Certified Public Accountant (CPA) Certification Guide

What’s in this guide?

By financejobs.net Staff Writer

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What is the CPA certification?

The Certified Public Accountant (CPA) certification is a highly respected and widely recognized professional designation that signifies expertise in the field of accounting. It is administered by the American Institute of Certified Public Accountants (AICPA) and is recognized in the United States as the premier accounting qualification.

Why get the CPA Certification?

  • Credibility and Respect – CPAs are held in high regard in the business world, enhancing credibility with clients and employers.
  • Career Opportunities – The CPA designation opens doors to a variety of career paths in accounting, finance, and business.
  • Increased Earning Potential – CPAs typically earn more than their non-certified counterparts. According to the AICPA, CPAs can expect to earn 10-15% more than accountants without this certification.
  • Professional Independence – A CPA license allows accountants to open their own practice in the United States, offering services such as auditing, tax preparation, and consulting.

How to Become a Certified Public Accountant

Meet the Educational Requirements

You must first obtain a bachelor’s degree in accounting, finance or a related field. However, most states in the US. require that candidates complete 150 semester hours of college coursework—known as the “150-hour rule”—which typically exceeds a standard bachelor’s degree. This often means pursuing additional coursework or obtaining a master’s degree.

Pass the CPA Exam

The CPA exam is organized into four sections: Auditing and Attestation (AUD), Business Environment and Concepts (BEC), Financial Accounting and Reporting (FAR), and Regulation (REG). Each section is taken as a separate exam.

Preparing for the CPA exam is rigorous, and many candidates enroll in CPA review courses to enhance their chances of passing.

Once you’re prepared, you must apply to take the exam through your state board or designated agency, pay the necessary fees, and schedule your exams through Prometric, which administers the tests at its centers nationwide.

Complete the Experience Requirement

Most states require you to gain one to two years of accounting experience under the supervision of a licensed CPA. The specific requirements can vary significantly by state, so it’s essential to check the rules governing the state in which you intend to practice.

This experience must be verified by a licensed CPA who can attest to the fact that your work meets the standards and ethics expected of the profession.

Ethics Examination

Many states require CPA candidates to pass an ethics exam, which is typically a self-study course and exam focusing on professional conduct, practices, and the philosophical and practical aspects of ethics in accounting.

Apply for Licensure

After passing the CPA exam, completing the required educational and experience prerequisites, and passing the ethics exam (if required), you can apply for your CPA license through your state board of accountancy.

Once licensed, CPAs must meet continuing professional education (CPE) requirements to maintain their certification. The amount of CPE needed varies by state (see our guide to CPE requirements by state for more detail)

Maintain Your License

Keeping up with CPE is critical to maintaining your CPA license. CPAs are typically required to complete a certain number of CPE hours every 1-3 years, depending on the state.

License renewal processes differ by state but usually involve submitting proof of completed CPE credits and paying a renewal fee.

The CPA Exam

The average pass rate for the CPA exam in the United States fluctuates between 45% and 55%, with most candidates not passing on their first attempt.

The CPA exam is a comprehensive assessment of the knowledge and skills expected of professional accountants. It covers a wide range of accounting and auditing topics, from financial reporting to tax regulations. The computer-based format tests not only your knowledge through multiple-choice questions, but also your ability to apply that knowledge through simulations and written communication tasks. While challenging, passing the CPA exam demonstrates your commitment to the profession and opens doors to diverse career opportunities in accounting, auditing, and finance.

Exam Format

The CPA exam consists of four sections, each designed to test a different domain of accounting knowledge and skills. Each section is taken separately:

  1. Auditing and Attestation (AUD): 4 hours
  2. Business Environment and Concepts (BEC): 4 hours
  3. Financial Accounting and Reporting (FAR): 4 hours
  4. Regulation (REG): 4 hours

Each section of the CPA exam is delivered in a computerized format and consists of multiple-choice questions (MCQs), task-based simulations (TBSs), and for the BEC section, written communication tasks.

