Thesis and plan of development (finding a focus)

Thesis:   The major differences between public and private accounting are the tasks and responsibilities, work environment, and career opportunities.

Intro

·         “You can think of public accountants as “external” accountants who provides services to clients such as audit, consulting and tax planning services.”

·         “Private, or non-public accountants are “internal” accountants who work in a company, non-profit organization or a government agency. You can work in the financial accounting, management (cost) accounting, budgeting, corporate planning, treasury or in the internal audit department within the corporation.”

Tasks and Responsibilities

·         Breadth vs. Depth: Because corporate accountants spend all of their time working for one company, they are extremely knowledgable about the accounting for the company they work for. This makes an accomplished corporate accountant valuable to her company and companies that sell similar products and services. However, public accountants frequently serve many clients, sometimes in different industries. This gives them a breadth of knowledge about accounting issues at a variety of companies. This makes public accountants valuable to companies that are looking for employees with a large base of knowledge.

·         Public Accountant Job Duties: General responsibilities shared by all public accountants include preparing and verifying vital financial documents, analyzing budgets and planning finances. Public accountants give advice and provide basic financial information to a range of clients, from individuals to corporations. They also perform bookkeeping, consulting and auditing tasks. However, the duties of a public accountant vary by individual concentration; for example, some public accountants specialize in tax issues. Their responsibilities involve working with income tax returns and filing taxes in accordance with rules and regulations. Another specialty is forensic accounting, a branch that involves investigating financial fraud.

·         Education (private acc): A private accountant generally requires a four-year degree with an emphasis in accounting, business, economics or a related field. Courses in administration, business organization management, and business policies and procedures are also helpful. Some organizations and businesses prefer accounting candidates with a master's degree. Certification is also available for specific job functions, such as in payroll. Certification provides credibility for the individual's training, skills and experience.

·         Duties and Responsibilities: The private accountant performs a variety of tasks depending upon the size of the organization for which she works. In larger structures, private accountants are usually assigned to specific areas, such as general ledger -- the master record of all accounts and transactions -- accounts payable, accounts receivable, payroll or taxes. Accounts payable involves bills that need to be paid, while accounts receivable deals with income and invoice creation for clients. The private accountant's job in her area of specialty is to ensure that financial transactions are accurate and current. She might review financial statements, provide analysis of data and create reports.

·         “At present, there are approximately 28.5 million private companies in the United States and approximately 14,000 public companies. Public companies have financial reporting requirements to the Securities and Exchange Commission (SEC) pursuant to the Securities Act of 1933 and the Securities Exchange Act of 1934.”

·         “Many of the private companies in the U.S. are very small businesses and thus have no reporting requirements other than filing income tax returns. There are, however, significant number of private companies that prepare financial statements in accordance with U.S. GAAP because such financial statements are required by lenders,

other creditors, bonding and credit-rating agencies, regulators, business owners, and

others. Many private companies preparing U.S. GAAP financial statements must issue

audited, reviewed, or compiled financial

statements.”

·         Most individuals who understand the basics of financial reporting are familiar with the phrase generally accepted accounting principles (GAAP) and will readily identify the Financial Accounting Standards Board (FASB) as the standard-setting body in the United States responsible for establishing accounting principles for nongovernmental entities. However, some may not be aware that there is no single reference source for GAAP because these principles are derived from a variety of sources. For example, although the FASB is responsible for issuing FASB Statements of Financial Accounting Standards, Interpretations, and Technical Bulletins, the American Institute of Certified Public Accountants (AICPA) issues Statements of Position, Audit and Accounting Guides, and Practice Bulletins, and the FASB Emerging Issues Task Force (EITF) issues EITF Abstracts.  It may seem that accounting principles could be generally accepted because of popular vote or consensus of opinion. However, generally accepted accounting principles is a technical accounting phrase defined in Accounting Principles Board (APB) Statement No. 4, Basic Concepts and Accounting Principles Underlying Financial Statement of Business Enterprises, as "the conventions, rules, and procedures that define accepted accounting practice at a particular time."

GAAP includes not only broad guidelines of general application but also detailed practices and procedures that provide a standard by which to measure financial presentations. For the most part, in financial reporting, generally accepted implies substantial authoritative support.

