CPAs hold specific legal authorities that distinguish them from non-licensed accountants. While both can prepare financial statements and tax returns, CPAs possess exclusive rights to perform certain high-stakes functions in public accounting, IRS representation, and regulatory compliance.
IRS Representation Rights
CPAs hold unlimited representation rights before the IRS. They can represent taxpayers in audits, appeals, and collections matters without restrictions on client selection or issue complexity.
Non-CPA accountants face severe limitations. Tax preparers without CPA, enrolled agent, or attorney credentials can only represent clients on returns they personally prepared and signed. Their authority extends exclusively to interactions with revenue agents and customer service representatives, not appeals officers or collections personnel.
This distinction matters when IRS examinations escalate beyond basic documentation requests. CPAs can advocate through the entire administrative process, from initial audit through Appeals Office conferences, while unlicensed preparers cannot.
Audit Authority for Public Companies
Only CPAs registered with the Public Company Accounting Oversight Board can audit publicly traded companies. The Securities and Exchange Commission requires public companies to file audited financial statements prepared by PCAOB-registered CPA firms.
This exclusive authority extends to companies preparing for initial public offerings. Before filing with the SEC, private companies going public must provide at least two years of audited financial statements under PCAOB standards.
Non-CPA accountants can perform internal audits for organizational use but cannot provide the independent audit attestation required for SEC filings. The legal framework restricts this function to licensed CPAs meeting specific independence requirements.
Attest Services and Compliance Reports
CPAs can sign attestation reports including reviews, compilations, and agreed-upon procedures engagements. State accountancy boards restrict these services to licensed CPAs, as they involve providing assurance on financial information to third parties.
Lenders and investors frequently require reviewed or audited financial statements before extending credit or making investments. Organizations without access to a CPA cannot provide these independently verified financial reports.
The signature authority extends to SOX 404 compliance attestations, internal control reports, and other regulatory filings where state law mandates CPA certification.
Limited Privilege Protections
Federal law (IRC § 7525) extends limited confidentiality protection to federally authorized tax practitioners, including CPAs. This privilege applies to tax advice provided in civil tax matters before the IRS, though it excludes tax return preparation.
The protection does not reach the level of attorney-client privilege. It fails to apply in criminal tax proceedings, state tax matters, or situations involving already-filed returns. Communications with non-licensed accountants receive no federal privilege protection.
Some states provide additional confidentiality protections through statutes prohibiting CPAs from disclosing client information without permission or court order. These state-level protections vary by jurisdiction and typically do not extend to non-CPA accountants.
State Licensing and Professional Standards
CPAs operate under state board oversight with mandatory continuing education, peer review, and adherence to the AICPA Code of Professional Conduct. These requirements create enforceable professional standards and disciplinary mechanisms.
Non-licensed accountants face no uniform regulatory framework. While ethical accounting practices apply universally, no single oversight body governs unlicensed practitioners or enforces continuing competency requirements.
State boards can investigate complaints, impose sanctions, and revoke CPA licenses for ethical violations. This regulatory structure provides client protection mechanisms absent in relationships with non-credentialed accountants.
Scope of Practice Distinctions
Both CPAs and accountants can prepare tax returns, maintain accounting records, provide bookkeeping services, and offer financial planning guidance. The dividing line emerges in regulated activities requiring state authorization.
CPAs can sign tax returns, represent taxpayers before revenue agencies, audit financial statements, provide attestation services, and practice in all U.S. jurisdictions under reciprocity agreements. Accountants without licensure cannot perform these functions.
The restriction protects public interests by ensuring professionals handling high-consequence matters meet education, examination, and experience standards verified by state licensing boards.
CPA Licensure Requirements
CPA licensure requires passing the Uniform CPA Examination, meeting state-specific education requirements (typically 150 credit hours), and completing experience requirements under licensed CPA supervision.
Accountants can practice without these credentials, performing valuable accounting functions that do not trigger regulatory restrictions. Many accountants pursue CPA licensure mid-career to expand their service capabilities and meet client expectations for credentialed representation.
When CPA Credentials Become Essential
Organizations facing IRS examinations beyond simple correspondence audits benefit from unlimited representation rights. Companies preparing for public offerings or seeking capital requiring audited financial statements must engage PCAOB-registered CPAs.
Entities needing reviewed financial statements for lending purposes, businesses operating across state lines requiring practice mobility, and situations involving complex tax controversies all favor working with licensed CPAs rather than non-credentialed accountants.
The credential signals verified competency, regulatory oversight, mandatory professional development, and adherence to enforceable ethical standards. These factors become particularly relevant when accounting work carries legal or financial consequences for third parties.
Sources:
IRS: Understanding Tax Return Preparer Credentials and Qualifications
IRS: Power of Attorney and Other Authorizations