Basis of Analysis
Hiring an accountant should be a significant decision when it comes to your finances. For some, their finances are not as significant as others, so the decision has a lower priority than other decisions. As your wealth increases, there should be a corresponding increase in concern if you are paying more to the government than you should in taxes.
Frosty recognizes it is biased on this topic and for that reason will try to keep things supported and analytical on this topic, while keeping opinions minimal.
We will take the range of costs for three services. Personal tax, corporate tax, and a financial controller position. These prices were the lowest costs available online or an estimated average made based on industry knowledge within the Calgary market.
| Service Level | Personal Tax | Corporate Taxes | Financial Controller Hourly* |
| Low Cost | Free (CloudTax) | $200 | ~$31/h |
| Accounting Firm (Non-CPA) | $125-$500 | $1,200 | ~$60/h |
| Frosty Squirrel CPA | $300-$800+ | $2,400-$3,600 | ~$200/h |
| Premium CPA Firm | $500-$1,500+ | $4,000-$5,000 | ~$500/h |
All in CAD.
*Controller hourly is based on estimated wages paid to a full-time employee for rows 1 & 2, while Frosty Squirrel CPA and Premium CPA are based on managerial advisory rates. This may result in a seemingly large increase in price in comparison between the employees as it is not expected to be 40 hours per week at these rates.
Corporate Taxes
The pricing for CPAs is 2-3x compared to non-CPA firms for corporate tax returns. This is due to the CPA lines including a compilation of the financial statements with the corporate tax filings. Many CPA firms require compilations along with corporate tax returns as this reduces the risks for the CPA and improves the client’s visibility of their company’s financial health. This can sometimes include a meeting with the CPA to discuss various things, such as tax planning, and changes in corporate structure, and may include advice on ways to improve the financial health of the company.
The lowest cost of $200 for a corporate tax return can be found in industrial parks or online through unregulated parties. The only requirement for anyone to open a tax filing service is to be registered by the CRA as a tax filer. Below is a screenshot from the CRA website on the steps to register a business as a tax filer.
Once registered, the Representative will need to renew each year via a 10-15 minute phone call where they have to answer honestly a few questions. This process is minimal and in the opinion of Frosty, does not reflect a verification that should be relied upon when you can be on the hook for significant penalties and interest. This does not look into the qualifications of the company filing these taxes.
Even if you are not going with a CPA firm, Frosty highly recommends performing your own tax return over these “pop-up accountants”. Frosty has taken over several files from these types and the hours spent on the mess created can sometimes be reflected on the billings to the client and often the penalties and interest are several times the CPA fee.
CPAs will not clean up other accountant’s messes for free.
Personal Taxes
The complexity of your tax return will normally dictate when it is best to switch to a tax accountant. As your basic tax evolves into specific tax issues, personal finance, tax planning, and ever-changing tax laws and regulations become more complex. Hiring a tax professional at this point may be the next step, however, the average cost of a tax specialist is not worth it for the majority of Canadians.
When to hire a tax specialist?
The best scenario you can be in is having your regular accountant inform you that they require outside expertise. The CPA then would outsource the work to prepare your tax to an accounting firm based on your situation. Utilizing their connections within the accounting industry would allow them to hire an accounting firm that works well with your systems. The average non-tax specialized CPA will normally have to engage these specialists for things like complex corporate structures in different jurisdictions. This is not to say that your CPA cannot provide services beyond what they normally offer, each CPA is encouraged to continue learning, which includes ensuring tax compliance from tax code changes and challenging themselves with more complex tax issues. This is normally done with a whip called Professional Development hours.
If you are not in that situation, it is recommended you find a CPA office that you feel is in line with your values and focus to engage them with questions about your personal tax situation. Unless they are not taking on clients, most CPAs have minimal issues assisting prospective clients with an assessment.
However, if you want to save a bit of time a quick assessment of if you need a tax specialist would be, would you be okay spending over $1,000 to prepare just your personal taxes? If not, a regular CPA or other low-cost options are more likely your best option.
Engaging a CPA just for your personal taxes could be overkill if your taxes are not complex.
Financial Controller
A financial controller is paid anywhere from $60,000 to $250,000 annually and most have no clue what this position does. In simple terms, a financial controller operates the financial systems and internal policies, including the accounting software, payroll, consultation with the small business owner, and even tax preparation in limited cases. They are the ones who keep the invoices flowing and the vendors paid while ensuring they have all the proper accounting performed for the various transactions and reporting to either a CFO or directly to the owners about the financial position.
Small businesses do not normally require a full-time controller as this is usually overkill for the operations of the company. However, as the complexity of the company increases the need for controller work is required, this is where Fractional Controllers would come in.
Accountants as Controllers
Many “accountant” positions are controllership positions in their nature, and anyone can be an accountant. Additionally, an accountant position is often paid less than a controller position, companies will do this intentionally, resulting in confusion on the difference between the two positions.
Below we have broken down the different levels.
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A bookkeeper is the first title most accountants hold. This is mainly a data input position, with experience the bookkeeper can evolve into an accountant!
