# Certified Public Accountant: What the CPA Credential Means

![Certified Public Accountant (CPA): A designation given to accounting professionals who meet education and experience requirements and pass an exam.](https://www.investopedia.com/thmb/bD9Y54bT9Udq7PS_GYTUx48A9tE=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/terms_c_cpa.asp-FINAL-44d586c6065c4346a6c0290cfab18574.jpg)

*CPAs can work in public accounting firms, within corporate settings, or in government. — Daniel Fishel / Investopedia*

> **Definition**
>
> A Certified Public Accountant (CPA) is a licensed accounting professional who has met rigorous examination, education, and experience requirements, allowing them to provide various financial services.

## What Is a Certified Public Accountant (CPA)?

A Certified Public Accountant (CPA) is a prestigious designation for a qualified and licensed professional.

To become a CPA, you must pass a rigorous examination, known as the Uniform CPA Exam; have a bachelor's degree, usually in business, finance, or accounting; complete 150 education hours; and gain at least two years of experience in public accounting.

Roles and responsibilities of CPAs include tax preparation and financial management.

Potential career paths and specializations for someone with a CPA credential include public, corporate, and government accounting roles and even chief financial officer (CFO) for a business.

### Key Takeaways

*   The CPA credential is a prestigious designation that allows professionals to conduct audits, file tax returns, and provide financial advisory services, which are not permitted for non-CPA accountants.
*   To obtain the CPA designation, candidates must meet rigorous requirements, including completing 150 hours of education, acquiring at least two years of experience in public accounting, and passing the Uniform CPA Exam.
*   The Uniform CPA Exam consists of four sections, each requiring a minimum score of 75% to pass, with some sections historically having low pass rates, making it a challenging qualification to achieve.
*   CPAs can explore diverse career paths, including roles in public, corporate, and government accounting, and have opportunities to advance to high-level executive roles such as CFO.
*   Maintaining the CPA designation involves ongoing education to ensure adherence to a strict code of ethics and professional conduct, which is vital for credibility in the accounting field.

## Key Responsibilities of a Certified Public Accountant (CPA)

Not all accountants are CPAs. Accountants who are CPAs are licensed by their state's Board of Accountancy after passing the Uniform CPA Exam.

CPAs prepare reports that accurately reflect the business dealings of the companies and individuals that hire them. Many prepare tax returns for individuals or businesses and advise them on ways to minimize taxes.

Earning the CPA title requires a bachelor's degree, usually in business, finance, or accounting. Other majors are acceptable if the applicant meets the minimum requirements for accounting courses.

Candidates must complete 150 education hours and at least two years of public accounting experience. To receive the CPA designation, a candidate also must pass the Uniform CPA Exam.

Maintaining a CPA requires completing continuing education hours.

### Did You Know?

Other countries have equivalent certifications, notably the [chartered accountant (CA)](https://www.investopedia.com/terms/c/ca.asp) designation created in Scotland and now used in many countries.

## Understanding the CPA Exam Structure and Requirements

The [CPA exam](https://www.investopedia.com/articles/investing/111214/cpa-exam-what-you-need-know.asp) totals 16 hours, divided into four sections of four hours each. The exam consists of three core sections that must be completed and one discipline section. Candidates can choose from three discipline sections.

The three core sections are:

*   Financial Accounting and Reporting (FAR)
*   Auditing and Attestation (AUD)  
    
*   Taxation and Regulation (REG)

The three discipline sections, of which a candidate must choose one, are:

*   Business Analysis and Reporting (BAR)
*   Information Systems and Controls (ISC)
*   Tax Compliance and Planning (TCP)

Each section consists of a different number of multiple-choice questions and task-based simulations. For example, AUD consists of 78 multiple-choice questions and seven task-based simulations.

It takes a score of at least 75% to pass the exam. The pass rates are low, with three out of the six possible sections having pass rates below 50%. The hardest section is BAR, with a pass rate of 41.04%. The easiest section is TCP, with a pass rate of 78.16%.

Candidates have four hours to complete each section, with a total exam time of 16 hours. Each section is taken individually, and candidates can choose the order in which they take them but must pass all four sections of the exam within 18 months.

> **Important**
>
> International equivalency exams allow CPAs to work outside the country of their certification.

## Exploring Career Opportunities for CPAs

CPAs can work in public accounting firms, within corporate settings, or in government. Individuals with the CPA designation can also move into executive positions such as controller or chief financial officer (CFO).

Most CPAs compile, maintain, and [review financial statements](https://www.investopedia.com/terms/a/attest-function.asp), regardless of their employer. Many CPAs file tax forms or returns for individuals and businesses. CPAs are authorized to perform and sign off on audits.

Though known for their role in income tax preparation, CPAs can specialize in other areas such as [auditing](https://www.investopedia.com/articles/professionals/120415/career-advice-accounting-vs-auditing.asp), [bookkeeping](https://www.investopedia.com/articles/professionals/091715/career-advice-accounting-vs-bookkeeping.asp), [forensic accounting](https://www.investopedia.com/terms/f/forensicaccounting.asp), [managerial accounting](https://www.investopedia.com/terms/m/managerialaccounting.asp), and even aspects of information technology (IT).

A CPA license isn't needed for corporate accounting or [private companies](https://www.investopedia.com/articles/active-trading/121015/understanding-accounting-private-equity-funds.asp), but public accountants at firms like Deloitte must be CPAs.

## Ethical Standards and Guidelines for CPAs

Certified Public Accountants are subject to a code of ethics. The AICPA 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](https://www.investopedia.com/updates/enron-scandal-summary/) is an example of CPAs not adhering to the code. Arthur Andersen company executives and CPAs were charged with illegal and unethical accounting practices.

