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What is a CPA (Certified Public Accountant)?

Updated for Tax Year 2019


OVERVIEW

A CPA (Certified Public Accountant) is an accounting professional licensed and credentialed by a state or territory to offer accounting services, including tax preparation, to the public.


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A CPA (certified public accountant) is an accounting professional licensed and credentialed by a state or territory to offer accounting services, including tax preparation, to the public. Certified for  their accounting skills, educational background and their ethical standards, CPAs are granted the right to represent taxpayers before the IRS by the Department of the Treasury.

What does CPA stand for?

CPA is short for certified public accountant. A CPA can provide a variety of services depending on whether they are in a public practice or work for a corporation as an accounting professional. The services an accountant can provide includes analyzing financial data, maintaining accounting records, providing financial projections, and preparing taxes.

According to the Bureau of Labor Statistics, there were about 1.4 million accountants in 2016, but only about half of those (664,532) are CPAs who are registered with National Association of State Boards of Accountancy.

What does a CPA do?

An essential task of most CPAs is to keep or inspect financial records to ensure that that the information they represent is accurate and complies with relevant laws and regulations. This can include:

  • organizing and maintaining financial records
  • examining financial statements to ensure they are accurate
  • preparing tax returns
  • providing financial forecasts
  • providing auditing services

Because accountants have the ability to intimately understand a person’s or business’s finances, they are often in a position to suggest ways to improve financial performance, set financial goals, and plan how to achieve them.

Some CPAs work internally for companies, but many have their own businesses or work for public accounting firms, offering their services to various individuals, businesses, and nonprofit organizations. CPAs often work with and prepare financial documents that their clients are required by law to disclose. These include:

  • tax forms
  • financial statements that corporations must provide to potential investors
  • documents that publicly traded companies must submit to the Securities and Exchange Commission (SEC)

Some CPAs concentrate on taxes, preparing individual income tax returns and help their clients take advantage of all potential tax benefits.

Education and credentialing

CPAs are licensed and regulated at the state or federal territory level. States require that CPA candidates:

  • Pass a rigorous test known as the Uniform Certified Public Accountant Examination (Uniform CPA Exam) from the American Institute of Certified Public Accountants.
  • Complete 150 semester hours of college coursework before sitting for the Uniform CPA Exam.
  • Gain work experience under the supervision of a licensed CPA.

Ethical standards

In addition to the rigorous training, examination, and experience requirements, more than forty state boards now require CPA candidates to pass an ethics exam. Most states accept a “fifth” exam from AICPA, the self-study Professional Ethics for CPAs, as well as other exams. In many states, the ethics requirement must include information about the state’s laws and standards for professional practice.

CPA specialties

CPAs can specialize in a number of areas. Some of these include:

  • Tax preparation, providing assistance to individuals and small businesses who are filing their taxes.
  • Forensic accounting, investigating financial crimes such as embezzlement, securities fraud, and other criminal financial activities.
  • Management accounting, analyzing the financial information of the organizations for which they work.
  • Government accounting, maintaining and examining the records of public agencies.
  • Information technology accounting, reviewing financial controls for an organization’s computing systems.

Tax CPAs

Some CPAs specialize in tax preparation. Their experience and knowledge of the tax code enable them to identify credits and deductions to reduce taxes due and increase refunds. For example, a tax CPA can review a client’s mortgage tax deductions, charitable deductions, and child expenses to make sure the individual is maximizing their tax savings.

Tax CPAs also often provide expert advice regarding rental property, investment income, business expenses, and industry-specific deductions that people might miss. CPAs are authorized to represent clients before the IRS to help deal with all matters including tax return audit and collections.

Because CPAs have passed the Uniform CPA Exam and meet other credentialing requirements, they are not required to take any additional competency exams administered by the IRS before representing clients before the IRS. Tax preparers and accountants who are not CPAs, such as Enrolled Agents (EAs), must pass an IRS exam as well as meet other requirements to establish their ability to have unlimited rights to represent clients before the IRS.

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