How to Become a CPA: The Ultimate Step-by-Step Guide
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Amidst a CPA pipeline crisis and a high demand for skilled accountants, the National Association of State Boards of Accountancy (NASBA) is actively seeking solutions to attract and educate the next generation of CPAs.
To become a Certified Public Accountant (CPA), one must complete educational requirements, including a bachelor’s degree and specific accounting courses, pass the Uniform CPA Exam, and gain relevant experience as mandated by state boards of accountancy.
This guide provides a clear roadmap for finance professionals trying to figure out how to become a CPA, highlighting key steps such as exam preparation, licensure application, and maintaining active CPA status.
Key Takeaways
Education: Bachelor’s degree plus 150 semester hours, with some states allowing CPA exam candidacy at 120 hours.
State-Specific Rules: Varied requirements like passing an ethics exam for several states like California and residency rules like Texas and Florida mandating 24 hours each in upper-division accounting and business courses.
CPA Exam: Consists of three core sections plus one discipline-specific section.
Experience: 1-2 years under a licensed CPA’s supervision.
CPE: Continuing education is required to maintain CPA certification.
CPA Educational Requirements
Becoming a CPA begins with fulfilling the educational prerequisites, which vary by state. These often include:
Bachelor’s Degree: A fundamental requirement for candidates wanting to obtain their CPA license is earning a bachelor’s degree from an accredited institution. While the degree is typically an accounting degree or has a business-related major like business administration, the key is to ensure that the coursework aligns with the CPA exam and licensure requirements.
Credit Hours: The NASBA requires 150 semester hours of education for CPA candidates to qualify for licensure. This standard is in place to ensure that CPAs have a comprehensive education in various aspects of accounting and business. However, some states allow candidates to sit for the CPA exam after completing 120 semester hours, with the understanding that the remaining 30 hours will be completed before licensure.
Bridging the Credit Gap: Many individuals pursue a master's degree in accounting. Some may decide to focus on an MBA with an accounting concentration to meet the 150-hour requirement. This additional education helps meet the credit hour requirement and deepens their understanding of the field.
Specific Coursework: Some states specify particular coursework to ensure that CPA candidates have a solid foundation in critical areas of accounting and business.
For example, the state of Florida requires:
24 semester hours in upper-division (junior or senior level) accounting courses, covering areas such as Taxation, Auditing, Financial, and Cost Accounting.
24 semester hours in upper-division general business-related subjects, with a mandatory three semester (or four quarter) hours in business law.
Common Experience Requirements to Become a CPA
In addition to fulfilling educational prerequisites, CPA licensure requires candidates to meet experience requirements as determined by their state boards. These requirements typically entail the following:
Duration: 1 to 2 years of accounting-related work. This period is crucial for applying theoretical knowledge to practical situations, which allows to bridge the gap between academic learning and professional application.
Type of Work: The work experience must be varied and relevant, encompassing roles in public accounting firms, industry, government, or academia. Responsibilities should involve critical areas such as accounting, auditing, tax laws, financial planning, or consulting services, offering broad exposure to the field.
Crucially, this work experience must be completed under the supervision of a licensed CPA. This requirement ensures that aspiring CPAs receive guidance and mentorship from experienced professionals. These CPAs can provide insights into the complexities of accounting practices, ethical considerations, and professional responsibilities.
The CPA Exam: A Crucial Step Towards Licensure
The American Institute of Certified Public Accountants (AICPA) manages the Uniform CPA Examination, which is the same across all states. However, the application process and eligibility criteria to sit for the exam are determined by individual state boards of accountancy. This ensures that candidates meet the specific professional standards required in their jurisdiction.
In addition to educational prerequisites, states impose other requirements on CPA candidates. These typically include:
Age Requirements: Most states require candidates to be at least 18 years old, but some states allow candidates of any age to sit for the CPA exam.
Residency Requirements: Some states require candidates to be residents, have an office, or be employed within the state. This ensures a commitment to the state’s business environment and regulatory framework.
Social Security Number: Many states require candidates to provide a Social Security number as part of the application process.
Ethics Examination: Some states also require candidates to pass an ethics examination separate from the CPA exam. This test assesses candidates’ understanding of professional conduct and ethical standards in accounting.
