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CFA vs. CPA – Which is harder?

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If you’re in the accounting field, you’ve probably heard of both the CPA (Certified Public Accountant) and CFA (Chartered Financial Analyst) designations. Both are well-respected credentials that can open doors and lead to career advancement.

But which one is right for you? Here’s a look at what each qualification entails and how they compare.

What is the CPA?

Certified Public Accountant (CPA) is the gold standard for accounting professionals. It is a globally recognized credential that demonstrates a high level of skill and expertise in financial planning, tax consulting, and other fields.

What is the CFA?

The Chartered Financial Analyst (CFA) program is a professional designation that shows your commitment to the financial industry, such as asset management, portfolio management, and equity analysis. It’s one of the world’s most prestigious and recognized certifications, and it’s a must-have for any aspiring investment professional.

CFA and CPA – Qualification Requirements

CFA Qualifications

In the US, you must pass a three-tier examination process to become a Certified Financial Analyst (CFA). It is distinct from the Chartered Financial Analyst professional qualifications offered by CFA Institute in the UK, Ireland, India, and Africa.

A variety of requirements must be met to become a CFA charter holder, such as having a bachelor’s degree, passing the three CFA exams, completing an internship, and gaining a certain amount of work experience. Additionally, the CFA Program is designed to be a continuous learning experience that spans a candidate’s entire career.

CPA Qualifications

The requirements for becoming a Certified Public Accountant typically include having a bachelor’s degree in accounting or corporate finance, successfully passing a series of examinations, gaining work experience under a licensed CPA, and undergoing certain ethical and regulatory requirements.

The International Federation of Accountants (IFAC) has published a global framework of the CFA curriculum for the education and training of accountants. This framework is used by more than 100 countries, including the most developed economies, to standardize CPA qualifications. [1]

Which Has More Difficult Qualification Requirements?

The Certified Financial Analyst (CFA) and the Certified Public Accountant (CPA) share similar educational requirements, but which is the more challenging qualification?

Generally speaking, CPA exams are more rigorous and demanding and you’ll need a considerable amount of professional credit hours before you obtain your license.

CFA vs. CPA – Exam Structure

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CFA Exam Structure

The CFA exams consist of three levels, each of which requires a total of 300 hours of professional study to complete. Each CFA exam covers three major topics. 

Level I

The level 1 CFA exam tests your knowledge of financial markets, investment analysis, portfolio management, and ethics.

Level II

The Level 2 CFA exam focuses on alternative investments such as private equity, real estate, and hedge funds. 

Level III

The Level 3 CFA exam tests your knowledge of macroeconomics, corporate finance, capital markets, and derivatives.

Each exam consists of multiple sections designed to test your understanding of various topics. Each section is worth 35% of the overall exam score, so studying each thoroughly is essential. [2]

CPA Exam Structure

The CPA exam structure and the type of questions will vary by state. Therefore, you must understand your state’s requirements. Generally,  CPA exams consist of a knowledge-based multiple-choice section, a task-based simulation section, and two written communication tasks. Here’s an in-depth look at what the exam content entails:

Auditing and Attestation

This will test your ability to interpret a company’s financial statements, determine whether they are accurate, and then make recommendations for improvement.

Business Environment Concepts

Include questions about how changes in interest rates, inflation, and unemployment affect the business environment and how those changes affect a company’s financial statements.

Financial Accounting and Reporting

In this section, you will be asked to interpret financial statements and data and prepare a financial report by applying your knowledge of accounting principles and practices, financial reporting, and auditing.

The exam emphasizes the application of knowledge, skills, and abilities to a variety of situations that occur in a professional setting.

Regulation Ethics

This will test your knowledge of the professional standard of conduct that governs the behavior of Certified Public Accountants. The regulation establishes a code of ethical behavior, which includes a code of conduct, a code of professional responsibility, and a code of conduct for business and finance professionals.

Each of these sections is worth 50% of the overall exam score. Additionally, two different exams can be taken as part of the CPA exam process: The Professional Responsibility Exam (50 multiple-choice questions) and the Multistate Essay Examination (two essays). 

Which Has a More Difficult Exam Structure

CFA exams are much more complex than CPA exams because they require more preparation time and commitment and are more comprehensive. It also requires people to study both current and historical financial information because, as we know, this sector constantly changes.

On the other hand, the CPA exam is based on more general knowledge of accounting principles used in the everyday business world. The CPA exam also has a much shorter time frame for completion, making it easier to study for than the CFA.

CFA vs. CPA – Responsibilities and Duties

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What do a CFA and CPA actually do? The two are often confused with one another, so let’s look at the job responsibilities and duties required from these two professions.

CFA Job Responsibilities and Duties

Chartered Financial Analysts (CFA) are often considered the “experts” in the financial sector. Here are some of the most common CFA job requirements and duties:

  • Provide Financial Advice and Recommendations

CFAs can help you to determine how much money you should save for retirement, what investments are best suited for your goals and risk level, and how to make the most of your savings. They can also help you with wealth planning and life insurance.

Additionally, A CFA can help you find ways to increase the value of your investments by making them more tax-efficient. They can also advise you on how to save money on taxes through retirement accounts.

  • Develop Investment Portfolios

One of the duties of a Chartered Financial Analyst (CFA) is to create and maintain a variety of investment portfolios, including stocks, bonds, mutual funds, commodities, and more. The goal is to create a portfolio that will achieve the highest return with the lowest risk possible.

Developing investment portfolios involves using sophisticated portfolio management software to run simulations and models on historical data to determine which portfolio would have performed best over a given period.

  • Analyze Financial Data

Financial analysis is an integral part of a company’s operations. It can help you make more informed decisions, avoid unnecessary risks, and give you a better overall picture of your business’s current financial situation.

CFAs also analyze the company’s balance sheet, then its income statement, and then its cash flow statement. The next step is to compare the data from these three statements to determine how to achieve better financial health.

Current Demand For a CFA

CFA’s have to keep up with current events and trends to make informed decisions, making them one of the most sought-after professionals in the world.

The type of companies that usually hire Chartered Financial Analysts are the following:

  • Investment banking companies (e.g., Goldman Sachs, Morgan Stanley, JP Morgan)
  • Hedge funds (e.g., Bridgewater Associates, Moore Capital Management)
  • Brokerage firms (e.g., Charles Schwab Corporation, TD Ameritrade)

CPA Responsibilities and Duties

A CPA is an accountant who has passed the CPA exam and is responsible for organizing and managing a company’s or individual’s financial records.

Here are some of the most common responsibilities of a CPA:

  • Maintaining Financial Records

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Maintaining client records is one of the important tasks of a CPA because it helps to ensure that the client’s financial information is accurate and up-to-date.

A CPA should keep track of all transactions that involve your client’s money, as well as any other relevant information about their finances, such as accounts payables, accounts receivables, payroll, and more. A CPA should also be able to provide concise financial reports for their clients.

  • Prepare Tax Returns

The responsibilities of a Certified Public Accountant (CPA) include preparing tax returns for clients. CPAs are responsible for gathering information about the client and their tax situation, calculating the amount of taxes owed and preparing the forms that will be submitted to the IRS when filing.

In addition to preparing taxes, a CPA can also represent a client in disputes with the IRS. This can include negotiating a settlement, filing an appeal, or taking your case to court.

  • Auditing of Financial Records

Auditing is another important responsibility because it helps prevent fraud within companies or organizations by conducting financial analysis and identifying any financial discrepancies or irregularities.

The CPA will audit a company’s books and records to ensure that no fraudulent transactions are happening within the business. This can help prevent embezzlement, which is when an employee steals money from their employer.

  • Give Financial Advice to Clients

Certified Public Accountants are responsible for providing clients with the best financial advice possible. This means that they need to be able to answer all of their questions and give them an honest opinion about their situation.

This can be difficult because many clients may not know what they want or how to ask for it. However, CPAs are trained to ask the right questions and get their clients on the right track. They can also advise them on how to save money, invest wisely, pay off debt, and more.

Current Demand For a CPA

The demand for a CPA is higher than ever. The Bureau of Labor Statistics reports that the number of people employed as accountants and auditors will grow by 19 percent from 2016 to 2026. The number of new accounting firms is growing, creating a  demand for CPAs.

CPAs are sought after by small businesses, large corporations, and individuals who need their financial records organized, analyzed and reported on.

Which Has More Difficult Responsibilities and Duties

Although both CFA and CPA have some similarities in what they do, a CPA has more difficult responsibilities. They require extensive knowledge of accounting principles, laws, and regulations, and they cover a much wider accounting scope.

CFA vs. CPA – Difference Between Salary and Compensation

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Salary of a CFA

According to data by payscale, the average salary for a CFA range between $52,000 and $153,000 per year. This number can vary based on the type of employer, location of employment, and the individual’s experience. However, on average, a CFA will make around $70,000 annually.

Salary of a CPA

According to payscale, the average compensation for a CPA ranges between $49,000 and $114,000 per year. A CPA can also charge per project, usually costing $500 to $1,000 per hour. [3]

At first glance, CFAs have the edge over CPAs when it comes to salary.

However, you should also consider the fact that CPAs can be hired by a variety of employers, so the job opportunities available to a CPA are higher than a CFAs.

This is because not all companies need to hire a CFA, but they require a CPA’s services. But overall, both career paths are equally rewarding.

Things To Consider When Choosing a Career as a CFA or CPA

Choosing a career as a CFA or CPA can be hard. It’s important to take time to consider your options and make sure that you’re choosing the right one.

Here are some things to think about:

  • Look at the requirements for each CFA and CPA certification and make sure that they fit with your schedule and lifestyle.
  • Consider the job market and whether there are enough positions available in your field. You should also consider how much time you want to spend on your education and consider whether or not you’re willing to relocate to advance your career.
  • Know what kind of work you enjoy. Are you interested in working in finance, accounting, or management? Do you want to work at an accounting firm or in a bank? Do you want to work on international projects? Do you want to focus on public interest? Consider what work interests you most and determine whether being a CPA or CFA will help you succeed in your chosen field.

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Takeaway

While CFA exams are harder and have more rigorous requirements, working as a CPA is not for the faint of heart. The workload of a certified public accountant often ends up being harder than that of an investment analyst because of the many details that must be considered.

At the end of the day, it really depends on you!  If you’re willing to put in the time, effort, and dedication required by these two professions, you will succeed in either career path.

Sources:

1 – https://www.ifac.org/

2 – https://www.cfainstitute.org/en/programs

3 – https://www.payscale.com/