The terms “accountant” and “certified public accountant” or “CPA” are often used interchangeably. But they’re not exactly the same thing. All CPAs are accountants, but not all accountants are CPAs. Here’s a look at the five main differences between them.
Accountants generally have an associate’s or bachelor’s degree in accounting, though in reality they don’t need a degree at all. As long as they’ve learned the ropes of accounting, accountants may ply their trade at will. Of course, an experienced, reputable accountant is always preferable to one who isn’t.
CPAs, on the other hand, usually have a bachelor’s or master’s degree in accounting or finance. Either level of degree is acceptable as long as the would-be CPA completes 150 semester hours of accounting and business-specific coursework. CPAs must also complete 40 hours of continuing professional education every year to stay up to date on their profession.
Accountants don’t need any particular license in order to perform accounting services. CPAs must pass the Uniform CPA Exam, which is administered by the American Institute of CPAs (AICPA). The exam is comprised of four areas of knowledge: regulation, financial accounting and reporting, business environment and concepts, and auditing and attestation. Studying for the test and taking it is a big time commitment, and less than 50 percent of those taking the exam pass it on the first try.
Accountants typically handle day-to-day accounting or bookkeeping tasks. They may also prepare compiled financial statements. If working at a company, accountants may allocate budgets and do financial planning. Many accounts specialize in a certain industry or business sector.
CPAs are qualified to do everything an accountant can and more. In addition to preparing compiled financial statements, they can also prepare audited or reviewed financial statements. CPAs often play a consultancy role for businesses, who trust them to offer sound, knowledgeable advice regarding business formation, taxes, and most any other financial matter.
- Taxes and Representation
Both accountants and CPAs can prepare tax forms. Because of their continuing education, though, CPAs are generally more knowledgeable on current tax codes. In the event of an audit, CPAs may represent clients before the IRS, while accountants may not.
- Fiduciary Responsibility
Accountants are certainly expected to be informed, honest and forthright. CPAs take it one step further. They are considered to be trusted fiduciaries who have the legal duty and the power to act on behalf of their clients. Keeping their client best interests in mind always, CPAs have a responsibility to act with integrity and within the law. CPAs who don’t can lose their licenses.