What is a CPA?
As the joke goes – when someone asks what their business income is, the accountant replies “what do you want it to be?”
While CPAs are accountants, the accounting profession is much more than that.
A CPA is a “Certified Public Accountant.” From a slightly biased perspective, it is one of the greatest professional licenses available. From an objective standpoint, a CPA is a trusted advisor for individuals and business-owners alike.
This article will lay out the steps to become a CPA with the requirements by state, CPA exam requirements, and everything else you’ll need to know.
Is it hard to become a CPA?
The CPA license is often considered one of the hardest professional certifications to obtain.
While this is true, as with all difficult things, the reward is worth the work. The reason it’s hard is because so many people rely on the work being performed.
Compare this to being the engineers of the financial world. When you drive your car on a bridge, you put a lot of trust in the engineers that designed it – hoping they received the right education, training, licenses, etc. so the whole thing doesn’t come crashing down.
When you need help with your personal taxes, advice for the business you own, or even companies you consider investing in, you also trust that the person you consult has obtained those things.
What is the common denominator between the two? Trust.
What exactly are the requirements for becoming a CPA?
The most important milestone in obtaining your CPA license is passing the CPA exam.
When researching requirements for CPA licenses, you’ll want to start by looking at the requirements for the state in which you live (or plan to work in), because each state has its own accountancy board.
This means that while most requirements are consistent among the states, each can have various nuances within requirements.
To start with the requirements for your state check out this list provided by the American Institute of CPAs (referred to as the AICPA).
We will dive into the exam requirements shortly, but after you’ve passed the exam, additional requirements will include a term of work experience, character references, and passing an ethics and accountancy law class.
Applying for the CPA Exam
To apply for the CPA exam, you’ll first want to ensure that you are eligible.
What makes you eligible?
- U.S. Citizenship
- Social Security Identification
- At least 18 years old
- Educational Requirements
Most states require you to be a U.S. citizen before applying to take the exam. Although, Alabama, Louisiana, Hawaii, and North Carolina currently don’t require citizenship, so be sure to check in your specific state.
Social Security Identification
You’ll need your social security card for identification in most states as well. Applicants who aren’t U.S. citizens might also run into this issue.
Illinois, Montana, New York, South Dakota and Wisconsin do not have this requirement.
At Least 18 Years Old
You must be at least 18 years old to apply for the exam in all 55 licensing jurisdictions. Most of the time this is not an issue, unless you’re an ambitious minor – in which case, the profession looks forward to seeing you in a few years!
This is the big one.
Just like the other requirements, this will vary across the states, but most require at least a bachelor’s degree or 120 college credit hours to be considered eligible.
In order to become fully licensed, most states require 150 credit hours – typically with a concentration in accounting courses of at least 20 hours.
The idea behind this is to allow college students to sit for the exam before graduation. The larger trend in the industry is moving towards Master’s of Accountancy programs which help to fulfill the concentration of credit hours requirement and the full 150 hours to become licensed.
Hint: Make sure that you hit all these requirements before applying to save yourself a few bucks – if you aren’t eligible your state accountancy board won’t refund the administrative fees!
Once you’ve got the minimum 120 hours, you’ll need to provide your transcripts to your state board.
This can be a very slow administrative process depending on your school’s response time, so get a head start on this.
You’ll want to send every transcript from every school you’ve attended that contributes to the minimum hours requirement. Send these with or before your application to avoid a rejection from the board.
Whether or not you need a specific degree in accounting will be determined by your state. It will definitely help in the process of becoming a CPA, but in a lot of cases it’s not mandatory.
There are a ton of groups within local state societies supporting second-career CPAs, or at the graduate school level programs will typically have a wide variety of previous majors (in rare cases, some graduate programs don’t even accept accounting undergrads).
The most common path though is majoring in accounting as an undergraduate, and now that the credit hour requirements are increasing in so many states a graduate degree is almost becoming a necessity.
You might see a few different accounting graduate programs out there but the most common are either the Master’s of Science Accounting (MAC) or Master’s of Science in Accountancy (MSA).
For your research, here are the most recent top accounting graduate school programs.
Submit Your Application
Now that you’ve got your transcripts, you’re ready to submit the application!
This likely will contain a few personal and educational questions, along with an administrative fee (typically around $150).
After you submit the application, you’ll receive an Authorization to Test (ATT).
This is the point where you decide which section(s) of the exam you want to take.
Hint: Do NOT apply for all sections within this ATT – after you’ve applied, an NTS (covered below) will be sent to you and you’ll have 6 months to test for the sections you’ve selected. Trying to cover all sections in this timeframe is extremely difficult.
