:

• Auditing. A CPA can audit an individual or firm’s financial records to look for any discrepancies or irregularities. This ensures there’s compliance with federal and state laws, minimizing penalties.
• Maintaining financial records. CPAs are able to assist with building and maintaining detailed records for a person or organization. This includes handling documents like balance sheets, cash flow statements, income statements, and depreciation schedules.
• Tax planning and preparation. A certified accountant can help with charting out your tax situation, as well as preparing and filing returns that comply with state and federal regulations.
• Financial planning. CPAs possess a wealth of financial knowledge, which you can use to help reach your goals. They can help you plan for taxes, create a budget, and make crucial decisions. This is especially useful for businesses, which are constantly needing to adjust their strategies.
• Forensic accounting. CPAs are invaluable resources when it comes to investigating financial fraud. This typically entails auditing and investigating financial records for criminal activity or irregularities.
• Compliance and reporting. Federal and state laws are ever-changing and difficult to comprehend for the average person. A CPA can help people ensure they or their company is compliant with current and future regulations.

Having a CPA in your corner can help you ensure you or your company are approaching accounting the right way. And, perhaps most importantly, they’ll help you stay compliant with laws, so you’re not hit with heavy penalties.

Ethical Standards

Every CPA must follow a strict standard of ethics set forth by their state’s board of accountancy. Over 40 states also require candidates to pass an ethics exam. The American Institute of Certified Public Accountants (AICPA), a prominent organization in the industry, outlines its standards as:

• Integrity
• Objectivity
• Due care
• Competency
• Full disclosure of conflicts of interest
• Client confidentiality
• Full disclosure of fees and commissions
• Serving public interest

While CPAs typically follow a standard of ethics, they’re not necessarily bound by any fiduciary duty. In some cases, they may adhere to this standard if their specific role necessitates it, like having power of attorney. However, it’s generally not a requirement by state accountancy boards or other organizations, such as the AICPA.

Qualifications to Become a CPA

To become a CPA, one must complete a rigorous set of education, experience, and exam requirements. Achieving the prestigious title takes serious dedication, time, and quite a bit of effort. Certifications are administered on the state level, rather than by a third-party organization.

In general, you’ll need to complete the following requirements to become a CPA:

• Pass the Uniform Certified Public Accountant Examination (Uniform CPA Exam) from the AICPA.
• Before the exam, complete at least 150 hours of college.
• Complete the AICPA Code of Professional Conduct course, as well as pass the exam (if applicable in your state).
• Complete continuing education requirements in your state (if applicable in your state).
• Gain the requisite hours of work experience in your state.

After completing the above requirements, an individual should be well-equipped with the necessary skills and experience to effectively serve clients, whether it be a person or an organization. They’ll also understand the ethics needed to do their job honestly and within the law.

Do I Need One?

CPAs are extremely valuable professionals, but do you need one on your team? This, as with any other type of financial expert, depends on your current circumstances. Hiring one can be expensive and if your needs are simple, it may not be the right fit.

Perhaps the best way to answer this question is by looking at the types of people who could use a CPA. Here are four classes of individuals or organizations who should consider hiring a certified accountant:

1. Individuals with complex finances. If you have a high net worth, are self-employed, or have a complex investment portfolio, you may need a CPA. They can help you organize your taxes, make decisions, and stay compliant with the law.
2. Small business owners. Owning a business comes with a whole host of tasks that a CPA can help you address, such as maintaining records, filing taxes, and staying compliant. They may also be able to help with business formation.
3. Large organizations. The bigger the organization, the more there is to manage. A CPA can help you ensure everything accounting-related is running like clockwork. They can also make sure you avoid government scrutiny by keeping the business compliant.
4. Those with specialized needs (e.g., finance professionals). A CPA can work in conjunction with finance professionals, such as retirement or estate planners, to maximize results for clients. For instance, they may help an estate planner minimize taxes as assets are distributed to beneficiaries.

How Much They Cost

With their credentials, you may be wondering how much it’ll cost to hire a CPA. Unfortunately, they’re typically on the expensive side. In general, one can charge anywhere from $1,000 to $1,500 per hour to file either personal or business returns on your behalf. Of course, you’re also getting their expertise and finance savvy when you’re paying this price.

What you end up paying a professional varies based on who your work with, however. It’s a smart practice to compare several options before settling on one. You should also make sure you know exactly what you want them to do for you, so you don’t end up wasting time and money throughout the process.

Frequently Asked Questions

Is a CPA better than an accountant?

In most cases, a CPA is better suited to handle various types of duties than an accountant. This is because of the rigorous education and experience requirements necessary to become one. However, this doesn’t mean a typical one is always ill-equipped to handle certain situations.

What’s the difference between a CPA and a CFA?

Despite the similar sounding acronyms, the two are very different types of professionals. A CPA is an accountant that can assist with a variety of different tasks in the field, such as tax preparation, auditing, record keeping, and reporting. Chartered financial analysts (CFAs) are highly qualified experts who specialize in portfolio and investment management.

How much does a certified public accountant make?

Per ZipRecruiter, the national average annual CPA salary is $87,421. However, this number will depend heavily on the state one lives in, as well as the company they work for.

Can a CPA do my taxes?

Yes, a CPA can assist with both tax planning and preparation. With their experience and education, they’ll help you file returns in a way that can potentially save you money and is compliant with federal and state laws. In general, it can cost you around $1,000 to $1,500 per hour for a personal or business return.