Becoming a CPA is no easy task. It demands a higher education commitment than most other career paths. To qualify for certification, you must meet the requirements of the state or jurisdiction where you wish to practice.
The state requirements are established by the state board of accountancy and vary from state to state. Because of these variations, first determine where you are planning to practice accounting and then review that state’s certification requirements on the web site for the state’s CPA society or board of accountancy.
Becoming a certified public accountant entails the successful completion of the following:
- 150 credit hours of college-level education, which translates to five years of college and graduate level work;
- Achievement of passing grades on all four parts of the Uniform Certified Public Accountants Exam (the CPA exam);
- The requisite amount of accounting work experience as mandated by each country, often two years or so.
Why Should I Become a CPA?
We’ll talk about the requirements for becoming a CPA in more detail later, but first, you might be asking yourself:
Why should I go through all of this? Can’t I be an accountant without being certified?” What you can do without becoming a CPA?
You most certainly can perform accounting functions without being certified, and there are many successful people in the profession who have taken this route. Non-certified accountants are not required to fulfill the five-year requirement, they aren’t even required to have a degree in accounting (although, obviously, it helps). A traditional four-year degree is all that is necessary to be a non-certified accountant. The actual functions of an accountant are not, as the saying goes, rocket science, and complicated mathematics is rarely needed, thus, advanced certification might not seem necessary.
Internal auditors, management accountants and tax personnel may all practice their professions without the CPA or any other professional designation. Furthermore, many accounting professionals (CPAs and otherwise) contend that the CPA exam is nothing more than a rite of passage, an intense exercise in memorization that adds little actual value to your technical development as an accountant. These people generally feel that all of the information you crammed into your brain disappears once the exam is over. Many of them even said that this “brain drain” should happen since much of this information will never be seen in your actual practice; if you ever do need it, you can quickly look it up.
What you can’t do without CPA Status?
However, not being certified has a few significant drawbacks. Foremost among these is that it can be career limiting – most public accounting firms will not promote an auditor above a certain level (senior associate; we will discusse these levels later) without at least passing the exam.
There are a couple of important reasons for this:
First, only a CPA may sign an audit opinion. This signature is crucial, as it signifies that the auditor believes that the financial statements reasonably represent the company’s actual financial position, giving the users of these statements more confidence that they can rely on them to make their decisions. Thus, an auditor without a CPA can not perform one of the most important activities of the profession.
Furthermore, a failure to pursue certification is often interpreted by public accounting firms as a lack of commitment to the profession, and few firms are willing to invest resources in someone who might leave the profession altogether (especially when there are so many others out there who are willing to pursue certification).
Another downside of not having a CPA is that you would miss out on the credibility that the certification carries. As with other advanced professional certifications, the CPA tends to give the stamp of “expert” in the eyes of the public and thus more perceived confidence in the accountant’s abilities. Such credibility could mean the difference to a recruiter who’s deciding between two otherwise comparable job candidates.
One final, ever-so-important downside of not having a CPA: you’ll make less money. According to the staffing agency Robert Half International, the CPA can, on average, increase a candidate’s base salary by 10 percent, with specialized fields (such as forensic accounting) commanding even higher salaries.
Now, this is not meant to scare you into pursuing the CPA, nor is it meant to suggest that you are a slacker if you don’t pursue the CPA. You can still have a successful career in accounting without it. For example, public tax accountants generally do not sign off on audit opinions, and tax returns generally do not require the signature of a CPA. However, pursuing the CPA opens you up to many more opportunities and can only help a career in accounting. Thus, plans for certification should be seriously considered by anyone looking to break into the accounting field.
The 150-Hour Education Requirement
In 1998, the AICPA membership voted to increase the educational credentials required for certification. It implemented this requirement in response to increases in accounting, auditing and tax regulations, the increasing complexity of the business environment, the advance of technology and to improve the overall quality and breadth of work performed by CPAs. Now, in order to sit for the CPA exam in most states, you must have completed 150 credit hours, or five years, of college-level education. The additional year allows for increased development of communication, analytical and interpersonal proficiencies as well as technical competence.
According to some university career services offices, this requirement of a fifth year of education to sit for or practice as a CPA has inhibited the number of students entering the field. However, while the additional education might seem onerous to some, the good news is that starting salaries for accountants are spiking up to accommodate the increased education and skill levels.
How do you fulfill the requirement?
While the education requirement generally does not call for the attainment of a full master’s degree, the most straightforward way of satisfying the requirement (and the way most schools have designed their accounting programs) involves a graduate degree. The 150-hour education requirement may usually be met in the following ways:
- Combine an undergraduate accounting degree with a master’s degree at the same school or a different one.
- Combine an undergraduate degree in a non-accounting discipline with a master’s degree in accounting or an MBA with a concentration in accounting.
- Enroll in an integrated, five-year professional accounting school or program leading to a master’s degree in accounting.
