Accounting Careers Paper

Accounting Career Background

AccountingEven before the introduction of the first coins in about 600 BC, farmers kept track of their livestock and other valuable possessions in order to have an accurate financial record. Having 16 sheep, for example, meant the ability to trade up to 16 sheep for something else of equal value. The farmer needed to know how many sheep to keep to ensure continued offspring, and how many he could trade. This was the first, most basic, type of accounting.

Financial records have been found in the ruins of ancient Greek and Roman towns showing that accountants and bookkeepers were at work balancing the financial records of businesses. Once currency in the form of paper money came into play—about AD 600 in China, but not until the 1600s in Europe—more advanced accounting skills were needed to keep track of where the money went.

In 1494, Luca Pacioli, an Italian mathematician, wrote a treatise on accounting and bookkeeping that established the foundation for modern bookkeeping methods. One of these was the double entry method of bookkeeping, in which each transaction is recorded twice in a financial ledger, once to the debit of one account and once to the credit of another. This method allowed businesses to keep track of the movement of their funds.

Throughout the 15th and 16th centuries, how-to books on bookkeeping were printed in Italy. Since printing presses made reproductions relatively inexpensive, the disbursement of information on the new bookkeeping methods was swift. Presses in major cities in Italy were able to write and print their own manuals on bookkeeping and accounting.

As property investment, taxation, and tax write-offs made running a business more complex, there was a growing need for flexible, comprehensive bookkeeping methods. In the late 18th century, the industrial revolution gave birth to large businesses that were involved in a vast array of production and manufacturing services. The heads of these companies needed accurate financial records to determine the cost and effectiveness of doing business.

The accounting profession in the United States dates back to the 1880s, when English and Scottish investors began buying stock in American companies. Needing experts to keep an eye on their investments, they sent over accountants. Many of these accountants stayed on to establish their own accounting businesses.

Federal legislation, including the introduction of the income tax in 1913 and the excess profits tax in 1917, helped bring about an accounting boom that has made the profession one of the largest in business today.

In order to establish standardization and identification of qualified public accountants, the certified public accountant (CPA) examination was developed in 1917. The Uniform CPA Exam measures professional competence and earning the CPA certificate is evidence of professional qualification. The American Institute of Certified Public Accountants grades and prepares the nationally recognized four-part CPA examination, which is administered by the state boards of accountancy.

Other qualifying tests have also been developed over the years. Some of them include the licensing exams for the Certified Management Accountant (CMA) credential for professionals who work primarily for corporations, Certified Internal Auditor (CIA), and the Certified Information Systems Auditor (CISA). These credentials help to establish an accountant’s expertise and help potential clients to identify the accountant that meets their needs.

Until the 1980s, eight large, conservative, and stable firms known as the Big Eight dominated the industry. Accounting jobs tended to be predictable and dependable. But that changed as accounting firms became “lean and mean,” consolidating and diversifying to become more competitive. Some, like Arthur Andersen, added new services such as management and computer consulting. Others bought out rival companies. The Big Eight was reduced to the Big Six as companies were hit by the recession and the savings and loan crisis.

Accounting firms were blamed as savings and loan institutions went bankrupt and were sued for faulty audits. Facing costly lawsuits while in the midst of a recession, firms began to cut jobs in an effort to lessen costs. Salaries were reduced, training programs cut, and the days of guaranteed employment, promotion, and job security came to an end.

However, the number of large corporations continues to increase as mergers and acquisitions dominate the marketplace, and accounting continues to grow in complexity. Smaller companies are experiencing transitions as well and are outsourcing their accounting work, as well as other back office services, to outside contractors in an effort to cut costs. Accounting now involves more than “bean counting” and more than simply balancing daily financial journals and account ledgers for a business. Accountants must be able to draw pertinent financial data from a variety of sources and analyze complicated transactions, often involving huge sums of money.

New technologies flourished during the 1990s, and much of the work that was done by hand is now computerized. Firms are utilizing new electronic systems for submitting and preparing financial statements, and new ways of tracking costs have been developed. Online services and CD-ROMs now provide a framework for financial planning and allow individuals and small businesses to manage their own accounting and prepare and file their tax returns.

The accounting industry will always face new challenges. Working within the global economy and integrating new technologies such as e-commerce are just a few of the issues that are changing the face of the industry.

In 1998, the Big Six became the Big Five with the merger of two of the industry’s powerhouses. To better compete in the global marketplace, Price Waterhouse and Coopers & Lybrand joined to form PricewaterhouseCoopers. In 2002, the Big Five became the Big Four as a result of Arthur Andersen’s indictment for obstruction of justice for its role in the bankruptcy of Enron Corporation, which defrauded investors and energy consumers on a massive scale. Today, the four largest firms are Deloitte Touche Tohmatsu (now doing business as Deloitte), Ernst & Young, KPMG, and PricewaterhouseCoopers.

In response to this recent financial crisis, the federal government passed the Sarbanes-Oxley Act in 2002. This law requires higher levels of financial accounting and disclosure from all publicly held companies.

Accounting Career Field Structure

Accountants and auditors prepare, analyze, and verify financial reports for businesses and government organizations. The accounting department figures profits for the company, prepares its taxes, and keeps track of the cost of running the company. The auditors check those calculations to verify their accuracy.

Accountants develop bookkeeping methods that allow a company to keep track of assets and liabilities at any given time and monitor any changes that occur over a period of years. Accountants and auditors may be required to establish a system that breaks down debits into categories of expenditure (money going out of the company) or periods of expenditure. The bookkeeping system depends on the goals of the business and the needs of its management.

