A Career as an Accountant
Death and taxes are the only certainties in this world. There has been so much scrutiny on tax policy over the years, it’s becoming a political hot potato. Regulations and oversight are becoming more onerous for many in the wake of financial crises and scandals. Certain sectors like financial securities should keep accountants busy making sure they are in compliance and properly reconciling whatever complex financial products can be conceived. Since tax laws will be forever tweaked by politicians, accounting is a profession that should always be in demand.
What is an Accountant?
An accountant is someone that prepares, files and audits financial records for a variety of people and organizations. They also make sure their clients taxes are prepared correctly and paid on time to the proper authority. They are abreast of all the latest law changes and regulations that can affect their clients and business.
What are the Different Types of Accountants?
Managerial accountants do internal accounting, budgeting and performance evaluation for the companies they work for. The information is used to increase efficiencies within the organization. The information and processes generally aren’t provided to outside entities. Internal auditors check for waste and fraud within an organization and for compliance. They are also typically employed by the organization.
Forensic accountants are similar to internal auditors but they typically come from outside an organization and are assigned to an organization only when it’s being investigated. Many work for government agencies.
Public accountants are what you generally think of as your typical accountant. They prepare the taxes for people and small businesses, publicly traded companies and governments. Many public accountants strive to become Certified Public Accountants (CPAs), the highest designation for public accountants. They have passed an extensive vetting process and difficult examinations. They also adhere to strict ethical guidelines.
Who Uses Accountants?
Individuals use the services of accountants. Many prepare their own taxes or use the services of an HR Block or even automated services like TurboTax. But many individuals (often wealthier) have more complicated taxes and can afford professional accounting services. Taxes are notoriously confusing and consulting an accountant is always recommended for complicated matters or just for gray areas. For example, if the individual is contemplating starting or entering a business (as a partner, sole proprietorship, single-member LLC, etc) the accountants can recommend the best entity you for your particular situation and then also handle the tax filings of these entities. Gray areas might include deductions for a home office and classifications of travel expenses (were they ‘ordinary and necessary?’).
Many small businesses use professional vendors such as accountants to make sure you’re in proper compliance and help in case of a government audit. They make sure your 1099s are sent so you know who’s a contractor and who’s an employee. Accountants can also help with questions you have regarding confusing and potentially non-compliant situations. Can you legally employ an unpaid intern? Can you deduct tolls during your commute as a business expense? The chances are small you’ll ever get audited, about 2.5%, but you’ll certainly want help if you are.1
Publicly traded companies
Publicly traded companies are required to use outside accounting firms to audit their financial statements and ensure they are in accordance with GAAP, Generally Accepted Accounting Principles. This is for the protection of investors and other stakeholders. This is typically done by the Big Four accounting firms, KPMG, Deloitte, Ernst & Young and PriceWaterhouseCoopers. Combined, these four accounting giants audit over 80% of all U.S. public companies.2
Some accounting firms serve as consultants to publicly traded companies but in the wake of the Enron scandal, they aren’t typically also the auditors. Former accounting giant Arthur Andersen found this out the hard way as it was both auditor and consultant for Enron during its infamous scandal and bankruptcy. Arthur Andersen consequently surrendered its licenses to practice accounting as CPAs but the consulting arm survives on, now as Accenture.3 That’s why they’re known as the Big 4 accounting firms and no longer the Big 5.
Publicly traded companies also have an accounting department and internal auditors. This is for preparation of financial records but also to help with regulatory compliance, Sarbanes Oxley particularly. Regulations can be quite onerous and are expensive to comply with. One provision, SOX section 404, costs large companies over $10 million annually.4 But violations are much more costly.
In an effort to regain investor trust in the wake of major bankruptcies including WorldCom and Tyco, many SEC filings are required to be signed by CPAs. The fiduciary responsibility of accountants is paramount. There is so much oversight on accounting for publicly traded companies is the amount of subjectivity involved in many financial statements. The methods used for some statements may also be ‘pro forma’ which is using the company’s projections and forecasts for the numbers. Often, these begin with a revenue forecast and trickle down the income statement as the other line items adjust as a percentage of the sales. With Wall Street expecting better numbers quarter after quarter, it can put a real strain on companies to stay conservative in their accounting estimates and assumptions.
When we think of accountants in governments, we naturally think of the IRS. They are large employers of accountants, tax examiners and revenue agents tasked with making sure the over 300 million Americans are filing taxes properly. Federal agencies such as the SEC and the FBI are also large employers of accountants, often forensic accountants for investigations.
What are the Required Skills and Credentials of an Accountant?
Being detail-oriented and skilled in math is obviously essential, but being proficient with new technology is also important. Accountants will be familiar with Intuit QuickBooks and TurboTax programs. These software programs are shaking up the field but nothing beats a real-life accountant to who knows the limitations of these programs and can help with complex tax situations. Given the amount of subjectivity with some accounting standards, accountants must also have impeccable character.
While you can be an accountant without a bachelor’s degree, many decide to go back for more education to become CPAs or to broaden their career options. Some schools have combined five year programs where students can transition right in and get their Master’s degrees. You can also become an accountant with a Master’s degree in finance and accounting which will make you significantly more marketable. The extra year of Master’s level education might actually be required because you’ll need to have logged 150 hours of coursework to sit for the CPA exam, depending on your state.
To work in a government position in accounting you may not need a bachelor’s degree, as long as other requirements are met. These include applicable work experience and an acceptable number of accounting course taken. You will have to be 18, a U.S. citizen and probably be background checked. But to be a tax examiner or revenue agent at the IRS, you’ll need an accredited bachelor’s degree.
What is the Compensation for Accountants?
The median annual salary for an accountant was $65,080 in 2013, according to the Bureau of Labor Statistics (BLS)5. The top 10% of accountants make well over $100,000 annually. To get these higher paying positions consider getting an advanced degree or a designation such as the CPA. Many CPAs register with the SEC and audit financial statements and prepare SEC filings for publicly traded companies, a very lucrative path. Ambitious CPAs go on to sit on boards and become consultants and advisors for other companies, further increasing their pay.
How do I Become an Accountant?
The top five sectors employing accountants, according to the BLS6:
1- Finance and Insurance
3- Management of companies and enterprises
4- Accounting, tax prep, bookkeeping and payroll services
Getting a bachelor’s degree in accounting is a great way to start your financial career as an accountant. This should allow you to qualify for most public sector accounting positions. For the private sector, consider an advanced degree such as a Masters in Accounting, especially if you want to pursue the CPA.
Search career services at your school and try and get an internship. Interning is a great way to get some experience and many full-time positions come from this path. Check for openings on job sites like Indeed and make sure to network.
A career as an accountant might not seem exciting but it’s a well-paying profession that’s not likely to ever get go out of style. Tax laws are constantly tweaked by politicians with ramifications left to the accountants to decipher, often for years to come. And with a tax code of 73,954 pages and counting, job security seems assured for accountants.7