COLLEGE COMPASS -- Occupational Overview

Accountants and Auditors

Nature of the Work

Managers must have up-to-date financial information in order to make important decisions. Accountants and auditors prepare, analyze, and verify financial reports and taxes, and monitor information systems that furnish this information to managers in all business, industrial, and government organizations.

Four major fields of accounting are public, management, and government accounting, and internal auditing. Public accountants have their own businesses or work for public accounting firms. They perform a broad range of accounting, auditing, tax, and consulting activities for their clients, who may be corporations, governments, nonprofit organizations, or individuals. Management accountants, also called industrial, corporate, or private accountants, record and analyze the financial information of the companies for which they work. Internal auditors verify the accuracy of their organization's records and check for mismanagement, waste, or fraud. Government accountants and auditors maintain and examine the records of government agencies and audit private businesses and individuals whose activities are subject to government regulations or taxation.

Within each field, accountants often concentrate on one phase of accounting. For example, many public accountants concentrate on tax matters, such as preparing an individual's income tax returns and advising companies of the tax advantages and disadvantages of certain business decisions. Others concentrate on consulting and offer advice on matters such as employee health care benefits, and compensation; the design of companies' accounting and data processing systems; and controls to safeguard assets. Some specialize in forensic accounting investigating and interpreting bankruptcies and other complex financial transactions. Still others work primarily in auditing examining a client's financial statements and reporting to investors and authorities that they have been prepared and reported correctly. However, fewer accounting firms are performing this type of work because of potential liability.

Management accountants analyze and interpret the financial information corporate executives need to make sound business decisions. They also prepare financial reports for nonmanagement groups, including stock holders, creditors, regulatory agencies, and tax authorities. Within accounting departments, they may work in financial analysis, planning and budgeting, cost accounting, and other areas.

Internal auditing is rapidly growing in importance. As computer systems make information more timely and available, top management can base its decisions on actual data rather than personal observation. Internal auditors examine and evaluate their firms' financial and information systems, management procedures, and internal controls to ensure that records are accurate and controls are adequate to protect against fraud and waste. They also review company operations evaluating their efficiency, effectiveness, and compliance with corporate policies and procedures, laws, and government regulations. There are many types of highly specialized auditors, such as electronic data processing auditors, environmental auditors, engineering auditors, legal auditors, insurance premium auditors, bank auditors, and health care auditors.

Accountants and auditors also work for Federal, State, and local governments. Government accountants see that revenues are received and expenditures are made in accordance with laws and regulations. Many persons with an accounting background work for the Federal Government as Internal Revenue Service agents or in financial management, financial institution examination, and budget analysis and administration.

In addition, a small number of persons trained as accountants teach and conduct research at business and professional schools. Some work part time as accountants or consultants.

Computers are widely used in accounting and auditing. With the aid of special computer software packages, accountants summarize transactions in standard formats for financial records or organize data in special formats for financial analysis. These accounting packages are easily learned and require few specialized computer skills, and greatly reduce the amount of tedious manual work associated with figures and records. Personal and laptop computers enable accountants and auditors in all fields even those who work independently to use their clients' computer system and to extract information from large mainframe computers. Internal auditors may recommend controls for their organization's computer system to ensure the reliability of the system and the integrity of the data. A growing number of accountants and auditors have extensive computer skills and specialize in correcting problems with software or developing software to meet unique data needs.

CPA's have the widest range of job opportunities.

Working Conditions

Accountants and auditors work in offices, but public accountants may frequently visit the offices of clients while conducting audits. Self-employed accountants may be able to do part of their work at home. Accountants and auditors employed by large firms and government agencies may travel frequently to perform audits at clients' places of business, branches of their firm, or government facilities.

The majority of accountants and auditors generally work a standard 40-hour week, but many work longer, particularly if they are self-employed and free to take on the work of as many clients as they choose. For example, about 4 out of 10 self-employed accountants and auditors work more than 50 hours per week, compared to 1 out of 4 wage and salary accountants and auditors. Tax specialists often work long hours during the tax season.

Employment

Accountants and auditors held about 939,000 jobs in 1992. They worked throughout all types of firms and industries, but nearly one-third worked for accounting, auditing, and bookkeeping firms, or were self-employed.

The majority of accountants and auditors were unlicensed management accountants, internal auditors, or government accountants and auditors. However, in 1992 there were on record over 475,000 State-licensed Certified Public Accountants (CPA's), Public Accountants (PA's), Registered Public Accountants (RPA's), and Accounting Practitioners (AP's). The vast majority of these over 400,000 were CPA's, but there may have been far fewer practicing CPA's in the country; many CPA's hold licenses in several States at once.

Most accountants and auditors work in urban areas where public accounting firms and central or regional offices of businesses are concentrated. Roughly 10 percent of all accountants were self-employed, and less than 10 percent worked part time.

Some accountants and auditors teach full time in junior colleges and colleges and universities; others teach part time while working for private industry or government or as self-employed accountants.

