A CPA (certified public accountant) is an accountant who holds a license from a state board of accountancy after meeting that state's education, exam and experience requirements. The license gives the holder rights that an unlicensed accountant lacks, mainly the right to sign audit and review reports on financial statements and unlimited rights to represent taxpayers before the IRS.
So when someone asks what is a CPA, the short answer is a licensed professional who is accountable to a regulator. Every CPA is an accountant, but many accountants in the US are not CPAs. The license also has to be maintained through continuing professional education (CPE) and an ethics framework, which is why lenders, investors and the IRS treat a CPA's signature differently from anyone else's. This guide covers how the license is earned in 2026, including the newer 120-hour route, how the exam is built, what CPAs actually do for clients, and what the role pays.
The title "CPA" is protected by state law. Each of the 50 states, plus the District of Columbia and the US territories, runs its own board of accountancy, and that board decides who can call themselves a CPA and who can sell CPA services. The IRS describes CPAs as "Licensed by state boards of accountancy, the District of Columbia, and U.S. territories."
Two national bodies shape the rules without issuing licenses themselves. The American Institute of CPAs (AICPA) writes the CPA Exam and professional standards. The National Association of State Boards of Accountancy (NASBA) coordinates the state boards and, with the AICPA, maintains the Uniform Accountancy Act, a model law that states copy in whole or in part.
What sets the license apart is attest work. The AICPA's own career site states that "Only CPAs are legally permitted to perform certain services, like auditing financial statements" and formally attesting to their accuracy. In practice that means audits and reviews must be issued through a licensed CPA firm, and those firms answer to quality management rules such as the AICPA's SQMS standards. A business that needs audited statements for a bank, an investor or a government grant has to hire a CPA firm. If you are weighing whether a generalist practice or a licensed firm suits you, our comparison of an accounting firm and a CPA firm sets out what each can sign.
Licensing rests on four elements. NASBA summarises them as "the 4 E's: education, experience, ethics and the Exam." The details sit with each state board, so candidates should always read their own board's rules before planning coursework or a job offer.
For decades the standard route has been 150 semester hours of college education, which is 30 hours more than a typical bachelor's degree, plus one year of supervised experience. This route still exists in every state. Many candidates fill the extra 30 hours with a master's in accounting or taxation, and others take additional undergraduate courses.
In May 2025 the AICPA and NASBA approved an additional path. According to the AICPA announcement dated May 14, 2025, it requires "a baccalaureate degree, including an accounting concentration, plus two (2) years of experience," followed by passing the CPA Exam. States must "formally enact legislation and/or adopt rules and regulations" before candidates can use it. The same release noted that 14 states had already taken steps when the model was approved.
Adoption moved quickly after that. In November 2025 the AICPA reported that "half of the states have adopted the third pathway, and 22 states plan to introduce legislation," with effective dates varying by jurisdiction. That count dates from late 2025 and more states have acted since, so check NASBA's pathways map for the current status of your state.
Tennessee is a clear example of how a board writes this into its rules. The Tennessee State Board of Accountancy now lists two routes: "Pathway 1 to initial licensure requires 150 hours of education and one year of experience," and "Pathway 2 to initial licensure requires 120 hours of education and two years of experience." The second pathway opened on January 1, 2026 under the Less is More Act of 2025. Other states have set later start dates, so a candidate in one state may still be on the 150-hour rule while a classmate across the border is not.
Ethics is the fourth element. Boards handle it in different ways, such as a separate ethics exam or a required ethics course, and ethics hours return later as part of CPE. Check the form your board requires before you apply for the license.
The figures below are illustrative. They assume a Tennessee graduate who finishes a 120-credit accounting degree in May 2026 and passes all four exam sections while working.
| Step | Pathway 1 (150 hours) | Pathway 2 (120 hours) |
|---|---|---|
| Credits held at graduation | 120 | 120 |
| Extra credits needed | 30 | 0 |
| Time spent on extra credits | 1 academic year (2026 to 2027) | none |
| Experience required | 1 year | 2 years |
| Earliest experience complete | mid-2028 | mid-2028 |
| Years of paid work by licensure | 1 | 2 |
Both candidates reach the license at roughly the same time, about two years after graduation. The Pathway 2 candidate has an extra year of salary and no extra tuition, while the Pathway 1 candidate holds a graduate qualification. Which is better depends on the job market and the candidate's goals. If the graduate's state has not adopted the new route, only the first column applies, and a move to another state does not automatically change that.
The Uniform CPA Examination switched to a core-plus-discipline model in January 2024. NASBA describes the current format plainly: "The CPA Exam consists of three four-hour Core sections and one four-hour Discipline section of your choice." That makes 16 hours of testing in total.
Every candidate takes the three core sections:
Each candidate then picks one discipline section. Business Analysis and Reporting (BAR) suits people heading toward technical accounting, reporting and financial analysis. Information Systems and Controls (ISC) leans toward IT audit, data and security. Tax Compliance and Planning (TCP) goes deeper into individual and entity tax work.
