Many people do not know the difference between a CPA certificate and a CPA license. Even though they may appear to be the same, they are entirely different, especially in terms of the powers and duties each holds.
It is important to understand the main distinguishing factors as they can help inform career paths and terms of engagement.
Let’s look at the main differences in the CPA license vs CPA certificate debate and see which is more beneficial for your accounting career.
What’s A CPA Certificate?
Contents
The CPA certificate is an official acknowledgment that a candidate has undertaken and met the requisite academic standards by passing the four sections of CPA. It is usually issued by the American Institute of Certified Public Accountants (AICPA).
Advantages
- It is issued without considering the work experience of the individual since the sole qualification is passing the CPA examination.
- Continuing education is not a requirement to attain the certificate.
- The certification is excellent for career growth as most organizations set it as a bare minimum requirement for employment.
- You can use the title (CPA) on unofficial documents like resumes and online profiles as a professional identity feature. This is only allowed in some states.
Disadvantages
- The responsibilities are limited with the certificates because you cannot sign official reports or tax returns.
- One is not allowed to use the title CPA on official or legal documents.
- Candidates are not allowed to start their own firms or serve as partners.
What’s A CPA License?
A CPA license is issued to candidates with the CPA certificate plus at least 1-2 years post-qualification experience. Licensed CPA practitioners must meet specific professional requirements as may be determined by the relevant boards in their respective states. To keep the license, you must meet some continuous professional education requirements of about 40 hours per year. Furthermore, the license is only valid upon payment of set annual fees.
Advantages
- The license gives the holders freedom to use the CPA title on legal and official documents alongside their name.
- The licenses offer wider responsibilities than the certificates, such as signing audit reports and tax returns for clients.
- One can start own practice or be a partner in an auditing or accounting firm.
Disadvantages
- Candidates must have some experience in the field after attaining the CPA certificate to be licensed. This may vary from state to state, but in most cases, it can be one or two years.
- To keep the practicing CPA license, it is mandatory that the candidates meet annual continuing education requirements. Most states have set this at 40 hours.
- The annual fees may be high, limiting an individual’s ability to practice if the license is not renewed in good time.
CPA Certificate vs CPA License – Which One Should You Get?
The CPA certificate and CPA license are linked. While there are some individuals who only get the certificate and never see the need to pursue a license, there are some circumstances that will require a license.
If you are keen on working in an accounting/auditing firm or just a department in an organization with no immediate plans of pursuing a career beyond that, then you might be okay using the certificate. However, you should be aware of the limitations that come with that decision.
On the other hand, a CPA license is an elite authorization to practice everything that a CPA entails.
You have the freedom to start your own firm with no questions asked, use the CPA title beside your name on official documents, sign tax returns and audit reports, and contribute towards the growth of the profession through continuous education. Therefore, a CPA license offers more privileges and freedom than a certificate.
Different Levels Of CPA Licensure: Non-Reporting And Inactive
The qualifications for the issuance of the certificates and licenses may vary from one state to another. Generally, there are two types of levels: one-tier and two-tier states.
One-Tier States
One-Tier States: The states that practice a one-tier system that requires candidates to pass the CPA examinations and at the same time meet other requirements, especially on the years of experience to be issued with both the license and the certificate. Even though this option is demanding, it helps establish a clear distinction as the credentials are only issued to individuals who satisfactorily meet all the requirements with no loopholes.
Two-Tier States
Two-Tier States: Some states have in place a two-tier system that allows candidates to get the certificate after meeting the academic requirements, then work for about one or two years to be issued with the license that officially allows them to practice as public accountants. Some two-tier CPA licensure states are Alabama, Oklahoma, Nebraska, Illinois, Hawaii, Kansai, and Connecticut.
Due to the diversity of requirements, it is recommended that you check with your state’s board for proper guidance on what you need to do. States like Massachusetts have non-reporting licenses that permit holders to exercise some public accounting privileges without meeting the working experience requirement.
Some states also allow licensed CPAs to opt for the inactive states, which allows them to keep the license but not practice or even advertise themselves as CPAs.
During the inactive period, these individuals do not need to sit for the annual continuing professional education. This status can be reactivated back into action with ease if you choose to bounce back into the public accountancy world upon meeting basic requirements determined by your state’s board.
CPA Certification or License For International Candidates
CPA is a globally recognized certification that is issued to candidates who meet set CPA exam requirements. International students can therefore pursue CPA and even pass the examination, especially if their spoken and written English is good.
There are, however, challenges that they may encounter during the examination because some topics are best understood by someone living in the United States.
Licensed certified public accountants from other candidates seeking to practice in the United will need to meet some professional requirements set by the state boards. It can be an intricate process because licenses are only issued to candidates who meet academic, professional, and ethical qualifications determined by the state boards.
Should You Become A Licensed CPA?
An absolute yes! There are numerous reasons why the CPA license is revered worldwide. It basically gives you the keys to the world of practicing public accountancy as the master of your own trade.
You get the chance to represent any firm or individual before Uncle Sam on any matter relating to taxation. You also become more employable because blue-chip companies are willing to pay any amount to keep licensed CPAs in their teams to keep their books in order.
If you are tired of employment, then you are at liberty to start your own firm or join hands with friends and start a partnership. You can also use and advertise yourself as a CPA alongside your name for the world to know.
All these are only possible with a CPA license. You can start that interesting journey by finding out from your respective states about the requirements.
Final Thoughts
The decision on whether you choose to pursue your accounting career beyond the CPA certificate will depend on your career projections.
A certificate, though it recognizes you as a professional who has undertaken the CPA course and passed, limits how much you can do. On the other hand, a license is your gate pass to the ultimate experience.
You can make sound fiscal decisions and steer organizations to financial freedom and compliance as you establish yourself as an authority in the profession.