What is an Accountant?
An accountant is a professional who performs accounting functions such as audits or financial statement analysis. This is also known as account analysis. Accountants can either be employed with an accounting firm or a large company with an internal accounting department, or they can set up an individual practice. Accountants are given certifications by national professional associations after meeting state-specific requirements, although non-qualified persons can still work under other accountants or independently.
An accountant is qualified person who is trained in bookkeeping and in preparation, auditing and analysis of accounts. Accountants prepare annual reports and financial statements for planning and decision making, and advise on tax laws and investment opportunities.
An accountant is a practitioner of accounting or accountancy, which is the measurement, disclosure or provision of assurance about financial information that helps managers, investors, tax authorities and others make decisions about allocating resource(s).
Accountants who have demonstrated competency through their professional associations’ certification exams are certified to use titles such as Chartered Accountant, Chartered Certified Accountant or Certified Public Accountant. Such professionals are granted certain responsibilities by statute, such as the ability to certify an organization’s financial statements, and may be held liable for professional misconduct. Non-qualified accountants may be employed by a qualified accountant, or may work independently without statutory privileges and obligations.
Accountants must abide by the ethical standards and guiding principals of the region where they practice, such as the International Financial Reporting Standards (IFRS) or Generally Accepted Accounting Principles (GAAP). The most common accounting designations are the Certified Internal Auditor (CIA), Certified Management Accountant (CMA) and Certified Public Accountant (CPA). A Certified Internal Auditor doesn’t need to receive any license in order to practice, and neither do Certified Management Accountants.
Accountants can have more than one designation and may perform multiple types of accounting duties. The type of educational background and designation that an individual has will determine his or her professional duties. Accountants have bachelor’s degrees and may need to get a certificate, which can take up to a year to obtain depending on the type of certification being pursued and the state in which those requirements must be met.
In the U.S., certification requirements for accountants can vary from state to state, but one requirement that is uniform in every state is the passing of the Uniform Certified Public Accountant Examination, an exam that is written and graded by the American Institute of Certified Public Accountants.
How Does an Accountant Work?
Accountants often work in a company’s accounting department, at an auditing firm, or in a private practice. Regardless of where they work, an accountant’s work generally revolves around recording, measuring, and presenting financial information.
In a company’s accounting department, accounting functions often include billing customers, collecting payment, paying vendors and employees, reconciling bank accounts, calculating and remitting taxes, and correctly recording transactions among subsidiaries and ventures. They also include creating budgets, setting spending policies, and making or participating in major business decisions.
Audit work includes verifying a company’s financial information, helping a company determine the appropriate accounting treatment for complex transactions, and providing public opinions about the quality of a company’s accounting records. Accountants in private practice may provide bookkeeping services for small companies, prepare tax returns for companies and individuals, or offer consulting services for certain types of transactions or industries.
Here are several examples of the types of transactions in which an accountant may become involved:
- Issuing an invoice to a customer, which involves recording a sale and account receivable.
- Receiving an invoice from a supplier, which involves recording an expense or asset and an account payable.
- Issuing a salary or wage payment to an employee, which involves recording an expense and the outflow of cash.
- Reconciling a bank statement, which likely produces adjustments to the cash account.
In addition to transaction recordation, an accountant produces a number of reports. The key types are as follows:
- Financial statements are issued to the owners and/or operators of a business, as well as to lenders and other creditors. The financial statements include the income statement, balance sheet, and statement of cash flows.
- Management reports are issued to the management team. The reports are highly customized to the needs of each entity, and may cover such topics as the sales of certain product lines, investigations of cost variances, sales returns, and an analysis of overtime incurred.
- Tax reports are issued to several government entities. The reports provide detail regarding the amounts paid for income taxes, property taxes, sales taxes, use taxes, and so forth.
An accountant may also be involved in the creation of a number of processes within a business, which typically include several controls to ensure that assets are properly managed. Examples of such processes are:
- Shipments to customers
- Receipts from suppliers
- Cash receipts from customers
Legal Responsibility of Accountants
Certified public accounts have a legal responsibility to be honest and to avoid negligence in their duties. CPAs have real influence over their clients, and their judgments and work can affect not just an individual but an entire company, including its employees, its board and its investors. Accountants may be held liable for paying uninsured losses to creditors and investors in the case of a misstatement, negligence or fraud. Accountants can be held liable under two different types of law: common law and statutory law. Common law liability includes negligence, fraud and breach of contract, while statutory law includes any state or federal securities laws.
Why Does an Accountant Matter?
Although people often refer to accountants as “bean counters” who focus on the smallest details, accountants have the rare advantage of being able to understand both the details of each area of a company and the big picture. This broad and deep knowledge is why CEOs often come from the ranks of accounting and finance.
Effective accountants must be able to solve problems creatively and analyze information to gain insight into situations. They must also be able to persuasively discuss and defend their views, stay abreast of new e-commerce and software technologies, manage projects and deadlines, and have the confidence to make recommendations and policies that affect an entire organization. Above all, successful accountants are good communicators, act ethically, and rigorously follow the law and accounting rules.
It is very important to understand that not all accountants are CPAs. CPAs are licensed by the states in which they practice. To become a CPA, an accountant must complete a formal program of study at a college or university, pass the Uniform CPA Examination administered by the American Institute of Certified Public Accountants, and have a certain amount of related work experience. Each state’s board of accountancy determines the exact requirements in each of these three areas. In some states, only CPAs can perform certain accounting functions. The Securities and Exchange Commission also requires that only CPAs perform certain functions.
Each state board of accountancy requires its CPAs to keep current on accounting rules and practices by taking Continuing Professional Education (CPE) courses each year. Each board determines how many CPE credits a CPA in that state must obtain each year and what activities warrant these credits.