Cost

The cost of the CPA exam varies by state but typically includes an application fee and fees per section. Generally, you can expect:

  • Application Fee –  Approximately $50 – $200, depending on the state.
  • Examination Fees – About $200 per section, totaling around $800 for all four sections.
  • Other Costs – Additional fees may include a Notice to Schedule (NTS) fee, re-examination registration fees, and fees for changing appointment times or testing locations.

Topics Covered

Each section covers different areas of accounting:

  1. AUD: Covers concepts related to the auditing process, including ethics, professional responsibilities, forming conclusions, and reporting.
  2. BEC: Includes topics in corporate governance, economic concepts, financial management, information systems, and strategic planning.
  3. FAR: Focuses on financial accounting standards, financial statement accounts, and specific transactions unique to governmental entities and nonprofits.
  4. REG: Emphasizes federal taxation, ethics, professional responsibilities, and business law, as well as the taxation of individuals, entities, and property transactions.

Scheduling Your Exam

Begin by applying through your state’s Board of Accountancy to obtain eligibility. Once your application is accepted, you’ll receive a Notice to Schedule, which allows you to schedule an exam section(s) through the Prometric website. It’s important to schedule your exams within the validity period of your NTS, which is typically six months.

Studying/Preparing for the Exam

Preparing for the CPA exam requires a structured approach due to the breadth and depth of material covered.

  1. Review Courses – Enroll in a reputable CPA review course. These courses provide structured learning materials, including videos, textbooks, practice questions, and simulations that are crucial for preparation.
  2. Study Schedule – Create a consistent study schedule. Dedicate specific hours each week to study, aiming for at least 300-400 hours of study time in total to prepare for all four sections.
  3. Practice Tests – Regularly take practice tests to assess your knowledge and adjust your study habits accordingly. Focus on understanding the rationale behind each answer.
  4. Study Groups – Consider joining a study group or finding a study partner. Discussing complex topics with peers can enhance understanding and retention.
  5. Simulations and Writing – Pay special attention to task-based simulations and, for BEC, the written communication tasks. These are significant components of the exams and can impact your scores substantially.
  6. Time Management – During your preparation and on exam day, practice managing your time efficiently. Learn to allocate your time appropriately among the multiple-choice questions and simulations.

Your CPA Certification Questions Answered

Our career coaches frequently work with individuals considering the CPA certification and here are some of the questions they hear time and time again:

What strategies can I use to balance working full-time while studying for the CPA exam?

Balancing a full-time job while preparing for the CPA exam is challenging but manageable with effective time management. Consider adopting a flexible work schedule if your employer allows, such as shifting to a four-day workweek or utilizing flexible hours to allocate specific study times. Also, maximize your study efficiency by using lunch breaks and commutes for lighter study tasks like flashcards or listening to audio summaries of key topics.

What are some lesser-known benefits of obtaining the CPA certification besides increased salary?

Beyond the obvious financial benefits, obtaining a CPA certification expands your professional network through interactions with fellow professionals during CPE events and seminars. It also increases your credibility in the industry, which can lead to opportunities such as speaking at industry conferences, contributing to professional publications, or serving on boards of directors for non-profits and corporations.

Can I pursue the CPA certification if my bachelor’s degree isn’t in accounting?

Yes, you can pursue a CPA certification even if your bachelor’s degree is not in accounting, but you might need to complete additional coursework to meet the 150-hour requirement and ensure you have covered all necessary accounting subjects. Many states require specific accounting courses such as auditing, business law, and taxation, which can be completed through post-baccalaureate programs designed for non-accounting majors seeking CPA certification.

What are the implications of failing a section of the CPA exam, and how can I recover?

Failing a section of the CPA exam can be discouraging, but it’s a common hurdle. You can retake any section during the next testing window. It’s important to analyze your performance to understand where you fell short, and adjust your study plan accordingly. Focusing on weak areas and seeking additional resources such as tutoring or different study materials can improve your chances of success on the next attempt. Remember, persistence and adaptability are key in successfully navigating the CPA exam.

Which Jobs Value the CPA Certification?

Here are some senior and executive-level positions where a significant number of professionals hold CPA certifications: