Accountants and certified public accountants (CPAs) are two types of financial professionals that both individuals and businesses may need. Even though their titles are often used interchangeably, they perform different services. CPAs can do everything accountants do, but accountants can’t do everything CPAs do. CPAs can perform audits while accountants cannot. CPAs are professionally licensed, but accountants are not. If you’re considering working with a CPA or an accountant, you may want to consult with a financial advisor first. Try using SmartAsset’s free advisor matching tool to find advisors that serve your area.
What Is an Accountant?
An accountant is a financial professional who compiles and analyzes financial information. A person who does accounting can call himself or herself an accountant; such persons do not need any certification or licensing, though many have a college degree or at least college-level training. Bookkeepers compile and post financial information while accountants take the information that bookkeepers compile and prepare financial statements, budgets and tax returns.
Accountants also assist in analyzing the financial data, including financial ratio analysis, to determine where the strengths and weaknesses lie. Accountants develop budgets and keep track of any variances from the line items. They can prepare tax returns but for more complex tax returns, a CPA should prepare them
Role and Responsibilities of an Accountant
An accountant’s responsibilities vary from client to client. Common responsibilities include:
- Using financial data to prepare financial statements
- Reconciling accounts at the end of each accounting period
- Ensuring the accuracy of the financial data used to develop financial statements and reports
- Performing financial analysis and using the results to prepare financial reports
- Preparing basic tax returns and ensuring that returns are filed on time and taxes paid on time
- Supervising bookkeepers who gather and post financial data
- Evaluating financial operations to determine their efficiency and best practices
- Strategizing solutions for weaknesses found in operations
Some accountants offer guidance on how to cut costs, increase revenue and maximize profitability. Some also perform risk assessment, risk management and forecasting.
Accountants do not have a fiduciary responsibility, but they do have a legal responsibility to be sure that a client’s records conform to all laws and regulations. Accountants cannot represent you in an audit before the Internal Revenue Service. They do not have the power of attestation, which is the power of reviewing a company’s finances and formally attesting to their accuracy and reliability.
What Is a Certified Public Accountant (CPA)?
CPAs can be distinguished from an accountant because they have earned the professional designation through a combination of expanded education, experience and state licensing. A CPA is particularly important to an individual because a CPA can provide advanced taxation services along with financial planning services. CPAs have attestation powers and can perform auditing functions. They can represent you in front of the IRS if you are audited, which an accountant cannot do.
For businesses, CPAs also provide expanded taxation and auditing services to businesses. In addition, they help companies manage their money, taxes and investments in a manner specified by laws and regulations. In a world context, CPAs drive the financial reporting and advisory services in business and industry to foster growth and success.
Roles and Responsibilities of a CPA
A CPA’s responsibilities include:
- Attestation services
- Auditing public companies
- Representing individuals and companies in front of the IRS when they are audited
- Preparing Securities and Exchange Commission reports
- Preparing all types of income tax returns
- Representing clients in bankruptcies and mergers
- Helping clients reduce their tax liability
- Managing client accounting operations
Qualifications for the CPA Professional Designation
The Association of International Certified Public Accountants (AICPA) sets the standards and qualifications for the CPA professional designation. Each state has a board of accountancy that sets the specific standards for the state.
In general, you must have 150 extra hours of either undergraduate or graduate education. You have to have from six months to two years of experience working in public accounting, depending on the state you live in. After that you sit for a four-part exam, each part requiring four hours to complete. You must pass all four parts within an 18-month period. The four parts of the CPA exam are attestation and auditing, financial accounting and reporting, regulation and business environment and concepts. CPAs also have to complete 40 hours of continuing education requirements each year and conform to strict ethics requirements as stated by the AICPA. Accountants don’t have any of these additional requirements.
Which Do You Need: CPA or Accountant?
Most businesses and high-net-worth individuals need both. You use an accountant’s services daily, recording financial transactions, reconciling statements and performing financial analysis. You need a CPA on a more occasional basis. If you are a public corporation, only a CPA can prepare your audited financial statements. As an individual, you need a CPA for complicated tax returns and to help and represent you if the IRS is auditing you.
There is a need for both accountants and CPAs for both businesses and individuals. The two financial professionals are used for different services. Accountants take care of your daily financial transactions and routine monthly accounting needs. CPAs have been through a rigorous process to get their professional certification. They are necessary for public corporations, advanced tax issues, audits and other miscellaneous tasks.
Tips for Tax Season
- A financial advisor can be hugely helpful during tax season. Finding a qualified financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
- If you want to know how much you have to pay in federal taxes given your personal details, use SmartAsset’s federal income tax calculator. With only a few clicks, you can calculate your federal income tax liability.
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