What Is a Certified Public Accountant (CPA)?

Certified public accountant (CPA) is a designation given by the American Institute of Certified Public Accountants (AICPA) to those who meet education and experience requirements and pass an exam. For the most part the accounting industry is self-regulated. The CPA designation helps enforce professional standards in the industry. Other countries have certifications equivalent to the certified public accountant. For example, in Canada the equivalent to a CPA is chartered accountant (CA).

Understanding Certified Public Accountant (CPA)

CPAs are required to get a bachelor’s degree in business administration, finance, or accounting. They are also required to complete 150 hours of education and have no fewer than two years of public accounting experience. CPAs must pass a certification exam whose requirements vary by state. Additionally, they must complete a specific number of continuing hours of education yearly.

A wide range of career options in public accounting or corporate accounting is available to CPAs. They can move into executive positions such as controllers or chief financial officers (CFOs). CPAs are known for their role in income tax preparation but can specialize in many other areas, such as auditing, bookkeeping, forensic accounting, managerial accounting, and information technology.

Certified public accountants are subject to a code of ethics. The Enron scandal is an example of CPAs not adhering to a such a code. Arthur Andersen company executives and CPAs were charged with illegal and unethical accounting practices. Federal and state laws require CPAs to maintain independence when performing audits and reviews. While consulting at Enron, Arthur Andersen CPAs did not maintain independence and performed both consulting services and auditing services, which violates the CPA code of ethics.

Key Takeaways:

  • CPAs are required to get a bachelor’s degree in business administration, finance, or accounting. 
  • CPAs must have no fewer than two years of public accounting experience and are required to complete 150 hours of education, plus a specific number of continuing hours of education yearly.
  • CPAs must pass a certification exam whose requirements vary by state and are subject to a code of ethics.

History of Certified Public Accountant (CPA)

In 1887, 31 accountants created the American Association of Public Accountants (AAPA) to define moral standards for the accounting industry and U.S. auditing standards for local, state, and federal governments, private companies, and nonprofits. Renamed several times over the years, the organization has been known as the American Institute of Certified Public Accountants (AICPA) since 1957 and also gives CPA certification exams. The first CPAs received licenses in 1896.

In 1934 the Securities and Exchange Commission (SEC) required all publicly traded companies to file periodic financial reports endorsed by members of the accounting industry. The organization eventually known as AICPA established accounting standards until 1973, when the Financial Accounting Standards Board (FASB) was launched to set standards for private companies.

The accounting industry thrived in the late 1990s due to large accounting firms expanding their services to include various forms of consulting. The Enron scandal in 2001 resulted in major changes in the accounting industry, including the fact that Arthur Andersen, one of the nation’s top accounting firms, went out of business. Under the Sarbanes-Oxley Act, which was passed in 2002, accountants were subject to tougher restrictions about their consulting assignments.