What Is a CPA and How Do I Become One? (2023)

What Is a CPA and How Do I Become One?

A certified public accountant (CPA) is an accounting professional who has met certain education, exam, and experience requirements for licensure by a state board of accountancy. To become a CPA, you’ll need to pass an exam that demonstrates you have mastered the technical skills necessary to provide services for financial accounting, financial reporting, auditing, attestation, regulations, business environments, and business concepts.

CPAs are highly sought after by businesses and nonprofit organizations because they have extensive training in tax law, auditing procedures, management practices, and other important aspects of business financial operations.

Is CPA a certificate, degree, or license?

CPA is a license awarded by the state you want to work in, which allows you to practice as an advanced accountant. To obtain a CPA license, you must pass all four parts of the CPA exam. Once you’ve passed them, and you’ve met the work experience requirement, you’re eligible to apply for a CPA license with your state board of accountancy.

CPA vs. accountant

All CPAs are accountants, but not all accountants are CPAs. A CPA is a financial professional licensed by a state board to provide accounting services to the public. A CPA performs accounting duties such as tax preparation, auditing, and consulting. An accountant is an individual who professionally practices accounting.

As a CPA, you have demonstrated advanced accounting competencies. Therefore, you can take on additional duties related to the Internal Revenue Service (IRS) and Securities and Exchange Commission (SEC) that not all accountants can perform.

Read more: How to Get a Job as an Accountant | 10 Tips

What does a CPA do?

Like most accountants, CPAs perform a wide range of accounting, auditing, tax, and consulting work for corporations, small businesses, non-profit organizations, governments, and individuals.

When you become a CPA, you can be responsible for preparing financial statements for your clients and filing reports with the SEC. To comply with SEC regulations, you must be a CPA to prepare and file reports.

You'll also represent clients before the IRS to help them resolve their tax problems. The IRS only allows CPAs, attorneys, enrolled agents, enrolled retirement plan agents, and enrolled actuaries to represent clients directly.

As a certified public accountant, you’ll have the opportunity to work with individuals and businesses in various industries, advising on financial and tax-related matters. You may choose to specialize in a particular area, such as forensic services, taxes, or working within an industry like health care. Alternatively, depending on your career path, you can focus on a wide spectrum of accounting services.

As an accountant, your job duties may depend on the business size, your experience, and the industry. However, you will likely find yourself doing some of the following:

• Maintaining records and preparing financial documents

• Preparing tax returns for companies, organizations, and individuals

• Consulting with management on financial matters

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• Identifying financial discrepancies and areas for improvement within the company’s internal processes, policies, and procedures

• Conducting forensic accounting for audits

• Advising on the financial risk involved in taking on new projects or mergers, retirement planning, and other financial decisions

Benefits of becoming a CPA

CPA certification is the most well-recognized professional accountancy qualification. The prestige and respect associated with being a CPA can offer you various exciting career opportunities.

Here are some of the benefits you can expect by getting your CPA:

• Earn more money: On average, CPAs earn more than non-CPAs with similar education and experience. According to Glassdoor, CPAs with one to three years of public accounting experience earn an average salary of $74,529 per year, compared with $57,607 per year for their non-CPA peers [1,2].

• Increased job opportunities: Becoming a CPA can allow you to pursue many different career paths within the accounting field. You can work in public accounting firms, private companies, government agencies, and nonprofit organizations as a CPA.

You can also pursue management consulting, information technology, education, and financial planning careers. While these may not seem like typical professions for accountants, many industries rely on financial expertise.

• A sense of accomplishment: Passing the CPA Exam shows you have what it takes to be successful in the profession. It's a challenging exam—an average of 52 percent of first-time test takers pass all four sections [3].

• Credibility: As a trusted business advisor and financial expert, your credibility is essential to you and your client's success. By becoming a CPA, you’re not just showing your clients that you know what you’re talking about; you’re showing them that you’ve been tested on it too. That’s important because it helps build trust with clients by giving them confidence in your advice.

