CPA License Requirements: What Does it Take to Get Licensed as a CPA?

11 Sep 2012

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You know how important being a CPA is and you’ve invested years of dedication, study and practice in preparation for becoming a CPA.

You enlisted in the best CPA review course you can find, and by effectively using the tips and resources you’re provided with, you finally took the CPA exam.

You excelled the CPA exam, with a passing score above 75 in all four sections.

You passed FAR, REG, BEC and AUD and have officially passed the CPA exam.

You’re now a qualified CPA ready to add the “3 letters” to your license and start getting jobs only CPAs can get, right?

Well, WRONG!

Of course, with a first time passing rate of under 30% and a national average passing rate of under 50%, the CPA exam is one of the most difficult professional exams anyone can take.

The average CPA exam pass rate for all CPA exam sections from 2010 – 2011 – which is an average of 47% – is shown in the graph below:

Pass Rate Data from NASBA

Provided you meet all the requirements already, passing the CPA exam is probably the most difficult thing you’ll do on your journey to become a CPA but the reality is that passing the CPA exam doesn’t qualify you as a CPA … yet.

Passing the CPA exam is one of the many steps you will take to become a CPA.

The only way to really call yourself a CPA and be able to practice as one, is by being licensed. But of course, you have to pass the CPA exam to be licensed.

Essentially, calling yourself a CPA by passing the CPA exam without being licensed is illegal.

Here’s Fast Forward Academy’s guide to everything you need to know about getting licensed as a CPA:

Does Passing the CPA Exam Automatically Make You a Licensed CPA?

The CPA exam is designed to test and prepare better accountants to protect public interest as far as accounting is concerned.

Passing the CPA exam is a first step in proving that you’re qualified to be a CPA, but it doesn’t make you licensed. And without a license you can’t practice.

The reason for a CPA license is to ensure the licensee is competent.

Becoming licensed as a CPA doesn’t just end there; you will still have to take steps to maintain your license that ensures you’re just as competent as you were when you first became a CPA.

When it’s Time to “be a CPA”

Being a CPA, or being able to call yourself a CPA is something that involves a lengthy process.

While passing the CPA exam is a critical aspect in the process of becoming a CPA, it isn’t the final part.

Essentially, you can’t call yourself a CPA if you’ve passed the CPA exam and you can’t add those 3 letters to your name unless you’ve been licensed.

Do You Need a CPA License to be Employed by the Big 4, or Other Important Firms?

A lot of us are in accounting to get employed by the Big 4 or some other major accounting firm.

You’ve probably dreamt about working for the Big 4 from a very young age and that’s probably the reason why you gave in your best effort in the best accounting school you could enter.

Unfortunately, even if you have A+ in college and the highest GP you’d still have problems working in the Big 4 if you didn’t have the CPA designation.

Not that you’d have many problems entering in the first place – especially if they recruit from your school – but you will have problems getting the higher salary you deserve and you’ll also have problems getting promoted to important managerial positions.

While you don’t really need a CPA license to be employed by the Big 4, you need it to get paid well and be promoted to important positions. You need it to prove your worth!

The table below illustrates how huge the salary gap can be when you have an accounting certification, especially the CPA certification:

Accountant with certification vs. Accountant without certification

It is also very important for you to realize that certain tasks can only be performed by a CPA, and these kinds of tasks are common in big accounting firms.

Passing the CPA exam doesn’t mean you’re a CPA yet, getting licensed is the crux of it.

The Requirements for Getting Licensed as a CPA

If you’ve heard about how hard the CPA exam is and how many people fail, you probably think it’s all you need to pass the CPA exam. If licensing is the real deal when it comes to being a CPA, what then does it take to become a licensed CPA?

What are the requirements for getting licensed as a CPA?

Every state is made up of a State Board of Accountancy, and each state board of accountancy determines the accounting requirements of their state.

There is no one size fits all rule when it comes to getting licensed as a CPA.

The requirements always differ for each state, but there are some general requirements common with most states when it comes to licensing:

  • You must have taken and passed all sections of the CPA exam
  • You must have passed the ethics exam offered by the state
  • You must have at least 1 year (sometimes 2 years) of experience under the direct supervision of a CPA. The experience is often required to be in public accounting, but some states will allow flexibility; you should get in touch with your State Board of Accountancy for more about what their experience requirements are
  • A minimum of a bachelor’s degree with at least 150 credit hours
  • Have a number of credit hours in accounting and business related courses; this varies according to states

Most states have other requirements, but they are mostly formed around the above ones. It is important to first get in touch with your State Board of Accountancy about their requirements on licensing before moving forward with that.

What kick-starts the CPA licensing process is passing the CPA exam. If you can’t pass the CPA exam then nothing else matters, so make sure you find the best CPA preparation course that can help you prepare to pass the CPA exam.

How Long does it Take to Get Licensed as a CPA?

