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What can a CPA do that an accountant can’t?

Two female CPAs doing paperwork

Source: pexels

We all know accountants are important. They help us keep track of our finances, prepare our taxes, and ensure we stay within the law. But what do CPAs do? 

Here is a brief summary of what a CPA is qualified to do that an accountant can’t.

  • Represent your company in front of the IRS
  • Prepare audited financial statements
  • Conduct external audits for public companies

Main Differences Between a Certified Public Accountant and an Accountant

 

Licensing

One of the most significant differences is that only CPAs are licensed. To earn their CPA certification, candidates must meet the education requirements (varies by state) and pass a uniform CPA examination. 

In addition, they must complete a year of professional experience before they can sit for the CPA exam. The Uniform CPA Exam consists of four sections: [1]

  • Auditing and Attestation (AUD)
  • Business Environment and Concepts (BEC)
  • Financial Accounting and Reporting (FAR), and
  • Regulation (REG)

The educational requirements for CPAs are more rigorous than for accountants. To become a CPA, you must have at least 150 semester hours of bachelor’s degree education.

This includes 24 hours in accounting, which may cover business law and taxation. These courses are usually taken during your first two years of a bachelor’s degree, though some states allow you to take them any time after your freshman year.

Continuing Education

Accountants are required to complete continuing education units (CEUs) every three years, but CPAs must complete them every year. This ensures that CPAs are always up-to-date on the latest accounting and tax laws changes. They must also pass a rigorous exam every five years to maintain their credential.

IRS Representation

If you find yourself in trouble with the IRS, only a CPA can represent you before the agency. A CPA has more experience and knowledge of tax codes than an accountant. In fact, accountants cannot represent taxpayers before the IRS under any circumstances.

Additionally, a CPA can work out agreements with the IRS for financing and write audited financial statements on your behalf. They can also help to negotiate a settlement if you owe back taxes.

In addition, a CPA can assist with audits, appeals, and tax collection issues. If you are facing any kind of tax troubles, it is advisable to consult with a CPA to see how they can help you resolve the issue. [2]

Code of Ethics

Two accountants in a meetingSource: Pexels

All CPAs must adhere to a strict code of ethics set forth by the American Institute of Certified Public Accountants (AICPA). This code of ethics includes integrity, objectivity, confidentiality, and professional competence. When you hire a CPA, you can rest assured that they will always act in your best interests and maintain the highest standards of ethical behavior.

The AICPA’s Code of Professional Conduct is available online and outlines the principles that all CPAs must follow. It also explains what constitutes professional misconduct and how to file a complaint.

Services Offered

A licensed CPA and an accountant are both accounting professionals.

While both accountants and CPAs can provide you with tax preparation services, a CPA is more likely to have an in-depth knowledge of tax laws and principles due to their rigorous studies.

Additionally, while many accountants will prepare your taxes for you, only certified public accountants are required by law to sign off on your return before sending it off to the IRS. This makes them more qualified to handle complicated returns or returns that involve multiple entities or tax jurisdictions.

What is a CPA qualified to do that an accountant can’t?

  • Represent your company in front of the IRS
  • Prepare audited financial statements
  • Conduct external audits for public companies

CPAs also have greater expertise in areas such as

  • business financial planning
  • auditing and accounting for non-profit organizations
  • tax compliance consulting services
  • forensic accounting services (for example, fraud investigations)
  • internal control assessments (for example, internal audit responses), and
  • ethics reviews (for example, whistleblower reports).

How To Determine Whether You Need a CPA or an Accountant

A female business owner deciding between a CPA and AccountantSource: pexels

CPAs are usually more expensive than accountants, but they can help manage your finances and offer valuable advice on saving money. Accountants, on the other hand, are less costly than CPAs, but they don’t always have the expertise that CPAs have.

So how do you determine whether your business needs a certified public accountant or an accountant?

Here are some questions to ask yourself before you make the decision:

  • How complicated are my company’s taxes? CPAs know how to handle complex tax laws and can help you save money by finding loopholes and taking advantage of them. 
  • Do I need someone who specializes in business? If so, consider hiring a CPA who undergoes training to handle big and small business matters such as accounts payable, accounts receivable, payroll, and other financial documents. CPAs are also trained to think about their clients’ finances holistically, while not all accountants are.
  • Do I need help managing my money? CPAs offer financial management services like budgeting advice, accounting support, preparing a detailed accounting process flow and audited financial statements, whereas accountants don’t.
  • How often would I need advice/reports? If you want someone to look at your finances once a year and provide advice on how to improve them, then an accountant would be the right choice. If you need help or someone to perform mandatory audits every month or week, hire a CPA who can work with you in real-time.

Salary Difference Between A CPA and an Accountant

According to Payscale, the average CPA salary is $73,000 annually, while the average accountant’s salary is $55,000. This means that CPAs earn an average of $18,000 per year more than accountants. Qualified CPAs often have access to higher-paying positions and can command a premium for their services. [3]

Additionally, some CPAs work for large companies, while others work as independent contractors and can charge more for their services because they have fewer overhead costs.

Which Has a Higher Demand Between a CPA and an Accountant

An employer conducting an interviewSource: pexels

The demand for CPAs has been rising steadily since 2010, according to the Bureau of Labor Statistics (BLS).

The BLS estimates that there will be a 17% increase in jobs for CPAs between 2016 and 2026. In comparison, the BLS estimates that there will be only a 3% increase in jobs for accountants during the same period.

This number is expected to grow even further as technology advances and businesses become more dependent on financial data to make important business decisions.

Takeaway

Before you make your decision, consider exactly what you need from an accounting professional. While CPAs can perform any accounting-related job, an accountant will often be more than qualified to enter financial data and complete basic reports. But if you need someone with specialized tax skills who can offer big-picture financial advice, you may prefer to hire a CPA.

Contact us today if you’re looking for a way to automate time-consuming accounting tasks! We would be happy to discuss our services and how we can help you meet your needs.

 

Sources:

1 – https://www.aicpa.org

2 –  https://www.irs.gov

3 – https://www.payscale.com