The other answers are more or less right but missing some important details.
You do not want exposed cement board to extend out. The goal should be for the tile - even 1" - to lap over the drywall next to the cement board. Remember you don't need cement board outside your doors and things like that.
What if you have to have "exposed" ...
You can finish cement board just like drywall. It's a little more difficult due to the rough texture, but a couple skim coats and you're all set. Keep in mind that the use of regular drywall mud over cement board would defeat the purpose of using cement board for those locations. Use setting-type joint compound where you expect regular moisture.
That said, I'...
You do not need to protect the entire bathroom with cement board, no.
However, the cement board and tile should extend past the tub/shower at least a little bit so that drywall isn't the first victim of excess water splashing out.