As long as you’ve passed all 4 sections of the CPA exam, the ethics exam and you’ve met other licensing requirements for your state it’s only a matter of weeks – or months depending on your state – before you get licensed.

How long it takes will ultimately depend on your state but it can take three weeks for some states and it can take up to 8 weeks for others.

Make sure to get in touch with your State Board of Accountancy for more about the process and duration involved in getting licensed. Details about this will often be available on their website, and sometimes you’ll have to contact them to find out.

You can find out more about your State Board of Accountancy and how to contact them here.

If you want to know how long it takes to get licensed right from college, it is illustrated in the bar below:

How Long it Takes to become a CPA

How Long Does the CPA License Last?

With the effort involved in getting a CPA license and the difficulty of the process, it isn’t uncommon for people ask how long a CPA license lasts.

To keep the value of being a CPA as important as it is, getting licensed as a CPA isn’t just set and forgotten.

Depending on your state, you have to renew your CPA license after a number of years to keep it active.

As a requirement for being a licensed CPA, you have to complete a number of CPE courses before renewal of your CPA license. It involves 80 hours of qualifying continuing professional education (CPE) every two years – for most States. Two states, for example, that follow the 2 year renewal cycle are Florida and California.

It’s more for some states; take Illinois for example. To renew your CPA license in Illinois you have to do so every 3 years after fulfilling at least 120 hours of CPE.

This requirement will vary depending on your state but you can get in touch with your State Board of Accountancy to find out what the renewal cycle for your CPA license is, as well as the accompanying credit hours you have to fulfill.

Will Your CPA License be Valid in another State, Country or Jurisdiction?

Is it worth it to become a CPA if your plan is to use your license in another state, jurisdiction or country?

Using Your CPA License in another State/Jurisdiction

You can use your CPA license in another jurisdiction depending on the rules and requirement of that state.

Most jurisdictions will allow you to apply for reciprocity; that is the ability to be able to use your CPA license in a particular state if it is issued from a substantially equivalent state.

A substantially equivalent state is a state that has the same requirements as the state you were licensed in. To make this possible, the AICPA and NASBA have created the “Uniform Accountancy Act” designed to make it easy for CPAs to practice inter-state.

The Uniform Accountancy Act usually consists of the “3Es”. The 3Es stand for Education, Exam and Experience and it mainly consists of the following requirements:

  • You need to have fulfilled the 150 credit hours requirement when it comes to education
  • You should have passed all 4 sections of the CPA exam
  • You should have fulfilled at least one year of work experience

Most states have adopted the above explained standard, thereby making them substantially equivalent.

Some jurisdictions are yet to be substantially equivalent due to the fact that they’re yet to adopt these standards. Those jurisdictions are:

  • Colorado
  • Puerto Rico
  • Virgin Islands

If you get your license from the above 3 jurisdictions then you can’t get reciprocity from states required as substantially equivalent due to the fact that they’ve adopted the Uniform Accountancy Act. The reason is because of the difference in the examination and licensing requirements.

Some states are also referred to as substantially equivalent but have other ways you can get licensed without fulfilling the 3Es. These states are called borderline states and are only recognized by some – not all – states in terms of reciprocity.

Currently, those states are:

  • Delaware
  • Vermont
  • Wyoming
  • Pennsylvania
  • California – until January 2014
  • New Hampshire – until July 2014

Another way you can use your CPA license in another jurisdiction is to be licensed by endorsement; this is entirely different from reciprocity. Reciprocity means you can use your CPA license in a substantially equivalent state while endorsement means you have to apply to be licensed again in a particular state if you’re already licensed in a substantially equivalent state.

Some states – Florida for example – only accept licensure by Endorsement. In other words, while these states are substantially equivalent states you won’t be able to use your CPA license in those states by reciprocity. You’ll have to get licensed again by proving your credentials.

The requirements for licensure by endorsement differs depending on the state involved but it often involves proving you’ve met the education requirements, you’ve passed the CPA exam and that you have a certain years of work experience. Make sure you get in touch with the State Board of Accountancy of the state you want to get licensed in for more information about licensure by endorsement.

Using Your CPA License in another Country

It’s also possible to use your CPA license in other countries.

Sometimes, depending on the country, all you have to do is take an equivalency test in the country where you want to use your license.

It’s easier to get a job in New Zealand as a New Zealand Chartered Accountant for example by taking and passing a New Zealand equivalency test you’ll become a New Zealand Chartered Accountant.

In cases where there is no equivalency test you can take, there are also jobs for US CPAs in other countries around the world and you can check with the company you’re planning to work with to see if being a CPA meets their requirements for a position advertised.

Can You be a Licensed CPA if You’re an International Student?

Another aspect of getting licensed as a CPA is if you’re an international student.

You can become a licensed CPA as an international student but the process can be a little complicated. Here are the steps involved:

1. Determine Which State You Want Your License from: The first step you should take as an international student wanting to get licensed as a US CPA is to determine which state you want your license from.

