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What Do Accountants Do?

This article will detail what accountants do and how you too can be Batman... I mean an accountant.

What do accountants do?

If you asked me that question senior year of college I would have told you that I have no idea. That’s because the term ‘accounting’ is so broad, that it’s hard to pinpoint exactly what they do. Ask an auditor a tax question and they’ll most likely give you a blank stare. Ask a tax accountant about internal controls and they’ll respond, “we don’t believe in GAAP around these parts.”

It’s gotten to a point where being called an accountant is almost cringe-worthy, and sitting through movies like The Accountant leaves an accountant shaking his head (except the parts where he kills people, that’s totally an accounting thing).

This article will detail what accountants do, and how you, too, can be Batman.

I mean, an accountant.

Let’s Break It Down

When you go into accounting you will most likely fall into one of five main categories:

  1. Public Accounting: You work for a CPA firm who sells accounting services to businesses.
  2. Private Accounting: You work for a business that has accounting functions internally.
  3. Governmental Accounting: You work for a governmental agency like the IRS or FBI
  4. Nonprofit Accounting: You work for free (inside joke…)
  5. Unemployed: You work for nobody because you’re strong and independent and you’re waiting for the right person.

Public Accounting

Public accounting is the most lucrative, stressful, and challenging of the five options. Most college graduates will try to seek employment at a Big 4 firm (if that’s you, then you need to read this article on how to work for the Big 4). There is Deloitte, PwC, EY, KPMG and SALY (same as last year).

Within public accounting there are 3 distinct pathways you can follow:

  1. Audit: “I don’t do taxes, quit asking”
  2. Tax: “What is GAAP?”
  3. Consulting: “I know everything and nothing at the same time”

I. Audit

Think all accountants do taxes? Think again. If you go into public accounting, there is a high likelihood that you will start out as an auditor. Essentially, this is what auditors do…

Public and private companies have several financial reporting requirements. Some businesses need a financial statement to get a loan, some need a financial statement because it is required by the SEC, and some need financial statements because of other regulatory requirements. This is especially true for publicly traded companies who need audited year-end financial statements by an independent CPA firm – it’s the law.

That’s where auditors come in. Contrary to popular belief, auditors aren’t coming into a business with the sole purpose of finding fraud and dragging the CFO away in handcuffs. They are simply looking at the numbers and giving a “reasonable assurance” that the numbers look good. They are making sure that the financial statements aren’t misleading, that the financial statements conform with the applicable reporting requirements (i.e. GAAP), and that the financial statements contain proper disclosures. Remember, auditing is not forensic accounting!

II. Tax

Whenever someone thinks of an accountant they automatically think about taxes. “Can I deduct the money my wife spends on her new shoes…?” You’re not funny, Rick, and no, she can’t…unless they are required for her job and they are not reimbursed by her employer. She will be able to take it as an itemized deduction subject to the 2% AGI limitation.

Tax accountants do taxes, and a lot of them. There are even subcategories within the tax field from individual tax, corporate tax, state and local tax, and much more. There are so many rules and exceptions to the rules that tax accountants are basically lawyers. These are the people to whom you should direct your tax questions…leave all the other accountants alone.

III. Consulting

Consulting and advisory services are the goodie bags of public accounting (you come for the cake but you leave with the candy). Essentially, they are add-on services that are intended to help current or potential clients with any business issues they may have.

This category is so broad that it is impossible to dive any deeper than “consulting has everything to do with accounting and nothing to do with accounting at the same time.” There are IT consultants that can help implement the proper accounting software. There are consultants that will help maximize your tax savings when you retire or sell your business. There are also consultants that will help implement internal controls in your business to reduce fraud or theft.

Implementing proper accounting software does very little for the bottom line, but it is crucial in figuring out what the bottom line is in the first place. That’s why consulting services are both accounting and non-accounting in nature.

Private Accounting

If public accounting isn’t your style, then there is always private accounting. Accountants who choose to work in a private firm will usually be categorized as one of the following (or sometimes all of the following).

  1. Accounts Payable/Accounts Receivable: “We pay the bills around here.”
  2. Financial Reporting: “So how can we make these numbers look…better?”
  3. Internal Controls: “Janet from accounting is stealing paperclips again.”
  4. CFO/Controller: “Talk to me after month-end.”

I. Accounts Payable/Accounts Receivable 

If you work in accounts payable or accounts receivable, then chances are you will be looking at invoices all day long. Whether it is paying the bills or collecting revenue from the clients, these accountants are on the front lines of any business.

