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 examCPA ExamA Certified Public Accountant (CPA) is a US state board-issued license to practice the accounting professionread more and issue the license.

The CPA certification is the most esteemed certification sought by an accountingAccountingAccounting is the process of processing and recording financial information on behalf of a business, and it serves as the foundation for all subsequent financial statements.read more 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 auditingInternal AuditingInternal audit refers to the inspection conducted to assess and enhance the company’s risk management efficacy, evaluate the different internal controls, and ensure that the company adheres to all the regulations. It helps the management and board of directors to identify and rectify the loopholes before the external audit.read more, and forensic accountingForensic AccountingForensic accounting is the investigation of fraud and misrepresentation.read more.

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 salary 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 webpages.

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 risksFinancial RisksFinancial risk refers to the risk of losing funds and assets with the possibility of not being able to pay off the debt taken from creditors, banks and financial institutions. A firm may face this due to incompetent business decisions and practices, eventually leading to bankruptcy.read more. 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), the 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 professionalism 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 upon 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 group, 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.

This has been a guide to CPA vs Actuary. Here we discuss the difference between CPA and Actuary with infographics and why to pursue them. We also discuss the exam requirements for both. You may also have a look at the following CPA articles –

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