Certified Public Accountant (CPA)

What Is a Certified Public Accountant (CPA)?

A certified public accountant (CPA) is a designation provided to licensed accounting professionals. The CPA license is provided by the Board of Accountancy for each state. The American Institute of Certified Public Accountants (AICPA) provides resources on obtaining the license. The CPA designation helps enforce professional standards in the accounting industry. Other countries have certifications equivalent to the CPA designation, notably, the chartered accountant (CA) designation.

Understanding a Certified Public Accountant (CPA)

Obtaining the certified public accountant (CPA) designation requires a bachelor’s degree in business administration, finance, or accounting. Individuals are also required to complete 150 hours of education and have no fewer than two years of public accounting experience. To receive the CPA designation, a candidate also must pass the Uniform CPA Exam.

Additionally, keeping the CPA designation requires completing a specific number of continuing education hours yearly.

Certified Public Accountant (CPA) Career Paths

CPAs have a wide range of career options available, either in public accounting (that is, working for an accounting firm) or corporate accounting (working inside a company), or in government service. Individuals with the CPA designation can also move into executive positions such as controllers or chief financial officers (CFOs).

Someone earning a CPA degree generally ends up as an accountant of some sort. That is, they put together, maintain, and review financial statements and related transactions for companies. Many CPAs file tax forms or returns for individuals and businesses. CPAs can perform and sign off on audits.

Though known for their role in income tax preparation, CPAs can specialize in many other areas, such as auditing, bookkeeping, forensic accounting, managerial accounting, and information technology.

The CPA designation isn’t required to work in corporate accounting or for private companies. However, public accountants⁠ — which are individuals working for a firm, such as Deloitte or Ernst & Young, that provides accounting and tax-related services to businesses — must hold a CPA designation.

Certified Public Accountant (CPA) Ethics

Certified public accountants are subject to a code of ethics. The APCIA requires that all CPA designation holders adhere to the Code of Professional Conduct, which lays out the ethical standards CPAs must adhere to.

The Enron scandal is an example of CPAs not adhering to such a code. Arthur Andersen company executives and CPAs were charged with illegal and unethical accounting practices. Federal and state laws require CPAs to maintain independence when performing audits and reviews. While consulting at Enron, Arthur Andersen CPAs did not maintain independence and performed both consulting services and auditing services, which violates the CPA code of ethics.

The CPA designation has become more important after the Sarbanes-Oxley (SOX) Act of 2002, which was passed partly in response to corporate financial scandals like the Enron affair.

History of the Certified Public Accountant (CPA)

In 1887, 31 accountants created the American Association of Public Accountants (AAPA) to define moral standards for the accounting industry and U.S. auditing standards for local, state, and federal governments, private companies, and nonprofits. Renamed several times over the years, the organization has been known as the American Institute of Certified Public Accountants (AICPA) since 1957. The first CPAs received licenses in 1896.

In 1934, the Securities and Exchange Commission (SEC) required all publicly traded companies to file periodic financial reports endorsed by members of the accounting industry. The AICPA established accounting standards until 1973 when the Financial Accounting Standards Board (FASB) was launched to set standards for private companies.