What Is CPA Vs FRM?
BothCertified Public Accountant (CPA) andFinancial 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, thechief responsibility of a CPAis to examine a company’s financial records, gain crucial insights, and offer appropriate financial advice. On the other hand,an FRM is accountable foranticipating, assessing, and mitigating critical business risks. Both these professionals are experts in financial analysis.
Table of contents
- What Is CPA Vs FRM?
- CPA Vs FRM Explained
- Comparative Table
- What Is CPA?
- What Is FRM?
- Recommended Articles
CPA Vs FRM Explained
CPA vs FRM refers to the basic differences between two professional courses in the financial world. CPA is Certified Public Accountant and FRM is Financial Risk Manager. Both of they are equally valuable professional courses that help candidates identify and demonstrate their skill and expertise in the field of financial management as well as risk management.
The course of CPA totally focusses in areas of financial accounting, reporting, tax and auditing in an organization along with any other areas of study related to them. Professionals who have the CPA certification are experts in managerial and financial accounting, auditing, etc. They can prepare financiala statements, do tax planning, auditing, and provide financial services to individuals and coorporates.
The professionals who have FRM certification are experts in financial risk management who are skilled in identifying areas of risk. They engage in assessing and evaluating the risk levels and design techniques to control and mitigate them. The risk may be related to the market or operational procedure, or any form of financial or credit risk.
However, both the above courses are highly regarded, recognized and valued in the financial industry. The professionals are considered very knowledgeable and skilled in their own areas. They are extremely sought-after positions because they provide a very lucrative career opportunity for individuals who want to pursue them and make a place for themselves in the job market.
But the ultimate choice of the CPA or FRM certification will depend on the individual choice, career goals and interests. The candidate should have inclination towards accounting, reporting tax, audit etc or a passion to work in the risk management field. In such cases either of the two cases are extremely useful.
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.
| Particulars | CPA | FRM |
|---|---|---|
| Definition | An AICPA-administered accounting license is gained after fulfilling the exam, education, and experience requirements. | A GARP-accredited risk management certification is 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 • Regulation | • 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 the Part 2 exam within four years of qualifying for the Part 1 exam. |
| Continuing professional education | Mandatory | Not mandatory |
| Fees | Application fees – $50-$200. Each exam section - $200 (approx.) | Enrollment fees - $ 750 to US$ 1150. Each part Exam fee - is $1200. 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 • Advisory • Research and Strategy • Trading |
| Average Annual Salary (approx.) | $119,000 | $100,000 |
What Is CPA?
CPA is aUS-recognized accounting credential you earn after passing the Uniform CPA Exam and fulfilling theState Board-issuededucational and experience requirements.Moreover, CPA is a highly prestigious and respected designation across the globe.
Licensing prerequisites
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.
Professional bodies
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 for all 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 more syllabi 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 idealmonetary strategiesto protect and promote their client’s interests. 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 planning and budgeting
- Financial consulting
- Tax preparations and filing payments
Career prospects
CPAs have promising career prospects. With their specialized training and knowledge, they command higher pay packages, 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 foreclosures, bankruptcies, and other sudden financial outbreaks, professionals rely upon CPAs to help guide them in the right direction.
From forecasting and cash flow analysis 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.
Eligibility
You do not have to fulfill any specific education or professional requirement to take up the FRM program. However, you are entitled to the certification only after:
- Passing FRM ExamPart 1
- Passing FRM ExamPart 2
- Acquiring two years ofwork experience in risk management
Please note that you must pass the Part 2 exam within four years of qualifying for the Part 1 exam. However, you can gain relevant experience before or after passing the exam. But, you must submit your work experience requirement with five years of passing the Part 2 exam.
Continuing Professional Development (CPD)
GARP strongly recommends that 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.
FRM Exam
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 consists of two sets of test with multiple-choice questions (MCQs).
| FRM Exam | Weightage | MCQs | Content |
|---|---|---|---|
| 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 risks 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 ensures a company’s smooth operation and long-term growth.
Some of theirjob responsibilitiesare as follows:
- Assessing and evaluating risk exposures
- 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 audits
Please note that FRM certification does not restrict you to a risk management profile alone. Instead, you can advance your career in different domains like portfolio management, investment banking, asset management, or insurance.
Career prospects
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 careers, 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 risks. 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
The infographics given below will help us to get an idea at a glance about the important differences between the two professional certifications. Let us go through them.
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