Requirements for CPA License
What You Need to Know About Becoming A CPA
In the world of accounting, Certified Public Accountants (CPAs) stand at the top. Think of them as the Spartans of finance — highly skilled, trusted, and in demand. Becoming a CPA comes with significant perks, including better job stability, more career opportunities, and a higher salary. In fact, the average CPA makes $40,000 more per year than an average accountant. However, the journey to obtaining a CPA license is not an easy one, with tough educational and experience requirements for CPA license candidates.
This article breaks down the requirements for CPA licensure and everything you need to know to become a licensed CPA, from educational prerequisites to the CPA exam requirements, to licensing standards.
But, what is a CPA exactly?
A Certified Public Accountant (CPA) is a financial advisor who has passed the uniform CPA examination, fulfilled educational and work experience requirements, and adhered to ethical guidelines. Unlike regular accountants, CPAs can offer services like tax compliance, financial advisory, auditing, management advisory, and more advanced financial roles that aren’t available to non-licensed accountants.
Becoming a CPA requires a combination of formal education, passing a rigorous exam, and gaining relevant work experience. But it’s not just about passing the CPA exam — you’ll need to prove you’re up to the high standards expected of a Certified Public Accountant by meeting the requirements for CPA license.
In this article, we’ll discuss:
CPA Education Requirements
The requirements for CPA licensure generally fall into three categories:
- Education Requirements
- CPA Exam Requirements
- License Requirements
1. CPA Education Requirements
The CPA education requirements can vary from state to state, but the most universal requirement is the 150-hour rule. This rule mandates that CPA candidates must have completed a bachelor’s degree with at least 150 semester hours of coursework from an accredited institution before sitting for the uniform CPA exam.
Here are a few ways to meet the education requirements:
- Complete a 4-year bachelor’s degree followed by one additional year of coursework toward a master’s degree.
- Complete an accelerated 4-year program designed to meet the 150-hour requirement.
- Take a bachelor’s degree in any field, but with at least 30 additional accounting and business courses.
Many states require accounting and business courses, such as financial accounting, business law, and information systems. Some states allow business-related subjects to meet part of the educational requirements, but others may require more specialized coursework, such as forensic accounting or taxation..
2. CPA Exam Requirements
The CPA exam requirements are another hurdle that candidates must clear. The uniform CPA exam is composed of four sections:
- Auditing and Attestation (AUD)
- Financial Accounting and Reporting (FAR)
- Regulation (REG)
- New Discipline Sections
The new discipline sections in the CPA exam reflect the evolving landscape of the accounting profession. These sections are designed to test advanced skills in specific areas of accounting. Some of the most common updated sections include:
- Business Analysis: This section evaluates a candidate’s ability to analyze and interpret business and financial information, applying critical thinking to complex scenarios.
- Taxation: Here, candidates are tested on their ability to navigate the complexities of tax compliance, including federal, state, and local taxation laws.
- Financial Advisory: This area tests candidates’ proficiency in advising clients on financial decisions, including budgeting, investing, and asset management.
- Management Advisory: In this section, candidates must demonstrate their understanding of management consulting skills, such as strategic planning and organizational behavior analysis.
- Forensic Accounting: As fraud prevention and detection become increasingly important, candidates are evaluated on their knowledge of forensic accounting techniques.
To be eligible to sit for the exam, CPA candidates must meet specific state requirements. Some common CPA exam requirements include:
- Minimum age of 18 years.
- Completion of 150 semester hours in accounting or business-related subjects.
- U.S. citizenship or residency may also be required by certain states.
Importantly, states require CPA candidates to pass all four sections of the CPA exam within 18 months. If any section is failed or the time limit exceeds, the process must be restarted.
The CPA exam sections are known for their difficulty, and the average passing rate is historically low, hovering around 50%. Candidates typically need 300-400 hours of study to adequately prepare for the CPA exam. Scoring at least 75 on each section is required to pass.
After successfully completing the exam, most states require candidates to take an ethics exam administered by the American Institute of CPAs (AICPA). This exam tests your understanding of the ethical guidelines and scenarios you’ll encounter in real-world practice.
