Public accounting firms prepare, maintain and/or audit (that is, review and certify) their clients' financial statements and records. These firms also assist clients in calculating taxes and submitting tax returns. The principal career paths in public accounting tend to require a CPA license. Law degrees are especially useful qualifications in the tax field.
Public accounting firms vary in size from individual proprietorships to the Big Four — Ernst & Young, Deloitte, KPMG and PriceWaterhouse Coopers. These four are the undisputed leaders in the field, with offices around the world.
The largest firms in this sector are typically organized as partnerships rather than corporations. They are major employers of professionals in accounting and auditing, as well as highly-regarded training grounds for financial professionals who later find significant career opportunities elsewhere. Here are a few of the main career paths you can take in public accounting firms, along with the pros and cons of working for one.
While larger businesses normally have accounting and finance personnel on staff to do take care of auditing, smaller ones often outsource all their financial record keeping to public accounting firms. They hire these firms to conduct periodic accounting audits, reviews and certifications of their internally-calculated accounting figures.
A company with publicly-traded securities is required by law to make certain financial reports public and to have these reports audited by an independent CPA or public accounting firm.
Holding a CPA license is a vital job qualification in the audit field. Audit experience also can develop a financial professional develop the sorts of analytic skills that are transferable to careers in securities research, to cite one example.
The average auditor's salary, according to Payscale.com was $55,049 as of November 2018.
Tax Return Preparation
Small businesses, as well as individuals, frequently hire an independent CPA or public accounting firm to prepare and file their tax returns. The largest public accounting firms, particularly the Big Four, typically won't bother with preparing individual tax returns, except for extremely wealthy people whose income and assets make them the equivalent of institutional clients.
Larger businesses tend to have in-house staff to prepare tax returns and often rely upon their auditor to review this work. The internal tax department in a corporation requires key staff members to hold CPA licenses and/or law degrees, just as their counterparts in public accounting firms. The tax professionals within a public accounting firm also advise clients on legal strategies to mitigate taxes.
The Internal Revenue Service (IRS) began imposing professional standards on paid tax preparers and enrolled agents in 2011. These standards include passing a competency exam, completing 72 hours of education every three years, registering with the IRS and paying an annual registration fee. Because of these rules, many independent, non-CPA, tax preparers have gone out of business, and the rules further strengthen the market position of public accounting firms in this area. CPA holders are exempt from these requirements, given the high professional standards to which they already are subject.
Someone working as a tax return preparer can make an average of $12.36 an hour, according to Payscale.com. The median annual salary, according to the site, was $39,838 as of November 2018.
The major public accounting firms often have extensive consulting practices, largely staffed by non-CPAs. These practice groups advise business clients on a variety of management issues including structuring, business improvements, logistics, and efficiency. They can generate significant revenues and profits — in some firms exceeding the contributions of audit and tax departments.
Consultant salaries vary based on the firm. But the average salaries ranged between $45,793 and $109,737, with the median salary being $71,523, as reported by Payscale.com as of November 2018.
Why Work for a Public Accounting Firm?
Recent graduates find working at a major public accounting firm can offer a host of different opportunities, much like a well-paid internship. It offers hands-on experience with a number of different companies and industries. The Big Four tout high rankings in one or more independent surveys of the best places to work. They also claim high rankings in independent surveys of the most prestigious employers. Also, becoming a partner in a Big Four firm can be highly rewarding financially.
Disadvantages of Working at Public Accounting Firms
There are many different cons to working at a public accounting firm. Many employees experience burnout because of the long hours it takes to become successful and to maximize billable hours. And although the Big Four firms trumpet their employee retention policies today, they tend to have high staff turnover rates. Potential conflicts of interest are rife in public accounting, creating a difficult balancing act. Strict adherence to the profession's ethical canons can result in the loss of a client’s business, such as when audit results do not meet the client's expectations.