Federal and state laws require CPAs to stay independent during 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 gained importance after the [Sarbanes-Oxley Act of 2002](https://www.investopedia.com/terms/s/sarbanesoxleyact.asp), passed partly due to financial scandals like Enron.

### Note

To give yourself the best chance possible when taking the exam, consider taking one of the best CPA prep courses.

## The Historical Evolution of the CPA Credential

In 1887, a group of 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)](https://www.investopedia.com/terms/a/american-institute-of-certified-public-accountants.asp) since 1957. CPAs first received licenses in 1896.

In 1934, the Securities and Exchange Commission (SEC) required all public companies to file periodic financial reports endorsed by accountants.

The AICPA set accounting standards until 1973, when the Financial Accounting Standards Board (FASB) began to set standards for private companies.

The accounting industry thrived in the late 1990s as big firms expanded into consulting. The Enron scandal in 2001 resulted in major changes in the accounting industry, not least the collapse of Arthur Andersen, one of the nation’s top accounting firms.

After the Sarbanes-Oxley Act in 2002, accountants faced stricter rules on consulting assignments.

## What Are the Responsibilities of a CPA?

CPAs compile, maintain, and review financial statements and related transactions. They also prepare tax returns for individuals and businesses. They are authorized to perform audits.

Some CPAs specialize in areas like forensic accounting, personal financial planning, and taxation.

A CPA is required to complete continuing education requirements and uphold a standard of professional ethics.

## What Can CPAs Do That Accountants Cannot?

A CPA is an accountant who has earned a professional credential. Their main responsibilities are the same and involve preparing or reviewing financial documentation for businesses or individuals.

CPAs are authorized to take on certain other roles. These include performing audits of public U.S. companies and preparing audited financial statements for a company, such as a balance sheet or an income statement.

## Which Is Better: an MBA or a CPA?

The Master of Business Administration (MBA) is an academic degree in management. If you are interested in starting or running a business, the MBA program will help you prepare.

The Certified Public Accountant (CPA) is a license for working accountants that signals a degree of professional expertise. If you are an accountant or want to be one, it's a valuable tool to help you move up the ladder.

## Is Becoming a CPA Worth It?

Earning the CPA credential is a big time commitment, and the exam is challenging. Still, those with a CPA earn 25% more, on average, than non-CPA accountants. Also, accountants with a CPA certification tend to advance to positions of more responsibility within one to two years and often are promoted to senior-level jobs within a few years after that.

## The Bottom Line

The Certified Public Accountant (CPA) credential is given to professionals who pass a state exam and meet education and experience requirements. The professional value of the designation is that CPAs often earn 25% more than non-CPAs and advance in their careers more quickly.

The rigorous requirements to become a CPA include passing the Uniform CPA Exam, completing 150 hours of education, and gaining at least two years of professional experience.

Diverse career paths are available to CPAs, such as roles in public, corporate, and government accounting, as well as executive positions.

CPAs are held to high ethical standards in the Code of Professional Conduct, which they must adhere to and which reflects the vital role that CPAs play in maintaining financial integrity.

If you're considering the CPA path, it's a good idea to take a CPA prep course for better Uniform CPA Exam readiness.  

> **Article Sources**
>
> 1.  AICPA. "[150 Hour Requirement for Obtaining a CPA License](https://us.aicpa.org/becomeacpa/licensure/requirements)."
>     
> 2.  NASBA. "[Maintaining a License](https://nasba.org/licensure/maintainingalicense/)."
>     
> 3.  AICPA & CIMA. "[Everything You Need to Know About the CPA Exam](https://www.aicpa-cima.com/resources/toolkit/cpa-exam)."
>     
> 4.  UWorld. "[All About the CPA Exam](https://accounting.uworld.com/cpa-review/cpa-exam/)."
>     
> 5.  AICPA & CIMA. "[Learn More About CPA Exam Scoring and Pass Rates](https://www.aicpa-cima.com/resources/article/learn-more-about-cpa-exam-scoring-and-pass-rates)."
>     
> 6.  NASBA. "[CPA Exam Application Process Frequently Asked Questions](https://nasba.org/features/cpa-exam-application-process-faq/)."
>     
> 7.  NASBA. "[International Qualification Examination (IQEX)](https://nasba.org/exams/iqex/)."
>     
> 8.  AICPA. "[Professional Responsibilities](https://us.aicpa.org/interestareas/personalfinancialplanning/resources/practicecenter/professionalresponsibilities)."
>     
> 9.  Journal of Accountancy. "[The Rise and Fall of Enron](https://www.journalofaccountancy.com/issues/2002/apr/theriseandfallofenron.html)."
>     
> 10.  Cornell Law School, Legal Information Institute. "[Sarbanes-Oxley Act](https://www.law.cornell.edu/wex/sarbanes-oxley_act)."
>      
> 11.  AISCPA & CIMA. "[History](https://www.aicpa.org/resources/article/history)."
>      
> 12.  National Association of State Boards of Accountancy. "[10 Totally Random but Interesting Facts About Accounting](https://nasba.org/app/uploads/2017/07/Infographic-Accounting-Facts.pdf)."
>      
> 13.  Cornell Law School, Legal Information Institute. "[Securities Exchange Act of 1934](https://www.law.cornell.edu/wex/securities_exchange_act_of_1934)."
>      
> 14.  FASB. "[About the FASB](https://www.fasb.org/about-us/facts)."
>      
> 15.  Brigham Young University. "[BYU Study: 20 Years Later, Accountants Burned by Enron Scandal Outperform Peers](https://news.byu.edu/byu-study-20-years-later-accountants-burned-by-enron-scandal-outperform-peers)."
>      
> 16.  University of Scranton. "[Statistics That Prove Becoming a CPA Is Worth It](https://elearning.scranton.edu/resources/infographic/cpa-worth-it-statistics/)."