The licence is widely recognised and not widely understood, including by the businesses deciding whether they need somebody who holds it.
It matters absolutely for a narrow set of work and is one credential among several for everything else. Knowing which category your need falls into saves both money and a conversation with the wrong kind of firm.
This covers what the designation is, the education, examination, experience and continuing requirements behind it, the work only a licence holder can do, and how it compares with the other credentials in the market.
CPA Definition
CPA stands for Certified Public Accountant. It is a state-issued professional license granted to accountants who meet specific education, examination, and experience requirements. The CPA designation is the highest credential in the US accounting profession and is legally required to perform certain services, including signing audit reports.
The licence matters for a narrow set of work and matters absolutely for that set. For everything else, judge on experience with businesses like yours. Know which category your need falls into before you start looking.
Abhinav Gupta, CPA, CA, MBA · LinkedInCPA Requirements: Education
All CPA candidates must meet their state's educational requirements before sitting for the exam. In most states:
- Bachelor's degree from an accredited institution (minimum)
- 150 semester credit hours total (30 more than a standard 4-year bachelor's, which is 120)
- Specific credit hours in accounting courses and business courses (requirements vary by state)
- Many candidates complete a 5th year of education (150-hour requirement) through a master's degree in accounting or MBA
CPA Requirements: The CPA Exam
The Uniform CPA Examination is a national exam administered by the AICPA and NASBA. It is computerized and administered at Prometric testing centers.
Under the CPA Evolution structure:
- Core sections (all candidates): Financial Accounting and Reporting (FAR), Auditing and Attestation (AUD), Taxation and Regulation (REG)
- Discipline sections (choose one): Business Analysis and Reporting (BAR), Information Systems and Controls (ISC), or Tax Compliance and Planning (TCP)
- Each section is up to 4 hours; passing score is 75 or above on a 0-99 scale
- 18-month window to pass all four sections after passing the first
CPA Requirements: Experience
Most states require 1-2 years of public accounting experience (working at a CPA firm under the supervision of a licensed CPA) before the license is issued. Some states accept experience in industry or government settings. The supervising CPA must attest to your competency.
CPA Requirements: Continuing Education (CPE)
Licensed CPAs must complete Continuing Professional Education to maintain their license. The standard requirement is 40 hours per year (or 80 hours per two-year reporting period), including specific ethics hours.
- State boards set CPE requirements; they vary slightly by state
- Ethics CPE (2-4 hours per year) is required in virtually all states
- CPE can be completed through AICPA courses, state CPA society programs, conferences, or accredited online providers
What Only a CPA Can Do
| Activity | CPA Requirement |
|---|---|
| Sign audit reports | Required, only licensed CPAs can attest to financial statements |
| Issue reviews and compilations | Required, CPA license needed for attest services |
| Unlimited IRS representation | CPAs can represent any client in any IRS proceeding |
| Use 'CPA' designation | Legally protected, only licensed CPAs may use this title |
| Sign tax returns | Not required, any paid preparer can sign tax returns |
| Provide bookkeeping | Not required, anyone can do bookkeeping |
CPA vs. Enrolled Agent (EA) vs. Unlicensed Preparer
| Credential | Key Points |
|---|---|
| CPA | State license; broadest credential; required for audit; full IRS representation |
| Enrolled Agent (EA) | Federal license from IRS; unlimited representation rights; tax-focused; no audit authority |
| Unlicensed preparer (PTIN) | Can prepare tax returns; limited IRS representation (only for returns they prepared) |
| Attorney (JD) | Can represent in Tax Court; specialized in legal tax matters |
An EA is the best option if you need a tax specialist at lower cost. A CPA is the broadest credential and is required for audit and attest services. For many small businesses, an EA handles taxes perfectly well.
How Long Does It Take to Become a CPA?
- Complete bachelor's degree: 4 years
- Complete 150 credit hours (may require additional year or master's): 1-2 additional years
- Pass CPA Exam (typically takes 12-18 months while working): 1-2 years
- Complete experience requirement: 1-2 years
- Total timeline from high school: 7-9 years
Why CPAs Charge More
CPA services cost more than unlicensed tax preparers for several reasons:
- Extensive education and licensing investment by the CPA
- Ongoing CPE compliance costs
- Professional liability insurance (required and expensive)
- Legal exposure: CPAs can be sued for negligent work
- Expertise: complex situations (business entities, multi-state, international) require deeper knowledge
- Broad scope: CPAs offer advisory, financial planning, and audit services beyond tax prep
Pro Tip: For a simple W-2 return, an unlicensed preparer or even tax software may be sufficient. For a business owner, S-corp, rental properties, or any complexity, the CPA's fee typically pays for itself in tax savings and avoided mistakes.
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Frequently Asked Questions
Does a CPA have to be licensed in my state?
Yes. CPAs are licensed by individual states. A CPA licensed in California cannot practice in Texas without obtaining Texas licensure (or temporary practice privileges under reciprocity). Most states offer reciprocal licensure for CPAs in good standing in another state.
How do I verify if my accountant is actually a CPA?
Each state's Board of Accountancy maintains a public license lookup tool. Search your state's board website to verify the CPA's current license status and any disciplinary history.
What is the difference between a CPA and a CFP?
A CPA (Certified Public Accountant) focuses on accounting, tax, and financial reporting. A CFP (Certified Financial Planner) focuses on personal financial planning (investments, retirement, insurance, estate planning). Some professionals hold both designations.
Can a CPA give investment advice?
A CPA license does not authorize giving investment advice. For investment management and securities-related advice, the professional needs to be a registered investment advisor (RIA) with FINRA or the SEC. Some CPAs also hold CFP or Series 65 licenses and can do both.
Do we need one, or will a different qualification do?
It depends entirely on what you need done. Some work is restricted by law to a licensed holder, and for that there is no substitute. A great deal of other work, including preparation, planning and representation, can be performed by other qualified professionals whose credentials suit it perfectly well. The useful approach is to define the task first and then ask which credential it requires, rather than assuming the most senior one is always necessary.
Written by
Abhinav Gupta, CPA, CA, MBA
Abhinav works with business owners across the US on industry-specific bookkeeping, from dental practices and restaurants to construction and e-commerce. He writes about what each trade's books actually need. Connect on LinkedIn
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