Talk:Certified Public Accountant/Archives/2013

Omission

A curious omission in this article is that (at least until the changes described in the article made Nov. 2003), only 5% of those people who took the CPA test for the first time passed it. AFAIK, this makes that test the most difficult of any professional certification tests. (I'd add this fact to the article, but I don't have a citable source for it -- although every accountant appears to know it.) -- llywrch 18:52, 3 October 2005 (UTC)

The percentage of passing is indeed one of the lowest in terms of Board examinations. A number of CPAs who are engaged in providing managerial services to corporate clients also take the Bar to better equipped themselves in issues involving legalities and taxation. Modelwatcher 06:14, 23 November 2006 (UTC)

Education

I want to know what percentage of CPAs have no more than a bachelor's degree? -Amit

It may be that the statment "This requirement mandating 150 hours of study has been adopted by 45 states" is correct with respect to ultimate certification (I don't know that it is). But, this paragraph relates to sitting for the test. According to the Becker website, not even half of all states have adopted the 150 hour requirement to sit for the test. —Preceding unsigned comment added by 141.156.72.198 (talk) 20:41, 8 December 2009 (UTC)

Use of "buddy-buddy"

Instead of the paragraph stating the CEO's should not be buddy-buddy with his or her outside accountants, a more appropriate statement should make reference to the rules of independence by which every CPA is bound. It should also include a reference to Sarbanes-Oxley Act of 2002. The statement used is much too broad and is misleading. [This comment was by JohnPatterson on 14 March 2006].

Dear fellow editors: Pursuant to comment by John Patterson, I made some edits. I think a reference to Sarbanes-Oxley would also be good, but I'm short of time today and I'd like to take time before I add anything on that law. Possibly someone else can get to it before I do. Yours, Famspear 21:40, 14 March 2006 (UTC)

General business advice: CPAs and attorneys

Dear fellow editors: I would like to comment on the following entry from the main article:

Many in the business world feel it necessary to work in conjunction with a licensed attorney as CPAs are unable to provide legal advise [sic; should be “advice”] to their clients.

It’s not clear from this passage what the editor was trying to say. Perhaps he or she was trying to say that some people use an attorney for general business advice in addition to a CPA. Perhaps the editor was trying to say some people use an attorney for general business advice instead of a CPA. In any case, I argue the entry “as is” raises more questions than it answers. The implication may have been that because business has so many inherent legal questions, a businessman would need a lawyer “instead of” a CPA for general business advice. However, that argument somehow proves too much; business has so many inherent accounting issues, a businessman would be just as likely (if not more likely) to need a CPA “instead of” an attorney. I don’t want to put words in my fellow editor’s mouth. I would like to point out that many business people would not look upon either an attorney or a CPA as somehow being their sole provider of general business advice.

Generally, the more sophisticated the business, the more likely that business is to work with a group of advisers – attorneys for legal advice, CPAs for accounting advice, insurance people for insurance advice, and so on. You wouldn’t necessarily feel it necessary to work with an attorney instead of a CPA merely because CPAs are unable to provide legal advice. You would want to work with an attorney in addition to a CPA – not because the CPA cannot practice law without an attorney’s license – but because the attorney does provide legal advice. Business people need both legal and accounting advice from time to time.

There certainly is “overlap” between the two professions – though many of us don’t acknowledge it. Much of the tax advice given by CPAs, for example, really is legal advice (hey, don't tell anybody!) – though it’s never called “legal” advice, and many CPAs and attorneys don’t normally think of tax advice as being "legal" advice.

I have practiced as an attorney and as a certified public accountant, and I have a total combined legal and accounting experience of -- well, let's say over 20 years and leave it at that. Maybe someone else has a different perspective. I don't want to change the entry in the main article in this case, at least not at this point, as I may be all wet. Anybody have any thoughts? Yours, Famspear 03:08, 8 May 2006 (UTC)

Dear fellow editors, I would like to further clarify the roles and backgrounds of CPA's and attorneys, and tax specialists.

Small business attorneys focus mainly on legal matters such as contracts, entity formation and debt collections.

Small business accountants wear many hats, such as: handling the books, interacting with the state and federal revenue services, reconciling bank records, preparing quarterly wage reports, etc. They simply don't have the time to learn all the intricacies of the ever changing tax code (now 72,536 pages) and applying the tax saving opportunities that lie within it.