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An accountant is a title for someone who understands accounting in the context of that position. A revenue accountant for example understands how to post revenue for the company based on the complexities of the contracts or through policies enacted by a controller.
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A financial controller is the title of an accountant who understands the accounting framework, standards and application for the company they are working for. An accountant’s accountant if you like.
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A corporate controller is the title of an accountant who understands the accounting framework, jurisdictional issues, and consolidations and is normally the point person involved in company audits. The final form of an accountant.
Of course, all these positions do not require a CPA. But would you prefer a CPA sitting on the other side of the table handling your audit needs as your corporate controller or the accountant who was good at revenue recognition? This is why many high-paid accountants are CPAs as the designation demands a premium due to the training, regulations and experience of the accountant.
Many experienced accountants will discover a glass ceiling as their career advances without a designation.
Training
If an 18-year-old high school dropout wants to call themselves an accountant, nobody can stop them. If they want to call them a Chartered Professional Accountant, they will be dragged through the streets tarred and feathered before being sent a cease and desist letter from a lawyer. Or maybe just the second part.
If this 18-year-old wanted to become a CPA they would first need to get their high school equivalency then their undergraduate degree with all required courses with minimum grades in each. After graduation, they would need to find an employer that is hiring CPA students and convince them they are the best choice. They would likely be hired on for ~$50,000. Once they are accepted into the CPA PEP they are now at the start of the path to becoming a CPA.
During their first busy season, they would be expected to work 60+ hours per week with no overtime compensation (CPAs and CPA students are not required to be paid overtime by law). If they were allowed to take on 1 of the 6 education modules during the busy season they may need to pay for the module up front or the company may pay for it. During these 2 years, they will be used as grunt labour, learning as much as they can, while studying 20 hours a week. This is one reason some firm policies disallow modules during the busy season, as 60 + 20 = a lot of burned-out assets.
If the student passes all their modules within 3 attempts they can then write the CFE which is held twice a year. The CFE is a 3-day exam. If you fail a single day, you will need to rewrite at least in part. Want to know why you failed? Too bad. If you want to challenge it, and thereby learn what you did wrong? $1000. If you go through all this, and then additionally have worked at a training firm that has submitted your hours for 30 months or more. THEN you can obtain your CPA designation.
Having spoken to CAs, the predecessor designation, graduating in the 80s and 90s, they recall the failure rate was in the 40% in some years nearing 50% for the UFE. This could be the “in my day” speech though. If this failure rate was accurate this could have been an indicator of the gatekeeping that the public accounting practice held on the designation. Becoming blackballed from public practice was much more possible in those days, which was a significant issue within the program. If you allow one group of people to decide who to let in and then legislate them to be the only people allowed to perform certain work then you are giving too much power to gatekeep the entire industry. If you don’t think this candidate will play ball with “bending” the rules, toss them out and find someone from the mile-long lineup of candidates. You think the partners are acting unethically? Keep your mouth shut or you could find out you are not CA material. These sorts of issues were dealt with during the merger of CPA by allowing non-public practice companies to run training programs. This began in 2010, 5 years prior to the consolidation of CA, CMA and CGA into CPA, but few companies could afford to train audit work outside of public practice.
You hammer out the impurities until you have a finished product. That time, effort, and diligence have significant value.
Regulation of the Industry
The biggest difference between a CPA and another accountant is the other accountant is unregulated beyond the general laws of Canada. Regulation happens for all CPAs regardless of whether they offer CPA services, are tax preparers, or are public accountants. However, there is a varying level of regulation for these activities. All CPAs must pay annual fees and are required to perform at least 20 hours of verifiable professional development each year, this is things such as courses, seminars, and conferences. This helps ensure they are maintaining their level of knowledge.
For the accounting firm, they also must pay a fee annually. In addition, they are required to submit to a practice review every 3 years, this is an audit of a selection of files to ensure compliance with the requirements of each engagement (tax, compilation, review, audit). This significant amount of “red tape” can be a hindrance and requires attention from the partners of the firm to ensure a passing grade. For assurance engagements (review & audit) there is a higher level of compliance and rigidity. This is one of the reasons Frosty has elected to remove assurance engagements from its service offering.
In addition to all this, all CPAs are required to follow the Rules of Professional Conduct, which limits what we can say, how we advertise, and the professional relationships we reference among many other things.
The heavy regulation is often a justification for high fees, but where there is regulation for CPAs vs non-CPAs this results in the CPA fees being significantly higher than the unregulated for what appears on the surface to be the same work.
CPA vs CPA
Not all CPAs are created equal. This is an issue with the governance of the profession. In 2015 Chartered Accountants, Certified Management Accountants, and Certified General Accountants organizations combined to form the Chartered Professional Accountant Organization. It was a bumpy transition and certain issues have not been resolved.
Prior to merging, CAs were the only designation that were legislated to perform audits, all CAs needed to be trained in a public accounting office. This changed a few years before the merger when they allowed larger companies that could handle the training to become training “offices”. This results in a student who could have never had any audit experience or public accounting experience becoming a CA and obtaining a senior auditor position for a large firm as soon as they obtain their letters (true story).
