In the world of accounting and finance, there are so many certifications that you obtain. And there is a lot of debate/discussion around which ones are worthwhile and which ones are not. Almost all of them cost money and of course the time you put into studying/proving that you are worthy of the credential.
But for those outside the world of accounting and finance….it can be very confusing as to what the difference between the various certifications are. There’s also a lot of misconceptions and quite frankly, outright ignorance about these certifications. So let’s hop right into it, shall we?
Accounting Designations
The classical definition of accounting is the recording and analysis of financial activity that has already occurred. However, over time, the role of being an accountant has incorporated other tasks as well — such as business advising, technology implementation and taxation strategy (taxation is a part of accounting — but can really be its own field). You don’t need a degree, a degree in accounting, or be a CPA to work as an accountant.
Certified Public Accountant (CPA)
Many times when people think ‘accountant’ they think ‘CPA’. CPA stands for Certified Public Accountant and this is a license that is issued by various states in the United States. So each one has their own requirements in place to issue the license. Several things are standard though:
- Successful passing of the Uniform CPA Exam (a 4 part, 16 hour exam — where you have to pass all 4 parts within an 18-month time window)
- The completion of 150 college credit hours (a minimum number must be in accounting; some states require a minimum number of credits in other subjects as well — this varies from state to state)
- A minimum amount of work experience under another CPA (usually 1 – 2 years of full time work)
Although you can sit for the CPA exam without a degree in accounting, it may be difficult to meet the required coursework for your license without having a degree in accounting. It is possible though — and there are colleges that even offer certificates to people from non-accounting majors that will make them eligible to become a licensed CPA.
But let’s not lose sight of what this actually is: which is a license to practice as a public accountant. You can work as an accountant for a private company on their staff and not violate any laws or business protocols. Public accountants are the only accountants who can provide attestation services; independent certification of a company’s financial reports. CPAs are also authorized to represent tax payers in dealings with the IRS. However Enrolled Agents (more on them later) and Tax Attorneys (who won’t be addressed here) hold these rights as well.
Certified Management Accountant (CMA)
The Certified Management Accountant credential is issued by the Institute of Management Accountants. Since the designation is issued by this organization, anyone in the world can obtain this designation (the exam is given in 2 languages – English and Chinese). You do not have to have an accounting degree to take the exam. You do need to have relevant work experience though. The pass rates for the CMA exam are actually lower than the pass rates for the CPA exam (45% vs. 50%)….but keep in mind, this could be because of the much wider pool of backgrounds that those who take the CMA exam are coming from.
Associate Chartered Accountant (ACA)
The term ‘Chartered Accountant’ is commonly used in countries that are part of the British Commonwealth. Canada also has a ‘CPA’ designation….but it stands for ‘Chartered Public Accountant‘.
Master of Accounting (M.Acc.)
The Master of Accounting degree is a graduate program that is often pursued by those who are looking to both earn a degree and obtain the 150 credit hours needed to become a licensed CPA. Many times an accounting undergraduate degree is needed for admission into these programs. Many programs will also offer the opportunity for undergraduate accounting majors to earn an M.Acc. degree with only 1 year of additional study.
Tax Designations
Tax is part of accounting in that you often have to gather past financial activity and present it to the Internal Revenue Service (IRS) to show your tax liability. But in many ways, it is more similar to the practice of law — in that you have to know the tax code; interpret it; and apply it for your client’s need.
Not all accountants, including CPAs, are working tax professionals. In fact, the IRS stipulates that you do not need any particular credential to prepare tax returns for a fee (although some states do require this). Here are some designations that you’ll find among tax professionals:
Enrolled Agent (EA)
Enrolled Agents are licensed by the U.S. Department of the Treasury. Contrary to a commonly held misconception, they do not work for the IRS; although, if you work for the IRS for at least 5 years in certain capacities, you can be excepted from taking the Special Enrollment Examination (SEE) — which is a 3 part, 10 hour exam solely on the U.S. tax code. Since the Enrolled Agent designation is issued by a federal agency, Enrolled Agents can represent U.S. taxpayers regardless of location.
Master of Taxation (M.Tax)
The Master of Taxation is a graduate degree that is offered by many colleges and universities. Many people who wish to become CPA and who wish to focus on being a tax practitioner pursue this degree (since when paired with an undergraduate degree in accounting, can fulfill the 150 credit hour requirement needed to become a licensed CPA). Like most graduate degrees in business, it is around 30-40 credits in coursework that is dedicated to topics in taxation.
National Tax Practice Institute (NTPI)
That National Tax Practice Institute designates NTPI Fellows — attorneys, CPAs and enrolled agents who have completed a rigorous, 3-part program
Some Other Designations
Here are some of the other certifications that you’ll see among many of the professionals that work in accounting/taxation/finance:
Certified Bookkeeper (CB)
The American Institute of Professional Bookkeepers offers a Certified Bookkeeper (CB) credential to anyone who is able to pass their exam and complete 60 hours of continuing education every 2 years. There is also another bookkeeping designation called the Certified Public Bookkeeper (CPB) credential — but they don’t seem to be as widely known about (but it is getting there).
Master of Business Administration (MBA)
The Master of Business Administration (MBA) degree is a graduate degree in business. Unlike many graduate degrees, most MBA programs accept people with a bachelor’s degree in any major. If someone does not have an undergraduate degree in business, the will often need to take 1 or 2 semesters of business foundation programs before starting the core MBA curriculum.
MBA programs are very popular and can be challenging to gain acceptance to. Many (but not all) programs require that you take the Graduate Management Admission Test (GMAT) to gain admission. But just like colleges, the quality of MBA programs range from horrendous to top notch. In general, the best programs have accreditation from the Association to Advance Collegiate Schools of Business (AACSB).
MBA programs often have specialization tracks; such as accounting, finance, marketing, management information systems, entrepreneurship, etc.
Certified Financial Planner (CFP)
Similar to accountants, financial planners do not have to have any particular degree or certification to call themselves such. People do need to have a license to sell or broker securities and investment products. But the CFB Board does issue a Certified Financial Planner (CFP) designation. CFPs focus on businesses and not individuals. Even so, in the world of small business and tax practice, personal financial position comes into play a lot. There is an exam process to become a CFP. You can have a bachelor’s degree in any area. But you do have to complete required college level coursework in financial planning (which can be a part of a degree program or a specialized, non-degree program.
So breaking the normal protocol a bit on this post — I am allowing comments to be made to this post. If you have questions or corrections to any of the information given above, fee free to let me know. I will definitely be writing a post at some point in the future about why I pursued the professional certifications that I did. I hope this post was insightful and if it was, please feel free to share!