Though competent and qualified, the attorneys and accountants serving the small business community are not tax specialists. They are general practitioners. CPA's are no longer automatically admitted to practice before the United States Tax Court. Most CPA's have not earned the designation of LLM from a degree of Master of Laws in Taxation, and most are not attorneys (J.D.'s).

A CPA performs post-transaction work. A tax attorney performs pre-transaction work. A tax attorney will advise and assist in structuring business or personal transactions so as to minimize taxable income, reduce the marginal tax rate, qualify for all available tax credits, minimize the Alternative Minimum Tax, and defer and/or control when tax is required to be paid. The CPA will help properly record and report the transaction. Very little can be done to change the tax consequence after a transaction has taken place.

A CPA performs compliance work for the IRS. Most people mistakenly believe that CPAs are certified tax advisors. CPAs are professionals, but they are not tax attorneys. CPAs are certified for adherence to proper accounting procedures, not tax law. CPAs determine your liability, but not the cause of it. By law, he/she must use the numbers you provide.

According to our own treasury, in 1998, the average small business overpaid it's taxes by $11,638. At that time the tax code was about 40,000 pages. Yours, Snanai (talk) 21:47, 5 January 2012 (UTC)

Some quotes from above:

”Small business accountants wear many hats, such as: handling the books, interacting with the state and federal revenue services, reconciling bank records, preparing quarterly wage reports, etc. They simply don't have the time to learn all the intricacies of the ever changing tax code (now 72,536 pages) and applying the tax saving opportunities that lie within it.”

My response: No one, whether a tax lawyer or a CPA specializing in tax, has the time to “learn all the intricacies of the ever changing tax code.” And the Internal Revenue Code itself is huge, but it’s nowhere near 72,536 pages. The Internal Revenue Code, Treasury regulations, IRS revenue rulings, IRS revenue procedures, and other IRS pronouncements, the tax treaties, and the huge mass of case law together may well come to 72,536 pages.

”Though competent and qualified, the attorneys and accountants serving the small business community are not tax specialists. They are general practitioners.”

Well, no, that’s really too broad of a statement. Some are general practitioners. Others are specialists. It depends on the individual. Many attorneys and accountants serving the small business community are indeed tax specialists. Many of them do nothing but tax – and some specialize in sub-categories of tax.

”CPA's are no longer automatically admitted to practice before the United States Tax Court.”

It is correct to say that only someone licensed as an attorney at law can be “automatically” admitted to the bar of the U.S. Tax Court. All others must pass a Tax Court bar exam.

”Most CPA's have not earned the designation of LLM from a degree of Master of Laws in Taxation, and most are not attorneys (J.D.'s).”

Well, that’s correct. Generally, a person is not eligible to enter an LL.M. degree program unless he or she already has a J.D. degree. There are other kinds of Master’s degrees in taxation. For example, the University of Denver has a program for both lawyers and non-lawyers. The lawyers get an LL.M., and the non-lawyers get a “Master in Taxation” or something like that.

A CPA performs post-transaction work. A tax attorney performs pre-transaction work.”

That’s a bit of an over-simplification, but that’s generally correct in most cases.

”A CPA performs compliance work for the IRS. Most people mistakenly believe that CPAs are certified tax advisors.”

In the United States, as far as I know there is no such thing as a “certified tax adviser” in the sense of someone certified or licensed by a federal or state government agency to give tax advice. There might be such a designation as “certified tax adviser” granted by some private organization somewhere in the United States (it seems everyone these days is setting up organizations and creating "credentials" out of thin air), but the term "certified tax adviser" is not generally recognized.

On the point about compliance work: Some CPAs do only compliance work (meaning, preparing tax returns), but others do other kinds of tax work as well, including procedural work such as representing clients in IRS audits and IRS collection (liens, levies, etc.) matters.

”CPAs are certified for adherence to proper accounting procedures, not tax law. CPAs determine your liability, but not the cause of it. By law, he/she must use the numbers you provide.”

Sorry, but that’s not correct. First, there is no such thing in the United States as a person being “certified for adherence to proper accounting procedures.” And it is not correct to say that CPAs cannot determine the “cause” of your tax liability. A CPA can most certainly determine exactly the “cause” of your tax liability -- and does so, every time he or she prepares your tax return. And no, there is no law that requires a CPA to “use the numbers you provide.” It is true that a CPA does not generally “audit” the data used to prepare tax returns – but he or she definitely is NOT allowed to simply accept the numbers the client provides, much less “required” to do so. IF the CPA has reason to believe the numbers are not correct, the CPA (and any other tax return preparer) has a legal duty to dig more deeply. Famspear (talk) 23:33, 5 January 2012 (UTC)

Further education:

"My response: No one, whether a tax lawyer or a CPA specializing in tax, has the time to “learn all the intricacies of the ever changing tax code.” And the Internal Revenue Code itself is huge, but it’s nowhere near 72,536 pages. The Internal Revenue Code, Treasury regulations, IRS revenue rulings, IRS revenue procedures, and other IRS pronouncements, the tax treaties, and the huge mass of case law together may well come to 72,536 pages."

According to tax publisher CCH, there are now 72,536 pages of federal tax code rules, regulations, and IRS rulings. Together, that is what makes up the "law" as it must be followed.

"Well, no, that’s really too broad of a statement. Some are general practitioners. Others are specialists. It depends on the individual. Many attorneys and accountants serving the small business community are indeed tax specialists. Many of them do nothing but tax – and some specialize in sub-categories of tax."

CPAs can provide essential advice concerning financial planning, and they routinely help clients file or correct tax returns. However, they are not well versed in the law. That's why we have LAWyers. Of course there are "some" that are specialists, but even those that do "nothing but tax" really do nothing but tax preparation, not tax planning. A simple look at the qualifications of professionals at "tax strategy" firms serving the small business community verses large corporations and you will find small business firms are comprised mostly of CPA's, while firms serving the larger corporations are comprised of CPA's, along with J.D's and LLM's - specialists in tax law, as opposed to tax preparation. The distinction is not just a semantic one.

It is a fact that small privately held businesses pay a considerably higher percentage of their earnings to taxes than do large corporations. Part of the reason for this is the commonly held belief that CPA's are tax law specialists. They are not.

Most CPA's have not earned the designation of LLM from a degree of Master of Laws in Taxation, and most are not attorneys (J.D.'s). ::Well, that’s correct. Generally, a person is not eligible to enter an LL.M. degree program unless he or she already has a J.D. degree. There are other kinds of Master’s degrees in taxation. For example, the University of Denver has a program for both lawyers and non-lawyers. The lawyers get an LL.M., and the non-lawyers get a “Master in Taxation” or something like that.

Of course it's correct. A Master of Laws in Taxation is typically reserved for lawyers as opposed to CPA's because CPA's are not tax LAW specialists, whereas some lawyers are. Yes, a CPA, or ANYONE with an undergraduate degree of ANY background can earn a Master of Science in Taxation, Master Business Taxation, or a Master in Taxation. However, if the CPA had done this, they would surely use the suffix in their professional title (MST, MBT, or MTax). To my greater point, most CPA's do not.

”A CPA performs compliance work for the IRS. Most people mistakenly believe that CPAs are certified tax advisors.” ::In the United States, as far as I know there is no such thing as a “certified tax adviser” in the sense of someone certified or licensed by a federal or state government agency to give tax advice. There might be such a designation as “certified tax adviser” granted by some private organization somewhere in the United States (it seems everyone these days is setting up organizations and creating "credentials" out of thin air), but the term "certified tax adviser" is not generally recognized.

Correct, no such thing as a "certified tax advisor". However, most people who use CPA's believe that their CPA is a specialist in tax law, which is not true, unless of course that CPA is also an attorney and LLM.

"On the point about compliance work: Some CPAs do only compliance work (meaning, preparing tax returns), but others do other kinds of tax work as well, including procedural work such as representing clients in IRS audits and IRS collection (liens, levies, etc.) matters."

Preparing IRS tax returns, and performing procedural work in IRS audits and IRS collection, is IRS compliance work.

"Sorry, but that’s not correct. First, there is no such thing in the United States as a person being “certified for adherence to proper accounting procedures.” And it is not correct to say that CPAs cannot determine the “cause” of your tax liability. A CPA can most certainly determine exactly the “cause” of your tax liability -- and does so, every time he or she prepares your tax return. And no, there is no law that requires a CPA to “use the numbers you provide.” It is true that a CPA does not generally “audit” the data used to prepare tax returns – but he or she definitely is NOT allowed to simply accept the numbers the client provides, much less “required” to do so. IF the CPA has reason to believe the numbers are not correct, the CPA (and any other tax return preparer) has a legal duty to dig more deeply."

First, CPA's are licensed by their state to attest for the adherence to Generally Accepted Accounting Principles (GAAP). In this instance, GAAP was loosely referred to as "proper accounting procedures".

In addition, according to James R. White, Director, Tax Issues for the United States General Accounting Office, "taxpayers who use a paid tax preparer are still responsible for the accuracy of their return. According to the law, taxpayers take responsibility for the accuracy of their returns when they sign them. Even if the preparer is at fault, it is the taxpayer who is ultimately responsible for any additional tax, interest, and/or penalties." Further, "Paid preparers are not always the cause of problems—taxpayers can provide preparers inaccurate or incomplete information. Despite using a preparer, taxpayers are still ultimately responsible for the accuracy of their return." Further, "Paid preparers... rely heavily on their clients’ oral statements and documentation to complete tax returns. Paid preparers take various steps to ensure that the tax returns they complete are accurate, such as probing about personal circumstances and reviewing income and expense documentation. However, the effectiveness of such steps depends, in part, on the taxpayer. If taxpayers provide inaccurate or incomplete information about, for example, their social security or if they do not keep tax documents, such as wage or interest statements, preparers cannot complete an accurate return." Further, "estimated that over 2 million taxpayers overpaid their 1998 taxes by $945 million… Half of these taxpayers used a paid preparer."

If the CPA does not have reason to believe the numbers are incorrect, he/she uses the numbers provided to them by the client, and performs the year end compliance work required by the IRS. The CPA basically subtracts expenses from revenues, throws in the standard deductions, and tells the client how much they owe the IRS. The government agrees. According the GAO, small businesses, over a two year period overpaid their taxes by 18 Billion Dollars.

The CPA handles the books, interacts with state and federal revenue services, reconciles bank records, prepares quarterly wage reports, and files taxes (post transaction). A tax attorney can properly advise regarding tax planning (pre transaction).Snanai (talk) 16:20, 6 January 2012 (UTC)

My fellow editor wrote:

“CPAs can provide essential advice concerning financial planning, and they routinely help clients file or correct tax returns. However, they are not well versed in the law. That's why we have LAWyers.”

I believe that’s too general of a statement to be correct. The average CPA is much more well versed in federal tax law, for example, than the average attorney.

“A Master of Laws in Taxation is typically reserved for lawyers as opposed to CPA's because CPA's are not tax LAW specialists, whereas some lawyers are. Yes, a CPA, or ANYONE with an undergraduate degree of ANY background can earn a Master of Science in Taxation, Master Business Taxation, or a Master in Taxation. However, if the CPA had done this, they would surely use the suffix in their professional title (MST, MBT, or MTax). To my greater point, most CPA's do not.”

That’s because most CPAs don’t have a master’s degree in tax. Likewise, most lawyers do not have an LL.M. in tax (or an LL.M. in anything else).

“However, most people who use CPA's believe that their CPA is a specialist in tax law, which is not true, unless of course that CPA is also an attorney and LLM.”

Sorry, but that is incorrect. There are plenty of CPAs who are “specialists” in tax law. In fact, as a percentage of the total population, the number of CPAs who are “specialists” in tax law is almost certainly much greater than the number of lawyers who are “specialists” in tax law. Not only that, but the Uniform Certified Public Accountant Examination (which a person must pass to become licensed as a CPA) includes extensive testing of the knowledge of federal income tax law. Relatively few state bar exams (which a person must pass to be licensed as an attorney) include anything at all on the subject of taxation -- federal or otherwise.

“Preparing IRS tax returns, and performing procedural work in IRS audits and IRS collection, is IRS compliance work.”

No, I would consider procedural work in IRS audits and IRS collections matters to be representing taxpayers in dealings with a government agency (the IRS), not “compliance” work. Having a CPA representing a taxpayer in an IRS audit is no more “compliance” work than having a lawyer represent a taxpayer in a tax case in federal court.

“First, CPA's are licensed by their state to attest for the adherence to Generally Accepted Accounting Principles (GAAP). In this instance, GAAP was loosely referred to as "proper accounting procedures".”

Yes, characterizing the adherence of a financial statement to GAAP as “proper accounting procedures” was a very loose use of terminology.

“The CPA basically subtracts expenses from revenues, throws in the standard deductions, and tells the client how much they owe the IRS.”

No. That is a very basic misconception about what CPAs do in preparing tax returns. The preparation of almost any federal income tax return "basically" involves quite a bit more than that.

Actually, I am now going to scold myself for using the talk page to respond to these comments. The talk page should be reserved for discussing ways to improve the article, not for talking about the practice of accountants and lawyers. Famspear (talk) 19:11, 6 January 2012 (UTC)

         "Many in the business world feel it necessary to work in conjunction with a licensed attorney as CPAs are unable to provide legal advise to their clients."

This was the original comment from the main article that was being discussed. This whole "talk" is about improving the main article.

The subtitle of this "talk" section is "CPA's and attorneys".

Let's be clear for the benefit of our readers. The profession of tax attorney is separate and distinct from that of an accountant, CPA designation or otherwise. The simple fact is that too many accountants fancy themselves consultants and attorneys, in addition to accountant.

I believe the point that the original editor was making is one that the evidence supports, and does not require pages of debate.

Professionals that carry the "CPA" title alone, without further formal training in the specialized field of tax law, are not tax law specialists. My good friend Famspear is failing to recognize the difference between preparing taxes and doing all of the post transaction work that he has mentioned, and the pre transaction work of a good tax attorney which would minimize a tax consequence before a transaction takes place.

The original comment about many in the business world seeking licensed attorneys is true. I have laid out the case clearly regarding the qualifications of large corporation tax strategists (CPA's, JD, LLM's) verses small business tax strategists (CPA's). When you compare the percentage of earnings paid to taxes of small and large corporations, one clearly understands through demonstration, the role and benefit of a good tax attorney, and a CPA.

One does not replace the other. The tax attorney is the coach, calling the plays. The CPA is the score keeper, keeping good records.

Yours, Snanai (talk) 19:46, 6 January 2012 (UTC)

Dear editor Snanai: I'll have to disagree. The idea that a CPA, without further formal training in the specialized field of tax law, is not a tax law specialist -- in relation to the expertise of a lawyer -- is simply misleading. And no, I am not "failing to recognize the difference between preparing taxes and doing all of the post transaction work that he has mentioned", etc. I'll continue this on your talk page. Yours, Famspear (talk) 19:57, 6 January 2012 (UTC)

Link to CPA Australia

Is this external link appropriate for this page? Does anyone object to its removal? Because in the CPA Australia context, CPA stands for Certified Practicing Accountants and members of CPA Australia are members of a Professional Body, and not licenced in the U.S as Certified Public Accountnants. Regards,Smorter 02:36, 10 June 2006 (UTC)

Uniform CPA Exam

Doesn't the information on the Uniform CPA Exam belong in an article of its own? Psnae 02:20, 24 June 2006 (UTC)

CPA - Not just a U.S. designation

CPA is also used as a designation for qualified accountants in many countries other than the U.S., including Singapore, Israel, Malaysia, South Africa, the Philippines and the Republic of Ireland. Plus Australia, where there's only a slight difference of name (certified practising accountant). This article ought to reflect the international use of the term CPA, perhaps with country specific versions such as Certified Public Accountant (United States). Psnae 02:25, 24 June 2006 (UTC)

The law tested on CPA exam

I added a correction regarding the law that's tested on the CPA exam. The CPA exam still tests both state and federal law. General contract law and Uniform Commercial Code, both of which are still tested, are creatures of state law, not federal law. The fact that what is being tested are the general principles (not specifically identified to, say, Vermont or Missouri or Nevada) does not change the fact that contract law and UCC are state laws. Yours, Famspear 21:34, 10 May 2007 (UTC)

PS: The law of agency is also still tested. That's primarily state law. Famspear 21:58, 10 May 2007 (UTC)

acknowledgement about CPA

can u gave me full knowledge of CPA course its fee and exam details with book.

Neutrality of "Practice mobility" section

this is a political argument and doesn't belong on wikipedia. —Preceding unsigned comment added by 69.226.33.240 (talk) 09:13, 3 October 2009 (UTC)

Anybody here to give me information about What kind of documents necessary for The Immigrant who want to give the CPA exam? — Preceding unsigned comment added by Pari87patel (talk • contribs) 17:57, 20 March 2011 (UTC)

I agree with the original poster, this post makes an assertion about how states should adopt new policies, which is an opinion, but it is presented as a fact.

History of the CPA

I would like to know more about the history of this certification in the US. Could anyone write it? Or can anyone direct me to some resources and I could add this section? Thanks, --Wikidan81 (talk) 14:33, 11 February 2010 (UTC)

There is no mention about employment opportunities and learning capability of CPAs. —Preceding unsigned comment added by 24.180.16.88 (talk) 23:02, 29 September 2010 (UTC)

certified accountant redirects

See Wikipedia_talk:WikiProject_Business/Accountancy_task_force#certified_accountant. --John Vandenberg ^(chat) 00:28, 13 June 2011 (UTC)