CPA vs Actuary

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 ExamThe CPA Exam assesses accounting professionals not just on their financial knowledge, but also on their ability to review and seek out key abilities.read more 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 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 employs a mix of accounting, auditing, and investigative acumen by recording accounting documents, preparing reports, and performing financial analysis for use in legal proceedings. Thus, it provides an accounting analysis from a litigation perspective.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. 

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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.

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Comparative Table of CPA vs Actuary

The following comparative table compares the role, salary, skills, etc., of an actuary to a CPA.

ParticularsCPAsActuaries
DefinitionThey 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 bodyAICPACAS/SOA
Professional RequirementsPass 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
ExamFour sections to be passed within 18 monthsA series of exams, e-Learning courses, proctored project assessments, VEEs, and professionalism seminars for Associate and Fellow certification
ExpertiseDealing with the financial matters at handPredicting and dealing with the possible financial issues in the future
Qualities to look forAccounting skillsAccounting SkillsAccounting Skills are the set of skills required to present business transactions comprising of financial and non-financial in the books of accounts as per prescribed Standards of Accounting (US GAAP, IFRS, Ind AS) and as a part of legal compliance and analysis of business outcome in an optimum way.read more
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 dutiesEnsuring accurate financial statementsFinancial StatementsFinancial statements are written reports prepared by a company's management to present the company's financial affairs over a given period (quarter, six monthly or yearly). These statements, which include the Balance Sheet, Income Statement, Cash Flows, and Shareholders Equity Statement, must be prepared in accordance with prescribed and standardized accounting standards to ensure uniformity in reporting at all levels.read more Internal auditing
Publishing the audited financial statements
Preparing and filing tax Forecasting revenues and assessing profit marginsProfit MarginsProfit Margin is a metric that the management, financial analysts, & investors use to measure the profitability of a business relative to its sales. It is determined as the ratio of Generated Profit Amount to the Generated Revenue Amount. read more
Setting up accounting policiesAccounting PoliciesAccounting policies refer to the framework or procedure followed by the management for bookkeeping and preparation of the financial statements. It involves accounting methods and practices determined at the corporate level.read more and processesAnalyzing 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 profitabilityProfitabilityProfitability refers to a company's ability to generate revenue and maximize profit above its expenditure and operational costs. It is measured using specific ratios such as gross profit margin, EBITDA, and net profit margin. It aids investors in analyzing the company's performance.read more
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 forGovernment agencies
Not-for-Profit organizationNot-for-Profit OrganizationA not-for-profit organization refers to a legal entity that isn't created to generate profits or revenue for its owners but aims at social, educational, religious or public welfare and service. Such an organization is tax-exempted and run through donations or any other income it makes.read more
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)

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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