Public Accounting
Public accounting is performed by accountants, in most cases Certified Public Accountants (CPAs). Public accounting firms are typically organized as partnerships, and vary in size from large, international firms employing thousands of people to small firms or even individual practitioners serving the needs of a local area. These firms offer varied services to the general public, their clients. The types of services rendered vary according to firm size and orientation. The most common service is the review and issuance of professional opinions on client financial statements, known as auditing. Management advisory services (a public accounting firm's consulting unit) and tax consultation constitute the two most common services offered in addition to auditing.
Firm size is a major factor determining what services a firm offers its clients. Small firms or solo practitioners usually work as generalists. (Their activities are described later in this chapter under "Private Accounting.") These firms service individual clients or small businesses that lack their own internal accountants or accounting department. Construction of client financial statements, known as write-up services, is another major service offered by smaller firms. Other services include creating and maintaining bookkeeping systems, performing monthly reviews or closings, and filing tax returns.
Large firms without small-business departments will not perform these write-up services and typically do not seek out small businesses or individuals as clients-at least as audit clients. These firms generally handle large organizations and corporations, offering expertise and experience in numerous specialized areas within each service classification. Billing rates are higher than in small practices. The "Big Eight," a term coined for the eight largest and most influential American public accounting firms operating nationally and internationally, possess large pools of talent, and serve 98 percent of New York Stock Exchange companies.
Regardless of size, most CPA firms are similarly structured, with nearly identical requirements for attainment of higher job levels. Figure 6.1 depicts the typical organizational structure of a public accounting firm. At the highest level of management are the firm's partners- individuals who generally have made a capital contribution. Partners head regional offices, practice sections within these offices, and serve on the firm's managing committees. While they do perform some accounting duties, their role focuses primarily on generating new business, maintaining existing client relationships, and guiding the firm's future progress.
Accountants with four to six years experience are generally promoted to the position of manager. Here, they act as liaison between the partners and the lower ranks. Managers perform substantial amounts of accounting work and are responsible for supervising and directing projects within their service groups.
One step further down the ladder is the senior level generally reached after two to four years experience. At this point, as an accountant, you must possess a substantial amount of technical knowledge and supervisory skill; if you are in auditing or tax divisions, you should have successfully completed the CPA exam.
Entry-level accountants act as staff accountants, and perform much of the "nuts-and-bolts" work of the firm.
Private Accounting
The private accounting field, also known as industrial or management accounting encompasses all accountants who, in varying capacities, handle the accounting needs of a single employer. The field is composed of both profit-making and non-profit organizations (e.g., hospitals, colleges, and charities). The public accountant's independent status does not exist for the private accountant, who must acquire an intimate knowledge of his or her company's operations, including both internal and external forces affecting its welfare.
Distinct from the firm-to-firm consistent activities and nearly identical hierarchical structures of public accounting firms, the organizational structure and job functions within private accounting departments vary widely, covering the spectrum from the highly functionalized accounting system of a Fortune 500 firm to a small firm where a single accountant performs all duties. While company size and complexity determine to a large extent the accounting system's structure and scope, most systems apply identical accounting principles and share a common goal: organizing and processing financial data in a form usable by company management and external parties as a basis for decision making.
"Corporate Finance," the vice president of finance is the chief financial officer, and reports directly to the company president. This position oversees both the finance and accounting departments, with direct subordinates being the treasurer and controller.
As the controller (or comptroller) is the chief accounting executive, we shall discuss briefly this position's responsibilities. The controller is responsible for all company accounting functions and departments, including general accounting, taxes, budgets and forecasting, cost accounting, and in some organizations internal auditing. The controller's role, while requiring technical accounting excellence, is best described as a managerial role involving the coordination of all accounting departments. Consequently, the controller must maintain good lateral relationships (for example, with the sales, marketing, and production departments), and must necessarily keep abreast of external factors affecting the company in general and the various accounting departments in particular. New government agency regulations, legal issues, and the general state of the economy are examples of the latter; they are important factors to consider in the context of an accounting department and its procedures.
The controller's responsibilities include reporting and interpreting the results of operations to all levels of management, administering the organization's tax program, supervising the preparation of government agency reports, protecting company assets (by establishing proper internal control procedures and, in some cases, supervising internal audit functions), and maintaining relationships with outside parties, including the organization's outside auditors. This position's requirements include, in addition to technical competence, a solid managerial background and overall knowledge of the business environment.
Required background and years of experience to assume controller-ship vary with company size. Fortune 500 controllers are typically veteran accountants with anywhere from ten to twenty years experience. A small organization's controller position may be filled by a public accountant with five to six years experience who has made the transition to private-sector practice.
Chief accountant, accounting manager, or supervisor are examples of job titles for positions either equal to or lower than an assistant controller position but higher than senior staff. These positions supervise and coordinate the activities of accounting department areas and report directly to an assistant controller or controller.
As private accounting departments vary widely in organizational structure and size, job positions below the controller ranks are hard to generalize about. However, it is common that senior staff accountants who have two to five years experience perform either as a functional area head, such as supervisor of an accounts receivable department, or as an accounting analyst within another department, such as budget or forecasting. Entry-level accountants and those with up to two years experience are considered junior staff and work in all accounting areas.
