Difference between CPA & FRM
Both Certified Public Accountant (CPA) and Financial Risk Manager (FRM) are credentials that qualify individuals to practice as certified professionals in the business world. However, in the context of CPA vs FRM, the primary difference between the two is that while the former is an accounting credential, the latter is a financial risk management one.
As a professional, the chief responsibility of a CPA is to examine a company’s financial records, gain crucial insights, and offer appropriate financial advice. On the other hand, an FRM is accountable for anticipating, assessing, and mitigating critical business risks. Both these professionals are experts in financial analysis.
CPA vs FRM Comparative Table
Both of these certifications help professionals upgrade their skills in their respective domains and improve their career prospects. Their primary difference lies in the area of expertise.
|Definition||An AICPA-administered accounting license gained after fulfilling the exam, education, and experience requirements.||A GARP-accredited risk management certification availed after passing both parts of the FRM Exam and gaining work experience.|
|Certification authority||AICPA & NASBA||GARP|
|Domain/Area of specialization||Accounting and finance||Risk assessment and management|
|Eligibility requirements||Uniform CPA Exam Bachelor’s Degree (120-150 credit hours) 1-3 years of Work Experience||FRM Exam Part 1 FRM Exam Part 2 2 years of work experience|
|Exam||4 sections||2 parts|
|Difficulty||Very difficult||Less difficult as compared to CPA|
|Pass rates||Around 50%||Around 45%|
|Syllabus||• Auditing and Attestation |
• Business Environment and Concepts
• Business Environment and Concepts
|• Risk management concepts|
• Risk models and valuation
• Financial markets
• Measurement and management of different types of risks
|Time limit||Pass all exam sections within 18 months of passing the first section||Pass Part 2 exam within four years of qualifying the Part 1 exam.|
|Continuing professional education||Mandatory||Not mandatory|
|Fees||Application fees – $150 (approx.) Each exam section – $224 (approx.)||Enrollment fees – $400 Each part Exam fees – $750 Discounted fees (early enrollment) – $550|
|Professional responsibilities||• Financial Consulting|
• Formulating accounting procedures and policies
• Preparing financial statements
• Supervising budget and financial management
• Maintaining the confidentiality of business financial details
• Verifying the accuracy of financial statements
• Ensuring on-time tax payments
• Monitoring regular bookkeeping activities
|• Designing and executing risk management process|
• Communicating findings to stakeholders
• Building risk awarenessRisk assessment
• Reviewing internal Business proposals
• Preparing insurance and risk management budgets
• Conducting compliance and policy audits
• Risk reporting
• Executing health and safety measures
|Career Profile||• Chief Financial Officer (CFO)|
• Chief Executive Officer (CEO)
• Financial Advisor
• Tax Accountant
• Financial Analyst
• Internal Auditor
• IT Auditor
• Accounting Manager
|• Financial Risk Analyst|
• Risk Manager
• Risk Quantification Manager
• Investment Banker
• TraderWealth Manager
• Market Risk Analyst
• Credit Risk Specialist
• Model Valuation officer
|Benefits of hiring||• Professional Assistance in filing taxes|
• Complex Business Software Management
• Valuable financial recommendations
• Efficient business assets management
• Well-organized Estate Planning
• Reduced Business Expenses
• Effective taxation process management
• Handle Bookkeeping matters
|• Risk Management|
• Product Management
• Model Building and Validation
• Regulatory Compliance
• Asset Management and Control
• Research and Strategy
|Average Annual Salary (approx.)||$119,000||$100,000|
What is CPA?
CPA is a US-recognized accounting credential you earn after passing the Uniform 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. and fulfilling the State Board-issued educational and experience requirements. Moreover, CPA is a highly prestigious and respected designation across the globe.
To obtain the coveted CPA license, you should satisfy the following requirements:
- Pass the Uniform CPA Exam
- Get a Bachelor’s Degree with 120-150 credit hours
- Gain 1-3 years of relevant work experience
- Take the ethics exam (if required by your state board)
Except for the CPA exam, all other licensing requirements may vary as per your state board. Also, you must fulfill the Continuing Professional Education (CPE) to maintain your CPA license.
The American Institute of Certified Public Accountants (AICPA) coordinates with the National Association of State Boards of Accountancy (NASBA) and the State Boards of Accountancy (BOA) of the 55 US Jurisdictions to conduct the exam and issue the license.
Uniform CPA exam
Passing the Uniform CPA exam is one of the most important aspects of earning a license. The exam is a computerized test consisting of four sections. You must take each section at a time. It contains multiple-choice questions, task-based simulations, and written communication essays.
You get four hours to complete each section. Please note that you have to qualify all the four exam sections within 18 months of passing the first section. Also, you need a passing score of 75 on 99 in every section.
In comparing the difficulty of CPA vs FRM exams, the CPA exam boasts of more syllabus and tougher exams. CPA exams test a wide range of accounting and finance topics compared to FRM exams, which are restricted to risk management concepts.
Duties & Responsibilities
CPAs are primarily responsible for devising the ideal monetary strategies to protect and promote their client’s interest. They use their knowledge and skill in the best possible way to maintain a company’s competitive edge in the long run.
