The CPA

Becoming a CPA is no easy task. It demands a higher education commitment than most other career paths. To qualify for certification, you must meet the requirements of the state or jurisdiction where you wish to practice. The state requirements are established by the state board of accountancy and vary from state to state. Because of these variations, first determine where you are planning to practice accounting and then review that state's certification requirements on the web site for the state's CPA society or board of accountancy.

Becoming a certified public accountant entails the successful completion of the following: (a) 150 credit hours of college-level education, which translates to five years of college and graduate level work; (b) achievement of passing grades on all four parts of the Uniform Certified Public Accountants Exam (the CPA exam); and (c) the requisite amount of accounting work experience as mandated by each state, often two years or so.

Why Should I Become a CPA?

We'll talk about the requirements for becoming a CPAin more detail later, but first, you might be asking yourself, "Why should I go through all of this? Can't I be an accountant without being certified?"

What you can do without becoming a CPA

You most certainly can perform accounting functions without being certified, and there are many successful people in the profession who have taken this route. Non-certified accountants are not required to fulfill the five-year requirement; they aren't even required to have a degree in accounting (although, obviously, it helps). A traditional four-year degree is all that is necessary to be a non-certified accountant. The actual functions of an accountant are not, as the saying goes, rocket science, and complicated mathematics is rarely needed; thus, advanced certification might not seem necessary. Internal auditors, management accountants and tax personnel may all practice their professions without the CPA or any other professional designation.

Furthermore, many accounting professionals (CPAs and otherwise) contend that the CPA exam is nothing more than a rite of passage, an intense exercise in memorization that adds little actual value to your technical development as an accountant. These people generally feel that all of the information you crammed into your brain disappears once the exam is over. Many of them even said that this "brain drain" should happen since much of this information will never be seen in your actual practice; if you ever do need it, you can quickly look it up.

What you can't do

However, not being certified has a few significant drawbacks. Foremost among these is that it can be career limiting - most public accounting firms will not promote an auditor above a certain level (senior associate; these levels are discussed later in this guide) without at least passing the exam.

There are a couple of important reasons for this. First, only a CPA may sign an audit opinion. This signature is crucial, as it signifies that the auditor believes that the financial statements reasonably represent the company's actual financial position, giving the users of these statements more confidence that they can rely on them to make their decisions. Thus, an auditor without a CPA can not perform one of the most important activities of the profession.

Furthermore, a failure to pursue certification is often interpreted by public accounting firms as a lack of commitment to the profession, and few firms are willing to invest resources in someone who might leave the profession altogether (especially when there are so many others out there who are willing to pursue certification).

Another downside of not having a CPA is that you would miss out on the credibility that the certification carries. As with other advanced professional certifications, the CPA tends to give the stamp of "expert" in the eyes of the public and thus more perceived confidence in the accountant's abilities. Such credibility could mean the difference to a recruiter who's deciding between two otherwise comparable job candidates.

One final, ever-so-important downside of not having a CPA: you'll make less money. According to the staffing agency Robert Half International, the CPA can, on average, increase a candidate's base salary by 10 percent, with specialized fields (such as forensic accounting) commanding even higher salaries.

Now, this is not meant to scare you into pursuing the CPA, nor is it meant to suggest that you are a slacker if you don't pursue the CPA. You can still have a successful career in accounting without it. For example, public tax accountants generally do not sign off on audit opinions, and tax returns generally do not require the signature of a CPA. However, pursuing the CPA opens you up to many more opportunities and can only help a career in accounting. Thus, plans for certification should be seriously considered by anyone looking to break into the accounting field.

The 150-Hour Education Requirement

In 1998, the AICPA membership voted to increase the educational credentials required for certification. It implemented this requirement in response to increases in accounting, auditing and tax regulations, the increasing complexity of the business environment, the advance of technology and to improve the overall quality and breadth of work performed by CPAs. Now, in order to sit for the CPA exam in most states, you must have completed 150 credit hours, or five years, of college-level education. The additional year allows for increased development of communication, analytical and interpersonal proficiencies as well as technical competence.

