CPA vs Accountant – what’s the difference? If you are just starting a business or are reaching that point where you can’t handle your finances on your own and need help, you must feel in over your head. You may not even know what kind of accounting help you need as there are different kinds of accounting professionals.
Table of Contents
CPA vs Accountant
We’re here to tell you the difference between a CPA firm vs accountant so you can choose the right one for your business!
What’s an Accountant?
An accountant is a person taking care of a company’s finances. Accountants will do things like recording and reporting financial transactions, bookkeeping, and taking care of tax-related matters. They may or may not have an accounting-related degree.
What’s a CPA?
CPA is short for certified public accountant and a CPA firm is a firm that consists of such professionals. Any CPA firm has to have a state license to practice. Much like accountants, they help businesses with financial planning, investing, and tax-related matters.
Education and Licensing
The first difference between an accountant and a CPA is in their education. To become an accountant, one only needs a bachelor’s degree in finance, business management, accounting, or a related field. Their training is usually made up of internship programs during school or on-the-job training.
CPAs on the other hand, have to have a bachelor’s degree in accounting or finances and they may require additional courses. They also need to pass the certified public accountant exam. As for training, they need anywhere between 6 months and 2 years of accounting experience, depending on the state they’re in.
Fiduciary Responsibility
The next major difference between an accountant and a CPA lies in fiduciary responsibility. A fiduciary is a person or organization that has legal rights to act on behalf of another person or organization. When it comes to accounting, it usually translates into managing a client’s assets and sticking to strict ethical standards.
Fiduciaries can be bankers, financial advisors, or the company’s board directors. CPAs also have the legal power and responsibility to be fiduciaries while accountants don’t. They may be responsible enough, but they don’t have the legal power to act on behalf of your business.
Taxes and Regulations
Most people looking to hire a CPA or an accountant are looking for help with taxes. And that’s perfectly understandable as taxes are confusing to most and they can take up a lot of time. Also, business owners should use all the tax deductions available to them so they can minimize their tax liability.
The difference between an accountant and a CPA when it comes to tax matters is that while accountants can prepare tax returns, CPAs have more knowledge. Accountants are also not authorized to represent you in case of an audit while CPAs are and have the legal authority with the IRS.
Code of Ethics
Last but not least is the difference in the code of ethics accountants and CPAs are to follow. These are the requirements they must meet and certain kinds of behaviors and virtues to adhere to. While it doesn’t sound as appealing as better knowledge on how you can save your money on tax liability, it’s important nonetheless.
Accountants don’t have a specific governing body or code of ethics to abide by. CPAs belong to the American Institute of Certified Public Accountants or AICPA. AICPA requires all CPAs to abide by strict ethical codes and professional standards. The AICPA Code of Ethics has 5 categories:
- Responsibilities – CPAs have a responsibility to provide excellent professional services.
- The public interest – CPAs are required to serve the public interest in every action they take.
- Integrity – A CPA must attain standards of integrity and their actions must meet the ethical standards.
- Objectivity and Independence – CPAs are to be objective and not involve themselves in any conflicts of interest.
- Due care – CPAs must do their service to the best of their ability and always seek to further develop themselves when it comes to their education.
CPA vs. Accountant – Which Is Better?
So, what’s the bottom line? As you may have noticed, CPAs are far better equipped to assist you with finance and tax-related matters and can provide you with a better service. So, how does that relate to their fees? Do CPAs cost more than accountants?
Most of the time, they do. The investment into a good CPA is definitely worth it and comes with great ROI. One of them is having to pay less tax, and depending on the size of your company, you might even save more than you pay your CPA.
Or, you can hire a firm near you. For example, if you live in Las Vegas, you can hire a Las Vegas CPA firm, as that’s usually a lot cheaper than hiring a CPA as an employee and you get all the same benefits. It’s a great option for small business owners. Whichever you choose, we wish you the best of luck!
