What is a CPA?

Certified public accountants (CPA's) function as independent auditors and act as advisors to individuals, businesses, financial institutions, nonprofit organizations and government agencies on a wide range of finance and tax related matters. They are also employed as financial managers in industry and hold key positions at various levels in both government and education.

CPA's are professionals, distinguished from other accountants by stringent licensing requirements. They must have at least a college degree or its equivalent, pass a rigorous two-and-a-half day national examination, and meet certain experience requirements to qualify for the CPA certificate and a state license. The American Institute of CPA's (AICPA) mandates continuing education for its members, and may states have similar requirements for CPA's to retain their licenses to practice.

In addition to meeting the profession's technical requirements, CPA's are governed by a code of professional conduct-one of the most exacting of any profession. In 1988, the AICPA code of conduct was substantially revised to strengthen its provisions and to enhance the hallmarks of the profession: independence, objectivity and integrity. The new code emphasized the CPA's commitment and protecting the public interest.

Quality control is a primary concern of the profession. This in 1988, AICPA members voted to require firms with which they are associated to undergo regular independent reviews of their accounting and auditing practices.

What is an Enrolled Agent?

An Enrolled Agent (EA) is an individual who has demonstrated technical competence in the field of taxation. Enrolled Agents, or EAs, can represent taxpayers before all administrative levels of the Internal Revenue Service.

EAs advise, represent and prepare tax returns for individuals, partnership, corporations, estates, trusts and any entities with tax-reporting requirements. EAs prepare millions of tax returns each year. EAs expertise in the continually changing field of tax law enable them to effectively represent taxpayers audited by the IRS.

Enrolled Agents are required to demonstrate to the Internal Revenue Service their competence in matters of taxation before they may represent a taxpayer before the IRS. Unlike attorneys and CPA's, who may or may not choose to specialize in taxes, all EAs specialize in taxation. EAs are the only taxpayer representative who receive their right to practice from the United States government. (CPAs and attorneys are licensed by the states).

The EA designation is earned in one of two ways: (1) an individual must pass a difficult two-day examination administered by the IRS which covers taxation of individuals, corporations, partnerships, estates and trusts, procedures and ethics. Next, successful candidates are subjected to a rigorous back ground check conducted by the Internal Revenue Service; or (2) an individual may become an EA based on employment at the Internal Revenue Service for a minimum of five years in a job where he/she regularly applied and interpreted the provisions of the Internal Revenue Code and regulations.

What Do CPA's Do?

Traditionally, the public has viewed the CPA as being primarily an independent auditor of company financial statements-someone who lends credibility to the date presented by corporate management. The audit function remains a vital part of the profession's role in serving the public interest. However, today's CPA provides a wide range of services, such as review and compilations of financial data for nonpublic entities, which are closely related to financial statements. Other activities performed by the CPA are of a broader nature. The following are some specific services that CPA's provide:

• Recommending tax planning strategies
• Preparing tax returns
• Advising individuals on personal financial planning, including retirement and estate planning
• Reviewing a company's accounting system and recommending improvements
• Assisting in the design and installation of data processing and management information systems
• Conducting special studies) financing, inventories, cost accounting, credit and collection) for business, government and nonprofit organizations
• Helping clients apply for loans and credit by gathering and preparing information required by lenders
• Working with clients, attorney and bankers on mergers, acquisitions and expansions.

How to Choose a Professional

When looking for Professional, consider the following:

• Ask your lawyer, banker, insurance agent or investment advisor for recommendations. Speak with people in the same field as yours. They should be able to recommend Professionals who know your special needs.
• Develop some idea of your plans and objectives before you talk with a Professional. Compile information about business or personal financial decisions under consideration so you can ask specific questions.
• Make sure the Professional is licensed to practice in your state and, if necessary, before the IRS.
• Ask what professional organizations they belong to and how active he or she is in those organizations. Many of these organizations require adherence to technical and professional standards, thereby helping to ensure the quality of a their services.
• Select your professional accounting advisor carefully. A long-term working relationship between you and your trusted Professional can help you take an informed, consistent approach to personal financial and business problems, and help you meet your financial goals.

The Determination of Fees

CPA's and Enrolled Agents usually base their fees on the time required to perform the services. There are no "fee schedules" common to the profession. Talk frankly about fees. Find out how much you will pay to have work performed by a staff accountant who is under the supervision of a CPA or by higher level employees such as a supervisor, manager, or partner. Fees depend on the type of services you require, the prevailing costs in the community, and the complexity of your work.

Professionals and clients often sign an engagement letter in advance of the work performed to avoid misunderstandings. The engagement letter describes in detail the services to be rendered, fee ranges, and the other terms and conditions of the engagement.