Accounting

Accountant vs. CPA: The 5 Main Differences

Certified Public Accountants

Online, in person, and even in some businesses, you’ll often hear the terms “accountant” and “CPA” (or “certified public accountant) used interchangeably. However, the reality is more nuanced. All Certified Public Accountants have experience as accountants, but not all accountants have the credentials to call themselves a CPA.

Understanding the difference is key to knowing where to turn for help on financial matters. While a regular accountant can provide many valuable services, they cannot deliver some of the higher-level resources that CPAs can. Let’s take a look at the main ways in which accountants and CPAs differ from one another.

Differences in Educational Requirements

Accounting can be a complex undertaking, and it requires an extensive education. This is also the first and most fundamental way in which CPAs differ from regular accountants. Someone who is not certified as public accountant has usually earned, at minimum, an associate’s degree, but usually a bachelor’s degree in accounting. These degrees are ideal for accounts payable/receivable, collections, and other simple back-office financial jobs. Some roles may even require only a high school diploma with on-the-job training.

While these positions offer valuable opportunities to gain experience, they do not provide the same level of expertise as continued formal education. As such, there are stricter requirements to become a CPA. A Certified Public Accountant (CPA) typically has at least a bachelor’s and often may complete a master’s degree, too.

In the United States, there is a 150-credit hour requirement in every state. In other words, you must complete 150 credit hours of accounting-related coursework to even sit for the CPA licensing exam. Some states, such as Maine and Florida, allow accountants with 120 hours to sit for the exam. However, they must still complete the additional 30 credit hours to fully earn their license.

Once a regular accountant finishes their degree and begins work, they might not seek additional education. However, CPAs must meet ongoing educational requirements to keep their license current. Every two years, no matter the state, you would need to complete 80 hours of additional coursework to renew. Some states require a set number of hours in specific courses, such as Auditing, during this period. These requirements keep CPAs current on the latest best practices and compliance updates.

Additionally, CPAs are trained in generally accepted accounting principles (GAAP)—a list of accounting best practices required by for profit, non-profit and government entities. Adherence to GAAP ensures financial information is consistently and accurately reported.

Licensure

Rank-and-file accountants do not need a license. An accountant working in an AP department is not required to have a license to do so. However, to render the higher-level services a CPA provides, individuals must obtain an official license from the state where they will practice. Many states do not recognize the concept of “reciprocity,” allowing a CPA licensed in one state to practice in another. A CPA usually has a license for every state in which they plan to practice.

What qualifies an individual for a license? First, they must pass the Uniform CPA exam. The American Institute of CPAs (AICPA) currently administers this exam. What’s on the test? The AICPA aims to test for competency in key areas such as:

  • Regulation
  • Financial accounting and reporting
  • Business environments and concepts
  • Auditing and attestation

This exam is the same in every state and has a long-held reputation for being a challenging test. In fact, less than 50 percent of individuals pass the Uniform CPA exam on their first attempt. The hard work required helps to ensure a dedication to professional standards.

In general, anyone can call themselves an “accountant” even if they aren’t licensed. The same is not true for the CPA label. Conducting CPA duties without a license is illegal.

Duties and Responsibilities

Accountants typically specialize in a particular area or business sector, and their roles vary across different industries. The responsibilities of an accounting professional often extend far beyond the preparation of basic taxes. Among their daily bookkeeping tasks, accountants may also do budgeting and prepare compiled financial statements.

CPAs are, of course, qualified to do all of these things as well. Individuals and businesses hire CPAs for much more in-depth purposes, though they may still support these basic accounting tasks. Consider that some of the CPA’s many duties can include:

  • Conducting detailed reviews of financial statements.
  • Auditing a company’s balance sheets.
  • Carrying out forensic accounting.
  • Representing an individual or business before the IRS.
  • Represent a business in filings before the Securities & Exchange Commission.
  • Make financial presentations to boards of directors or the C-suite.
  • Act as manager and have the final say over AP/AR processes.
  • Overseeing financial process automation.

  • Set the standards for a company’s accounting practices and methodologies.

As we can see, the CPA has a much richer and wider-ranging role — a role that can, in fact, significantly impact an operation’s financial well-being. As a result of this complex set of duties, many see CPAs as trusted advisors who help their clients plan effectively. In collaboration with key stakeholders, they work to meet milestone business goals while assisting in other financial matters.

The following chart provides a summary of the main accounting functions and duties performed by accountants vs CPAs.

ServicesNon-licensed AccountantLicensed CPA
Bookkeeping
Payroll
Budgeting
Account reconciliation
Tax Preparation
Recommend financial controls
Perform internal audits
Establish best practices
Prepare financial statements
Provide guidance
Establish accounting policies
Prepare audited financial statements
Tax Planning
IRS Representation
Perform External audits
Business Valuation
Consulting
File reports with the SEC

Tax Knowledge

Both accountants and CPAs prepare tax forms and do so regularly. However, a CPA will have a much deeper and more up-to-date knowledge of the existing tax code. This includes the many changes that often occur from tax year to tax year. In the unfortunate event of an audit by the IRS, an accountant cannot help you as much; an accountant who is not a CPA can only represent a taxpayer if they are an attorney or a federally authorized tax practitioner known as an enrolled agent (EA).

