A Certified Public Accountant (CPA) is a licensed expert who has successfully completed an exam given by their state’s Board of Accountancy.
These state CPA exams follow the rules set by The American Institute of Certified Public Accountants (AICPA). To take the Uniform CPA Exam, accountants need to have some professional experience and hold a bachelor’s degree.
Other countries offer similar certifications, like the chartered accountant (CA) title that originated in Scotland and is now recognized in various nations.
Role and Responsibilities
Not every accountant is a CPA. Those who are CPAs have earned their license from their state’s Board of Accountancy after successfully passing the Uniform CPA Exam.
CPAs create reports that accurately represent the financial activities of the businesses and individuals that hire them. A lot of them also handle tax returns for clients and provide advice on how to reduce tax liabilities.
To become a CPA, you need a bachelor’s degree, usually in business administration, finance, or accounting, though other majors can work if you’ve taken the required accounting courses.
Candidates must complete 150 hours of education and have at least two years of experience in public accounting. Plus, to earn the CPA title, you have to pass the Uniform CPA Exam.
To maintain the CPA designation, you need to complete a certain number of continuing education hours.
The History
In 1887, a bunch of accountants got together to form the American Association of Public Accountants (AAPA). Their goal was to set ethical guidelines for the accounting field and establish auditing standards for local, state, and federal governments, as well as private companies and nonprofits.
Over the years, the organization changed its name a few times and has been called the American Institute of Certified Public Accountants (AICPA) since 1957. The first CPAs were licensed back in 1896.
Fast forward to 1934, when the Securities and Exchange Commission (SEC) mandated that all publicly traded companies submit regular financial reports signed off by accounting professionals.
The AICPA was in charge of setting accounting standards until 1973, when the Financial Accounting Standards Board (FASB) took over that role for private companies.
The accounting sector really took off in the late 1990s as big firms started branching out into various consulting services. However, the Enron scandal in 2001 shook things up, leading to significant changes in the industry, including the downfall of Arthur Andersen, one of the leading accounting firms at the time.
According to a study from Brigham Young University, accountants affected by the Enron scandal have outperformed their peers two decades later.
Since the Sarbanes-Oxley Act was enacted in 2002, accountants have faced stricter rules regarding their consulting work.
Conclusion
You don’t need to be a Certified Public Accountant to work as an accountant, but getting your CPA license definitely boosts your resume. It shows you’ve aced a nationally recognized exam tailored to your state’s rules. Plus, it unlocks job opportunities that regular accountants can’t access, like auditing public companies.