So you’ve decided it’s time to hire a certified public accountant (CPA). Maybe you’re a business owner looking for help with taxes and financial statements. Or you’re an individual who needs tax planning and preparation guidance. Either way, bringing a CPA on board is a big step. 

A competent, ethical CPA can be an invaluable asset. But make one wrong hire, and you could end up with endless headaches. Shoddy filings, undetected errors, unethical behavior, and even fraud—no fun.

That’s why you need to enter the selection process with eyes wide open. Not all CPAs are created equal. There are key red flags to watch out for at all costs.

This article will cover everything you need to know to avoid CPA disasters. You’ll learn what it really takes to become a CPA, red flags that should set off alarm bells, crucial questions to ask, and how to ultimately find the ideal advisor to meet your needs.

Let’s get this CPA party started!

What Exactly is a CPA?

First things first – what does it actually mean to be a CPA? 

CPA stands for certified public accountant. It’s a legally defined title that indicates an accounting professional has met certain education, exam, and experience requirements set by their state. 

Earning the official CPA license involves:

– Getting a bachelor’s degree with a full course load of accounting and business classes

– Passing the Uniform CPA Exam – a brutal 4-part, 14-hour test covering everything from auditing to regulation 

– Working a minimum of 1-2 years under a licensed CPA 

– Passing an ethics exam 

Being a CPA also requires ongoing continuing education classes and licensing fees to maintain certified status. It’s no walk in the park.

The CPA exam and license are overseen by the American Institute of CPAs (AICPA). This rigorous credentialing process ensures those with an active CPA license are competent across a wide range of accounting and finance responsibilities.

These include tax preparation, auditing, financial reporting, bookkeeping, payroll, advisory services, and more. When you hire a properly licensed CPA, you can be confident you’re getting someone highly trained and knowledgeable. 

But not all CPAs are necessarily a good fit. You need to look closely for red flags and ask the right questions to find someone who matches your needs and personality. Let’s explore what to watch out for.

Major Red Flags to Keep an Eye Out For

Poor Communicators 

This is a big one. You want a CPA who responds to questions in a timely manner, explains financial concepts clearly, is readily available by phone and email, and keeps you informed of progress on your work. 

Nothing is more frustrating than an advisor who is impossible to get ahold of or gives vague, confusing answers to your questions. I once worked with a CPA who would take weeks to respond to a simple email. Not fun.

Good communication is a make-or-break for establishing trust and keeping you informed. An uncommunicative CPA who leaves you frustrated is unlikely to last long as a trusted advisor. 

Cagey About References

Quality CPAs should have no problem providing references from current or former clients. Be very wary if a prospect is hesitant to offer references or provide contact info for more than 1 or 2.

Take the time to actually call those references and ask about their experience. Validation from past clients helps ensure the CPA does quality work and provides excellent service. Avoid candidates who dodge providing these insights. 

Aggressive Salespeople 

The best CPAs aim to truly understand your needs vs. pressure you into services. Watch out for CPAs pushing quick sales tactics, bombarding you with calls, and overpromising.

High-pressure and unrealistic promises are red flags. Look for advisors who listen, allow you time to evaluate options, and make recommendations tailored to your situation.

Inexperienced

While newly licensed CPAs can start somewhere, you probably want someone with depth of experience. Make sure to ask how long they’ve been licensed, sizes of clients served, and industries covered. 

If a CPA has only handled individual tax returns for a couple years, they may lack the knowledge to handle complex books for a manufacturing company. Gauge if their experience level makes you comfortable. 

Murky on Pricing

Reputable CPAs are transparent about how they charge and quote reasonable rates upfront before projects. Watch for vagueness or avoidance on pricing discussion. Potential billing surprises down the road are not ideal.

Push to understand how they bill – hourly, fixed price, etc. Obtain fee estimates in writing before work starts to avoid major sticker shock when the invoices come.

Won’t Sign an Agreement

A quality CPA will provide an engagement letter or service agreement detailing the work they’ll provide and fees charged. Be very cautious if a prospect refuses to sign an agreement or brushes it off as “not necessary.” 

A proper engagement letter protects both you and the CPA, and any resistance could signal issues down the line. Don’t proceed without one.

Disorganized and Unreliable 

Pay attention for signs of disorganization and chaos. Frequently blown deadlines, constantly lost documents, rambling excuses – these behaviors will drive you nuts. 

You want someone who is prompt, professional, and buttoned-up. Sloppy CPAs can expose you to penalties if they file late returns or make reporting errors. Verify any prospect appears organized.

Doesn’t Ask Questions

Good CPAs are inquisitive. They’ll want to understand your current accounting systems, pain points, financial goals, and specific needs. Watch for advisors who seem oddly disinterested in the details of your situation.

Lack of inquisitiveness can lead to generic, unhelpful advice. Seek someone who digs in with detailed questions to tailor recommendations to you.

Stuck in the Past

Accounting has evolved with new technologies like automation, cloud platforms, data analytics and more. CPAs mired in paper ledgers and Excel may lack needed capabilities. 

Ask prospects about their use of technology and openness to emerging best practices. The advice from a digitally backwards CPA may quickly become outdated.

Not Committed to Learning

Rules change, standards evolve, and techniques advance. While CPE courses are mandatory, exceptional CPAs are constant learners. 

Look for passion for continuing education beyond bare minimum requirements. Seek out advisors who geek out on mastering the latest accounting knowledge and skills.

Bad Reviews

Do internet searches to see ratings, reviews and online complaints about potential CPAs. A few gripers happen, but patterns of poor feedback merit caution. 

Also check with state regulators for disciplinary issues. Some people slip through the cracks, so multiple bad reviews demand your attention.

Legal and Disciplinary Troubles

Serious red flags include previous legal and regulatory actions like fraud charges, license suspensions, shady behavior, bankruptcies and such. 

Use your state licensing board’s website to research any past disciplinary actions. Some CPAs have sketchy histories – better to uncover this upfront. 

Questions You Should Definitely Ask

To ensure you find the right CPA match, come armed with targeted questions, including:

– How long have you actively practiced accounting? What is your background?

– What types of clients and situations have you mostly worked with?

– Which accounting services do you offer – taxes, auditing, advisory?

– Will you handle the work yourself from start to finish?  

– How do you stay up to date on accounting regs and changes?

– How responsive are you to client inquiries? How quickly can I expect replies?

– What technology platforms do you use? Are you leveraging automation?

– May I have 2-3 current client references to contact?

– How do you charge – hourly, project, etc.? What are your rates?

– Have you ever been disciplined for ethics or legal issues?

Take time to meet with 2-3 candidates to get a feel for experience, communication style, knowledge, and overall fit. Listen closely to responses and trust your gut.

Trust Your Gut  

Finding the right CPA requires careful evaluation. While credentials provide a baseline, take time to watch for red flags and thoroughly vet candidates. 

Stay alert for poor communicators, sketchy references, aggressive sales tactics, inexperience, legal disciplinary issues and other warning signs we covered.

By avoiding concerning CPAs and asking smart questions, you can hire someone who excels technically and connects with you personally. This lasting relationship will provide huge value through optimized taxes, insightful advice, and total financial confidence and peace of mind.

With a meticulous search, you’ll find the perfect advisor to meet your accounting and financial needs both now and in the future. Best of luck with your important CPA quest! Let me know if you have any other questions.