The CPA Exam
The CPA exam is a four-part exam — the accountant’s version of running the gauntlet. As the AICPA requires that all four parts of the exam be passed, this represents the crucial step in becoming a certified public accountant, the culmination of those 150 credit hours of education.
Administered over two days, the Uniform Certified Public Accountants Exam is a grueling test designed to assess a candidate’s knowledge of the following four areas:
- Business Environment and Concepts (BEC) – CPA’s professional responsibilities and the legal implications of business transactions, particularly as they relate to accounting and auditing.
- Auditing and Attestation (AUDIT) – Generally accepted auditing standards and procedures, and other standards related to attest engagements.
- Regulation – Your national taxation, ethics, professional and legal responsibilities and business law.
- Financial Accounting and Reporting (FAR) – Generally accepted accounting principles for business enterprises, not-for-profit organizations and government entities.
The exam is written by the Board of Examiners of the American Institute of Certified Public Accountants (AICPA). In May 1996, the exam became non disclosed, which means that only selected questions from the exam are released to the public by the examiners. And as of 2004, the exam was given in an exclusively computerized format. This new version of the exam is also slightly shorter.
Preparing for the CPA Exam
Most CPAs recommend taking some sort of review course in preparing for the CPA exam. While many people have successfully passed the exam by studying on their own, such a feat requires a high level of self-discipline. The revised exam’s new format does make it easier to prepare for and take the exam, since most states now allow candidates to take one part of the exam at a time, but the exam’s modified form and content reflects an expanded range of business topics and requires a more analytical approach to problem solving. So candidates must take extra care to ensure they understand the material and are adequately prepared for the test.
CPA review courses are a great way to impose this discipline, and they often provide their own little tricks to help you study certain parts of the exam. There are many different organizations that provide CPA review services. Some public accounting firms will subsidize your preparation costs or otherwise facilitate your preparations in some manner. Some of the more well-known CPA review courses are as follows:
Becker Convisor CPA Review – This is the most recognized review course among current CPAs. It was one of the first CPA review courses established, with over 40 years of experience. According to Becker, students who complete their course pass the exam at double the rate of non-Becker students and approximately one-third of all new CPAs are Becker CPA Review alumni. Becker offers four options to prepare for the exam: 1) interactive live instruction in Becker’s multimedia classrooms (classes begin 4 months before the exam), 2) online instruction, 3) a self-paced CD ROM course, or 4) a 5-week intensive course. For schedules and registration, go to www[dot]beckerconvisor[dot]com
Kaplan CPA Review – Provides an online CPA course, providing students with flexibility, unlimited access and allows you to study at your own pace. For details, go to www[dot]kaptest[dot]com.
Micro Mash CPA Review – They Provides you with a CPA course tailored to your weaknesses using “The Micro Mash Way.” The course provides online tools and printed review textbooks for additional study. Micro Mash simulates the exam, with full-text answers and remedial help for all questions. The Homework Help Hotline provides staff CPAs and professors to answer questions promptly. Micro Mash guarantees you will pass the exam next time you sit. This is the course of choice of most of the large accounting firms. For information, go to www[dot]passmatrix[dot]com.
There are a few key factors in taking the exam:
- Make sure that you get the testing site that you want for the exam. To do this, register early, especially if you live in a highly populated area, so you can take the exam as soon as possible after completing your chosen method of review.
- The week of the exam, get lots of rest, take a day off from studying, eat well. Pretend the morning of the exam is like any other morning and don’t get too stressed out.
- Another interesting recommendation we heard quite often: “Go for the Pass.” In other words, while your competitive nature might lead you to try to get a high grade, your focus should be on simply passing. As one Big Four auditor explains, “There is no difference between a 75 and a 95 – the 75 certifies you just as well as the 95 does. It is one of the only exams you’ll ever take where a 75 is just as satisfying as a 95, if not more so since you know you didn’t over-study and go overboard.” The gist of this suggestion is that the exam is difficult enough without killing yourself trying to cram every last bit of information into your head. On the CPA exam, grades don’t matter – passing is the only thing that matters, and you should plan your preparation accordingly.
Required Work Experience
Most states or jurisdictions require two years of public accounting audit experience for certification. The two years is a general guideline and is based on the number of hours worked on audits you’ve performed. For auditors, the work experience requirement is fulfilled rather quickly as they spend virtually all of their work time on audits. For public accounting tax professionals, certification can take five years or longer since not all of their activities represent qualifying audit hours (for example, preparing a tax return is generally not considered audit work and does not count toward the CPA requirement). Many countries and states will also accept non-public accounting experience, but the number of years required is typically much higher, in some states as long as 15 years. It should be noted that some states, do not have any work experience requirement and only require the fulfillment of education guidelines and the passing of the CPA exam. You should check with the board of accountancy of the country and state in which you’ll be practicing to find out that state’s exact work experience requirements.
For further reading, you may want to read: CPA Exam – Frequently Asked Questions (FAQ)