Their job responsibilities are as follows:
- Maintaining and auditing business financial records
- Evaluating transactions and preparing reports
- Suggesting commercially beneficial methods to save money
- Financial planningFinancial PlanningFinancial planning is a structured approach to understanding your current and future financial goals and then taking the necessary measures to accomplish them. Because this does not begin and end in a specific time frame, it is referred to as an ongoing process. and budgeting
- Financial consulting
- Tax preparations and filing payments
CPAs have promising career prospects. With their specialized training and knowledge, they command higher pay package, better job opportunities, and a higher professional reputation.
CPAs are competent enough to take up any financial role in corporations, public accounting firms, government agencies, educational institutions, or not-for-profit organizations. As per the US Bureau of Labor Statistics, the demand for CPAs is likely to grow by 22% in the next decade.
In the wake of the coronavirus pandemic, their role has gained a lot of prominence. Now that businesses face foreclosuresForeclosuresForeclosure refers to the legal action taken by the lender when the borrower fails to repay the amount due against the mortgage loan. The lender can take the possession of mortgaged asset or property or resale it to a third party for recovering the default loan amount., bankruptcies, and other sudden financial outbreaks, professionals rely upon CPAs to help guide them in the right direction.
From forecasting and cash flow analysisCash Flow AnalysisCash flow analysis refers to examining or analyzing the company's different cash inflows and outflows during the period under consideration from the various activities, including operating activities, investing activities, and financing activities. to assessing revenues, they are essential for the commercial success of any entity. Also, their experience, knowledge, and skills come in handy to change the fortunes of an ailing system.
What is FRM?
FRM is a globally recognized certification in risk management awarded by the Global Association of Risk Professionals (GARP). It is granted to individuals who pass the GARP-administered FRM exams and have relevant work experience in financial risk management.
You do not have to fulfill any specific education or professional requirement for taking up the FRM program. However, you are entitled to the certification only after:
- Passing FRM Exam Part 1
- Passing FRM Exam Part 2
- Acquiring two years of work experience in risk management
Please note that you must pass the Part 2 exam within four years of qualifying the Part 1 exam. However, you can gain the relevant experience before or after passing the exam. But, you must submit your work experience requirement with five years of pass the Part 2 exam.
Continuing Professional Development (CPD)
GARP strongly recommends the certified FRMs acquire 40 credit hours of the CPD program every two years. Though not mandatory, it helps them stay updated on the best practices in financial risk management.
The optional CPD and less stringent eligibility requirements of the FRM exam vs CPA exam make it more popular. Since FRM is a niche specialization, the FRM exam tests the candidates’ in-depth knowledge in the specific area of risk management. The FRM exam consist of two sets of test with multiple choice questions (MCQs).
|Part I||50%||100||Financial risk assessment tools|
|Part II||50%||80||Application of the risk assessment tools|
Role and responsibilities
Every company faces market and non-market related risk of uncertain events. Such risks expose a company to financial losses. FRMs have the ability and expertise to identify, evaluate, and reduce the effect of these risks.
They leverage qualitative and quantitative analytical techniques to analyze complicated situations and develop a forward-looking plan. Minimizing or alleviating potential risks ensure a company’s smooth operation and long-term growth.
Some of their job responsibilities are as follows:
- Assessing and evaluating risk exposuresRisk ExposuresRisk Exposure refers to predicting possible future loss incurred due to a particular business activity or event. You can calculate it by, Risk Exposure = Event Occurrence Probability x Potential Loss
- Developing strategies to control potential risks.
- Communicating findings to stakeholders
- Designing risk management processes
- Preparing risk management budgets
- Implementing business continuity plans
- Reporting identified risk
- Regulating policy and compliance auditsCompliance AuditsCompliance Audit is a detailed review of organization’s compliance towards statutory laws, local laws, internal rules, and decisions of the organization as applicable.
Please note that FRM certification does not restrict you to risk management profile alone. Instead, you can advance your career in different domains like portfolio managementPortfolio ManagementA Portfolio Manager is an executive responsible for making investment decisions & handle investment portfolios for fulfilling the client’s investment-related objectives. Also, he/she works towards maximizing the benefits & minimizing the potential risks for clients. , investment banking, asset management, or insurance.
Just like CPAs, FRMs too enjoy a handsome salary and professional distinction. Apart from that, they too have better job opportunities, global connections, a stable career, and a professional edge over competitors.
FRM is a designation that has always been and will continue to be in demand across the world. Leading banks and corporations hire them for market survival and growth. Some of the top employers of risk managers are ICBC, Bank of China, HSBC, Citigroup, KPMG, PwC, etc.
Moreover, the coronavirus pandemic has highlighted the need for risk assessment more than ever. With the large-scale disruption of business activities, companies are grappling with operational, credit, and market risksMarket RisksMarket risk is the risk that an investor faces due to the decrease in the market value of a financial product that affects the whole market and is not limited to a particular economic commodity. It is often called systematic risk.. In such unprecedented times, efficient FRMs are the need of the hour to protect and safeguard a company’s business assets.
Earning this designation showcases your ability to add value to the organization in critical areas. The FRM credential is deemed equivalent to the American master’s degree standard. It is your perfect pick to boost career prospects in the financial industry.
CPA vs FRM Infographics
This has been a guide to CPA vs FRM. Here we discuss the difference between CPA and FRM along with infographics and a comparative table. You can learn more from the following articles –