How you want to use your license will often influence your choice. If you want to use your CPA license to pursue work in the US then you should be more careful about your choice, if you want only the license however, you can go with the states which have less strict rules.

Determine which state you want to pursue the CPA designation through. This will often be determined by a lot of factors, such as if you already have an accounting qualification from another recognized country and want to use that for licensing or if you want to take the CPA exam and get licensed.

Most states accept education from international students if they’re able to prove their education. All you need to do is use one of their recommended education evaluation services to evaluate your transcripts and education to see if it can be accepted by them.

Most international students also tend to stick to states that accept candidates with less than 150 credit hours to sit for the CPA exam – or that do not require a social security number to sit for the exam.

There are currently 54 US jurisdictions where you can be licensed as a CPA, so make sure to research each jurisdiction to find out which state has the most favorable requirement for you.

2. Getting the Required Work Experience: Provided your education has been evaluated and is found useful and that you’ve passed the CPA exam – or have a qualification accepted as useful for getting licensed – another major hurdle you have to overcome is in regards to the work experience.

Most states require you to have at least a year of experience in public accounting under a licensed CPA, which isn’t exactly an easy fit in another country.

Some states, however, will accept work experience that isn’t directly supervised by a CPA but that is evaluated by a licensed CPA. Examples of two states at the moment that recognize such experience are California and Montana.

3. It is Important to Note this: You can take the CPA exam in another jurisdiction and get licensed in another jurisdiction, but trying to get licensed in a state regarded as substantially equivalent with education from a state with lesser requirements won’t work.

If you take the CPA exam, for example, with a state that still allows candidates to sit exams with 120 credit hours then you won’t be able to get licensed in a state that follows the “Uniform Accountancy Act.”

Will Passing Just One Section of the CPA Exam Qualify You to be Licensed as a CPA?

The CPA exam consists of 4 exam sections and you’ve not yet passed the CPA exam even if you pass 3 of the 4 exam sections.

You need to pass all 4 CPA exam sections to have passed the “CPA exam” – and you have to do that within an 18-month period.

Passing just one section won’t qualify you to be licensed as a CPA because you haven’t passed “the CPA exam”.

How to Get the Job Experience Required to be a Licensed CPA

Depending on your state, there are two ways to get job experience as a CPA:

  • Get experience in a job under the direct supervision of a licensed CPA
  • Get experience in a job not under the direct supervision of a licensed CPA, but make sure your experience is verified by a licensed CPA

The problem is that most states require your experience to be in public accounting and supervised by a CPA, and most companies won’t hire a CPA without accompanying job experience. Getting the required experience as a CPA can be sometimes tricky then.

Here are a few ways you can get the job experience required to help you become a licensed CPA:

1. Work for a Nonprofit. You won’t be paid as much as you would if you’re working in your dream job, but getting experience from a nonprofit is just as valuable from getting experienced from anywhere else as long as the experience is verifiable.

2. Intern. If you’re just fresh out of college then you might want to apply to startups or companies accepting interns. You’ll only be learning the process there and the payment won’t be attractive, but getting the experience counts.

3. Freelance. Offer your services to small businesses as a freelancer or consultant and gain the required work experience doing so.

4. Churches and Religious Organizations: Your church probably needs a CPA to help with accounting and you also need the experience. Working for religious organizations can be a great way for you to gain the required work experience needed to be licensed as a CPA.

5. Jobs that Don’t Require Experience: There are companies that will happily employ a CPA without the required experience, although they don’t usually pay as much as companies that require experience.

Working for these companies isn’t about the payment but the experience. In most cases, you’ll also be able to get a job under the direct supervision of a CPA in these companies.

You can find these kinds of jobs on various job boards online, or by researching using internet search engines.

Note: Depending on your state, your experience has to be in public accounting so make sure you consider this when looking for jobs or contact your State Board of Accountancy for an alternative. Some states also require your experience to be under the direct supervision of a CPA, so make sure you factor this in when trying to get a job.

What are the CPE Requirements for Maintaining Your CPA License?

The CPE requirements differ for each state. Some states will require you to fulfill 80 hours of CPE in 2 years and others will require you to fulfill 120 hours of CPE in 3 years.

This requirement varies by states, though, so it is important that you get in touch with your State Board of Accountancy to find out what the CPE requirements for maintaining your CPA license are. This information can often be found on their website.

How to Get the Required CPE Needed to Maintain Your CPA License

You can get your CPE credits in a host of ways, and some common ways to get the CPE credits required to maintain your license are:

  • Seminars
  • Online webcasts
  • Live CPE classes
  • Self Study

Depending on where you’re planning to get your CPE credits, some programs will also give you some free CPE credits.

Some states also make it mandatory that part of your CPE credits contain credits for courses on ethics before each renewal period; anything from 2 – 8 CPE credit hours is okay with most states.

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