Certified Public Accountants (CPAs) are one of the most trusted disciplines of financial professionals in America. According to the National Association of State Boards of Accountancy, there are over 664,000 CPAs licensed to practice in the United States. The licensing requirements for CPAs vary by state with respect to education level and specific credits as well as supervised or unsupervised work experience in the field. While the four-part exam that every CPA must take is uniform, CPAs aren't one in the same. The average person on the street may ask "What does a CPA do?" but the answer is that it solely depends on what the CPA chooses to focus on.
No matter what practice areas the CPA concentrates in, there are certain powers and privileges only available to CPAs. Not all accountants are CPAs as those privileges aren't necessary for certain roles (such as bookkeepers, controllers, and treasurers) but in addition to proving their knowledge in a wide array of accounting subjects, accountants become CPAs usually to focus in one of these practice areas:
Financial Accounting: Financial accounting is the chief practice area that CPAs must study and be tested in, then what many choose to focus on solely or in addition to other practice areas like taxes or auditing. Financial accounting refers to the preparation, compilation, and review of financial statements and deciding which accounting principles to apply. Large and small businesses usually need a CPA (opposed to other types of accountants and financial professionals who do not have a CPA designation) to sign off on their financial statements in order to get bank or investor funds. CPAs are aware that these financial statements are intended for external users like the aforementioned sources of capital and accordingly ensure that the statements are fairly-presented and in accordance with US GAAP (generally-accepted accounting principles.)
Financial Statement Audits: While "auditing" is the same term that the IRS uses for investigating taxpayers' returns, the contexts are incredibly different. CPAs who function as auditors examine financial statements, internal controls, accounting processes and procedures, and other aspects of how an organization manages its finances by conducting an external financial statement audit. Publicly-traded companies require audited financial statements to be submitted to the Securities and Exchange Commission every year. Similarly, to not all accountants having to be CPAs, the same is also true of both tax and financial statement auditors. However, in order to conduct audits and issue opinions on publicly-traded companies one must be a CPA. Non-CPA auditors tend to focus on the startup and nonprofit spaces where an audit by a CPA is not mandated.
Management Accounting: Financial statements and audited financials are intended for external users, but some CPAs are management or cost accountants where their statements are designed for internal use by management. CPAs in management accounting roles provide ongoing monitoring of costs and in-depth analysis of how the organization is utilizing its resources with methods like job costing, process costing, and the balanced scorecard to assess their performance and efficiency.
Tax Preparation and Advisory: CPAs can also focus on tax matters like tax preparation and planning and are granted representation powers by the IRS to contact them about any of your tax issues, not just tax forms they prepared. CPAs can represent you in a tax audit and contact the IRS and state tax department on your behalf. Tax practice is a whole other practice area unto itself where just like other tax professionals like Enrolled Agents and tax attorneys, some CPAs focus on tax matters for large and complex businesses while others prepare individual tax returns only.
CPAs aren't one in the same and have a variety of professional practice areas based on preference and what they individually excel at, but their powers and privileges remain the same. Rue & Associates' Richmond CPAs can help you with a variety of business and accounting issues, contact us today to speak to one of our friendly and professional associates.
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