You may remember this statement from high school math class: Every square is a rectangle, but not every rectangle is a square. Okay, enough geometry for the day. But the same principle applies to the world of professional finance: Every Certified Public Accountant (CPA) is an accountant, but not every accountant is a CPA.
To be sure, there are certain similarities between these classifications of accountants. For instance, bookkeeping and tax preparation are three common job duties, certified or not. Accordingly, business insurance for accountants is an important safety net against client contracts gone wrong, allegations of misrepresentation or business interruption after a natural disaster.
Oftentimes, both accountants and CPAs have at least a bachelor’s degree in an accounting-related field. The difference is CPAs have gone on to meet licensing requirements set by the state in which they work. This includes a hefty, 14-hour Uniform CPA examination split into four sections:
− Financial Accounting and Reporting
− Business Environment and Concepts
− Auditing and Attestation
Passing rates for the exam usually hover just south of 50 percent. For instance, the Minnesota Society of Certified Public Accountants reports 2016 pass rates between 46 percent and 55 percent, depending on section. Passing the exam is a great accomplishment, but it’s only the beginning of the road to becoming (and staying) a CPA. While passing the exam grants a CPA license, keeping said license is a matter of meeting requirements over time.
Many states require CPAs to continue their education in various subjects. For example, California requires 80 hours (at least 20 hours per year), including 40 hours in technical subjects (at least 12 hours per year).
As the National Association of State Boards of Accountancy writes, “The intricate and ever-changing rules and regulations of the state boards of accountancy present challenges to CPAs and firms when trying to understand and comply with CPE requirements.” CPAs must stay vigilant about renewing their licenses within deadlines and enrolling in continuing education classes to fulfill state requirements.
So, besides accreditation, what’s the main difference between CPAs and accountants? According to AccountingEDU.org, financial statements break down into three categories: audited, reviewed and compiled. Any accountant can work with compiled statements; only CPAs can handle audited and reviewed statements. Public companies produce audited statements, while many private companies never need an audited or reviewed statement.
CPAs tend to earn a higher salary than non-certified accountants. College graduates with an accounting degree made, on average, $50,500 in 2012. College graduates with a CPA license earned a median salary of $73,800—all the way up to a top salary around $124,000. Since CPA accreditation is required for many senior accounting positions within companies, it makes sense finance professionals unlock higher salaries and more specific jobs with a CPA license.
To recap: accountants and CPAs are qualified to handle many of the same jobs, including bookkeeping, tax preparation and more. However, only accountants who have met all the requirements for CPA licensure can handle audits for public companies.
Both accountants and CPAs should take care to protect their reputations and finances in their line of work. After all, their advice and abilities literally affects clients’ and/or employers’ bottom line. Find a policy from a top provider with CoverHound today—for free!
Insurance shopping simplified
Insurance shopping simplified