Accountants working in accounts payable go through a step-by-step process to ensure that bills are accurate, are issued to real vendors, and are paid on time. They ensure the merchandise received matches the purchase order and then approve payment of bills. They don’t purchase the merchandise, they don’t receive the merchandise, and they don’t even record the purchase of inventory when it’s received (if proper controls are in place). They simply ensure that proper payments are made.

Accountants working in accounts receivable are on the opposite side of the spectrum and ensure that customers are billed correctly and are paying their bills in a timely manner. They go through the similar documentation process as the accounts payable department, but they’re just on the revenue side of the income statement.

II. Financial Reporting

Accountants who work in financial reporting are on the opposite side of the fence as auditors in public accounting firms. Many of them are former employees of these same firms. Financial reporting involves the timely and accurate reporting of financial data through annual (and sometimes quarterly) financial statements.

These departments can be broken down even further depending on the size of the business, but essentially the roles are the same – to accurately record the financial transactions of the business in accordance to acceptable reporting requirements.

These accountants don’t receive the money, they don’t pay the money, they simply report the ins and outs on the balance sheets, income statements, and statements of cash flow.

III. Internal Controls

Internal controls are essentially done for the health of any business, and are necessary by law for most (if not all) publicly traded companies. Internal control accountants ensure that there are effective controls in place to safeguard the companies’ assets and to verify reporting of the financial statements.

Think of internal control as the insider/outsider accountants. They work inside the company but should be independent when they are reviewing the work of others. Think of Ben Affleck in The Accountant, but just a little less violent.

IV. CFO/Controller

At the top of the food chain is the CFO and Controller. These are the accountants who look at the books at a higher level and steer the ship in the right direction.

Controllers are responsible for maintaining the books and making sure everything is in tip-top shape. They make sure everything is working as intended and that the financial systems put in place are working properly. They are the head coaches of accounting, while the CFO is the GM.

CFOs use financial information to help make management level decisions. These could range from hiring freezes to expanding the company into another state. They are analyzing the books to ensure the company is on track, and introduce and implement any financial changes when needed.

Governmental Accountants

Governmental accountants, whether they work for the IRS or a municipality, are hired by the federal, state or local governments. They are in charge of enforcing tax laws, prosecuting financial fraudsters, and balancing the budgets of major school districts. These accountants are essential for any functioning society.

The most popular example of these accountants are FBI agents – because they get to carry a gun. This is the closest thing you’ll actually get to fighting crime and all you’ll need are your accounting skills. From money laundering to embezzlement, FBI accountants are tasked with the difficult job of sniffing out major crimes and frauds as it relates to money.

IRS agents are people, too – whether or not accountants want to be associated with them. These are the enforcers of the tax law and ensure businesses and individuals are playing by the rules. Being an IRS agent is a tough job: from budget cuts to red tape, trying to be successful in this area of work can be difficult at times. But when you catch a big one it can be rewarding.

Lastly, accountants that work for state and local (and even federal agencies) are tasked with budgeting and ensuring the books are recorded in conformance with applicable reporting standards. Governmental accounting standards are vastly different from regular GAAP basis financials, so working in governmental accounting is in a world of its own.

Nonprofit Accounting

Working as an accountant in a nonprofit organization can be rewarding and frustrating. As you can imagine, the accounting for these organizations is vastly different and the financial statements don’t resemble that of a for-profit organization. Nonprofits still have the same accounting needs as any other business (and follow the same structure), however, the outcomes are completely different.

Financial metrics like, “how much money did we make?” are not as important as non-financial metrics like, “did we accomplish our goals?” Essentially, the role of an accountant in nonprofit is similar to for-profit corporations, just with an added emphasis on the outcomes. In this sense, budgeting and financial data related to outcomes (i.e. the number of people who can be served with $10,000) is top of mind for these accountants.

Unemployed?

Contact Adam and he’ll help you out.

Summary

Although I believe I covered a lot in this article, this summary is still not an all-encompassing list of everything accountants can do (please leave your hate mail in the comments below on how I missed your specific niche in accounting). Being an accountant is rewarding, frustrating, boring, sometimes exciting, pays pretty well, and opens up more opportunities than you can imagine. So the next time someone says they are an accountant, please keep your tax jokes to yourself – don’t be an ass[et].

2 comments on “What Do Accountants Do?

  1. DINESH B RAUT

    Great article ! Assumed my category as Unemployed … if possible please provide me contact details of Adam 

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