You can authorize any CPA, on the other hand, to act on your behalf in the serious matter of a tax audit. During an audit, a CPA’s knowledge of the tax code and your financial statements can be critical to the outcome of negotiations with tax authorities. Since CPAs often prepare and may even sign tax returns on your company’s behalf, they have a vested interest in defending your business from audits.

Fiduciary Duties and Codes of Ethics

This vested interest is what is known as the “fiduciary duty.” We expect accountants to be competent, knowledgeable, and trustworthy, but a CPA must hold themselves to an even higher standard. Why?

CPAs enjoy wide recognition as fiduciaries, or trustees, legally obligated to act on their client’s behalf. CPAs have a responsibility to act within the law while always keeping the best interests of their clients in mind. In other words, while they must follow all legal methods, their ultimate goal is to ensure that their clients end up in the best position possible. They cannot take actions that would unfairly or unreasonably cause financial harm to their clients.

CPAs can lose their license if they fail to uphold the ethical obligations of their role as a trustee.

Just as the American Institute of Certified Public Accountants administers certifying exams for CPAs, they also uphold professional standards. All CPAs must abide by the AICPA’s published code of professional conduct. Additional regulatory bodies at the state level may also prescribe the ethics by which CPAs much act.

What does this code entail? CPAs must provide their services to the best of their ability, maintain the confidentiality of client information, avoid conflicts of interest or the appearance thereof, and abstain from self-enrichment from using information obtained by doing their duties. Regular accountants may choose to abide by a code of ethics, but doing so is largely voluntary. For CPAs, the AIPCA regularly issues sanctions and enforcement actions against those who violate this code.

CPA vs Accountant: Which is best for your business?

Getting it right on financial issues matters. For in-depth accounting work, tax audit support, and other critical services, it is essential to understand what a Certified Public Accountant brings to the table. Although not every situation calls for a CPA, it is vital to work with one in the scenarios that do. With a basic understanding of what separates these two job classes from one another, you can make the right choice for your needs.

In a nutshell, accountants perform basic tax preparation, bookkeeping tasks, budgeting, and prepare compiled financial statements. A CPA is best qualified to tackle more complex, rigorous and regulated accounting and financial management duties including, but not limited to, preparing an audited financial state, filing reports with the Securities and Exchange Commission (SEC), in-depth financial planning, and representing clients in front of the IRS.

The following chart will help you quickly determine whether your business needs the services of an accountant, or would be better served by working with a CPA.

Basis of ComparisonAccountantCPA
DefinitionAn accountant prepares, inspects and maintains financial accounts, but it not licensed.A Certified Public Accountant (CPA) is an accounting professional who has met state licensing requirements.
EducationAlthough not required, most accountants complete a 4-year college degree in accounting or a related field.Completed a college-level education in accounting or related field and meet state licensure requirements.
LicensureThere aren't any licensing requirements to become an accountant.Each state has it's own licensing requirements to become a Certified Public Accountant.
AttestationAccountant cannot provided attestation services.A licensed CPA can provide attestation services.
IRS StandingAccountants cannot represent clients before the IRS.CPAs are authorized to represent their clients before the IRS in audits and financial cases.
Tax ReturnsAccountants can prepare tax returns, but cannot sign tax returns.CPA can prepare and sign tax returns on behalf of their clients.
Regulatory BodyThere is no specific regulatory body for an accountant.The National Association of State Boards of Accountancy is the umbrella group for the state boards that regulate accountants in each U.S. state.
CostWill depend on experience. Typically, lower than the cost of hiring a CPA.Hiring a licensed CPA is more expensive than hiring an accountant.
ExperienceNo experience requirementOne to two years (varies by jurisdiction)
Continuing EducationTypically 40 hours per yearTypically 72 hours every 3 years
Best for:Best for small businesses looking for an array of general accounting services.Best for businesses who require specialized tax preparation services, auditing and financial management.

Share this page

Author: Janet Behm
Janet has over 25 years of experience as an Entrepreneur, Business Broker, and CFO; with specialties in Accounting, Tax, Systems Development, Internal Auditing, Management, Consulting, Contract Review, and Training. She has worked.... read more
You may also like
Cash vs Accrual Accounting: What Every Small Business Needs to Know
Tax Saving Strategies for Business Owners
5 Reasons to Reconsider Your Accounting Strategy
Advantages of Using an Enrolled Agent for Your Taxes

Leave Your Comment

Your Comment*

Your Name*
Your Webpage