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If you’ve ever curiously Googled “What is a CPA?” when researching accounting information, you’re not alone. Many are confused over the difference between a regular accountant and a CPA. However, when examining both, the terms are not so confusing. A Certified Public Accountant (CPA) is someone who fulfills certain obligations to become licensed. They either do this by being admitted as a partner in public accounting or becoming part of a firm that employs 150 people or more. The most important thing these accountants do is understand their client’s taxes. This helps them make sure your company meets its financial goals on time and without any surprises. Accounting is critical to your business’s financial planning and budgeting. Let’s take a deeper dive into what it means to become a CPA, the difference between one and an accountant, and how to become a CPA.
What is a CPA?
A Certified Public Accountant (CPA) is an accounting professional that has earned their CPA license from the state. CPAs earn this status through a few different activities. They take part in educational training, gain real-life work experience, and pass the CPA exam.
These trusted financial advisors must uphold the highest standards to get and maintain their CPA designation. Although a CPA is also an accountant, not all accounts are CPAs. While they can still pull up your business EIN for you, there’s more to their credentials.
What Does a Certified Public Accountant Do?
Earning the professional designation of CPA can help an accounting professional open doors to better mobility and flexibility. CPAs are generally licensed in only one state. But sometimes, depending on the reciprocity laws specific to each state, CPAs can also become licensed in other states.
You can find CPAs working across different industries. Some of the most popular sectors for CPAs to work in include government, education, non-profit, business and industry, and public accounting. Let’s discuss the various type of work that a CPA may do.
In an accounting firm
Wondering what a CPA firm is? A CPA that works in a public accounting firm may do a variety of different activities for small businesses, non-profit organizations, individuals, governments, and corporations that may include auditing, accounting, consulting, and tax work.
Qualified accountants can do this work as well. However, only an accountant with a CPA license can do certain things. These include representing clients in front of the Internal Revenue Service and preparing audited financial statements and filing a record with the Securities and Exchange Commission (SEC). There are many different types of work a CPA can perform in a firm setting.
1. Tax prep
A CPA can help you with a full range of tax services, including local and federal tax returns. When CPAs work with organizations throughout the year, they ensure to minimize tax obligations for their clients. They can often help clients find deductions they didn’t know about. Additionally, if a client is audited by the IRS, the CPA will represent them on their behalf.
Using a CPA for audit and assurance services helps to enhance the quality of the financial information or context. This helps decision-makers decipher better choices. An audit is an objective evaluation of economic and financial information. This evaluation follows the Generally Accepted Accounting Principles (GAAP). Although an audit is based on general principles, it can be confusing and time-consuming to handle on your own. That’s why CPAs are so helpful. They’re familiar with IRS practices and understand how to navigate the auditing process. If you do get audited, a CPA can help you understand the process and represent you.
3. Forensic accounting
A CPA that works in forensic accounting services has specialized knowledge. They apply this knowledge and their investigative skills to collect, evaluate, and analyze evidential matters. Then, they will interpret and communicate these findings in a boardroom, courtroom, or another administrative or legal setting.
CPAs may also consult at or for a CPA firm. There are many different duties that an accounting professional may perform. They may help their clients improve their financial position, create more efficiencies in their accounting protocols, or enhance internal processes and procedures. If you’re not sure where to begin with your company’s accounting, you can enlist the help of a CPA. They can outline best practices for you and ensure you adhere to regulations you need to know.
5. Financial Planning
When a CPA works in a firm that includes financial planning and advisory services, they offer financial advice to their clients. This advice could be in areas like retirement planning, estate planning, risk management, investments, and even business 401k options. Some CPAs may have a specialization in a certain area like tax planning, while others offer a range of financial services.
Outside of a CPA firm
CPAs can work for CPA firms of varying sizes in a wide variety of areas. But there are also opportunities that exist for CPAs that are outside of working at a CPA firm.
CPAs also have the option to take on an industry role in the business world. This means that they go to work directly for an organization to manage their finances. CPAs can find themselves working in an organization, and soon take on the role of a controller. This means that CPAs are responsible for cost control, budgeting, accounting systems management as well as other managerial tasks. As part of this responsibility, the CPA is usually an integral part of the management team.
What’s the Difference Between a CPA and an Accountant?
The difference between an accountant and a CPA is this: Accountants record the financial affairs of companies while CPAs have to successfully pass an exam administered by the American Institute of Certified Public Accountants. Anyone who performs account functions can refer to themselves as an accountant. However, they will usually need some kind of degree in related subjects like business or economics for professional work.
It is not uncommon for individuals that have no certification to perform bookkeeping and other accounting matters. It typically will take training and experience to a certain degree for an accountant to perform a wider range of services.
A CPA must meet state requirements to earn their license. Furthermore, only those with a CPA license can legally verify documents and forms. CPAs can also represent taxpayers on their behalf with the IRS and during tax auditions. Additionally, CPAs can sign tax returns and earn a higher salary than your traditional accountant.
Should You Hire a CPA for Your Business?
Now that you know what a CPA is, you can use it to inform the accounting practices of your business. When you’re deciding whether or not to use a CPA, it’s important to have all the information. This includes answering the following questions:
- Will I need the assistance of a CPA long term?
- Are the needs of my business large enough to warrant this type of accountant?
- Do I need to contant a firm or a contracted individual?
Once you can clearly answer these questions, you’ll be on your way to making a decision. After reading this blog, you should know the benefits of having a certified accountant on staff or on retainer.