Sunday, February 20, 2011

Accounting: What's the Real World of Accounting Like? [1]

For recent accounting graduates, life holds the mysterious, age-old question:  what is it like in the real world? In particular, what is it like to work daily as an accountant and what does it take to succeed in your accounting career? The answers to those questions come in part from knowing yourself and your own goals, then realizing that there are several types of accounting careers. Your success will depend partly on whether the accounting path you choose fits your goals and your lifestyle. Whether you advance depends upon the structure of the company you work for. If you choose to work as one of three accountants, you may have to wait until one of the two above you leave or retire before you can move up. Consider the areas of accounting.

Those are:

Areas of Accounting

Early in your career, preferably while still in college, you will want to get an idea of what kind of accounting field you wish to enter. You may already know that there are three types of businesses, and accounting fits into each one:

Sole proprietor – a single, independent CPA practitioner with several reliable clients

Partnership – start a CPA firm with other CPAs and share clients, or join a firm already established. This provides advantages such as taking time off or reducing the workload or liability.

Corporation – joining a large company with several accountants. In this case, you have little liability but also not as much control.

In addition to these, you will want to decide whether to work in a for-profit firm in private industry or a not-for-profit organization such as a city, state or federal government agency. Private industry jobs normally pay more than government jobs, but there is also less job security. While all jobs have an "office politics" element, some jobs are clearly more political than others (e.g, handgun or tobacco manufacturers, or abortion clinics). Also, be aware that government jobs' salaries are generally publicized – and that means politicized. So, if any person or position makes too much money, the civil service commission may feel pressure from politicians, public interest groups or rival government agencies to modify the pay scale to reflect the public's priorities (e.g., police or public school teachers vs. accountants).

Finally, you will want to decide what branch of accounting you prefer to specialize in. Here are some examples:

General accounting – posting journal entries, posting and monitoring accounts receivable or accounts payable, reconciliations of accounts, keeping track of amortization schedules, monitoring investment income, etc.

Financial analysis – comparing actual income and expenses to budget or prior year, and reporting on the causes of variances. This also includes balance sheet analysis, where you ensure that a balance sheet account is reported at the proper level. These include extensive primary and secondary research.

Taxation – preparing and submitting tax forms for individuals or corporations. This may also include answering clients' questions or providing information to authorized parties.

Audit – testing client transactions and accounting policies and procedures to ensure management reports fairly represent the financial condition of the business, based on some standard such as Generally Accepted Accounting Procedures (GAAP). This includes internal audit (done with company employees) or external audit (done with independent CPAs).

Consulting – providing clients and business with ideas to improve their financial condition or profitability.

Major Accounting Firms

Many aspiring accountants start their careers with a major accounting firm. While those firms in fact do accounting, most of their business comes from consulting, auditing, and other attest engagements. In many cases, starting at an accounting firm allows you to become exposed to many facets of accounting and many types of businesses.
Most of the Fortune 500 companies and many public companies are audited by the "Big Four" accounting firms, that is, the ones ranking in the top four in the country in revenues and professional staff. They are:

~ Deloitte Touche Tohmatsu
~ Ernst & Young
~ PricewaterhouseCoopers

However, over the past few years, the Big Four have been losing clients and other major national firms, such as the following, have been gaining them. Other major national firms:
~ BDO Seidman
~ Grant Thornton
~ McGladrey & Pullen

While these companies are large and provide good compensation and some opportunity for advancement, they also pressure their employees to pass the CPA Exam. Also, only a few will make it to the level of "partner" or "managing partner," where the large salaries are made. More likely than not, you will stay at an accounting firm for two to three years, then move on to industry, as the compensation and opportunities for advancement are greater in a regular company. A firm that you may audit may seek your services as an employee.


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