As accountants are keen to tell you, the image of accountancy is changing. Accountancy is an industry with a growing profile and an even faster growing emphasis on accountability. Today, the profession can offer the incentives, challenges and financial rewards that are on a par with traditionally more glamorous professions, such as investment banking and law.
Accountancy is the language of business. Accountants measure, communicate and interpret financial activity so that users of the information can make informed decisions. This, for example, allows managers to look at their organisation, assess how well it is performing and implement strategies for future growth.
There are two main types of accountancy – financial and management:
- Management accountancy provides financial information to managers within organisations enabling them to make strategic and informed business decisions. It involves the identification, preparation, analysis, interpretation and communication of financial information, used by management to evaluate, manage, plan and assure the appropriate use of its resources and improve overall financial performance.
- Financial accounting, on the other hand, addresses the needs of decision-makers external to the organisation. These decision-makers may include investors, banks, suppliers, lenders, government agencies and regulatory bodies, special interest groups, and the general public. The financial accounting process typically culminates in the preparation of financial reports, such as balance sheets and quarterly or yearly income statements, that help to answer questions such as: 'What is the financial position of the company on a given day?' and 'How well did the company do during a given period?' Financial accounting is governed by rules (ex: IFRS, GAAP) which differ from country to country.
Here’s a quick look at accounting's main areas of specialisation:
- Audit, assurance and advisory: Audit and assurance are the traditional functions of accountancy firms. The major purpose of assurance services is to provide independent and professional opinions that improve the quality of information to stakeholders (which are both internal and external parties affected by the firm’s actions). An audit is a type of an assurance engagement which provides an unbiased examination and evaluation of the financial statements of an organisation. This adds credibility to the claim made by an organisation's management that the financial statements fairly represent the organisation's position and performance. Audits are carried out in accordance with various regulations to independently verify the accounts of the entity and the effectiveness of the operating controls. A number of advisory services can include completing due diligence on possible acquisition targets, recommending improvements on internal corporate governance structures, operating efficiencies and profitability, confirming compliance with debt agreements, etc…
- Tax: generally focusses on helping clients minimise their tax liability all the while complying with laws. Services cover a range of issues such as accounting for taxes on financial statements, the preparation of tax returns, ensuring these comply with the laws, advice on complex tax issues, consultation on M&A and structure to minimise taxes, personal wealth and estate planning.
- Corporate finance and risk management: This area covers a broad range of services ranging from M&A advice to strategic and financial advisory services, designed to minimise risk.
- Forensic accounting: Forensic means "suitable for use in a court of law". This area of accountancy deals with fraud and describes engagements that result from actual or anticipated disputes or litigation. Forensic accountants may, for example, just specialise in insurance claims, personal injury claims, fraud, construction, or royalty audits.
- Transaction services: This area employs audit and tax professionals to maximise the returns on M&A and other transactions, analysing each stage of the transaction process for both buyers and vendors to gain full value. Services may include financial and tax due diligence, transaction structuring, deal financing assistance, etc…
- Management consulting: has been a pillar of larger accountancies for some time and the industry is now wholly embracing the ‘professional services’ tactic. Management consulting addresses a multitude of issues related to the overall performance and direction of a company’s business (systems integration, business strategy, e-commerce and technology).
- Law consulting: Large firms (such as the Big Four) offer financial, economic and various data services to companies involved in litigations, mediations, arbitrations and other forms of dispute resolution.
