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Understanding all About CPA's

Understanding all About CPA's

When a person becomes a CPA (Certified Public Accountant), they have attained a highly desirable rung in the accounting ladder. The reason for this is that, as a CPA, the person has met the necessary educational requirements, sat for and passed a rigorous examination which is divided into four parts, and has committed to be guided by a specific code of ethics. 

As a result, Certified Public Accountants are highly respected by their colleagues, clients, business associates, and regulators, and they have been greatly sought after. Theirs is a booming career.

What Makes the CPA Different From Other Accountants?

As a Public Accountant, the job details include; a broader scope of accounting, preparation and filing of tax returns, and auditing and consultation services (for businesses, corporations, governments, non-profit organizations, and single individuals). Any qualified public accountant is equipped to carry out most of these tasks. However, two significant things differentiate a CPA from a regular accountant that doesn’t have a CPA license.

  1. A Certified Public Accountant can review or audit financial statements and prepare reports submitted to the Securities and Exchange Commission.

  2.  They can also stand as representatives for their clients before the IRS. However, someone who doesn’t have a CPA license but is enrolled in the program as a CPA, an enrolled retirement plan agent, an attorney, or an enrolled actuary can also represent their clients.

In most states in the U.S, any CPA firm is expected to have non-CPA ownership of a maximum of 48%. However, states like Delaware and New York, and a few others, mandate that CPA firms be fully CPA-owned.

What is the job of a CPA in an Accounting Firm?

Some of the duties of a Certified Public Accountant in an accounting firm include the following.

  1. Assurance services and auditing: Assurance services refers to a separate professional service that assists firms in improving the quality of their financial and non-financial data, which goes directly to their decision-makers. Their auditing service entails drawing up a concise evaluation of the firm's economic and financial data and ensuring that they are correct and abide by the dictates of generally accepted accounting principles. (GAAP)

  2. Filing of taxes: Public accountants also work with individuals and corporations to help them lessen their tax obligations during the financial year. They also prepare and file tax returns for federal, state, and local taxes. They can also represent their clients when the IRS is conducting an audit or when the local or state tax authorities have some questions.

  3. Management services: CPAs can also assist corporations or individuals with strategic planning for long-term goals. Also, they help manage and supervise schedules and daily activities. Some specific services that fall under this category are; guidance on investment, risk management, estate planning, insurance management, financial planning and budgeting, cash management, and preparing financial statements.

Code of Ethics for CPAs

Certain ethics guide every Certified Public Accountant. 

According to the APCIA, it is mandatory for everyone who holds a CPA license to abide by the CPA’s  Code of Professional Conduct. There have been cases of scandals resulting from CPAs not adhering to these guidelines. The Enron scandal is one of them. 

CPAs working with the Arthur Anderson Company (including the company) were charged with unethical and illegal accounting practices while working with the Enron company. This was because they didn’t act independently. They performed auditing and consultation services with the firm, which was against the CPA's code of ethics and state and federal laws that mandated that CPAs do their jobs independently while carrying out reviews and audits.