- For other meanings of "CPA" see CPA (disambiguation)
Certified Public Accountants (CPAs) are accountants in the United States who have met certain criteria. They have passed the Uniform CPA exam, which was developed and is maintained by the American Institute of Certified Public Accountants (AICPA), and have subsequently met additional state requirements for licensure as a CPA. Only CPAs are professionally licensed to provide to the public, attestation (including auditing) opinions on publicly disseminated financial statements.
Many states prohibit the use of the designations "certified public accountant" or "public accountant" (or the abbreviations "CPA" or "PA") by a person who is not licensed as a CPA. According to the National Society of Accountants, the "public accountant" does exist nationwide subject to certain exceptions.
While CPAs are known by the general public in part for their tax expertise and for "doing the books" of small organizations, they are uniquely educated for the attestation function discussed above. Because accountants are educated on the foundational levels of a business, they are commonly called upon for general business knowledge.
Due to a rise in technology over the past few decades, accountants have been able to better use the time once sacrificed to tedious manual record keeping. CPAs are not solely "number crunchers" but also work as analysts or upper management executives in many varied disciplines in addition to finance.
Although CPAs serve as business consultants, the consulting role is under scrutiny following the corporate climate in the aftermath of the Enron scandal. In audit engagements, CPAs are (and have always been) required by professional standards and Federal and state laws to maintain independence (both in fact and in appearance) from the management staffs of the organizations they audit.
CPA exam
The Uniform CPA exam was developed and is maintained by the American Institute of Certified Public Accountants, and is administered by the National Association of State Boards of Accountancy. The exam is used by the regulatory bodies of all fifty states plus the District of Columbia, Guam, Puerto Rico, and the U.S. Virgin Islands. Although the exam is uniform, licensing requirements are formed individually by each state's own laws, but vary only slightly by each state. Aside from passing the exam, states typically require:
- Completion of an accounting program at a university/college with 150 credit hours. Certain courses may also be required.
- Working experience of public accounting for a certain period of time (for example, one year).
- Individuals devote a minimum number of hours annually for appropriate continuing professional education (to keep the license).
An accountant is required to meet the legal requirements of any state in which s/he wants to practice, and the requirements may vary from state to state. Also, the term "practice of public accounting" and similar terms are given varying definitions depending on the state. The practice of public accounting under state law often includes the signing of audit reports and the performance of other services, such as tax or management consulting, while holding oneself out as a CPA. Some states also require an additional exam, generally in state rules and ethics, before being licensed in the state.
Before November 2003, exams were offered twice a year, in May and November. The four sections were given in a two-day period.
Since April 5, 2004 the exam has been entirely computer based. Research skill as well as use of word processing and database software is required.
The year is divided into four windows. In each three-month window the candidates can take any number of the sections, once for each section on a window, in the first two months (January and February, April and May, and so on).
The sections have been reorganized as follows:
- Auditing & Attestation (4.5 hours): (AUD) – This section covers knowledge of planning the engagement, internal controls, obtaining and documenting information, reviewing engagements and evaluating information, and preparing communications.
- Financial Accounting & Reporting (4.0 hours): (FAR) – This section covers knowledge of concepts and standards for financial statements, typical items in financial statements, specific types of transactions and events, accounting and reporting for governmental agencies, and accounting and reporting for non-governmental and not-for-profit organizations.
- Regulation (3.0 hours): (REG) – This section covers knowledge of ethics and professional responsibility, business law, Federal tax procedures and accounting issues, Federal taxation of property transactions, Federal taxation – individuals, and Federal taxation – entities.
- Business Environment & Concepts (2.5 hours): (BEC) – This section covers knowledge of business structures, economic concepts, financial management, information technology, and planning and measurement.
Multiple-choice questions comprise approximately 80% of the exam, while the other 20% consist of simulations. Accounting knowledge is tested in simulations through a variety of tasks, some of which require searching databases, completing written communication exercises, and working with spreadsheets and forms. The skills that simulations are intended to measure are: analysis, judgment, communication, and research.
In all simulations, candidates are presented with a situation and instructed to write a letter or memorandum on a specific topic.
Written communication responses are scored on the basis of three criteria:
- Organization - structure, ordering of ideas, linking of ideas one to another.
- Development - presentation of supporting evidence.
- Expression - use of standard business English.
Responses that do not address the assigned topic are not scored.
In Auditing and Attestation (AUD), Financial Accounting and Reporting (FAR), and Regulation (REG), multiple-choice testlets account for 70% and simulations 30% of the score. The 30% simulation portion is further divided into 10% for written communication and 20% for all other parts of the simulation. In Business Environment and Concepts (BEC), multiple-choice questions account for 100% of the score.
The new exam will be offered up to six days a week, during two out of every three months. The results are available within 60 days after taking the exam. Each credit for a passed section is valid for 18 months. Thus, a candidate must pass all four sections within an 18-month period. If all four sections are not passed within an 18-month period, sections passed outside the 18-month period must be retaken.
The score represents the candidate's overall performance on the identified examination section. Scores are reported on a numeric scale of 0-99, with 75 as the passing score. The scale does not represent "percent correct." A score of 75 indicates examination performance reflecting a level of knowledge and skills that is sufficient for the protection of the public.
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