Do You Need a CPA or an Accountant?

PA requirements to be a CPA and maintain licensure

The fundamental requirement is a bachelor’s degree that includes 150 semester hours of study fulfilling a variety of subjects, including general accounting, business law, auditing, and finance, from an accredited institution. 

The next requirement is to pass all four sections of the CPA exam within a limited period of time. The exam is very rigorous, with four sections covering:

• Auditing & Attestation
• Financial Accounting & Reporting
• Regulation
• Business Environment & Concepts 

The final requirement is one year of experience (1,600 hours) working in either the private or public sector under a licensed CPA. These hours must include work that demonstrates competency in:

• Attestation
• Audits
• Operational audits
• Compiling financial statements
• Tax research
• Financial projections and analysis
• Management advisory 

In order to maintain certification, a CPA must renew the license every two years by taking no less than 80 hours of continuing professional education (CPE) credits within those two years, with at least 20 credits in each year (in other words, no cramming them all in at the last minute). PSTAP provides CPE courses to help CPAs maintain their accreditation. 

Clearly, a significant amount of time and effort is involved in achieving and maintaining CPA status. CPAs are highly qualified and are dedicated to their field.                                     

There are other areas in which a CPA can specialize and earn additional qualifications. For instance, a CFA is a Chartered Financial Analyst with additional expertise in investments and financial analysis. An accredited CMA (Certified Management Accountant) has demonstrated the highest level of mastery in areas of financial strategy, analytics, and risk mitigation. 

What an accountant can do

While some individuals and self-employed people have straightforward income and expenses and can manage their own books or can get by with just a bookkeeper, most small businesses and people with more complex finances should engage the service of an accountant or CPA. Which you hire depends on the level of your needs.

An accountant can:

• Manage your company’s (or your household’s) income and expenses, accounts payable and accounts receivable
• Establish or maintain accounting and financial policies and procedures to ensure compliance with regulatory requirements
• Produce financial reports and offer actionable advice
• Prepare and file taxes

What a CPA can do that an accountant cannot

While all accountants are expected to handle their clients’ finances with care and integrity, CPAs are licensed by a professional governing body and are held to specific professional standards and a code of ethics. They are held to a “fiduciary standard” that requires that they put their clients’ interests first, above all else. 

A CPA can perform all the same functions as an accountant, but a CPA has additional qualifications, and can thus offer a higher level of analysis and advice. A CPA may be in a better position to provide more in-depth guidance on tax laws, helping you to minimize your tax bill through careful planning for the future and taking advantage of legal tax options that many accountants may not be aware of.

Most significantly, a CPA can represent clients in an IRS audit, while an accountant cannot. Due to the high level of tax and financial expertise, a CPA is in a better position than an accountant to avoid an audit in the first place; but if an audit does occur, your trusted CPA will know your financial situation in great detail and will be able to represent you successfully. Anything involving audits is in the purview of the CPA. 

Who needs a CPA

In the final analysis, only you can decide whether your needs require an accountant or the greater knowledge and expertise of a CPA. If your needs are simple and you do not expect an audit (whoever expects an audit?) then an accountant may have the skills and knowledge to fulfill your needs. But for a higher level of financial knowledge, advice, and analysis, and for support in case of audit, choose a CPA.