Certified Public Accountant Definition
Written by True Tamplin, BSc, CEPF®
Updated on January 11, 2021
Define CPA In Simple Terms
A Certified Public Accountant or “CPA”is the designation for public accountants who are licensed to practice in the United States.
A public accountant is an individual who performs accounting-related work on behalf of external clients, often for regulatory purposes.
The interests and standards of the profession are centrally guided by the American Institute of Certified Public Accountants or “AICPA” .
How Do CPA’s Work?
Large public companies enlist the help of CPA firms annually in order to provide the SEC with audited financial statements and the IRS with their corporate tax return.
CPA’s play an important role in giving confidence to investors to trust the financial statements they are analyzing.
CPA License Requirements
Each state has their own CPA board which determines the requirements of obtaining licensure, but typically, CPAs must have the following:
- 120-150 school credit hours
- One-full year of experience with an established CPA firm
- Pass four standardized tests in the areas of Financial Accounting, Taxation, Auditing, and Business Concepts
Sarbanes Oxley Act of 2002
The independence of CPA’s in relation to the clients they serve is one of the most important foundations of the profession.
In 2002, independence was compromised as a “Big Five”firm, Arthur Andersen, willfully destroyed documentation which proved Enron’s accounting fraud and became one of the largest accounting frauds in history.
In response, regulators passed the Sarbanes Oxley Act of 2002 which largely shapes the CPA-client relationships and auditing standards of today.
Careers for CPA’s
Because of their knowledge of financial accounting and critical thinking skills, common career paths for CPAs include CPA Firm Partner, Controller, Chief Financial Officer, Consultant, Financial Analyst, and Forensic Accountant.