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Difference Between CPA and Actuary
Both Certified Public Accountants (CPAs) and actuaries are professionals engaged in analyzing a company’s financial information to make relevant business decisions. In the context of CPA vs actuary, the primary difference between the two is that while a CPA evaluates and manages past and present financial events, an actuary predicts and provides financial insight for probable future events.
A CPA examines a company’s financial data from its books and records to offer the best possible business solutions. On the other hand, an actuary scans through the company’s vast statistical database to estimate and manage its future risks and opportunities. Both these professionals should possess good numerical skills.
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What is a CPA?
A CPA is a licensed accounting professional who has passed the Uniform CPA exam and fulfilled the state board’s prescribed education, experience, and licensing requirements. The American Institute for Certified Public Accountants (AICPA) coordinates with the National Association of State Boards of Accountancy (NASBA) to conduct the CPA exam and issue the license.
The CPA certification is the most esteemed certification sought by an accounting professional. A CPA ensures and endorses a company’s financial integrity. What distinguishes CPAs from other designations in the accounting industry is their wide range of financial expertise. They are adept at financial consulting, tax preparation, internal auditing, and forensic accounting.
CPAs boast of years of education, work experience, and know-how. It makes them the right person to go for when in financial trouble. Being the most reliable financial advisors to various companies and individuals, CPAs ensure they attain their financial goals with ease.
Being part of a ubiquitous industry and possessing a comprehensive work profile, CPAs enjoy handsome salaries and promising career prospects. To become a CPA, you have to pass the rigorous CPA exam.
The CPA exam consists of four sections. You must pass all the exam sections within 18 months of taking the first exam section. For details related to the CPA exam and licensing, kindly go through the AICPA’s CPA Exam Blueprints and NASBA’s CPA licensing web pages.
Once you attain your CPA license, you must renew the CPA license every 1-3 years (as per the state board requirement) by fulfilling the Continuing Professional Education (CPE). Depending on your state board, you may also have to take the ethics exam for licensing.
What is an Actuary?
An actuary is a CAS/SOA certified professional who is an expert in assessing and managing a company’s financial risks. The role of an actuary is to predict the occurrence of a future event, determine its financial impact, and develop policies to handle it.
The Casualty Actuarial Society (CAS) and Society of Actuaries (SOA) are regulatory bodies of actuaries. To make an actuary career in the property and casualty insurance domain, you must take the CAS certification. However, opt for the SOA certification to practice actuary in pensions, health, consulting, and finance sectors.
An actuary has excellent earning potential and is in demand in all organizations requiring risk assessment. According to the U.S. Bureau of Labor Statistics (BLS), employment in this profession is expected to grow by 18% in the coming decade.
To become an actuary, you have to acquire an associate certification followed by a fellow certification. You have to start with a Bachelor’s degree in actuarial science, statistics, mathematics, or associated fields. Follow it with validation of educational experiences (VEEs) in applied statistics, corporate finance, and economics.
For each certification, you have to pass a series of exams, e-Learning courses, proctored project assessments, VEEs, and professional seminars. It takes around four to seven years to get the associateship and a further two to three years to receive the fellowship. As compared to the CPA exam, the actuary exams are much more rigorous and challenging. The difficulty of CPA vs actuary exams is a crucial point of consideration while making a career choice.
While devising plans and strategies, the CPA aims at tackling the current problem at hand, whereas the actuary focuses on events that may or may not happen in the long run. Although both of them play with numbers, their primary roles are quite different.
Working of an Actuary
Usually, actuaries go through a company’s past data, analyze the statistics, and crunch the numbers. Then, they estimate the likelihood of a risk associated with an uncertain event in the foreseeable future. They calculate the financial implication of the risk assessed.
To explain their assessment in simple terms, they compile the data in a chart, graph, or report and present it to their clients. Also, they design plans and policies to minimize the damage involved and maximize the benefit of the clients.
Example of an Actuary
Let’s understand this with an example of a healthcare actuary in the current context. An actuary in a health insurance company analyzes statistical data related to COVID-19 cases as per the geographical regions, age groups, etc.
Then, he/she predicts the probability of causalities in the upcoming COVID third wave. After that, he/she estimates the intensity and length of the healthcare emergency.
Considering all these aspects, the actuary determines its financial implications on the insurance company and the insurers. Then, he/she designs the company’s health insurance policies or modifies existing ones to offer more benefits to the insurers.
CPA vs Actuary Infographics
The following infographics illustrate the key differences in the educational requirement, area of expertise, and salary of an actuary and a CPA.
Comparative Table of CPA vs Actuary
The following comparative table compares the role, salary, skills, etc., of an actuary to a CPA.
| Particulars | CPAs | Actuaries |
|---|---|---|
| Definition | They are Uniform CPA exam qualified professionals holding a State-Board issued accounting license. | They are CAS/SOA certified professionals who assess the financial impact of future events and manage them. |
| Professional association or regulatory body | AICPA | CAS/SOA |
| Professional Requirements | Pass the Uniform CPA exam Bachelor’s Degree in accounting (at least 150 semester hours of education) 1-3 years of work experience (education and experience requirements may vary as per the state board) | Bachelor’s Degree in Actuarial Science/Business/Economics/Maths/other associated fields Certification by CAS/SOA Pension actuaries are licensed by the U.S. Department of Labor and the U.S. Department of Treasury’s Joint Board for the Enrolment of Actuaries |
| Exam | Four sections to be passed within 18 months | A series of exams, e-Learning courses, proctored project assessments, VEEs, and professionalism seminars for Associate and Fellow certification |
| Expertise | Dealing with the financial matters at hand | Predicting and dealing with the possible financial issues in the future |
| Qualities to look for | Accounting skills High ethical standards Creative problem-solving approach Time management skills Good Communicator Organized and methodical Adaptable Highly attentive | Analytical and research skills Mathematical skills Communication skills Attention to detail Impressive business sense Organizational skills Investigative approach Programming/software skills |
| Primary duties | Ensuring accurate financial statements Internal auditing Publishing the audited financial statements Preparing and filing tax Forecasting revenues and assessing profit margins Setting up accounting policies and processes Analyzing statistical data for further research Assessing the possibility, expected cost, and financial implication of an event Devising strategies and plans to reduce the impact of an undesirable event Utilizing creative methods to maximize profitability Preparing and presenting reports/charts/graphs Explaining the proposal to clients/government officers/stakeholders/company officials etc. | |
| Annual Salary (approx.) | $60,000 -$160,000 | $111,030 |
| Industries they work for | Government agencies Not-for-Profit organization Educational Institutions Public accounting firms Corporate firms Start-ups | Insurance Finance and investment Consultancy Government agencies Academia Banking |
| Projected job growth (BLS) | 4% (2019-2029) | 18% (2019-2029) |
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