When the merger was presented to the membership, one of the selling points was that becoming CPAs would allow us to operate on a similar level to the US CPAs. However, a US CPA is a Certified Public Accountant, and their exam and regulations are similar to the legacy CA program and the current CPA Canada program. The issue arises from clarity to the public, each CPA has a responsibility to disclose if they can/cannot perform audits or are licensed in that jurisdiction. This has become a bigger issue that remote work has exploded becoming normalized.
If Frosty has a prospective client reach out from Maine, it needs to be made clear that Frosty is not able to assist them with their Maine-based needs with some exceptions. If they are looking for assistance with operations in New Brunswick, then this becomes an issue with registration with the Atlantic Canada governing body for CPAs instead.
All this can cause significant confusion for clients. If your bank told you they needed a compilation or notice to reader engagement completed to maintain your loan, you could walk into any accountant’s office and they could provide this service if they so choose. If the bank requires a review engagement for the same loan, then you can only obtain this service from a CPA. However, not just any CPA, needs to be a CPA that offers assurance services.
How do you tell who can offer assurance services? The CPA will tell you, usually on their website or when you call about the review. How do you know that a CPA firm is really licensed for assurance engagements? You trust them. If you don’t trust them you can search their CPA firm online to verify.
You will find this:
Showing that Frosty is a good boy and can perform specific services as listed. This seems like a significant amount of work for the general public. For the experienced/educated general public, I think this is a reasonable amount of work to vet the CPA firm, but for new companies and entrepreneurs navigating the professional space this could be “hidden”.
Frosty believes it would be easier for the profession to have two separate logos for CPA firms, one for those who can perform assurance and those who cannot/choose not to offer those services. Frosty has suggested a small green “assurance” checkmark on the logo to educate the general public further, but this is not seen as an issue within the profession.
Vet your CPA through your own criteria to ensure they are the right fit for you.
Other Reasons
Bookkeeping – CPAs will normally allow for some bookkeeper to work with their tax clients within their fees. This could be calculating gains and losses on investments or addressing shareholder loans. While the lower-cost options may charge additional fees to cover the time spent.
Errors – Shit happens. Even CPAs will screw up, either by not asking the right question or just by human error by the unexperience junior or the exhausted senior. For many tax issues, as long as the client was not intentionally hiding something that caused the error, the accountant may either discount fees in the amount or pay for these penalties if they are the cause. This is a firm-by-firm policy though.
Shared responsibility – You as the taxpayer are always responsible for your own tax returns, this was learned the hard way by Adrian Hodgson, CPA, CA in his youth when he trusted the wrong accountant. Even if you hand this to a CPA you are paying $1,500 to file your taxes, if they forget to file your taxes it is still your fault. Our system is not fair in that regard, however, there are avenues of recourse you can take as a client. While nothing legally will penalize the CPA for not finishing the work in a timely manner, they can be sued for their error. All CPAs are required to hold errors and omissions insurance while maintaining their practice and 7 years after they retire, this can often recoup the costs incurred. Additionally, if you were deceived by the CPA there is additional recourse through the governing body of CPA Alberta or the corresponding provincial governing body.
If you have your taxes done by a non-CPA you have very limited resources to recoup the costs of the accounting fees, CRA penalties and/or interest.
CPA Shortage
There is currently a significant shortage of CPAs in Canada. This is for many reasons, in addition to some of the items above there is a CPA shortage due to a significant depression in wages for a profession that does not appear to be valued. Fewer students want to do the unglamorous work of a CPA for low pay, With the improvement of AI within the industries, many expect to pay minimum accountant fees and avoid hiring the more expensive option as they believe ChatGPT can perform the work of an accountant. To address this issue, Frosty will simply say there is a reason Adrian Hodgson, CPA, CA writes all the current blog posts without any significant assistance from AI while using AI a significant amount in his personal life and other facets.
AI over time will cause the industry to shrink, causing a greater shortage of CPAs. Many experts will point out that it will only be those who don’t adapt to using tools like AI that will be deemed obsolete. While this is true, when 1 CPA can perform the work of 30 students using AI, the cost savings dictate that the students be culled. Resulting in fewer students going through the process, which results in fewer CPAs due to the failure rate discussed above in training. This results in fewer CPAs maintaining their CPA designation over their careers. Resulting in fewer CPAs overall.
Can governance keep control over the accounting profession if there are more limitations than benefits to maintaining your designation?
Squirrel Thoughts
CPAs cost more because they provide more reassurance to their clients that things are done correctly the first time, and if that expectation is not met there is recourse for the client. If CPAs were charging the same amount for the services provided by non-CPAs, they would make less than those who were not CPAs as the cost of regulation is significant. The additional cost of a CPA should be washed out by the value-added service and savings the CPA provides. If you are not seeing any value added or savings in a CPA perhaps that CPA is not articulating their value properly (which is difficult for many of us) or perhaps it is time for a change.
Unless you are willing to take on the risks yourself, hire a CPA because you should get what you pay for.