Skills CPAs need to have

There are no set skills that all CPAs possess. However, certain skills are common among successful CPAs.

• Technical skills: As a CPA, you need extensive technical knowledge to perform the job duties effectively. These include accounting software such as QuickBooks and tax preparation software such as TurboTax and Drake Tax software.

As a modern accountant, you’ll also need new technical skills like programming in Python and R, statistical analysis, data mining, and regression.

• Organizational skills: You need good organizational skills to prepare accurate reports, organize documents, and keep track of deadlines important for tax returns, audits, and other duties. You’ll often have several projects at once, so having a system is crucial.

• Critical thinking: As a CPA, you’ll have to be able to see the big picture and think critically. You must be able to analyze data, evaluate it, and then put it into context to provide meaningful, reliable advice.

• Problem-solving: Solving problems is a big part of being a CPA. You’ll be responsible for finding solutions to complex problems and developing strategies that address issues your clients may have with their taxes or business practices.

• Communication: As a CPA, you must be able to clearly and effectively communicate with others, both in writing and verbally. This skill is essential for any CPA working with colleagues, managing employees, or directly with clients.

• Attention to detail: As an accountant, you must maintain accuracy and precision in your work. Every part of an accountant's job has financial consequences for your employer or client, so accuracy is crucial. For example, the company could lose money without realizing if an accountant incorrectly adds up figures on a balance sheet. False reporting may also attract fines.

• Analytical thinking: Some people are naturally good at analyzing data and finding patterns. This skill can be beneficial in your accounting career and can help you spot problems with financial records or processes much more quickly than if you were simply going through the books line-by-line.

• Business acumen: Understanding how businesses operate is critical when working as a CPA in any industry. You need to understand the basic business strategies and principles to advise management on how their decisions will affect the company's financial position.

How do I become a CPA?

The path to becoming a CPA starts with earning a degree. You’ll then pass the CPA exam to get licensed in your state. You’ll also need to complete continuing education to remain licensed.

Earn a bachelor’s degree.

The education requirements to become a CPA vary by state. Most accounting majors can satisfy most of the educational requirements, although states require 150 semester hours of college credit before you're eligible to take the exam. This means you'll need to take 30 additional hours of coursework above and beyond what's required for your bachelor's degree. That could mean doing a double major, taking additional college classes, or earning a master's degree.

Undergraduate and graduate programs in accounting provide the basic foundation for meeting the education requirements for licensure. These programs introduce you to financial accounting, auditing, and taxation topics at both the individual and corporate levels. They also give you an opportunity to gain experience using industry-standard computer applications and software.

As an aspiring CPA, you might want to consider an online accounting degree program, which offers convenience and flexibility, especially when working full time while going to school. Online programs may also provide a flexible or accelerated format. You might like to consider the Online Master's of Accounting (iMSA), offered by the University of Illinois Urbana-Champaign.

Read more: What Is an Accountancy Degree? A Guide

Pass the CPA exam.

Each state sets its specific requirements for your eligibility to take the Uniform CPA Exam. Many states require you to hold a bachelor's degree, and most require or will require 150 hours of post-high school education. Some states require CPA candidates to be at least 18 to 21 years old, and a few require that you’re a citizen or permanent resident.

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Gain experience.

The required years of experience you need to take the CPA Exam vary from state to state, but most call for at least two years working in public accounting. Some states will accept other experiences, such as working in government or industry, but you will generally need more years of such experience.

Get licensure.

CPAs are licensed by their state boards of accountancy. Find your state's board of accountancy and review its website to get clarity on what you'll need to do.

For most states, you'll need:

• To meet education requirements

• To pass the Uniform CPA examination

• To meet experience requirements

• To complete the CPA ethics exam

Many states have passed versions of the Uniform Accountancy Act (UAA). This has helped to create more consistency in licensing across states so that you can be mobile working in this profession. Make sure you understand the requirements in your state and any states you plan to work in to ensure that your license is accepted.

