Certified Public Accountants (CPAS)

A certified public accountant (CPA) is an individual who has been certified by a state examining board as having passed the Uniform CPA Examination and met that state's additional requirements with respect to education and work experience. Most states also require that licensed CPAs obtain a specified number of hours of continuing professional education every 3 years to maintain the license to practice as a CPA.

Professional ethics plays an important role in the public accounting profession. Every state society of CPAs has its own code of professional ethics, and its members are expected to adhere to that code. Alleged violations are investigated by the state board or its designee, and those deemed to be in violation are subject to penalties ranging from censure to license revocation.

The Uniform CPA Examination was recently changed to a computer-based format that is administered two out of every three months during the year at test centers across the United States. Individual state boards of accountancy determine if candidates meet their jurisdictions' requirements to sit for the examination. The revised exam is divided into four sections—auditing and attestation, financial accounting and reporting, regulation, and business environment and concepts—and takes a total of 14 hours to complete. Candidates may take as many sections of the exam as they choose during each examination window, but must pass all four parts during a rolling 18-month period, beginning on the date that the first section has been passed.

Educational and experience requirements for CPAs vary somewhat from state to state. However, at present, most states require 150 hours of postsecondary education at an accredited college or university and 2 years of experience in public accounting or internal auditing. A useful resource summarizing the requirements by state is the Digest of State Accountancy Laws and State Board Regulations published jointly by the American Institute of Certified Public Accountants (AICPA) and the National Association of State Boards of Accountancy.

The largest national, professional organization representing CPAs in the United States is the AICPA. With approximately 328,000 members, the AICPA works with state CPA organizations, giving priority to those areas where public reliance on CPA skills is most significant. AICPA membership is not mandatory for CPAs, but it is estimated that three out of every four CPAs are members of the AICPA.

CPAs pursue careers in public accounting, private industry, governmental agencies, and not-for-profit organizations. CPAs in public practice engage in a broad range of services, including auditing, tax, and consulting activities for their clients. However, the Sarbanes-Oxley Act of 2002, passed partially in response to accounting scandals at Enron and WorldCom, prohibits public accounting firms from performing consulting and certain other services for those clients whose financial statements they audit. The firms, however, are permitted to perform these services for other, nonaudit clients. A primary function of CPAs is the audit of financial statements of public and privately held companies, as well as other business entities. This assurance function has become an important component of the U.S. economic system, as it provides potential investors and creditors with independent verification that a company's financial statements have been prepared on a consistent basis in accordance with generally accepted accounting principles. This verification process supports the overall economy by effectively lowering the overall cost of capital. [Page 273]There has been a rapid increase in the number of CPAs specializing in forensic accounting as a result of the recent accounting scandals. Forensic accountants investigate alleged white collar crimes, such as securities fraud and embezzlement, as well as other criminal financial activities, such as asset misappropriation and financial statement fraud. Forensic accountants combine their knowledge of accounting, law, and investigative techniques to determine if illegal activity has occurred. Often, forensic accountants serve as expert witnesses during trials, presenting the results of their investigations.

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