In the business world, several terms relate to the financial affairs and functions of a company. The most common are Certified Public Accountant, Chief Financial Officer and Controller. Depending on the entity, this could be one person or three different individuals. The essential difference between these three individuals, however, is CPA is professional designation and the CFO and Controller are job titles.

Some or all may be employees of a company or they may be independent contractors. Learn the difference between these three types of financial roles in a company.

Certified Public Accountant (CPA)

Certified Public Accountant is a professional designation, not a job title.

In the truest sense, the function of a CPA is making sure that financial accounting is in accordance with Generally Accepted Accounting Principles (GAAP) – an external function.

A CPA is an individual who is licensed by a state regulatory agency (typically a state board of accountancy) to practice public accounting. The licensing requirements generally include:

  1. A four-year college degree with a specified number of accounting credits.
  2. Passing a rigorous examination on accounting, taxation, business law and financial auditing.
  3. Gaining public accounting experience for several years.

Once licensed, the CPA must maintain the license by completing a certain number of hours of continuing education each year and otherwise remain in good standing with the state regulatory agency. If the CPA is licensed, they may hold themselves out as practicing public accounting. This really means two things – performing financial audits or providing the public with some reasonable level of assurance that they are competent in providing accounting, tax, and consultation services.

For example, the primary function, for which a CPA license is absolutely required, is to perform an attest function for, but not limited to, publicly traded companies regulated by the Securities and Exchange Commission. Sometimes a state government agency, bank or investors may also require these services. 

The attest function simply means that the CPA has performed independent tests and procedures on the books of a company with the purpose of providing some level of assurance that its financial statements are prepared in accordance with Generally Accepted Accounting Principles (GAAP). The attest function leads to the CPA issuing a letter to the management of the company stating the findings of their work.

In reality, the vast majority of businesses will never need to have a CPA provide these services.

So, why else would CPA’s exist? The most valuable reason a small business or the general public would want to seek out a CPA is to be assured that their financial matters, primarily accounting and taxes, are being handled by a professional who is trained (and current) in those matters and who is subject to a strict level of ethical behavior. 

Many people and that provide some level of bookkeeping, accounting and tax services who are not licensed CPAs. Most of them do excellent work and are reputable, and many may be former CPA’s who simply don’t keep their license active because they don’t perform the attest function mentioned above and, therefore, are not required to. However, they cannot hold themselves out as CPA’s.

The licensed CPA can hold themselves out to the public as a CPA, whether they perform the attest function, and are simply held to a higher standard.

Chief Financial Officer (CFO)

Chief Financial Officer is a job title within a company, not a professional designation (although the position requires a high degree of education, skill and experience which are certainly professional attributes). The CFO is most likely an employee of the company although the duties can be contracted out.

The CFO is primarily concerned with the overall financial management of the company – an internal function.

A CFO is a member of the top-level management of an organization. While duties vary widely depending on the size and needs of the company, in general the CFO is responsible for:

  1. Monitoring the financial strength of the company.
  2. Company wide financial planning, including coordinating the budget process between multiple locations, departments or products and services.
  3. Directing and approving asset and debt decisions (capital budgeting).
  4. Identifying the need for and coordinating with outside funding sources such as banks or investors.
  5. Coordinating with outside accountants performing attest functions for the company (i.e. CPA’s)

The CFO may or not be a licensed CPA or a former CPA who hasn’t kept their license current. They may hold a different professional designation such as Certified Management Accountant (CMA). Or they may have just worked their way up through the ranks after usually earning an undergraduate or graduate degree. It all depends on the organization.

Controller

Controller is a job title within a company, not a professional designation.  Again, the position requires a high degree of education, skill, and experience. The duties may also be contracted out if necessary

A controller is responsible for the direction and control of the accounting function within a company.  They will typically report to the CFO or, in the absence of that position, perform some or all of those duties. As with a CFO, duties will vary but may include:

  1. Designing or improving the accounting system of the company.
  2. Managing the accounting department and staff.
  3. Selecting, implementing, and managing the accounting software.
  4. Managing the accounting cycle (identifying, recording, journalizing financial transactions).
  5. Closing the books.
  6. Preparing financial reports for management and outside users.
  7. Designing and implementing a system of internal financial controls.
  8. Coordinating the budget process in accordance with CFO directives.
  9. Managing payroll.
  10. Human resources in the absence of a department dedicated to that function.

The Controller and the CFO may be the same person depending on the size of the company.  They may also be a CPA or former CPA or hold other professional designations.

The Difference between a CPA, CFO, and Controller

The main difference between a CPA and a CFO or Controller is that the CPA is a professional designation and the CFO and Controller are job titles.

The CPA is licensed to hold themselves out to practice public accounting and the license is only required to perform the attest function, as mentioned above. As such, a CPA may work for a large accounting firm that performs financial audits for publicly traded companies or the tax returns of sophisticated taxpayers. Or, they may have their own firm that does not require the CPA designation but in which they wish to project the higher standards to their clients that the designation confers.

CFO’s and Controllers are employees of companies that manage and perform the financial duties of the firm. There may be other duties in a company that employ but do not require a CPA such as Assistant Controller, Accounting Manager or Tax Manager. A licensed CPA is not required for these positions, but many companies will look for licensed or former CPA’s to fill them.

The roles of CPA and CFO/Controller can overlap if a CPA firm provides contract services to companies that have need for those positions but can’t afford to pay a full-time employee. Growing companies may often do this and realize attractive cost savings while ensuring that essential financial tasks are being performed. 

The only caution is for the company and the CPA providing the contract services to make sure that the CPA is providing those services without participating in management decisions, which should always be the responsibility of company ownership and management.
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