Continue your education.

As a CPA, you will be required to complete continuing professional education (CPE), generally every two years. The two main categories of CPE are:

• Programs: Formal courses

• Self-study: Reading journal articles or taking an online course

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It’s important to note that states have different CPE requirements and deadlines. For example, states have different requirements for the number of hours of ethics CPE you’ll have to do, and accept various types of education. It’s always best to check your state's rules and regulations before starting your CPE.

CPA career opportunities

The diverse business and technical skills you gain as a CPA open the door to various career options. Around 70 percent of CPAs work in private companies, with CPAs serving in many different types and sizes of firms, such as the following [4]:

• Large, international accounting and tax firms: These organizations often have offices all over the country and the world. They provide various services, including tax advice, financial consulting, and auditing.

• The Big Four accounting firms: Deloitte, PricewaterhouseCoopers (PwC), Ernst & Young (EY), and KPMG are the four largest professional services networks in the world. They offer audit, assurance services, taxation, management consulting, actuarial, corporate finance, and legal services to companies.

• Medium-sized firms: These organizations tend to be regional. They might have offices in several states or one area of the country. They provide similar services as large firms, but typically on a smaller scale and often have smaller clients.

• Smaller firms: Local accounting practices tend to focus on the needs of smaller businesses in their area. If a small business needs tax advice or an audit, they often contact a small firm for assistance.

• Business and industry accountant: A business and industry accountant is another career path available to CPAs. Business and industry accountants work in companies of all sizes in diverse areas, such as financial accounting and reporting, management accounting, financial analysis, and treasury/cash management.

CPAs work in other sectors too:

• Federal, state, and local government departments offer diverse opportunities for CPAs.

• Non-profit organizations employ CPAs in many capacities.

• Education also offers many diverse opportunities in research and teaching.

Specializations

Specializations are also an option for CPAs. With the right experience and training, you can specialize in areas such as:

• Business valuation

• Consulting services (including information technology)

• Corporate taxation

• Employee benefits

• Estate planning

• Financial forensics

• Financial statement auditing

• Forensic accounting and fraud examination

• International operations and taxation

• Investment management

• IT consulting

• Litigation support

• Mergers and acquisitions

• Personal financial planning

• Real estate

• Research and development tax credits

• State and local tax incentives

Salary and career outlook

The Bureau of Labor Statistics (BLS) projects employment for accountants and auditors to grow by 7 percent from 2020 to 2030, which is as fast as the average for all occupations [5]

According to Glassdoor, the average annual income (base salary plus additional commissions and benefits) per year for CPAs based on years of experience is as follows [1]:

• 0–1 years: $87,498

• 1–3 years: $93,477

• 4–6 years: $97,276

• 7–9 years: $101,451

• 10–14 years: $111,303

• 15+ years:$129,890

To give you an idea of the annual salaries of other jobs that CPAs can do here are a few:

• Public accountant:$104,767 [6]

• Management accountant: $100,305 [7]

• Governmental accountant:$102,999 [8]

• Internal auditor: $97,556[9]

• Tax advisor: $76,829 [10]

• Forensic accountant: $91,231 [11]

• Personal financial planner: $101,636 [12]

Next steps

If you’re looking to take your accounting career to the next level, a CPA designation may be what you need. CPA licensure is the gold standard in the profession and can lead to increased earning potential, career mobility, and prestige.

If you need extra semester hours after your degree, then a master’s degree is a viable option. Postgraduate education can help you be more appealing to employers, too. You can do the Online Master's of Accounting (iMSA), offered by the University of Illinois Urbana-Champaign on Coursera.

If you are interested in a specialization, consider the Forensic Accounting and Fraud Examination from West Virginia University or the University of Illinois at Urbana-Champaign's Financial Reporting Specialization or CPA Pathways Graduate Certificate.