What is a CPA? What education is required and what does the exam entail? What are the average and upper ranges of a CPA salary and why get one in the first place? Today we will discuss all of this to help you get an idea of whether becoming a CPA is right for you.
In the accounting world, you can have a whole alphabet behind your name, and that is not including your degrees earned. You find CFEs (certified fraud examiners) who are also licensed CMA (certified managerial accountants), CIAs (Certified Internal Auditors) or CPAs (certified public accountants) just to name a few. It is impossible to touch on these in depth in one article, so let's talk about one of the most important certifications you can get as an accountant. The three little letters CPA behind your name open the door for endless business opportunities, six-figure salaries with incredible benefits, sign-on bonuses and a better shot at breaking into some of the best public accounting firms in the country. With a couple of years of experience under your belt and big public accounting firms' names on your resume, it can catapult you to positions in the private field that may take you seven years or more to work your way up to without the public experience.
What is a CPA?
A CPA is an accountant who has earned a professional designation through education, examination, and experience.
Education & Certification
Requirements will vary by state but expect to need 150 credit hours to receive your certification. This is 30 more hours than is required to earn a Bachelor's degree. Some states will dictate that you need a certain number of credit hours in specific topics such as financial reporting, business or personal tax, audit or non-accounting business topics. If you sit for an exam and are certified in Alabama but want to land a job in New York, make sure the state you want to locate to will accept your certification. If moving to a state like Florida, you may have to take an ethics examination beyond the four exams you have already passed.
Format Of Exam
- Multiple choice - much like the SAT and ACT, the multiple-choice questions for this exam get increasingly harder as you get more answers correct. The subtopics are random, so you if you study for just a few, you may find the hardest questions are for a subtopic you didn't study for. Be sure you prepare for all questions. Do not perform poorly on purpose as the AICPA weights the harder questions more than the easier questions.
- AUD consists of 72 multiple-choice questions.
- BEC consists of 62 multiple-choice questions.
- FAR consists of 66 multiple-choice questions.
- REG contains 76 multiple-choice questions.
- After you complete your first two multiple choice testlets of either two medium sets or one medium and one hard set, you will move on to task-based simulations. This allows you to prove you understand the concepts well enough to apply them in real-world situations. The most common formats across the four exams include matching and fill-in-the-blanks. Expect to research one topic in the authoritative literature and cite the relevant code that discusses the topic assigned to you.
- AUD contains eight task-based questions.
- BEC contains 4 task-based questions.
- FAR contains 8 task-based questions.
- REG contains 8 task-based questions.
- When sitting for BEC, you must complete a written communication section.
- BEC contains three written communication questions, each worth just under 12% of your final score.
The four exams every CPA candidate has to take are:
AUD (Audit and Attestation)
Audit and attestation is one of the four four-hour uniform examinations you must pass within an 18-month time frame to be eligible for your certification. You must pass with a score of 75 or higher. While you can take all four tests in one window, it is advisable to study for one of these to the best of your abilities at a time. Take this as soon after graduating college as you can while the concepts are still fresh in your mind. Why pay $1,000-$3,000 for self-study courses or even more for guided classes when you passed your audit class and still have your notes and textbook?
AUD covers 15-25% Professional Responsibilities, Ethics, and General Principles, 20-30% Assessing Risk and Developing a Planned Response, 30-40% Performing Further Procedures and Obtaining Evidence and 15-25% Forming Conclusions and Reporting.
FAR (Financial Accounting and Reporting)
The AICPA, or American Institute of Certified Public Accountants, shortened this exam to make the time across the four tests uniform in 2017. FAR covers 25-35% Standard-Setting, Conceptual Framework and Financial Reporting, 30-40% Financial Statement Accounts, 20-30% Transactions and 5-15% Local and State Governments.
As with AUD and FAR, multiple-choice questions are worth half of your score and task-based simulations are worth the other half. REG covers 10-20% Ethics, Professional Responsibilities, and Federal Tax Responsibilities. It also covers 10-20% Business Law, 12-22% Property Transaction Federal Transaction, 15-25% Individual Federal Taxation and 28-38% Entity Federal Taxation.
BEC (Business Environment and Concepts)
In 2017, the AICPA added time to this test to four hours, consistent with the other three tests. Expect to complete a written communication section for this exam to prove your technical writing skills. If you take business communication classes as part of your post-bachelor's curriculum, you will find this section easy. If you have never written a memo in your life, you may find this more difficult. Be sure to budget your time wisely based on your personal strengths and weaknesses. Practice writing memos and client letters in a word processor several times before this exam and have one of your business professors review your work.
BEC covers 17-27% Corporate Governance, 17-27% Economic Concepts and Analysis, 11-21% Financial Management, 15-25% Information Technology and 15-25% Operations Management.
- Less than 50% of people who take this exam pass.
- Veterans may qualify for the reimbursement of testing expenses.
- In 2018, it only cost around $1,000 to take all four required portions of this exam.
- As recently as 2016, the multiple-choice questions were worth 70% of your score - that's around 1% per question!
While a CPA salary is rewarding, there are many other benefits that come along with this certification. One is the opportunity to pursue many jobs in the business field - not just accounting. You have proven yourself to be intelligent, diligent in your studies and teachable. Do you want to spend eleven months out of the year in a hotel in cities around the country or world? Become an external auditor and (words). Do you want to learn one industry particularly well and thrive in it, finding tracking and logging billable hours tedious and outdated? Do you have a knack for developing efficiencies in both your personal and professional life? A role as an internal auditor may be for you.
Work your way up to becoming the Chief Executive Officer or Chief Financial Officer for a company. Become an information technology manager if IT and business both suit you. If you want to wear a cute skirt suit to court and flaunt your intellectual prowess after logging eight to fourteen-hour days to prove fraud has been committed, become a fraud specialist. The sky is truly the limit with this certification.
A CPA allows you a better shot than other job-seekers into many companies in a variety of industries. You can audit within the jewelry industry for an international diamond distributor or audit within the restaurant industry for a family-owned Chinese restaurant a block from your house. Travel the world auditing externally, prepare taxes while working for a local CPA tax firm.
Average CPA Salary
The average salary for an accountant is $50,500 per year. A Certified Public Accountant can expect to earn $73,800, but top earners will make $124,000 per year. A CPA opens the door for higher-level positions in the company including Controller, Vice President of Finances and Chief Financial Officer. Work your way up to the CFO position in a publically traded company, and you will easily clear six figures with better benefits than some workers will see in a decade.
Besides the higher than average CPA salary, it is common for public companies such as Dixon Hughes Goodman, Ernst & Young, PWC, and Deloitte to offer incentives for you to receive your certification, such as a $2,000 onetime bonus. Other companies make this a pre-requisite. Many privately owned companies will pay for your continuing education, study materials, and examination fees required for you to earn your certification. This is because it looks good for a company to have 48% of its tax accountants as certified public accountants or whatever the case may be.
CPA Salary - The Conclusion
A CPA salary will offer you the freedom to do what you want when you want if you handle your money wisely. But more than just good money and quality benefits come with this certification. It also comes with the prestige that tells prospective employers you are dedicated to your craft, and you can learn, understand apply business concepts across several fields. Your career opportunities are limited to your ambition, and it only takes a few years at a nationally recognized public accounting firm to allow you to transition to a high-level officer position in a private company.