Each section of the exam is going to cost between $180-250 per test, totaling to around $1,200 with fees included.
Once you’ve paid the fees, a Notice to Schedule (NTS) will be sent to you.
This is the document that you’ll use to schedule your exam and take to the testing center with you. The NTS typically takes between 3-6 weeks to arrive.
As mentioned above, this requires you to schedule any sections you wish to take in the next 6 months, otherwise you lose the administrative fees paid before.
Four exam windows are offered:
- January 1 – March 10
- April 1 – June 10
- July 1 – September 10
- October 1 – December 10
To use your NTS and schedule your section, visit the Prometric Testing Center website.
Taking the CPA Exam
After you’ve scheduled your exam, it’s time to study.
Congrats to you by the way, this is a big accomplishment already 🙂
Now the big question is how do you properly prepare for the exam?
The exam itself is made up of four, four-hour sections: Financial Accounting and Reporting (FAR), Auditing and Attestation (AUD), Regulation (REG), and Business Environment and Concepts (BEC).
Each section is designed to test a different portion of the knowledge required to operate as a CPA.
There are a few different routes you can take to prepare for the exam. Multiple software programs and online courses are out there to help you study.
These range from self-study books to full-blown lectures and guided study.
We’ve listed a few of the most popular below:
How long does it take to become a Certified Public Accountant?
After you’ve passed the exam, or in some states while you’re taking it, you must meet work experience requirements.
Most states require at least two years public accounting experience, although some may require less.
Many of these states also accept non-public accounting experience – either in industry or government. Although, the years required typically increase for non-public accounting experience.
As with other requirements, you’ll need to check the specific requirements from your state to see exactly what you need.
These work experience requirements will typically dictate how long it will take you to become a CPA. Everyone’s timeline is different, so it could take you anywhere from a year to multiple years.
What happens after?
After you’ve paid your dues with hours on hours of hard work and studying, you’re ready now to start your career. So where do you go?
There are five paths that CPAs can choose:
- Public Accounting
- Corporate Accounting
In public accounting, CPAs serve a wide variety of clients as an objective outsider or in an advisory capacity. Two of the more widely taken paths are in either the audit or tax departments of firms (although this is changing rapidly with the addition of so many new services in the industry).
You can read more about the public accounting path and its positions here.
Down this path you can become an accounting educator. In this role, CPAs instruct students within the various areas of the accounting profession and work as members of faculties within university business schools, professional schools of accountancy, or graduate schools of business and community colleges.
Along with public accounting, corporate accounting is another of the most widely chosen paths. New CPAs will also often have been working in a corporate accounting position for years before pursuing their license.
In corporate accounting, CPAs will work with companies ranging from startups to Fortune 500 companies.
Governmental responsibilities can be wide-ranging. Within either the federal government or state and local government, CPAs help in the efficiencies of government departments and the ability to advise decision makers in the use of entity resources.
CPAs can serve a variety of roles within the non-profit sector. Whether it’s on-staff or in a position with the Board of a non-profit, CPAs here have the ability to solve tax problems, improve internal controls, efficiently budget resource or aid in fundraising activities.
As with any position, compensation can change a lot depending on the sector, position, and experience.
What is the average salary of a CPA?
According to the Bureau of Labor Statistics report, the median pay for accountants and auditors as of 2017 is $69,350 per year.
Accountants on the low end of the spectrum measured here made approximately $43,000 per year and those in the top 10% earned around $122,000.
This might look like a wide range, but it actually reflects just how valuable the CPA license is.
Since the title “accountant” encompasses both CPAs and non-licensed positions the average actually gets skewed down. As shown in this Journal of Accountancy article, newly qualified CPAs with less than one year of experience earn an average salary of $66,000 per year, and CPAs with over 20 years of experience earn an average of $152,000 per year.
This is quite a different picture.
CPAs also expected a 5% raise on average for 2017. So as you advance, the pay follows.
To see the average CPA salary by state, check out this comparison.
The top 5 states ring in as Tennessee, Oklahoma, Georgia, Texas, and Michigan.
Continuing Education Requirements
One final important thing to be aware of after obtaining your CPA license is requirements for continuing education.
States want their CPAs to remain informed on all new issues and pronouncements within the industry and typically require a certain amount of educational hours each year (for example, North Carolina requires 40 hours each year, with 2 hours of required ethics training).
To see your states specific requirements, check the NASBA listing here.
Aside from the requirements after obtaining the license, the CPA is one of the best professional licenses you can obtain.
As we’ve shown above, the average salaries are some of the highest in the nation out of many professions (and growing).
There are also almost limitless possibilities in a career path.
The final verdict – becoming a CPA is hard, but the rewards are worth it.