Careers at Public Accounting Firms
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.
Careers at Public Accounting Firms
Public accounting firms vary in size from individual proprietorships to the Big Four (or Big 4) that are the undisputed leaders in the field, with offices around the world. Even the largest firms in this sector typically are organized as partnerships rather than as corporations. They are major employers of professionals in the fields of accounting and auditing, as well as highly-regarded training grounds for financial professionals who later find significant career opportunities elsewhere.
Very small businesses often outsource all their financial record keeping to public accounting firms. Larger businesses normally have accounting and finance personnel on staff to do this work. They hire public accounting firms to conduct periodic accounting audits, or 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.
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 will not bother with the preparation of 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 but often rely upon their auditor to review this work. The internal tax department in a corporation, meanwhile, requires key members of staff 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 in 2011. These standards include passing a competency exam, meeting continuing education requirements for at least 15 hours per year, registering with the IRS, and paying an annual registration fee. One upshot of these rules has been to put many independent, non-CPA, tax preparers out of business, and to strengthen the market position of public accounting firms in this area.
Since the testing, education and registration requirements apply to the paid preparer who signs a client's tax return, there is a potential loophole. It may be possible for an unregistered employee to prepare a tax return, and then a registered supervisor could review and sign it. However, the major tax preparation chains ideally should have all their preparers registered, both to limit liability and as a selling point to clients. However, CPA holders are exempt from these new requirements for tax preparers, given the high professional standards to which they already are subject.
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. They can generate significant revenues and profits, in some firms exceeding the contributions of audit and tax departments. Follow the link for details.
Why Work for a Public Accounting Firm?
Recent graduates who are unsure of their final career destination find that frequently a period of work at a major public accounting firm as the equivalent of a well-paid internship. It offers hands-on experience with a number of different companies and industries. Likewise, public accounting experience is a great resume enhancer, highly respected by a wide range of employers. Doing excellent work for a client company also frequently opens doors to job opportunities there.
The Big Four firms 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.
Things Not to Like
Major public accounting firms have issues with employee burnout. Partners have a direct economic incentive to maximize employees' billable hours. While the Big 4 firms today trumpet their employee retention policies, they have histories of high staff turnover, partly due to treating staff as disposable and easily replaceable.
Partners can withdraw as pay only a portion of their share of the firm's profits, being required to leave the rest of their theoretic earnings invested in the firm as working capital. The politics surrounding promotions to partnership can be intense and ruthless.
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 loss of a client’s business, such as when audit results do not meet the client's expectations.