Training, Other Qualifications, and Advancement

Most public accounting and business firms require applicants for accountant and internal auditor positions to have at least a bachelor's degree in accounting or a related field. Those wishing to pursue a bachelor's degree in accounting should carefully research accounting curricula before enrolling. Many States will soon require CPA candidates to complete 150 semester hours of coursework prior to taking the CPA exam, and many schools have altered their curricula accordingly. Some employers prefer those with a master's degree in accounting or a master's degree in business administration with a concentration in accounting. Most employers also prefer applicants who are familiar with computers and their applications in accounting and internal auditing.

For beginning accounting and auditing positions in the Federal Government, 4 years of college (including 24 semester hours in accounting or auditing) or an equivalent combination of education and experience is required.

Previous experience in accounting or auditing can help an applicant get a job. Many colleges offer students an opportunity to gain experience through summer or part-time internship programs conducted by public accounting or business firms. Such training is invaluable in gaining permanent employment in the field.

Professional recognition through certification or licensure also is helpful. In the majority of States, CPA's are the only accountants who are licensed and regulated. Anyone working as a CPA must have a certificate and a license issued by a State board of accountancy. The vast majority of States require CPA candidates to be college graduates, but a few States substitute a certain number of years of public accounting experience for the educational requirement. Based on recommendations made by the American Institute of Certified Public Accountants and the National Association of State Boards of Accountancy, some States currently require that CPA candidates complete 150 semester hours of college coursework, and many other States are working toward adopting this law. This 150-hour rule requires an additional 30 hours of coursework beyond the usual 4-year bachelor's degree in accounting.

All States use the four-part Uniform CPA Examination prepared by the American Institute of Certified Public Accountants. The 2-day CPA examination is rigorous, and only about one-quarter of those who take it each year pass each part they attempt. Candidates are not required to pass all four parts at once, although most States require candidates to pass at least two parts for partial credit. Many States require all sections of the test to be passed within a certain period of time. Most States also require applicants for a CPA certificate to have some accounting experience.

The designations PA or RPA are also recognized by most States, and several States continue to issue these licenses. With the growth in the number of CPA's, however, the majority of States are phasing out the PA, RPA, and other non-CPA designations by not issuing any more new licenses. Accountants who hold PA or RPA designations have similar legal rights, duties, and obligations as CPA's, but their qualifications for licensure are less stringent. The designation Accounting Practitioner is also awarded by several States. It requires less formal training than a CPA license and covers a more limited scope of practice.

Nearly all States require both CPA's and PA's to complete a certain number of hours of continuing professional education before their licenses can be renewed. The professional associations representing accountants sponsor numerous courses, seminars, group study programs, and other forms of continuing education.

Professional societies bestow other forms of credentials on a voluntary basis. Voluntary certification can attest to professional competence in a specialized field of accounting and auditing. It also can certify that a recognized level of professional competence has been achieved by accountants and auditors who acquired some skills on the job, without the amount of formal education or public accounting work experience needed to meet the rigorous standards required to take the CPA examination. Increasingly, employers seek applicants with these credentials.

The Institute of Internal Auditors confers the designation Certified Internal Auditor (CIA) upon graduates from accredited colleges and universities who have completed 2 years' work in internal auditing and who have passed a four-part examination. The EDP Auditors Association confers the designation Certified Information Systems Auditor (CISA) upon candidates who pass an examination and who have 5 years of experience in auditing electronic data processing systems. However, auditing or data processing experience and college education may be substituted for up to 3 years. Other organizations, such as the National Association of Certified Fraud Examiners and the Bank Administration Institute, confer other specialized auditing designations.

The Institute of Management Accountants (IMA), formerly the National Association of Accountants, confers the Certified Management Accountant (CMA) designation upon college graduates who pass a four-part examination, agree to meet continuing education requirements, comply with standards of professional conduct, and have at least 2 years' work in management accounting. The CMA program is administered through an affiliate of the IMA, the Institute of Certified Management Accountants. The Accreditation Council for Accountancy and Taxation, a satellite organization of the National Society of Public Accountants, awards a Certificate of Accreditation in Accountancy to those who pass a comprehensive examination, and a Certificate of Accreditation in Taxation to those with appropriate experience and education. It is not uncommon for a practitioner to hold multiple licenses and designations. For instance, one internal auditor might be a CPA, CIA, and CISA.

Persons planning a career in accounting should have an aptitude for mathematics, be able to analyze, compare, and interpret facts and figures quickly, and make sound judgments based on this knowledge. They must be able to clearly communicate the results of their work, orally and in writing, to clients and management.

Accountants and auditors must be good at working with people as well as with business systems and computers. Accuracy and the ability to handle responsibility with limited supervision are important. Perhaps most important, because millions of financial statement users rely on their services, accountants and auditors should have high standards of integrity.

