Becoming a certified public accountant (CPA) is a worthy goal for accountants and those interested in accounting. CPAs make about 10% more than non-CPAs, they also have an easier time finding work, and more security once they have a job. The designation shows that you hold yourself to a higher standard. When you consider that the Bureau of Labor Statistics pegged the median salary for an accountant at $63,550 in 2012, you can see that a 10% bump is pretty substantial.
How to Become a CPA
To get a CPA license, you must be declared eligible to take the Uniform CPA Examination by one of the 55 U.S. jurisdictions (all 50 states, plus Washington, D.C.; the U.S. Virgin Islands, Guam, the Northern Mariana Islands and Puerto Rico). Information on each jurisdiction can be found at the National Association of State Boards of Accountancy (NASBA) website.
Each jurisdiction has specific requirements, but many require 150 semester hours of accounting, business law, and general education before allowing you to take the test. This equates, roughly, to a Master’s degree. In some jurisdictions, you can have a Bachelor's degree in an unrelated field, so long as your Master’s is in accounting, taxation or business law. The American Institute of Certified Public Accountants administers and scores the test. More information can be found at www.aicpa.org.
The test itself is divided into four parts – Auditing and Attestation (AUD), Financial Accounting and Reporting (FAR), Regulation (REG), and Business Environment and Concepts (BEC). The first two parts take four hours each, and the latter two each take up to three hours. Each part is taken individually, and candidates can choose the order in which they take them, but once a candidate passes the first exam, the remaining three must be passed within 18 months. Each part is graded on a scaled that runs from 0 to 99; you must score at least 75 to pass.
Fewer than half of those taking the test pass it in their first attempt. (For related reading, see: What is the Average Salary for an Accountant?)
The CPA exam is offered eight months of the year – the first two of every quarter: January and February, April and May, July and August, and October and November. It is given via computer at more than 300 test centers in the U.S. as well as Bahrain, Brazil, Japan, Kuwait, Lebanon and the United Arab Emirates through a company called Prometric. The AICPA recommends candidates schedule their test session at least 45 days in advance through Prometric's website.
Nothing good in life is free. Neither are gigantic tests. Though the 55 jurisdictions aren’t bound by it, most use the examination fee schedule set by NASBA wherein all four parts of the test cost $729.08. First-time candidates are also required to pay an initial application fee, which ranges from $30 to $200 (in Missouri, it’s currently $132; in New York: $150). Returning candidates must pay a repeat application fee in some, but not all, states. This repeat fee is generally lower than the initial application fee.
A Huge Time Commitment
Far beyond the monetary costs, there’s a huge time commitment.
Unless you possess savant-like accounting wisdom, you’re going to need a lot of time to prepare for the test – about 500 hours of study in total. The FAR section covers planning and reviewing the engagement, internal controls, obtaining and documenting information, and communications preparation. It's the most involved section and will require up to 180 hours of study.
AUD is a bit easier, especially if you’ve tackled FAR first. Still, plan on devoting up to 130 hours of prep time to thoroughly familiarize yourself with standards for financial statements, what needs to be included in statements, and how to account and report for government agencies, non-profits and other organizations. (For related reading, see: What's The Difference Between a CFA and a CPA?)
REG, which covers ethics and professional responsibility, business law, tax procedures and accounting, and Federal taxation for individuals, entities and property transactions, also takes about 130 hours of study.
BEC is among the easier sections, and most candidates pass it in their first attempt, but you should still devote up to 100 hours for study. This section addresses business structures, economic concepts, financial management, and information technology, among other subjects. It features multiple-choice questions and no simulations.
Exam Prep Classes
Candidates can take CPA-prep classes from schools such as Fast Forward Academy or Roger CPA Review. These might be especially helpful if you need an organized framework for studying or if you haven’t been out of college for a while. Those studying on their own would do well to set aside one to three hours each day in the months leading up to the each section of the test. You cannot pull an all-nighter to cram for a test of this magnitude. Bryce Welker of the 'Crush the CPA Exam' website strongly suggests candidates make their own note cards for equations, acronyms and fact points as a way of better reinforcing the information you read. (For related reading, see: CPA, CFA or CPF: Pick Your Acronym Carefully.)
The Bottom Line
Once you’ve passed all four sections of the CPA exam, you need to complete any other requirements for the jurisdiction in which you plan to practice. Many states require at least a year of public accounting work experience before they’ll grant a CPA license, while some allow for different types of work experience in place of public accounting experience. (For more, see: Finding the Right Accounting Certification.)