Work environments

·         Good People Skills. Public accounting is a client oriented business which means that you need good people skill. For example, you’ll need to communicate effectively with your clients when trying to understand the client’s business and to request information for your analysis. As you move towards partnership, you’ll acquire important skill in how to deal with difficult clients and getting the information you need at the same time.

·         Good Sales Skills. This is people skill in the next level, and is required if you aspire to become a partner or own your CPA firm. In short, you need to solicit business for your firm and good sales and marketing skill (and keeping your professionalism at the same time) is a critical skill.

·         More Stressful Environment. Because you are dealing with a wide variety of people and demands, public accountant’s work is inevitably more stressful. On the other hand, private accountants work with the same group of colleagues and tend to have a more relaxed lifestyle.

·         Longer Hours. Similarly, because you are working with clients vs colleagues, the deadlines are hard deadlines and over-time / late nights are common especially for junior accountants (associates and senior associates).  Other than the account-closing month, private accountants have more or less a 9-5 job.

·         Corporate accountants typically work long hours around the monthly close period, when the company completes the accounting records each month. In addition, corporate accountants work longer hours around the annual audit and quarterly reporting dates. Public accountants tend to work longer hours during the "busy season" of their clients. Usually, this is from January to April. However, as public accountants move up through the organization, this busy season can sometimes extend into a greater part of the year.

Career opportunities

·         Less Stability. While accounting job is considered one of the safest jobs, the boom and bust of economic cycle does affect CPA firms as clients cut budget and corporate finance activities. Within public accounting, audit and tax teams are more secure than advisory teams for this reason.

·         Better Exposure. Having said that, working in a public accounting firm expose you to a wide variety of projects in different industries and this is an unrivalled experience when compared to an accounting role in the corporate world.

·         More Doors Opened. Because of this, an experience in CPA firm (especially Big 4) is excellent for your resume, and you can always go from public accounting to private accounting but not vice versa.”

·         The U.S. Bureau of Labor Statistics has projected employment growth for all types of accountants, including public accountants, to rise at a rate of 22% between 2008 and 2018 (www.bls.gov). Job prospects should be good for accountants; however, CPAs should have better job prospects than their non-certified counterparts, due to their additional training and experience.

·         Earnings and Benefits: Private accountants typically work a 40-hour week as exempt employees with a salary. The U.S. Bureau of Labor Statistics lists the median annual wage for all accountants in 2010 at $61,690 in May. The top 10 percent can earn more than $106,880 per year. Most private accountants receive vacation pay, sick leave, and health and dental benefits. Some organizations offer 401k benefit plan or retirement plans for accountants after the accountant meets internal vesting requirements.

·         Career Opportunities and Outlook: The bureau reports that accountant jobs are expected to grow as fast as most occupations, at 16 percent from 2010 to 2020. Private accountants can work as cost accountants in manufacturing or companies with product lines, as accounting supervisors, payroll accountants or accounting analysts. After gaining on-the-job experience, private accountants are often promoted to positions of management. Accountants with graduate degrees can be promoted to controller or executive-level management positions.

·         Staff auditors perform the meat of an audit, engaging in the often mentioned "ticking and tying" activities, i.e., analyzing and verifying the information contained in the myriad ledgers and statements provided by the client. Under the supervision of an audit senior, they will work with the client to obtain information and determine the validity and accuracy of the accounting records. It is the staff accountant's responsibility to investigate specific accounts assigned to them and to identify, resolve and document any material issues. Staff auditors will often start to direct small audits (and will be referred to as the "acting senior" on the engagement) in their second years.

·         Tax Staff (year 1-3). Like their audit counterparts, tax staff personnel perform the meat of the tax work. They prepare tax returns, research tax issues and counsel clients on tax matters under the supervision of a tax senior and/or tax manager. Generally, tax staff do not have as much direct client contact as their audit counterparts. This level encompasses a significant amount of learning and training as the tax staff gets up to speed regarding basic aspects of income tax reporting, compliance and analysis.

Conclusion

·         Public Accountant Salary Information: PayScale.com reported in July 2010 that public accountants earned salaries ranging between $41,920 and $58,520. Annual salaries ranged from $47,901 to $71,173 for Certified Public Accountants. This wage difference can be attributed to the added requirements CPAs must meet in order to earn their distinction.