According to some university career services offices, this requirement of a fifth year of education to sit for or practice as a CPA has inhibited the number of students entering the field. However, while the additional education might seem onerous to some, the good news is that starting salaries for accountants are spiking up to accommodate the increased education and skill levels.

How do you fulfill the requirement?

While the education requirement generally does not call for the attainment of a full master's degree, the most straightforward way of satisfying the requirement (and the way most schools have designed their accounting programs) involves a graduate degree. The 150-hour education requirement may usually be met in the following ways:

1. Combine an undergraduate accounting degree with a master's degree at the same school or a different one.

2. Combine an undergraduate degree in a non-accounting discipline with a master's degree in accounting or an MBA with a concentration in accounting.

3. Enroll in an integrated, five-year professional accounting school or program leading to a master's degree in accounting.

For a list of class topics most relevant to the profession, see the "Hiring Process and Interviews" chapter. Also see the AICPA's website at www·aicpa·org for more information.

Which jurisdictions support this requirement?

This requirement is in effect in 45 out of the 50 U.S. states, Puerto Rico and the District of Columbia. Currently, California, Colorado, Delaware, New Hampshire, Vermont and the Virgin Islands do not have the 150-hour requirement in place. In these states, only four years of education (an undergraduate degree) are required to sit for the exam. It should be noted that, since the general AICPAmembership voted for and approved this requirement, it is expected that all U.S. states will eventually conform to these requirements.

Top accounting schools There are hundreds of schools with well-developed accounting programs in the U.S. Below is a list of schools recognized for their undergraduate and graduate accounting programs. While this should not be considered an exhaustive list, these schools are generally considered the best in the nation for those pursuing accounting careers:

The Exam

The CPA exam is a four-part exam - the accountant's version of running the gauntlet. As the AICPArequires that all four parts of the exam be passed, this represents the crucial step in becoming a certified public accountant, the culmination of those 150 credit hours of education.

Administered over two days, the Uniform Certified Public Accountants Exam is a grueling test designed to assess a candidate's knowledge of the following four areas:

• Business Environment and Concepts (BEC) - CPAs' professional responsibilities and the legal implications of business transactions, particularly as they relate to accounting and auditing.


• Auditing and Attestation (AUDIT) - Generally accepted auditing standards and procedures, and other standards related to attest engagements.


• Regulation - Federal taxation, ethics, professional and legal responsibilities and business law.


• Financial Accounting and Reporting (FAR) - Generally accepted accounting principles for business enterprises, not-for-profit organizations and government entities.

The exam is written by the Board of Examiners of the American Institute of Certified Public Accountants (AICPA). In May 1996, the exam became nondisclosed, which means that only selected questions from the exam are released to the public by the examiners. And as of 2004, the exam will be given in an exclusively computerized format. This new version of the exam is also slightly shorter (14 hours total as opposed to 15 1/2

CPA FAQ

When should I take the exam? Our recommendation - and the recommendation of virtually everyone in the business - is to begin preparing for the exam as soon as you graduate from college. You generally have the summer after graduation free, and the longer you wait, the harder it will be to motivate yourself to study. When you graduate, all of your accounting friends will be studying, too. If you do it together, it will most likely be a lot less painful. So, if you graduate in June, you might want to begin taking a preparation class (see below) in July. If you're working in public accounting, the firm will likely expect you to take the exam the first time it's offered after you start.

Will I get hired without it? Firms will hire you without your CPA, but the public accounting firms will expect you to pass the CPA before you can get promoted to manager, which typically comes around five years.

What happens if I fail? The exam is designed to be a rigorous challenge. Most people will tell you that, while the content of the exam is not unreasonably complicated, the sheer volume of knowledge that is tested makes the exam quite an ordeal. The numbers back this up: historically, only approximately 10 percent pass all four parts on the first try. Approximately 50 percent of the people who are sitting for the exam have taken it before. In other words, at least half the people who take the exam will fail at least one part of the exam on their first try.

If you don't pass all four parts on the first try, don't worry; it's not the end of the world. Take a look at your score and figure out what areas are your weaknesses. Focus your additional studying for the next exam on those areas. But no matter what, never give up. Each time you take the exam, you'll be able to identify areas of weakness, and if you take the time to brush up on those areas, without losing your existing strengths, you'll be more likely to pass.