Capable accountants and auditors should advance rapidly; those having inadequate academic preparation may be assigned routine jobs and find promotion difficult. Many graduates of junior colleges and business and correspondence schools, as well as bookkeepers and accounting clerks who meet the education and experience requirements set by their employers, can obtain junior accounting positions and advance to more responsible positions by demonstrating their accounting skills on the job.

Beginning public accountants usually start by assisting with work for several clients. They may advance to positions with more responsibility in 1 or 2 years and to senior positions within another few years. Those who excel may become supervisors, managers, or partners, open their own public accounting firms, or transfer to executive positions in management accounting or internal auditing in private firms.

Beginning management accountants often start as cost accountants, junior internal auditors, or as trainees for other accounting positions. As they rise through the organization, they may advance to accounting manager, chief cost accountant, budget director, or manager of internal auditing. Some become controllers, treasurers, financial vice presidents, chief financial officers, or corporation presidents. Many senior corporation executives have a background in accounting, internal auditing, or finance.

There is a large degree of mobility among public accountants, management accountants, and internal auditors. Practitioners often shift into management accounting or internal auditing from public accounting, or between internal auditing and management accounting. However, it is less common for accountants and auditors to move from either management accounting or internal auditing into public accounting.

Job Outlook

Employment of accountants and auditors is expected to grow faster than the average for all occupations through the year 2005. Qualified accountants and auditors should have good job opportunities. Although the profession is characterized by a relatively low rate of turnover, because the occupation is so large many openings also will arise as accountants and auditors retire, die, or move into other occupations. CPA's should have the widest range of opportunities, especially as more States enact the 150-hour rule and it becomes more difficult to become a CPA.

As the economy grows, the number of business establishments increases, requiring more accountants and auditors to set up their books, prepare their taxes, and provide management advice. As these businesses grow, the volume and complexity of information developed by accountants and auditors on costs, expenditures, and taxes will increase as well. More complex requirements for accountants and auditors also arise from changes in legislation related to taxes, financial reporting standards, business investments, mergers, and other financial matters. In addition, businesses will increasingly need quick, accurate, and individually tailored financial information due to the demands of growing international competition.

The changing role of public accountants, management accountants, and internal auditors also will spur job growth. Public accountants will perform less auditing work due to potential liability, and less tax work due to growing competition from tax preparation firms, but they will assume an even greater management advisory role and expand their consulting services. These rapidly growing services will lead to increased demand for public accountants in the coming years. Management accountants also will take on a greater advisory role as they develop more sophisticated and flexible accounting systems, and focus more on analyzing operations rather than just providing financial data. Similarly, management will increasingly need internal auditors to develop new ways to discover and eliminate waste and fraud.

Despite growing opportunities for qualified accountants and auditors, competition for the most prestigious jobs such as those with major accounting and business firms will remain keen. Applicants with a master's degree in accounting, a master's degree in business administration with a concentration in accounting, or a broad base of computer experience will have an advantage. Moreover, computers now perform many simple accounting functions, allowing accountants and auditors to incorporate and analyze more information. This increasingly complex work requires greater knowledge of more specialized areas such as international business and current legislation, and expertise in specific industries.

Earnings

According to a College Placement Council Salary Survey in 1993, bachelor's degree candidates in accounting received starting salary offers averaging nearly $28,000 a year; master's degree candidates in accounting, over $30,000.

According to a survey of workplaces in 160 metropolitan areas, accountants with limited experience had median earnings of $24,700 in 1992, with the middle half earning between $22,200 and $27,500. The most experienced accountants had median earnings of $76,000, with the middle half earning between $68,500 and $84,600. Public accountants employed by public accounting firms with limited experience had median earnings of $28,000 in 1992, with the middle half earning between $26,500 and $29,400. The most experienced public accountants had median earnings of $42,400, with the middle half earning between $36,900 and $50,400. Many owners and partners of firms earned considerably more.

Based on a survey by the Institute of Management Accountants, the average salary of IMA members was about $55,100 a year in 1992. IMA members who were certified public accountants averaged $61,900, while members who were certified management accountants averaged $58,700.

According to a survey by the Institute of Internal Auditors, salaries of internal auditors in 1992 ranged from $26,500 for those with less than 2 years of experience to $60,700 for those with over 10 years of experience.

In the Federal Government, the starting annual salary for junior accountants and auditors was about $18,300 in 1993. Candidates who had a superior academic record could begin at about $22,700. Applicants with a master's degree or 2 years' professional experience began at $27,800. Accountants employed by the Federal Government in nonsupervisory, supervisory, and managerial positions averaged $46,300 a year in 1993; auditors, $48,200.

Related Occupations

Accountants and auditors design internal control systems and analyze financial data. Others for whom training in accounting is invaluable include appraisers, budget officers, loan officers, financial analysts and managers, bank officers, actuaries, underwriters, tax collectors and revenue agents, FBI special agents, securities sales workers, and purchasing agents.


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Reprinted with Permission of U. S. Department of Labor

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