What is a Certified Public Accountant - CPA

Certified Public Accountant (CPA) is a designation given by the American Institute of Certified Public Accountants 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 Accountants (CA).

BREAKING DOWN 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 less than two years of public accounting experience. CPAs must pass a certification exam; certification 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 are available for 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 code of ethics. 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.

Certified Public Accountant History

In 1887, 31 accountants created the American Association of Public Accountants (AICPA) to define moral standards for the accounting industry and U.S. auditing standards for local, state and federal governments, private companies and nonprofits. The AICPA 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 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. As a result of the Enron scandal, Arthur Andersen, one of the nation's top accounting firms, went out of business. Under the Sarbanes-Oxley Act established in 2002, accountants encountered tougher restrictions about their consulting assignments.