When is the exam given? The exam is offered up to six days a week during January, February, April, May, July, August, October and November each year. Each two month testing period is called a window. Candidates make appointments for specific dates and times during a window at a regional testing center.

After the state board determines a candidate is eligible to sit for specific sections of the CPA Examination, the candidate will receive a Notice to Schedule (NTS).

The candidate can then register directly with a Prometric testing center to take one or more sections. Candidates can schedule test appointments online at www·prometric·com\cpa, or by calling 1-800-580-9648 (Candidate Services Call Center) or contacting their local test center.

What is the format? The exam is a combination of multiple-choice questions with four options, and condensed case studies called simulations. The format of each of the sections is as follows:

The content of the exam is governed by the Content Specification Outlines. A summary of each section is as follows:

Business Environment and Concepts:

• Business structure (17-23%)


• Economic concepts (8-12%)


• Financial management (17-23%)


• Information technology (22-28%)


• Planning and measurement (22-28%)

Auditing and Attestation:

• Planning the engagement (22-28%)


• Internal controls (12-18%)


• Obtain and document information (32-35%)


• Review engagement and evaluate information (8-12%)


• Prepare communications (12-18%)

Regulation:

• Federal taxation entities (22-28%)


• Federal taxation of property transactions (8-12%)


• Federal procedures and accounting issue (8-12%)


• Ethics and professional responsibilities (15-20%)


• Business law (20-25%)

Financial Accounting & Reporting - Business Enterprises:

• Concepts and standards for financial statements (17-23%)


• Typical items in financial statements (27-33%)


• Specific types of transactions and events (27-33%)


• Acounting and reporting for governmental entities (8-12%)


• Accounting and reporting for non-governmental entities and not-for -profit organizations (8-12%)

How are the written sections evaluated? In place of essays, an assessment of written communication skills will be incorporated into the simulation portion of the revised examination. According to the CPA exam's website, the testing of written communication skills was identified by the most recent accounting practice analysis and supported by a special task force consisting of CPAs, psychometricians, and writing experts. In this portion of the exam, candidates must read a situation description and then write an appropriate document ("constructed response") relating to the situation. The instructions will state what form the document should take (such as a memo or letter) and its focus. The candidate's response should provide the correct information in writing that is clear, complete and professional. Constructed responses will be scored holistically, based on three general writing criteria: organization, development, and expression.

Is there an ethics component to the test? Some states require an ethics exam prior to certification, but this is an area of the test that is continuing to evolve. The regulation section of the CPAexam (formerly known as "Accounting and Reporting") now includes material on ethics and professional responsibility. And some states are adding a separate section on ethics to the CPA exam. Check the board of accountancy of the state in which you'll practice for ethics exam requirements.

Should I bring a calculator? You will be able to use the online calculator to perform standard financial calculations. Be sure you understand how to move the calculator on the screen.

How is the exam graded? The exam is graded on a scale from 0 to 99, and the passing standard remains 75. Conditional status may be granted to candidates who receive a passing grade on some but not all sections. Grades are released to the state boards after each two-month window of testing, and it is up to the state boards when to release those grades to the people who took the exam. You can sit for each section of the computerized exam individually, and in any order. You must pass all four sections within a rolling, 18-month period, which begins the day the first section is passed.

How do I sign up? CPAExamination Services administers the CPAexam for the following states:

Colorado, Connecticut, Delaware, Florida, Georgia, Hawaii, Indiana, Iowa, Kansas, Louisiana, Maine, Massachusetts, Michigan, Minnesota, Missouri, Montana, Nebraska, New Hampshire, New Jersey, New Mexico, New York, Ohio, Pennsylvania, Puerto Rico, Rhode Island, South Carolina, Tennessee, Utah, Vermont, Virginia, Wisconsin

They can be reached at 800-CPA-EXAM (800-272-3926). Washington State candidates should contact Castle Worldwide at 1-800-655-4845. Candidates from other states should contact their state board of accountancy, contact information for which is available at www.nasba.org. Examinations must be scheduled at least six days in advance. CPA Examination sections are offered on a continual basis two out of every three months throughout the year (January, February, April, May, July, August, October, November) up to six days a week.