1.8 Careers in Financial Accounting and the Importance of Personal Ethics

If you are like most students who take intermediate accounting, you aren’t taking this class as a general social science elective. You intend to pursue a career in an accounting-related field. This introductory chapter closes with a brief discussion of some of the careers in accounting. One piece of advice: The best career move you can make right now (in addition to taking this class, of course) is to become familiar with your school’s job placement office. Ask the people there where the jobs are and what kinds of candidates employers are hiring. Have them help you get started crafting a “killer” résumé. Find out about summer internships. The sooner you start gathering information and establishing a network of contacts, the better.

The three major career areas in financial accounting are:

1. Public accounting

2. Corporate accounting

3. User (analyst, banker, consultant)

Public Accounting

Public accountants do not work for a single business enterprise. Rather, they provide a variety of services for many different individual and business clients. In essence, a public accountant is a freelance accountant, an accountant for hire. Public accountants practice either individually or in firms.

A CPA is a certified public accountant. As mentioned earlier in connection with the discussion of the AICPA, in order to become a CPA, an individual must pass the CPA exam and satisfy education and work experience requirements that differ somewhat from state to state. One of the most significant (and controversial) developments in CPA licensing is the requirement adopted in many states that one must have 150 college credit hours (five years of full-time education) in order to become a CPA.

Traditionally, the most prominent role of CPAs has been as independent auditors of financial statements. Almost all large publicly held corporations are audited by a few large CPA firms. Listed in alphabetical order, the four largest firms are Deloitte, EY, KPMG, and PricewaterhouseCoopers. Each of these firms is an international organization with many offices in the United States and abroad. Many small businesses are serviced by regional and local CPA firms, including a large number of sole practitioners. In these smaller firms, the role of auditing is often less important than the areas of tax reporting and planning and systems consulting. A CPA in a smaller firm is expected to be something of an accounting generalist as opposed to the more specialized positions of CPAs in large regional and national firms.

Corporate Accounting

Public accountants move from client to client as accountants for hire. Of course, businesses also employ their own staffs of in-house accountants. A large business enterprise employs financial accountants who are primarily concerned with external financial reporting; management accountants who are primarily concerned with internal financial reporting; tax accountants who prepare the necessary federal, state, and local tax returns and advise management in matters relating to taxation; and internal auditors who review the work performed by accountants and others within the enterprise and report their findings to management. In smaller organizations, there is less specialization and more combining of responsibility for the various accounting functions.

Not all CPAs are public accountants. Individuals who start their careers in public accounting and become CPAs often leave public accounting after a few years and join the in-house accounting staff of a business. Typically, the company they join is one of the clients they audited or consulted for as a public accountant. In fact, this is the most common career path for college graduates who start out working for one of the large accounting firms.

User (Analyst, Banker, Consultant)

Believe it or not, not everyone in the world wants to become an accountant. Many students take intermediate accounting in preparation for becoming a user of financial statements. Credit analysts in large banks are required to have a strong working knowledge of accounting to be able to evaluate the financial statements of firms seeking loans. Investment bankers and brokerage firms employ staffs of analysts to evaluate potential clients and to provide financial statement analysis services to customers. Consulting firms advise clients on how to improve operations. These days, most accounting-related consulting jobs require strong skills in information technology.

The Importance of Personal Ethics

Personal ethics is not a topic one typically expects to study in an intermediate financial accounting course. However, accounting-related scandals such as the one involving Enron have demonstrated that personal ethics and financial reporting are inextricably connected. The flexibility inherent in the assumptions underlying the preparation of financial statements means that an accountant can intentionally deceive financial statement users and yet still technically be in compliance with GAAP. Thus, our financial reporting system is of limited value if the accountants who operate the system do not have strong personal ethics.

Most of us believe that intentionally trying to deceive others is wrong. You will be reminded throughout this text that accounting choices often impact real economic decisions such as whether to grant a loan, make an investment, or fire an employee. Real economic decisions impact peoples’ lives, and it is sobering to think that accountants have this power in their hands. Your personal ethical standards are of paramount importance.