As stated before, NASBA has seen a downtrend in recent years of new CPA candidates taking the CPA exam. This is an advantage to those taking and passing the CPA exam because there is less competition in the job market compared to previous years.
Here are the CPA candidates by year, from 2006 to 2021, according to NASBA.
CPA Requirement State Examples
Florida sets a distinctive path for CPA candidates, focusing intently on educational rigor and specialized coursework requirements. Candidates in Florida are permitted to sit for the CPA exam upon completing 120 semester hours of education, similar to Colorado’s policy, yet must fulfill the full 150 semester hours before licensure.
This ensures a well-rounded educational background, but Florida distinguishes itself with a precise requirement for coursework: 24 semester hours must be in upper-division accounting courses and another 24 in upper-division general business courses, including a mandatory three semester hours in business law. This emphasis ensures candidates possess a deep understanding of both accounting principles and the broader business environment.
In comparison, other states like California and Texas have their unique stipulations, focusing more on residency and ethical standards. California mandates a Social Security number and passes an ethics exam, while Texas requires candidates to demonstrate a tangible connection to the state. Colorado, noted for its flexibility, allows candidates to take the CPA exam with 120 semester hours, without a specific residency requirement but still requires the completion of 150 semester hours for licensure.
These variations highlight the diverse approaches states take to ensure CPA candidates are well-prepared, with Florida’s specific academic requirements showcasing its commitment to thorough professional preparation and expertise in the accounting field.
CPA Exam Structure
The CPA exam includes three core sections and allows candidates to select one discipline-specific section, catering to the profession’s move towards specialization:
Auditing and Attestation (AUD): Evaluates understanding of auditing standards and procedures, emphasizing the importance of audits in financial reporting.
Financial Accounting and Reporting (FAR): Tests on financial accounting principles, including US GAAP, IFRS, and governmental accounting, ensuring comprehensive knowledge of financial reporting.
Regulation (REG): Assesses knowledge of business law, ethics, and federal taxation, focusing on regulatory requirements and ethical considerations in business and taxation.
Discipline Sections
The Discipline sections of the CPA exam allow candidates to tailor their certification to align with specific career paths or areas of interest within the accounting profession, such as Business Analysis and Reporting, Tax Compliance and Planning, or Information Systems and Controls. This choice enables candidates to demonstrate their expertise in a particular domain, supporting the CPA Evolution’s goal of fostering a more specialized and adaptable accounting workforce.
CPA Exam Format and Duration
Each core section lasts four hours, with the format for discipline-specific sections to be detailed as the exam evolves.
The exam combines multiple-choice questions with task-based simulations to test the practical application of knowledge.
The passing score is 75 for each exam section on a scale of 0 to 99, representing the competency level required to enter the profession.
Additional Requirements
Traditionally, candidates must pass all exam sections within 18 months. However, in response to the certified public accountant shortage and to accommodate the evolving landscape of the profession, some states are extending this timeframe to 30 months.
This extension aims to provide candidates with greater flexibility and support in completing the exam requirements amidst the challenges facing the CPA pipeline.
Preparation for the CPA Exam
Comprehensive study and CPA review courses, focusing on both core and chosen specialized sections, are crucial for success. Utilizing up-to-date review materials and practice exams is recommended.
Keeping informed about any changes to the exam content, structure, or requirements is essential. Candidates should consult resources from the AICPA and NASBA for the latest information.
Applying for a CPA License
Achieving CPA licensure is a pivotal step for accounting professionals, marking their readiness to uphold the highest financial integrity and expertise standards. The application process involves several important steps, each critical to demonstrating your qualifications and commitment to the profession.
Step 1: Confirm Eligibility
Before applying for licensure, ensure you meet the comprehensive set of requirements established by the state board where you intend to practice. As listed above, these include educational prerequisites, such as a bachelor’s degree and additional accounting coursework, passing all sections of the CPA exam, and fulfilling the specified work experience under a licensed CPA.
Requirements for CPA licensure can vary significantly from one state to another. It’s essential to:
Visit the website of your State Board of Accountancy to access detailed information about licensure requirements in your state.
Pay attention to the nuances of state regulations, including the number of required education hours, the nature of work experience, and any additional coursework.
