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Certified Public Accountants (CPAs) are accountants in the United States who have passed the Uniform Certified Public Accountant Examination and have met additional state education and experience requirements for certification as a CPA. In most U.S. states, only CPAs who are licensed are able to provide to the public, attestation (including auditing) opinions on financial statements. The exceptions to this rule are Arizona, Kansas, North Carolina and Wyoming, where although the "CPA" designation is restricted, the practise of auditing is not.

Many states prohibit the use of the designations "certified public accountant" or "public accountant" (or the abbreviations "CPA" or "PA") by a person who is not certified as a CPA in that state. According to the National Society of Accountants, the "public accountant" does exist nationwide subject to certain exceptions. However the majority of states have closed the designation "public accountant" to new entrants.

While CPAs are known by the general public in part for their tax expertise and for "doing the books" of small organizations, they are uniquely educated for the attestation function discussed above. Because accountants are educated on the foundational levels of a business, they are commonly called upon for general business knowledge. Increasingly, CPAs are employed by corporations in finance functions and do not provide services directly to the public.

Although some CPAs serve as business consultants, the consulting role is under scrutiny following the corporate climate in the aftermath of the Enron scandal. This has resulted in divestitures in the consulting divisions by many accounting firms. In audit engagements, CPAs are (and have always been) required by professional standards and Federal and State laws to maintain independence (both in fact and in appearance) from the entity they are conducting an attestation (audit and review) engagement. However, most individual CPAs who work as consultants do not work as auditors, or vice versa.

CPA exam

In order to become a U.S. CPA, it is mandatory to sit for and pass the Uniform Certified Public Accountant Examination (Uniform CPA Exam), which is set by the American Institute of Certified Public Accountants and administered by the National Association of State Boards of Accountancy.

Eligibility to sit for the Uniform CPA Exam is determined by individual State Boards of Accountancy. Typically the requirement is a U.S. bachelors degree in accounting with an additional 1 year study. This requirement for 5 years study is known as the "150 hour rule" and has been adopted by the majority of state boards, although there are still some exceptions.

Certain overseas qualified accountants seeking to become U.S. CPAs may be eligible to sit for the International Qualification Examination as an alternative to the Uniform CPA Exam.

Other licensing and certification requirements

Although the CPA exam is uniform, licensing and certification requirements are imposed separately by each state's laws and vary only by 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 and the Examination component is the Uniform CPA itself.

Two tier states

Some states have a 2 tier system where by an individual would first become certified as a CPA -- usually by passing the CPA exam. That individual would then later be eligible to be licensed once a certain amount of work experience is accomplished. Most states, however, have a 1 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 Delaware, Illinois, Montana, Florida and Nebraska. However the trend is for 2-tier states to gradually move towards a 1-tier system. Since 2002 the State Boards of Washington and South Dakota have ceased issuing CPA certificates, and Illinois plans to follow suit in 2010.

Work experience requirement

The Experience component varies from state to state:

  • The 2-tier states generally do not require work experience for a CPA certificate (it is required for a license to practise).
  • Some states, such as Colorado and Massachusetts, will waive the work experience requirement for those with a higher academic qualification compared to the state's requirement to sit for the Uniform CPA
  • The majority of states still require work experience to be of a public accounting nature. However an increasing number of states, including Oregon, Virginia, Georgia and Kentucky will accept experience of a more general nature in the accounting area. This allows persons to obtain the CPA designation while working for a corporation's finance function.
  • The majority of states require work experience to be verified by a licensed CPA. This can cause difficulties for applicants based outside the United States. However, some states such as Colorado and Oregon will accept work experience certified by a Chartered Accountant as well.

Ethics

Over 40 of the state boards now require applicants for CPA status to complete a special examination on ethics, which is effectively a Fourth E in terms of requirements to become a CPA. The majority of these will accept the AICPA self-study Professional Ethics for CPAs CPE course, however some states (notably California) set their own course, or specify a different requirement.

State laws

The Uniform CPA tests federal laws only, and as a rule, state laws and taxes are outside its scope. Most states do not yet require applicants for CPA status to pass any state-specific examination, however there are a few exceptions including the Utah Board of Accountancy

Continuing Professional Education

Most states require attendance for a minimum number of hours annually (often 40 hours annually or 80 hours biannually) for appropriate continuing professional education (CPE) to maintain a CPA license.

Two-tier states do not usually require CPE to maintain a CPA certificate. However, all members of the American Institute of Certified Public Accountants must undertake CPE as a condition of AICPA membership.

Inter-state practice

An accountant is required to meet the legal requirements of any state in which he wants to practice. Also, the term "practice of public accounting" and similar terms are given definitions that vary from state to state. The practice of public accounting under state law often includes the signing of audit reports and the performance of other services, such as tax or management consulting, while holding oneself out as a CPA.

Most states will grant CPA status under reciprocity to a CPA licensed in another state. However this is not universal, and in particular, CPAs from states with less stringent educational requirements (such as Colorado and Delaware) may not be able to benefit from these provisions. However, this does not affect those CPAs who do not plan to offer services directly to the public.

AICPA membership

The CPA designation is granted by individual state boards, not the American Institute of Certified Public Accountants (AICPA). Hence, it is not obligatory for CPAs to become members of AICPA, although many do so. In order to become a full member of AICPA, it is mandatory to have a valid CPA certificate or license from one of the 55 U.S. state boards of accountancy, however some additional requirements apply.

International context

Many persons from outside the United States obtain the U.S. CPA designation through sitting for the Uniform CPA Exam or International Qualification Examination (IQEX). Due to the size of the U.S. accounting profession and the importance of U.S. accounting rules, many overseas accountants wish to obtain the U.S. CPA designation in addition to, or as an alternative to, a local qualification.

The designation Certified Public Accountant also exists as a public accounting designation in many overseas countries, unrelated to the U.S. CPA designation. These countries include:

See also

External links

Professional titles | Professional Accountant | Accounting in the United States

Certified Public Accountant | Contador Público | 公認会計士 | 공인회계사 | Autorisert regnskapsfører | 注册会计师

 

This article is licensed under the GNU Free Documentation License. It uses material from the "Certified Public Accountant".

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