Budgeting is another major responsibility of most accountants. Using past and current financial records, accountants forecast what a company can afford to spend in a particular area. This plays a vital role when company executives decide how financial resources should be allocated.

Because each company has very specific needs, most managers, especially in larger firms, prefer to hire accountants to work exclusively for them. Some large companies are so complex that they have several different accounting divisions. A full-time accountant may be referred to as a management accountant, private accountant, or industrial accountant.

Smaller businesses may hire a permanent accountant as part of the staff, or they may hire one who will work with them on a freelance basis. Some small companies may hire a specific accountant to work with them on a particular project, especially if that accountant is an expert in that area.

The auditing department also works on the books for the company. Internal auditors keep track of company expenses to make sure that financial information is reported correctly. They are responsible for evaluating financial information to determine possible fraud or waste. They may also be responsible for developing more efficient methods of operation or new safeguards to ensure that the company is operating efficiently. Auditors monitor the company’s operations and bookkeeping procedures to maintain compliance with tax and business laws.

When experts set up an accounting system for a business or individual, the needs of the client must be assessed before the system is designed. Sometimes more than one accounting system is required to keep accurate track of the company’s transactions, particularly in large businesses.

A balance-sheet system lists assets and liabilities, as well as other financial data. This gives stockholders and company officials insight into the well-being of the business on a regular basis. An income statement provides an account of operative costs and cash intake, so the overall cost of doing business can be appraised regularly without calculating in other company investments.

Accounting systems can also be set up to list earnings paid to stockholders and earnings reinvested in the company. The flow of funds can be tracked to determine where and when company funds are paid out. If there are periods when a large amount of cash leaves the company, then arrangements may be made to reschedule payments to remove high and low points in the cash flow.

In a larger company, a staff of accountants shares the responsibilities of tracking the business. Accounting firms handle the complex finances of large corporations that require external assistance with financial management.

During the late 1980s, several accounting firms merged into larger corporations. The trend continues today as accounting firms condense into larger groups covering a broader geographical area and offering clients a wider range of services. As the world shrinks, the field of accounting continues to grow.

The single largest employer of accountants and auditors is the U.S. government. Government accountants maintain the enormous quantity of financial records of government agencies. They also have the same responsibilities as private accountants but, for some agencies, the budgets are immensely larger than those of private corporations.

Accountants also have the opportunity to work independently as financial consultants; others run their own business or work part time during tax season. Some also work as teachers or school administrators.

Accounting Careers Outlook

Overall the accounting industry is expected to grow faster than the average through 2014; however, the composition of the industry may change substantially. In 2002 the federal government indicted Arthur Andersen for obstruction of justice for its role in the bankruptcy of one of its clients, Enron Corporation. As a result, Andersen lost many major clients, fell from its Big Five position, and underwent prosecution. In response, the federal government enacted legislation that increase penalties for financial malfeasance, as well as making accounting executives personally responsible for the reporting of false financial information. The Sarbanes-Oxley Act requires companies to adhere to stricter accounting measures as a result of public mistrust of corporate and accounting procedures resulting from the bankruptcy of Enron and other corporations. Increased scrutiny of accounting procedures should increase opportunities for accountants, especially CPAs.

It seems reasonable to expect that technologies will continue to change the face of the industry, with the invention of complex computer systems, software, and artificial intelligence. Number crunching jobs will be eliminated, while those that require computer experience and analytical skills should become more numerous. The best positions will go to those with proficiency in accounting and auditing computer software or expertise in specialized areas such as international business, specific industries, or current legislation. In addition, employers increasingly seek applicants with strong interpersonal and communication skills.

Internal auditors and forensic accountants and auditors will increasingly be needed to discover and eliminate waste and fraud. There will be a shift away from tax preparation because of the increasing number of tax-preparation firms and software.

Firms will continue to merge in order to remain competitive, and they will specialize in an effort to find their niche in the marketplace. Accounting firms will find themselves competing against other non-CPA companies for the same business and ultimately will seek alliances to build a stronger business.

While mergers continue, staff, including partners, are cut back, smaller firms will flourish. The AICPA expects higher work standards to be established and more rigorous training and hiring of lower and mid-level workers. High-level employees will be phased out, and paraprofessional accountants will step in. According to the Chicago Tribune, more than 2,300 small accounting firms have been created in the United States since 2001.

The outlook for accounting will be strong despite a radically changed banking industry and the continuing increase in the number and complexity of financial transactions. Expect the accounting industry to grow in the following four key areas:

International accounting

International trade is on the rise, and accounting firms are expanding rapidly into Eastern Europe, Russia, China, East Asia, and Latin America. Future expansion is predicted to occur in Mexico, Chile, Venezuela, Argentina, and Brazil.

Investigative accounting

This will be a large growth area given the scope of fraud committed in recent years and the likelihood of future fraud as business transactions become more intricate.

Financial/estate planning

The number of Americans aged 65 or older is rising, and many members of this group will seek accounting assistance to make investment decisions and manage their finances.

Environmental accounting

This specialty is emerging as accountants consult with corporations to ensure compliance with rapidly evolvingenvironmental policies and avoid lawsuits.

Careers with Accounting Degree:

  • Accountants and Auditors
  • Actuaries
  • Bank Examiners
  • Billing Clerks
  • Bookkeeping and Accounting Clerks
  • Credit Analysts
  • Economists
  • Financial Analysts
  • Financial Institution Tellers, Clerks, and Related Workers
  • Financial Institution Officers and Managers
  • Financial Services Brokers
  • Forensic Accountants and Auditors
  • Statisticians
  • Tax Preparers

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