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Aicpa

What Is AICPA?

The American Institute of Certified Public Accountants (AICPA) is the primary professional organization for Certified Public Accountants (CPAs) in the United States. It plays a pivotal role within the broader field of Accounting Standards & Professional Organizations. The AICPA is responsible for setting ethical standards, developing and grading the Uniform CPA Examination, and establishing U.S. auditing standards for private companies, nonprofit organizations, and federal, state, and local governments.33 The organization's mission centers on serving the public interest by enhancing the integrity and relevance of the accounting profession.

History and Origin

The roots of the AICPA trace back to 1887 with the formation of the American Association of Public Accountants (AAPA).32 This initial organization was established to unify accountants and set a benchmark for professional conduct.31 Over the years, the organization underwent several name changes, including the Institute of Public Accountants (1916) and the American Institute of Accountants (1917), before officially becoming the American Institute of Certified Public Accountants in 1957.30 A significant milestone in its history was the establishment of Generally Accepted Auditing Standards (GAAS) in 1939 by its predecessor, the American Institute of Accountants, providing a foundational framework for financial audits.29 In 2017, the AICPA joined forces with the Chartered Institute of Management Accountants (CIMA) to form AICPA & CIMA, creating a powerful international alliance aimed at promoting accounting and finance globally.28

Key Takeaways

  • The AICPA is the largest professional association for Certified Public Accountants (CPAs) in the U.S.
  • It sets ethical standards and U.S. auditing standards for non-public entities.27
  • The organization develops and grades the Uniform CPA Examination, which is a key step for CPA licensure.26
  • The AICPA advocates for the accounting profession and provides resources for its members, including continuing professional education.24, 25

Interpreting the AICPA

The AICPA's influence is largely interpreted through the standards and guidelines it promulgates, which shape how financial reporting and auditing are conducted. For instance, the AICPA Code of Professional Conduct is a collection of codified statements outlining a CPA's ethical standards and professional responsibilities. Adherence to this code is mandatory for AICPA members and is crucial for maintaining public trust in the profession.22, 23 Furthermore, the AICPA's role in developing Generally Accepted Auditing Standards (GAAS) provides a framework for independent auditors to plan, conduct, and report audit results, ensuring a measure of audit quality and objectivity in financial statements.20, 21

Hypothetical Example

Imagine a small, privately-held manufacturing company, "Widgets Inc.," seeking an audit of its annual financial statements to satisfy a bank loan covenant. Widgets Inc. hires a CPA firm. The engagement partner and their team, all AICPA members, would adhere strictly to the AICPA's Generally Accepted Auditing Standards (GAAS) throughout the audit process. This means they would exercise professional judgment to adequately plan the audit, obtain a sufficient understanding of Widgets Inc.'s internal controls, and gather sufficient appropriate evidential matter. The audit report issued by the firm would reflect whether Widgets Inc.'s financial statements are presented fairly, in all material respects, in accordance with Generally Accepted Accounting Principles (GAAP).

Practical Applications

The AICPA's influence extends across numerous practical applications within the financial world:

  • Auditing and Attestation: The AICPA sets the auditing standards that CPAs must follow when performing audits for private companies and non-public entities, ensuring consistency and reliability in financial statements.18, 19 These standards cover planning, fieldwork, and reporting.17
  • Ethical Guidance: The AICPA Code of Professional Conduct provides a comprehensive framework for ethical behavior, addressing principles like integrity, objectivity, and independence for all members.15, 16 This code is vital for maintaining public confidence in the accounting profession.14
  • Licensure and Education: The AICPA develops and continually updates the Uniform CPA Examination, a critical component for individuals seeking to become licensed CPAs.13 They also provide resources and guidance for continuing professional education to ensure CPAs remain competent.11, 12
  • Advocacy and Policy: The AICPA actively monitors and advocates on legislative matters that affect the accounting profession, including tax policy and issues related to CPA mobility across states.10 For instance, the AICPA has supported legislation recognizing accounting as a STEM career pathway.9

Limitations and Criticisms

While the AICPA plays a crucial role in the accounting profession, it faces certain limitations and criticisms. One area of ongoing discussion involves the scope of its standard-setting authority. While the AICPA sets U.S. auditing standards for private companies, the Public Company Accounting Oversight Board (PCAOB) sets auditing standards for public companies registered with the Securities and Exchange Commission (SEC). This can create a dual set of standards depending on the nature of the audited entity. Critics also sometimes question the self-regulatory aspect of the profession and the potential for conflicts of interest, emphasizing the importance of rigorous enforcement of the AICPA Code of Professional Conduct to maintain the public's trust.8 The evolution of the accounting profession, driven by technology and globalization, necessitates continuous adaptation of standards and ethical guidelines to remain relevant and effective.

AICPA vs. FASB

The AICPA and the Financial Accounting Standards Board (FASB) both play critical roles in U.S. financial practice, but their primary functions differ. The AICPA is a professional organization for CPAs, focusing on setting auditing standards for private companies, ethical guidelines, and the Uniform CPA Examination. In essence, the AICPA dictates how CPAs should conduct themselves and their audits. The FASB, on the other hand, is the authoritative body for establishing Generally Accepted Accounting Principles (GAAP) for non-governmental entities in the U.S.7 GAAP are the rules for how financial statements are prepared, ensuring consistency and comparability. Thus, while the FASB sets the "what" of financial reporting, the AICPA guides CPAs on "how" to audit those reports and maintain professional conduct.

FAQs

What is the primary purpose of the AICPA?

The primary purpose of the AICPA is to serve as the national professional organization for Certified Public Accountants in the United States, setting ethical and auditing standards, developing the Uniform CPA Examination, and advocating for the profession.6

Does the AICPA set accounting standards?

The AICPA sets U.S. auditing standards for private companies, nonprofit organizations, and federal, state, and local governments.5 Generally Accepted Accounting Principles (GAAP), the accounting standards for financial statement preparation, are set by the Financial Accounting Standards Board (FASB) for non-governmental entities and the Governmental Accounting Standards Board (GASB) for governmental entities.4

How does the AICPA ensure ethical conduct among its members?

The AICPA ensures ethical conduct through its comprehensive AICPA Code of Professional Conduct, which outlines principles of integrity, objectivity, independence, and due professional care. Failure to adhere to this code can result in disciplinary action.2, 3

What is the Uniform CPA Examination?

The Uniform CPA Examination is a standardized test developed and graded by the AICPA that individuals must pass to become licensed Certified Public Accountants (CPAs) in the United States.1 The exam assesses the knowledge and skills necessary for entry-level CPAs.