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Difference Between CPA and CFA

business and financeCPA vs. CFA

Commonly, the problem people have is how to look for money. Although, when they already have enough money, they develop a new problem of how to use all the money. In this regard, this is where analysts and financial experts come in handy. Surfing the web, or listening to talk shows, won’t give you sufficient theories on how to manage your money. What you need is CPAs and CFAs, but how do these experts differ?

A CPA is known as a Certified Public Accountant. CPAs are the experts to whom you will turn for your tax concerns. Even if it is not always required for one to employ a CPA just to audit taxes, they are nevertheless the most knowledgeable persons on this subject.

Some CPAs also happen to master many fields of finance, auditing and accounting, which include: Corporate finance & governance, financial accounting, analysis & planning, income tax and tax preparation, assurances, and information technology (IT), amongst others. However, many of them tend to focus on only one craft, rather than becoming generalists of the many fields mentioned.

To become a CPA, you must first pass the CPA exam. In the U.S., this test is called the Uniform Certified Public Accountant Examination (UCPAE). Not only that, this license can also only be given to a person who already has the right education and experience. However, other specific requirements and CPA functions vary per state.

On the contrary, a CFA is a Chartered Financial Analyst. Unlike CPAs, they tend to delve more into finance by examining the flow of money, and assessing stocks and the overall market. Most of these experts are master degree holders, and have one or more expertise in the following: Economics, statistics, management and accounting itself.

The road to becoming a CFA is also not that easy. Unlike the CPAs, CFAs are obliged to take and pass three separate exams that are each 6 hours long. These exams are seen to have higher passing rates as the level of examination progresses. Hence, the third exam almost always displays the highest passing rate overall, based on the trend analysis for the past 5 years in the U.S. Not only that, CFA wannabees also need to undergo a special training, or experience in certain investment fields that requires decision making.

Basically, the two differ from each other because:

1. A CFA is focused more on financial aspects, while a CPA is more of an accounting position.

2. A person who wants to become a CFA needs to pass three separate exams, whereas someone who wants to become a CPA needs to pass four parts of CPA exam.


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14 Comments

  1. The CPA is not 1 exam, but instead 4. Also anyone with a undergrad can take the cfa exam. For example if you have a degree in dance or music, you can take the CFA exam. For the CPA exam on the other hand you need 150 units, 25 units at least in business related course and 25 units in accounting. It basically takes a masters degree just to take the CPA exam. Also note that the CPA exam has a lo

    • Ben no need to get defensive. The CPA is for accountants, the CFA is for portfolio managers and analysts. I am sure the CPA is tough to get, no disputing that and, if it helps, yes a dance major can obtain a charter, she just has to cram a week before each of the levels and she will be just fine.

      • @Phil: Your assertion that “the CPA is for accountants and the CFA is for portfolio managers” is simplistic and only slightly correct. I hold both, but don’t do accounting and wouldn’t be caught dead trying to do our tax returns. I’m also not a portfolio manager. It’s of no interest to me.

        @Saqib: For starters, although there are four parts of the testing regimen to become a CPA, they focus largely on accounting, auditing, and taxes. Yes, there is some coverage of IT, ethics, business law, the regulatory environment, etc., but that coverage is in the context of public accounting.

        In contrast, the three parts of the CFA exam cover a broad range of topics. It is both broad AND deep. To see the subject areas and the weights on each of the three parts of the CFA exam, click this link: https://www.cfainstitute.org/programs/cfaprogram/exams/Pages/exam_topic_area_weights.aspx.

        Of the two sets of tests, the four parts of the CPA are much easier to pass than the three that comprise the CFA testing regimen. That, in turn, is reflected in the numbers: In the United States alone, there are more than 500,000 holders of the CPA credential. In contrast, the number of CFA charterholders worldwide is about 110,000 at this writing.

        The irony is that the pass rates are higher on the CFA tests than on the accounting tests. The primary reason for that is that the administrator and overseer of the CPA test, the American Institute of CPAs, has a pass-rate quota: 28%. It will never admit that, but it’s true. Because CPAs are licensed by state boards of accountancy, AICPA doesn’t disclose the overall pass rate. Some state Boards might, but I’ve never heard of it.

        In contrast, the CFA Institute has no such quota. That is why pass rates can vary significantly not only among the three parts in a given year, but also on a given part from year to year. And, because CFA charterholders are regulated by the CFA Institute itself, and not by boards in the 50 states, the Institute can and does disclose the pass rate on each test each year. This reflects a significant difference in transparency in the two organizations: the AICPA is, at best, opaque. The CFA Institute is about as transparent as an organization can get. The contrast is truly, truly stunning. Think Richard Nixon vs. Mother Teresa.

        Another difference is that one can take the four constituent parts of the CPA exam in any sequence. Those who do their research before choosing which to take first usually opt to take FAR because (a) it is the most difficult test, and (b) one has only 18 months to pass all four parts of the exam, once one passes any part. So, if one doesn’t get FAR out of the way first, one runs the risk of having passed three other three parts first and then running out of time on the 18-month deadline.

        The CFA exam regimen, in contrast, has an in-concrete sequence: Level I, Level II, and Level III. The focus of each varies, but each is broad, much more so, in my view, than the CPA tests. In addition, one can make an appointment to take any of the four CPA tests during the first two months of a calendar quarter.

        There is no such flexibility in taking the CFA exam: Level I is offered world-wide on the first Saturday in June and the first Saturday in December; Levels II and III are offered only on the first Saturday in June. Therefore, from a time standpoint, there is a greater time penalty in failing any part of the CFA exam than there is in failing any part of the CPA exam. The good news is that there is not any deadline by which one needs to complete the three levels of the exam. There used to be–seven years–but that’s been done away with. The CFA exam is offered world-wide, but in English only.

        Although I am a CPA, I’m not an accountant. I became eligible for a job as an accounting professional when I chose to take twelve (12) hours of accounting during my last semester in undergraduate school because, at the time, the U.S. economy was in a deep recession, and accounting majors were having notably less difficulty getting jobs than those in other majors. I held accounting-related jobs during the first five years of my career, but they were all a means to an end: self-employment.

        I also have an MBA. I believe that what one learns obtaining the CFA charter runs circles around what one will learn in all but the very best MBA programs. In fact, I think that MBA stands for ‘Misguided Business Acumen.’ It’s a dreadfully overrated degree; again, the exceptions are the top-tier schools (e.g., Harvard, Chicago, Dartmouth, MIT, Stanford, Wharton, Yale, Columbia. After that, quality starts to fall off.

  2. hey hii
    I read this interesting article… hope this helps….
    http://www.crazycfa.com/cfa-or-cpa

  3. My son completed recently Dual Degree with B.Pharmacy and M.Sc – Finance at BITS, PILANI, INDIA. Presently working the JPMC.
    He is interested for further studies like CPA, CFA and MBA-Finance. For his career growth, please suggest which course would be better.

    • I personally find analysis to be incredibly interesting. It requires insight and ingenuity (there is no rule book), you can win by thinking correctly or lose by being wrong. If it is an MBA with a concentration in finance then my understanding is he will get a good idea of the overall business and have a little more insight in finance than his peers that chose a different path.

      It is not much of a debate (among those who took the time to look at the varying paths) that the CFA program is the most rigorous and difficult of any of the paths. However, the CFA does not possess the almighty “network” associated with an MBA. He will possess a knowledge of finance that trumps that of any MBA (all else equal).

      The CPA is a very prestigious and difficult title to obtain but it is for aspiring to be accountants. If your son does not wish to be an accountant and enjoys finance more, either the MBA or CFA is clearly the choice. Weighing costs and knowledge gained, I picked the CFA, and I am very very happy I did.

  4. Hello Sir
    I am finished with B COM and just an average candidate all through my life.
    i am at a juncture of my life where i have to show a pay back to my investors(parents)
    i love finance but i very lazy to the core ,i m hoping the i will work hard…so my question is
    will CFA be so difficult as seeing the content of the subject material i find it as the topics are
    self explanatory and familiar also as i expressed my interest for finance so is it my cup of tea???

  5. CPA or CFA , which one of this is more difficult . How is the payment for both………it would be gr8 if someone answer dis

    • I’ll try to help you out; however, judging from the way you typed your question, you may be in some trouble for either.

      Qualification: I currently hold both designations.

      If you are finance minded, the CPA will be more difficult, and the inverse for one who is accounting minded.

      If you want to become a CFA, get a degree and go take the exams. Many fail the first one and give up, but once you pass number 1, 2 is easier, and 3 is easier (really due to your comprehension of the material).

      As far as the CPA goes, you cannot even sit (in most states) unless you meet the rigorous education requirements. After you have written the exam (passed), which is given in four parts (Exam Sections) that are not entirely related to one another, you must pass an Ethics exam (even if you met the Ethics requirement under the new education requirements), and accummulate one year’s worth of proessional accounting experience under a practicing CPA.

      If you get a CPA, your ability to move up in the world of Publc Accounting is limitless. In an industry setting, you are rather limited to the accounting function until you get to either a Controller or CFO position. As far as a CFA goes, you are limited to data analytics and financial forcasts until you reach the CFO level. Both designations take you down drastically different roads, and holding both only benefits you if you find an employer who values both designations.

      If you want rely on one of the designations to move you up in the world, get a CPA. The finance world is crowded with people who have been in the business longer than you, know more than you, and who no longer have jobs. CPA’s are getting older (nearer to retirement – industry trend), which means an entire generation is soon to be replaced. There will need to be people to replace them, and people to replace them, and so forth down the chain.

      Hope that helps, good luck!

  6. hi , iam ansar malik from islamabad. i have recently completed MBA finance here in sarhad university peshawar. so could not ind the job. then now i have decided to do CMA/ oracle financial.
    can you help me in choosing a subject of CMA pakistan / cfa/ cpa/ cima etc. which course will be more suitable for me . i have got 3.22 cgpa in MBA finance . so please properly guide me , i wanna go to abroad , USA/ Canada/ australia/ uk/ europe/ gulf countries etc. thanks but i have no work experience. so what will be better for me?
    thanks

    Ansar Malik
    MBA Finance

    • A CPA with knowledge of IFRS. Come to the USofA, you will be the most highly recruited professional around.

      • hi I have studied Mba in Finance but later on i realized that it has no or less value in international market. I mean here in UK i could not find any relevant job yet , therefore i decided to go in Accounting or Finance. Firstly i decided to do CA, as i want to select a field which has much broader aspects than any other. but then after my friends recomended ACCA, i was a bit confused about choosing between them. Now here comes CPA and CFA. i also like these fields. I do not want to involve my self in Public accounting, so Can you please guide me what would be a better for me. thank you

  7. Major thanks for the blog article. Much obliged.

  8. I have achieved my level 1, CFA years ago and for various reasons have not yet earned level 2 and 3. I am over 40 now, and although I have various other accounting and auditing accreditation (i.e., MBA, CPA, CIA, CISA, CAMS), I am wondering how achieving a CFA can help me at this late stage in my career. Perhaps using the CFA to help others with their retirement planning?

    Anyway, please provide career advice if possible.

    Best Regards,

    Dennis

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