What Does a CPA Do for You and Your Business?

A Certified Public Accountant (CPA) is a financial professional and trusted advisor to individuals and businesses. Unlike general accountants, CPAs meet stringent educational, examination, and experience requirements, distinguishing their expertise and adherence to ethical standards. They offer a broad spectrum of services beyond basic accounting tasks. Their understanding of financial regulations enables them to provide guidance, helping clients navigate complex financial decisions and ensure compliance.

Core Tax Services

CPAs offer tax-related services, assisting individuals and businesses in fulfilling tax obligations and optimizing their financial position. A primary function involves tax preparation and filing, where CPAs prepare and submit tax returns. This includes individual income tax returns (Form 1040), corporate tax returns (Form 1120), partnership tax returns (Form 1065), and specialized filings like payroll taxes and sales tax. They ensure accuracy and compliance with current tax laws, identifying eligible deductions and credits to minimize tax liabilities.

Beyond mere compliance, CPAs engage in proactive tax planning to help clients reduce future tax burdens. This involves advising on financial decisions throughout the year, such as the timing of income and expenses, optimizing contributions to retirement accounts, and structuring business operations for tax efficiency. They integrate tax considerations into broader financial objectives, aiming to enhance after-tax income and wealth accumulation.

CPAs also provide representation services, acting on behalf of clients during interactions with tax authorities like the IRS or state tax departments. This representation can occur during audits, inquiries, or disputes, where the CPA navigates complex tax issues and advocates for the client’s interests. They prepare and submit documentation, formulate responses to official inquiries, and resolve tax-related challenges.

Financial Advisory and Planning

CPAs extend their expertise beyond tax compliance to offer financial advisory and planning services. For individuals, this often includes personal financial planning, providing guidance on budgeting, managing debt, and developing investment strategies without recommending specific investment products. They assist with planning for significant life events such as retirement, education savings, and major purchases. They help individuals establish clear financial goals and create actionable plans to achieve them.

For businesses, CPAs provide consulting services to enhance financial management and operational efficiency. They conduct cash flow analysis, helping businesses understand and predict cash flow to maintain liquidity and make informed decisions. CPAs also assist with budgeting, financial forecasting, and strategic planning, guiding businesses in setting realistic financial targets and optimizing resource allocation.

CPAs also offer guidance in wealth management and estate planning. They help clients structure their finances for long-term growth and asset protection, often collaborating with legal professionals to ensure a cohesive strategy. They advise on efficient wealth transfer, minimizing estate taxes, and establishing trusts or other legal vehicles to preserve assets across generations.

Accounting and Assurance Services

CPAs perform core accounting and assurance functions important for businesses of all sizes. They provide bookkeeping services, managing daily financial transactions, maintaining accurate ledgers, and organizing financial records. This foundational work supports the preparation of accurate financial statements, including balance sheets, income statements, and cash flow statements. These statements are important for internal management insights and external reporting requirements.

Beyond basic accounting, CPAs offer varying levels of assurance services: audits, reviews, and compilations. An audit provides the highest level of assurance, involving an independent examination of an entity’s financial records. The objective is to express an opinion on whether financial statements are presented fairly, in accordance with Generally Accepted Accounting Principles (GAAP). GAAP is a set of standardized rules and procedures for financial reporting in the United States, ensuring consistency and transparency.

A review offers a more limited level of assurance. In a review engagement, the CPA performs analytical procedures and inquiries to identify material modifications that should be made to the financial statements. This service is less extensive than an audit and provides a basis for expressing limited assurance. The lowest level of service is a compilation, where the CPA assists management in presenting financial information in the form of financial statements without expressing assurance regarding their accuracy or completeness.

The CPA Credential and What It Means

The Certified Public Accountant (CPA) designation signifies expertise and professional commitment in the financial field. Becoming a CPA requires meeting specific educational requirements, typically 150 semester hours of college coursework, exceeding a standard bachelor’s degree. This academic background provides understanding of accounting principles and business practices.

Candidates must also pass the Uniform CPA Examination, a multi-part test covering auditing and attestation, business environment and concepts, financial accounting and reporting, and regulation. This examination assesses a candidate’s knowledge and skills across a broad range of accounting and financial topics. Additionally, relevant work experience is required, often supervised by a licensed CPA, to ensure practical application of theoretical knowledge.

Maintaining the CPA license requires ongoing Continuing Professional Education (CPE). These annual education requirements ensure CPAs remain current with evolving tax laws, accounting standards, and best practices. CPAs are bound by a code of professional conduct, such as the AICPA Code of Professional Conduct, which emphasizes integrity, objectivity, and a commitment to serving the public interest. This adherence to ethical standards, coupled with state board regulation, provides trust and accountability for clients engaging with a CPA.