Candidates need a score of at least 75 on each section. The state board decides how long passed sections stay valid, so the credit window depends on where the candidate applies. Core sections can be booked year-round, while discipline sections are offered in set windows each quarter, which matters when planning a study calendar.
A CPA license is renewed on a cycle, and renewal depends on continuing professional education. The AICPA's CPE rules say members "shall complete 120 hours or its equivalent of continuing professional education" in each three-year reporting period. State boards set their own requirements on top of that, and the AICPA notes that "CPE requirements vary from state to state." Many boards also require a minimum number of hours each year and a set number of ethics hours.
An illustrative check for a CPA on a three-year, 120-hour cycle: if they log 24 hours in year one and 38 hours in year two, they have 62 hours, so they need 58 more in year three. A CPA who falls short risks a lapsed or restricted license, and a lapsed CPA cannot sign attest reports or hold out as a CPA until the board restores the license.
The license covers a lot of ground. Most CPAs work in one or two of the areas below.
This is the work reserved for licensed firms. An audit gives reasonable assurance that financial statements follow the reporting framework. A review gives limited assurance at lower cost, and a compilation presents the numbers with no assurance. Our guide to audit vs review vs compilation explains which one a lender or investor will usually ask for. The BLS also notes that any accountant who files a report with the SEC must be a licensed CPA, which is why public company auditors are always CPAs.
Tax is where most individuals and small businesses meet a CPA. Beyond preparing returns, CPAs plan the timing of income and deductions across the year, and our overview of tax planning strategies for small businesses shows what that looks like in practice. CPAs also hold unlimited representation rights before the IRS. They can handle audits, collection matters and appeals once the client signs a power of attorney, and our explainer on Form 2848 and Form 8821 covers how that authority is granted. Any CPA who practices before the IRS is also bound by Treasury's practice rules, summarised in our piece on Circular 230 due diligence.
Many CPAs run or oversee the monthly close, produce financial statements, build budgets and forecasts, and advise owners on pricing, financing and entity choice. Some act as outsourced controllers or part-time finance leads. For how this role compares with a bookkeeper, a staff accountant or a CFO, see our guide to bookkeeper vs accountant vs CPA vs CFO.
Some CPAs add credentials and focus on forensic accounting, business valuation, estate and trust tax, or IT assurance. Forensic engagements in particular are priced differently from routine work, as our forensic accounting fee guide explains.
The IRS sets out the main preparer categories on its preparer credentials page, and everyone who prepares returns for pay "must have an IRS issued preparer tax identification number (PTIN)." The CPA license stands out because it combines tax authority with attest rights.
| Credential | Licensed by | IRS representation | Attest reports |
|---|---|---|---|
| CPA | State board | Unlimited | Yes, through a licensed firm |
| Enrolled agent | IRS | Unlimited | No |
| PTIN-only preparer | None | None | No |
An enrolled agent is licensed by the IRS itself, and our guide to what an enrolled agent is covers that credential. For help choosing who should prepare your return, read our CPA vs tax preparer guide, and if a tax dispute might reach court, our breakdown of CPA vs EA vs tax attorney explains when an attorney adds value.
The Bureau of Labor Statistics does not publish a separate wage series for CPAs. It reports accountants and auditors as one group, which includes both licensed and unlicensed staff. According to the BLS Occupational Outlook Handbook:
These figures cover the whole occupation, so they understate what senior licensed CPAs in public accounting or industry often earn and overstate what new graduates start on. Pay for an individual CPA depends on specialty, firm size, region and whether they own a practice.
Every state board keeps a public license lookup. Before engaging a CPA, confirm that the license is active in the state where the work happens, check for disciplinary actions, and ask whether the firm holds a permit for attest work if you need an audit or review. Our guide on how to find a good CPA lists the questions worth asking about fees, response times and industry experience.
What is a CPA, in simple terms? A CPA is an accountant licensed by a state board of accountancy after meeting education, exam, experience and ethics requirements. The license allows them to sign audit and review reports and to represent any taxpayer before the IRS.
Do you still need 150 credit hours to become a CPA? The 150-hour route is still available in every state. By late 2025 about half of the states had also adopted a route that accepts a bachelor's degree with an accounting concentration plus two years of experience, and more states have acted since. Check your own board's rules and effective date.
How many sections does the CPA Exam have? Four. Every candidate takes three core sections (AUD, FAR and REG) and chooses one discipline section from BAR, ISC or TCP. Each section lasts four hours and needs a score of at least 75.
How much CPE does a CPA need? AICPA members need 120 hours over each three-year period, and state boards set their own rules on top of that, often with annual minimums and ethics hours.
Can a CPA represent taxpayers before the IRS? Yes. A CPA in good standing has unlimited rights to represent any taxpayer before the IRS once the client signs a power of attorney, covering audits, collections and appeals.
Is every accountant a CPA? No. Many accountants do bookkeeping, reporting and tax work without a license. Only licensed CPAs can use the title, sign attest reports and file audit reports with the SEC.
Madras Accountancy supports US businesses and CPA firms with bookkeeping, tax preparation, payroll, audit support and CFO-level advisory, so licensed CPAs can spend their time on review, signing and client advice. To talk through what your firm or business needs, contact our team.
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