Accounting

Accountants are responsible for four core functions: general accounting; auditing; assurance; and tax. There are also many other specialized functions such as environmental accounting and litigation consulting. The number and types of services that can be offered by accounting firms can change as quickly as the overall business climate. Supporting accountants and auditors are a variety of departments and workers, including those in information technology, human resources, legal affairs, strategic learning, administrative services and executive support, communications/public relations, marketing, business development, and risk management.

General Accounting

Accountants perform a variety of duties that promote the financial management and well-being of their employer. They record the financial activities of their organization and prepare financial statements that summarize the activity of a particular period (month, quarter, year, or other time span). At for-profit companies, they prepare a variety of financial statements and reports, including income statements, balance sheets, and statement of cash flows. These statements are based on generally accepted accounting principles and/or International Financial Reporting Standards, which are rules that have been established for preparing and presenting financial statements. General accounting departments perform many other tasks, such as preparing an organization’s state and federal income tax returns, managing the internal financial operations of their organization, and preparing financial reports and analyses for CEOs and financial officers.

Auditing

The primary service provided by the auditor is examination of financial statements of a company or any other legal entity, resulting in the publication of an independent opinion on whether or not those financial statements are relevant, accurate, complete, and fairly presented.

The most basic functions of CPA (short for certified public accountant, the professional designation for accountants who are licensed by their state’s board of accountancy) firms are accounting and auditing, which consist primarily of performing independent audits of the financial statements issued by companies. A company is a client of its accounting firm—it pays the accounting firm to audit its financial statements. The accounting firm’s audit signals that an independent authority attests to their validity. In addition, a number of audit-related services are offered, either as part of the audit engagement or as a separate engagement. Among those services are:

• recommending improvements on internal controls, operating efficiencies, and profitability to management
• acquisition audits (financial analysis or “due diligence” on a company the client is considering acquiring)
• validating financial and nonfinancial data for internal and external review
• confirming that the client is in compliance with debt agreements

In the past few years, the risk-based approach has become popular. As a result, auditors will identify clients’ business risks to determine the extent of substantive testing needed. This risk-based approach enables a high degree of precision in identifying which area/process of a client’s business is most susceptible to failure. Once this area/process is determined, the auditors will know where to focus most of their attention.

Assurance Services

The Association of International Certified Professional Accountants (AICPA) defines assurance services as “independent professional services that improve the quality of information, or its context, for decision makers.” In addition to accounting information, accountants involved in assurance provide financial projections and forecasts and assurance on e-commerce, mergers and acquisitions, comprehensive risk assessments, internal controls, inventories, fixed assets, accounts payable, system reliability, and any other area in which reliable information is needed to make a business decision.

Taxation

Accountants working in taxation do much more than prepare tax returns. Taxation departments create strategies to minimize tax liability (reduce the amount of tax payments) and comply with local, federal, and international law. Specific tax services now cover a wide range of issues:

• accounting for taxes on financial statements
• preparing federal, state, and local tax returns
• advising on multistate and international taxation issues
• consulting on mergers and acquisitions to minimize taxes
• structuring operations to leverage tax opportunities
• reviewing tax returns for compliance with tax laws
• personal wealth and estate planning for individuals

A firm’s tax practice often includes special service groups that address specific, complex tax issues. For example, some accounting firms maintain groups that monitor new tax laws, regulations, rulings, cases, and other developments within the tax regulatory environment and communicate this knowledge to the rest of the firm. Often, these practices are located in Washington, D.C., and employ attorneys to advise on the tax aspects of complex transactions.

Corporate Finance and Risk Management Services

This area covers a broad range of services designed to assess and manage organizational risk from strategic, tactical, and financial perspectives. These include:

• internal controls review and transformation
• internal audit outsourcing (i.e., handling audit functions for clients)
• operations benchmarking and advisory services (reviewing the client’s operations and comparing it to competitors)
• e-commerce security consulting

Financial risk management services include the quantitative assessment of the financial impacts of business risk and the creation of highly structured financing strategies composed of risk management products (e.g., options, futures, swaps) to address such risks.

Transaction Services

This area employs audit and tax professionals to maximize the returns on merger, acquisition, and divestiture transactions, analyzing each stage of the transaction process for both the buy-side and the sell-side to realize full value. These services may include:

• financial and tax due diligence
• transaction structuring
• capital raising assistance

Business Process Outsourcing

CPA firms often have both the expertise and size to assume the operation of many of the noncritical functions of their clients. Firms outsource such services in order to focus resources on their core functions and to rationalize nonoperating costs. The functions commonly outsourced to CPA firms include finance and accounting, enterprise resource planning systems, human resources, training and education, and information technology.

Litigation Consulting

The larger CPA firms offer financial, economic, and statistical services to parties involved in litigation, arbitrations, mediations, and other forms of dispute resolution processes. These services may include: forensic accounting and investigation; management, valuation, and defense of intellectual property; analyses related to antitrust situations; securities litigation services; asset tracing and recovery services; insurance litigation and fraud detection; and computer/information technology forensics.

Management Accounting

Management accountants serve internal management decision makers at a company or organization. Examples of these managers include top executives at corporations, college deans, and hospital administrators. Management accounting involves the identification, measurement, accumulation, analysis, preparation, and communication of financial information that is then used by managers to plot strategy and make decisions. Management accountants may make recommendations on business strategy, resource allocation, cost efficiencies, and operations to improve financial performance.

Environmental Accounting

As businesses have increased their awareness of environmental issues, CPAs have been getting involved in everything from environmental compliance audits and systems and procedures audits to handling claims and disputes. Companies in the utilities, manufacturing, and chemical production areas have increasingly turned to CPAs to set up preventative systems to ensure compliance and avoid future claims or disputes or to provide assistance once legal implications have arisen.

Personal Financial Planning

CPAs provide assistance to individuals in identifying financial objectives and counseling on the risk, liquidity, management, and tax characteristics of investments. These services include helping clients better manage their money through debt reduction and expense control, developing investment strategies and asset allocation plans, tax consulting, insurance analysis and planning, retirement, and estate and gift tax planning.

Management Consulting

Management consulting addresses an infinite array of issues related to the overall performance and direction of a firm’s business. These services include systems integration, business strategy, e-commerce and technology consulting, accounting and other financial issues, and human resources.