{"id":245,"date":"2018-09-24T15:11:29","date_gmt":"2018-09-24T15:11:29","guid":{"rendered":"https:\/\/courses.lumenlearning.com\/suny-osintrobus\/chapter\/the-accounting-profession\/"},"modified":"2018-10-12T17:56:07","modified_gmt":"2018-10-12T17:56:07","slug":"the-accounting-profession","status":"publish","type":"chapter","link":"https:\/\/courses.lumenlearning.com\/suny-herkimer-osintrobus\/chapter\/the-accounting-profession\/","title":{"raw":"The Accounting Profession","rendered":"The Accounting Profession"},"content":{"raw":"
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  1. What are the differences between public and private accountants, and how has federal legislation affected their work?<\/li>\r\n<\/ol>\r\n

    When you think of accountants, do you picture someone who works in a back room, hunched over a desk, wearing a green eye shade and scrutinizing pages and pages of numbers? Although today\u2019s accountants still must love working with numbers, they now work closely with their clients to not only prepare financial reports but also help them develop good financial practices. Advances in technology have taken the tedium out of the number-crunching and data-gathering parts of the job and now offer powerful analytical tools as well. Therefore, accountants must keep up with information technology trends. The accounting profession has grown due to the increased complexity, size, and number of businesses and the frequent changes in the tax laws. Accounting is now a $95 billion-plus industry. The more than 1.4 million accountants in the United States are classified as either public accountants or private (corporate) accountants. They work in public accounting firms, private industry, education, and government, and about 10 percent are self-employed. The job outlook for accountants over the next decade is positive; the Bureau of Labor Statistics<\/span> projects that accounting and auditing jobs will increase 11 percent faster than many other industries in the U.S. economy.[footnote]\u201cAccounting Industry in the U.S.,\u201d Statista, https:\/\/www.statista.com, accessed August 10, 2017; \u201cAccountants and Auditors,\u201d Occupational Outlook Handbook, https:\/\/www.bls.gov, accessed August 10, 2017.[\/footnote]<\/p>\r\n\r\n

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    Public Accountants<\/h3>\r\n

    Independent accountants who serve organizations and individuals on a fee basis are called public accountants. Public accountants<\/strong> offer a wide range of services, including preparation of financial statements and tax returns, independent auditing of financial records and accounting methods, and management consulting. Auditing<\/strong>, the process of reviewing the records used to prepare financial statements, is an important responsibility of public accountants. They issue a formal auditor\u2019s opinion<\/em> indicating whether the statements have been prepared in accordance with accepted accounting rules. This written opinion is an important part of a company\u2019s annual report.<\/p>\r\n

    The largest public accounting firms, called the Big Four, operate worldwide and offer a variety of business consulting services in addition to accounting services. In order of size, they are Deloitte<\/span>, PwC<\/span> (PricewaterhouseCoopers<\/span>), EY<\/span> (Ernst & Young<\/span>), and KPMG International<\/span>.[footnote]Raymond Doherty, \u201cDeloitte Overtakes PwC as World\u2019s Largest Firm,\u201d http:\/\/economia.icaew.com, accessed August 10, 2017.[\/footnote] A former member of this group, Arthur Andersen, disbanded in 2002 as a result of the Enron scandal.<\/p>\r\n

    To become a certified public accountant (CPA), an accountant must complete an approved bachelor\u2019s degree program and pass a test prepared by the American Institute of CPAs<\/span> (AICPA). Each state also has requirements for CPAs, such as several years\u2019 on-the-job experience and continuing education. Only CPAs can issue the auditor\u2019s opinion on a firm\u2019s financial statements. Most CPAs first work for public accounting firms and later may become private accountants or financial managers. Of the more than 418,000 accountants who belong to the AICPA, 47 percent work in public accounting firms and 39 percent in business and industry.[footnote]\u201cAbout the AICPA,\u201d http:\/\/www.aicpa.org, accessed August 10, 2017.[\/footnote]<\/p>\r\n\r\n<\/div>\r\n

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    Private Accountants<\/h3>\r\n

    Accountants employed to serve one particular organization are private accountants<\/strong>. Their activities include preparing financial statements, auditing company records to be sure employees follow accounting policies and procedures, developing accounting systems, preparing tax returns, and providing financial information for management decision-making. Whereas some private accountants hold the CPA designation, managerial accountants also have a professional certification program. Requirements to become a certified management accountant (CMA)<\/strong> include passing an examination.<\/p>\r\n\r\n<\/div>\r\n

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    Reshaping the Accounting Environment<\/h3>\r\n

    Although our attention was focused on big-name accounting scandals in the late 1990s and early 2000s, an epidemic of accounting irregularities was also taking place in the wider corporate arena. The number of companies restating annual financial statements grew at an alarming rate, tripling from 1997 to 2002. In the wake of the numerous corporate financial scandals, Congress and the accounting profession took major steps to prevent future accounting irregularities. These measures targeted the basic ways, cited by a report from the AICPA, that companies massaged financial reports through creative, aggressive, or inappropriate accounting techniques, including:<\/p>\r\n\r\n