3. CPA License Requirements
After passing the CPA exam, the final step to obtaining your CPA license is to fulfill the work experience component of the requirements for CPA license. While the experience requirements can differ by state, most states require 1–2 years of relevant work experience, which can often be gained through working under the supervision of a licensed CPA.
Some states require work experience in specific areas, such as taxation, auditing, or business analysis. Other states might allow volunteer experience to fulfill this requirement.
Once you meet the experience requirements, you must submit a formal application to your State Board of Accountancy for review. Each state board sets its own licensure requirements and may charge application fees.
Passing the CPA exam
The CPA exam is made up of four parts:
- Auditing and Attestation (AUD)
- Financial Accounting and Reporting (FAR)
- Regulation (REG)
- New Discipline Sections (including business analysis, taxation, and forensic accounting)
It’s notorious for being difficult, and passing it will be a significant part of your journey toward becoming a CPA. Each section of the CPA exam is approximately four hours long and consists of various types of questions, including multiple choice questions, simulations, and written communication.
To pass the exam, you must complete all four parts within 18 months. If you don’t, you will have to start over from scratch. This makes time management essential, as you will need to pass all sections within the allotted timeframe.
The AICPA recommends that CPA candidates dedicate between 300-400 hours of study to adequately prepare for the exam. As you prepare, keep in mind that passing the CPA exam requires a score of 75 or higher on a scale from 0-99. This score isn’t a percentage; it’s a weighted combination of your performance on each question type within each section.
After passing the CPA exam, many states will require you to take an ethics exam administered by the American Institute of CPAs (AICPA). The ethics exam is designed to test your understanding of ethical issues you may face in your career as a CPA. It consists of 40 multiple-choice questions, and while it is required in most states, it’s considered relatively straightforward. The exam can be taken online or on paper and is open-book, meaning you can take it at your own pace. You can take it as many times as necessary until you pass.
Workplace Experience
In addition to passing the CPA exam, all states require you to have relevant workplace experience in order to earn your CPA license. The amount of experience required varies by state, but most states require 1-2 years of work under the supervision of a licensed CPA. Some states may have more lenient experience requirements, allowing for volunteer work in the accounting field to satisfy part of the experience.
For example, if you’re working in an entry-level accounting position, such as bookkeeping, you may fulfill the experience requirement. However, some states may require you to work directly under a licensed CPA for a minimum of one year. Other states will accept a broader range of experience, including work in non-CPA roles, as long as it is accounting-related.
The most important thing to remember is that the specifics of workplace experience can vary greatly by state. Always make sure to check with your state board for the precise experience requirements.
Maintaining Your License
After successfully earning your CPA license, your journey doesn’t end there. You must continue fulfilling Continuing Professional Education (CPE) requirements to keep your license active. Each state’s State Board of Accountancy has different CPE requirements, including:
- Annual renewal date: The date by which you must apply to renew your license.
- CPE reporting period: The time period within which you must complete your required CPE hours.
- General number of hours required: Most states require around 40 CPE hours per year, though some require more or less.
- Specific courses required: Depending on your state and field, you may need to take specific courses such as business law, tax compliance, or ethics courses.
- Course type and area of employment: Certain areas of employment or specialized CPA disciplines may require specific types of CPE courses, such as forensic accounting or business analysis.
It’s crucial to stay on top of your state’s CPE requirements, as they can vary significantly. Failing to meet your state’s CPE obligations could result in disciplinary actions or the loss of your CPA license.
In Conclusion… Key Notes
Becoming a Certified Public Accountant is a rewarding, yet challenging process. Here’s a quick recap of the key CPA requirements:
- Education Requirements: You’ll need a bachelor’s degree with at least 150 semester hours, often in accounting and business-related subjects.
- CPA Exam: The uniform CPA exam consists of four challenging sections that require extensive study and preparation, including the new discipline sections.
- Experience Requirements: Most states require 1-2 years of relevant work experience, often under the supervision of a licensed CPA.
While the process is demanding, the rewards of becoming a CPA — such as higher pay, more career opportunities, and job stability — are well worth the effort. Remember, the specific requirements for CPA licensure can vary by state, so it’s important to stay on top of your State Board of Accountancy‘s rules and regulations.
Good luck on your journey to becoming a licensed CPA!
CPA Exam Requirements By State
To access the detailed CPA Exam requirements for your state click the appropriate link below: