What Can a CPA Do That an EA Can’t?

A Certified Public Accountant (CPA) is a state-licensed accounting professional who has met rigorous education, examination, and experience requirements to provide a broad range of financial services to the public. This designation signifies a high level of expertise in various financial matters, including tax preparation, auditing, and financial planning. An Enrolled Agent (EA) is a federally licensed tax practitioner authorized by the U.S. Department of the Treasury to represent taxpayers before the Internal Revenue Service (IRS). EAs specialize in taxation and have unlimited rights to represent clients on all tax matters before the IRS, including audits, collections, and appeals. While both CPAs and EAs are highly qualified, their scopes of practice differ significantly. This article will clarify the specific services and authorities unique to a CPA, providing insight into which professional might best suit particular financial needs.

Authority Granted by State Licensure

The fundamental distinction between a CPA and an EA lies in their licensing authority and the resulting scope of their practice. CPAs receive their license from individual state boards of accountancy, which requires meeting specific educational and experience criteria, along with passing the Uniform CPA Examination. This state-level licensure grants CPAs the authority to practice public accounting within their licensed state, allowing them to engage in a wide array of accounting services beyond federal tax matters. Their capabilities extend to state tax compliance, state-specific financial regulations, and general accounting services.

In contrast, Enrolled Agents are licensed federally by the U.S. Department of the Treasury under IRS Circular 230 regulations. This federal licensure provides EAs with unlimited practice rights to represent taxpayers before the IRS concerning federal tax issues. An EA’s authority is primarily confined to federal tax matters and representation before the IRS, irrespective of the state. The state-based licensing of CPAs provides a broader foundation for their services, encompassing a wider spectrum of financial and accounting practices beyond the federal tax specialization of EAs.

Exclusive Scope of Attestation Services

The ability to perform attestation services represents a significant and exclusive capability of CPAs, setting them apart from Enrolled Agents. Attestation services involve providing an independent opinion on the reliability of financial information. These services primarily include audits, reviews, and compilations of financial statements. Audits provide the highest level of assurance, where a CPA examines financial records to express an opinion on whether the financial statements are presented fairly in accordance with Generally Accepted Accounting Principles (GAAP).

Reviews offer a more limited assurance, involving inquiries and analytical procedures to determine whether material modifications are necessary for financial statements to conform with GAAP. Compilations present financial information in the form of financial statements without expressing any assurance. These services are important for various purposes, such as securing loans, satisfying regulatory requirements, attracting investors, or facilitating the sale of a business. Only CPAs, due to their state licensure and training in GAAP and auditing standards, are legally authorized to issue an opinion on the fairness of financial statements. Enrolled Agents cannot perform these attestation services, as their expertise and authority are centered on tax matters rather than financial reporting verification.

Advisory Beyond Federal Tax Matters

CPAs often provide a broader spectrum of advisory and consulting services that extend beyond the federal tax focus of Enrolled Agents. Their comprehensive accounting education and state licensure equip them to offer diverse financial guidance. CPAs can assist with business valuation, which involves determining the economic value of a business or its assets, often required for mergers, acquisitions, or legal disputes. They also engage in forensic accounting, investigating financial discrepancies, fraud, and other financial irregularities, providing support in legal proceedings or internal investigations.

Beyond tax optimization, CPAs provide complex financial planning, encompassing broader financial strategies, investment analysis, and estate planning. CPAs also offer internal control consulting, advising businesses on establishing and maintaining internal financial controls to safeguard assets and ensure accurate financial reporting. CPAs can provide support for obtaining financing by assisting businesses in preparing financial projections and presentations necessary for lenders or investors. While EAs are federal tax experts, CPAs frequently possess expertise in State and Local Tax (SALT) compliance and planning, navigating tax laws across different jurisdictions.