The CPA examination is given to all candidates who meet the requirements established by the board of accountancy in their state or territory. It stresses not only technical knowledge and its application but also the exercise of good judgment and a comprehension of the professional responsibilities of a CPA. Both theoretical and practical problems in financial and management accounting, auditing, federal income taxation, and business law are included on the examination.
Ideally, the CPA examination is best taken as soon as the requirements for candidacy are met. In addition to preparation in college, there are intensive review courses and self-study programs designed to better prepare candidates for the rigorous two-and-a-half days of tests. The examination, which is given twice a year, consists of four parts. Not all candidates pass all four parts at one sitting.
In many states, certification and licensing are one and the same. In a growing number of states, however, the CPA certificate is separate from the license to practice public accounting. In part, this trend is in response to the growing number of accountants employed in private industry. In fifty-one licensing jurisdictions (a total of fifty-four includes Puerto Rico, Guam. Virgin Islands, and District of Columbia). CPAs are required to take continuing education courses to maintain their competence. This requirement has principally focused on CPAs in public practice whose independent audit services have great importance to the financial world, investors, banks, and government at all levels. Separation of the certificate from the license facilitates eliminating the continuing education requirement for those CPAs who choose careers in industry, education, or government.
Both CPAs and non-CPAs who are pursuing careers in industry can receive certification denoting special competence in management ac-counting. The CMA certificate requires that the candidates successfully pass an examination that covers economics, finance, internal and external reporting, electronic data processing, quantitative methods, and managerial accounting.
The certified public accountant credential is an academic achievement that provides a valuable entry to the world of professional accounting. A CPA employed in industry, although not rendering independent auditing services to the public, still retains the right to use the designation CPA, although it is usually in connection with the title of the position held in the company. The public in certified public accountant takes on special meaning and importance in a state where the certificate and license are one and the same. It also has particular significance for those CPAs who. After obtaining their licenses to practice, choose to present themselves to the public as being engaged in the practice of public accounting. Let's take a more detailed look at the CPA credential in the remainder of this chapter.
THE CPA CERTIFICATE
What is the meaning of the CPA certificate? How is it obtained? What kind of examination must be passed? What are the education and experience requirements? Who prepares the examination? Who issues the certificate? Is a CPA certificate necessary for a career in accounting?
The CPA certificate is granted by state governmental authorities to accountants who have passed a rigid written examination and met certain education and experience requirements. It gives the holder the right to use the title certified public accountant or the letters CPA and to obtain a license to practice public accounting in the state granting the certificate. Persons other than those who have been granted the CPA certificate are barred by law from using that title or the letters CPA. The fact that states exercise this authority indicates that it is in the public interest to identify competent and responsible accountants who may offer their services to the public and on whose opinions people may rely in connection with investing money, extending credit, and making other financial decisions. The laws of the various states differ as to education and experience requirements, even though all states give candidates the same written CPA examination.
THE CPA EXAMINATION
Accounting is the only profession that has been able to reach an agreement and offer a uniform examination in every state and territory. The Uniform CPA Examination is given twice a year, in May and November. The painstaking procedures for drafting, administering, and grading it have been developed over a period of seventy-five years. The examination is prepared by the Board of Examiners of the American Institute of Certified Public Accountants, which is made up of educators, former members of state boards of accountancy, and practicing public accountants. The CPA examination is held over a two-day period.
The examination consists of four parts:
- Financial Accounting & Reporting
- Accounting & Reporting
- Business Law & Professional Responsibilities
3. Selected answers to free-response (essay or problem-type) questions will be graded for writing skills; five of the free-response percentages in the above table are allocated to writing skills.
4. For the examination's financial accounting and reporting and accounting and reporting sections, handheld calculators will be provided to candidates as a part of the examination material.
Essentially, the CPA examination is a test to measure judgment and intelligence in the application of accounting principles, auditing standards, and procedures to practical problems and to evaluate understanding of professional ethics. The examination is no more difficult than similar ones given to entrants in the professions of law and medicine; however, it is true that the number who fail the CPA examination is proportionately somewhat higher. The examination is a non-disclosed test.
A number of coaching schools have been established to help persons prepare for the CPA examination. Although these
do not pretend to be schools of accountancy, many candidates have found them to be useful in reviewing earlier studies and thus helping to raise examination scores. Correspondence courses also are available to achieve the same purpose.
Most states give credit for successful completion of two or more parts of the CPA examination, and in these states, candidates are required to retake only the parts they previously failed. A study of examination results showed that a substantial majority of those who have taken the examination have eventually passed all parts.
VALUE OF THE CPA CERTIFICATE
The CPA certificate is evidence of professional status. It is tangible evidence that the holder has met high standards of competence in accounting. Other accountants may have equal ability and some may have far greater knowledge in a particular area than the CPA, but there are few, if any, accounting positions in which the CPA certificate will not add prestige or its value not recognized.
Those planning to practice public accounting would find their futures limited without a CPA certificate. All partners of firms of certified public accountants must be CRAs or the firm cannot use that designation. In many such firms, staff members cannot advance to top staff positions until they become certified. In some states, the practice of public ac-counting is not restricted to certified public accountants, but it is none-the less true that those practicing public accounting without a certificate are working without the advantage of educational achievement and status attained by passing the CPA examination.
Women and men pursuing careers in private accounting may not find the certificate as necessary for advancement to positions of greater responsibility within their own organizations and, in most instances, when seeking employment in another company in the same line of business. There are top financial positions held by noncertified accountants. But there are many times when the holder of a CPA certificate has the edge over the one who does not have the same evidence of ability. When a vacancy at a management level occurs for which no understudy is avail-able, it is not unusual for employers in the business field to favor a certified public accountant to fill the position.
Similarly, the certificate is not essential for those employed by government in the accounting area, but here again, CPAs are often preferred over non-CPAs for responsible positions.
The American Institute of Certified Public Accountants recommends a five-year college course with an accounting major as the educational background for becoming a CPA. The CPA profession is in a transition period from a requirement of 120 hours of college or university credit to 150 hours. By the year 2001, at least thirty-two states will require 150 hours of college or university credit as a prerequisite for sitting for the CPA examination. This requirement was recommended by the AICPA so that new CPAs would be better prepared for the challenges and opportunities in the accounting profession.
Only a few states allow people to obtain certification with less than a bachelor's degree; and this is only if they pass a special written examination prepared under the direction of the board of accountancy that
tests their education level. This special exam is required in addition to, not in place of, the Uniform CPA Examination prepared by the AICPA.
Most states require a period of practical experience in accounting be-fore they will grant a CPA certificate. There is considerable variation between states as to the length and type of experience considered acceptable and whether the experience is a prerequisite to taking the examination or may be obtained later.
Most states require one to three years of public accounting experience before candidates are permitted to take any of the four parts of the examination, but in some instances this experience requirement may be reduced or waived if similar experience has been obtained in the business field or with government agencies. Also, the amount of experience required is sometimes related to the educational background of the candidate.
There are states that reduce the experience requirement needed for candidates with more than a bachelor's degree. Some states specify that the degree must have been granted by a college approved by state authorities. To obtain approval, a college must maintain certain teaching standards and offer a program of study for accounting majors similar to the one recommended by the AICPA.