Step 2: Complete the Ethics Exam (if required)
Some states require CPA candidates to pass an ethics exam. This exam typically covers professional conduct, ethical standards in accounting, and the AICPA’s Code of Professional Conduct. Preparing for and successfully passing the ethics exam demonstrates your commitment to maintaining the profession’s ethical standards.
Step 3: Submit Background Check
A background check is a standard requirement in many states to ensure the integrity and trustworthiness of individuals entering the CPA profession. This process may involve:
Fingerprinting
Disclosure of any past legal issues or disciplinary actions that might impact your eligibility for licensure
Step 4: Application for Licensure
Once all prerequisites are met, including the CPA exam, ethics exam (if applicable), and background check, you can proceed with the licensure application:
Gather all necessary documentation, including transcripts, proof of work experience, CPA exam scores, and ethics exam results.
Complete the application form available on your state board’s website, paying close attention to detail and accuracy.
Submit the application along with any required fees. Fees vary by state and may cover application processing, licensure, and initial registration.
Step 5: Await Approval
After submitting your application, the state board will review your materials to ensure compliance with all licensure requirements. This process can take several weeks or months, depending on the state. You’ll receive notification of your licensure status upon approval and can begin practicing as a licensed CPA.
Maintaining CPA Certification
Achieving CPA certification is a significant milestone in an accountant’s career, but maintaining that certification is equally important. The accounting profession is dynamic, with frequent changes in laws, regulations, and practice. Continuing Professional Education (CPE) requirements are designed to ensure CPAs stay knowledgeable, competent, and up-to-date with these changes.
CPE requirements vary by state but generally involve completing a certain number of education hours over a specific period, typically every one to three years. The required hours can range from 40 to 120 hours per reporting period, depending on the state board’s regulations.
CPA CPE credits can be earned through activities, including but not limited to:
Attending workshops, webinars, and conferences.
Completing relevant college or university courses.
Online CPE courses for CPAs.
Participating in professional development training.
Publishing articles or books on relevant accounting topics.
Teaching or instructing in relevant subject areas.
Conclusion
Becoming a CPA involves meeting specific educational criteria, passing the comprehensive CPA exam, fulfilling state-specific requirements such as those in Florida, California, and Texas, gaining relevant work experience, and committing to continuous professional education. This journey ensures that CPAs are well-equipped with the knowledge, ethics, and skills necessary to excel in the accounting profession.
FAQs
What are the initial steps to becoming a CPA?
To begin your career to become a CPA, you must first complete educational requirements, which typically include earning a bachelor’s degree in accounting or a related field and completing 150 semester hours of education as required by the NASBA. Some states permit you to take the CPA exam after completing 120 semester hours, with the expectation that you will fulfill the remaining hours before licensure.
What specific coursework is required for CPA candidacy?
Specific coursework requirements vary by state but generally include upper-division accounting and business courses. For example, Florida mandates 24 semester hours in upper-division accounting courses, covering areas like Taxation and Auditing, and 24 semester hours in general business courses, including business law.
How do I find state-specific requirements for CPA licensure?
Candidates should visit the website of the State Board of Accountancy, where they intend to practice. These websites provide detailed information about licensure requirements, including education, experience, exams, and additional state-specific criteria.
Can I sit for the CPA exam before completing all my education requirements?
In some states, candidates are allowed to sit for the CPA exam after completing 120 semester hours of education, with the expectation that they will complete the total 150 hours required for licensure at a later date. This policy varies by state, so checking with your State Board of Accountancy is essential.
What types of work experience are required for getting a CPA license?
Required work experience typically involves 1 to 2 years of accounting-related work under the supervision of a licensed CPA. This experience should encompass roles in public accounting, industry, government, or academia, with responsibilities involving accounting, auditing, tax, or consulting services.
How should I prepare for the CPA exam?
Preparation involves extensive study, often with the aid of CPA review courses, study materials, and practice exams. Candidates should focus on understanding the content of the core sections and any chosen discipline-specific section, staying informed about any updates to the exam content or format.
How can I fulfill my CPE requirements as a licensed CPA?
CPAs can fulfill their CPE requirements through various activities, including attending workshops, completing relevant college courses, participating in professional development programs, and teaching. Planning and diversifying learning methods are important to stay current in the field.
