Different Types of Accounting
There are four main types of accounting: public accounting, management accounting, governmental accounting, and internal auditing, each with its own financial management specialties.
All accountants are involved in recording and analyzing business transactions, bookkeeping, and assessing the financial capabilities of businesses, government organizations and nonprofit entities -- but accounting practices differ according to business arena, management status and experience. If you are pursuing a degree in accounting, it is beneficial to be familiar with the many types of accounting and the financial services each type provides.
Public accounting, also called "assurance services," is the broadest and most varied type of accounting. Public accountants practice bookkeeping, financial analysis and account management services for their clients, whether they are individuals, private businesses, public firms, government agencies or not-for-profit organizations. A public accounting business can be one accountant, a partnership involving two or more accountants, or a firm containing hundreds of accountants.
The duties carried out by the various types of public accountants range from simple tax preparation and advice, to consultations in the areas of employee compensation and accounting system design. Some public accountants are involved in external auditing, where they audit their clients' financial records to ensure statements have been handled properly, reporting their findings to investors and authorities. These accountants primarily look at historical financial data, discovering problems or errors in retrospect.
One specialty under public accounting is forensic accounting. Forensic accountants analyze historical financial data in order to track white-collar crimes such as securities fraud, embezzlement, money laundering and other questionable or illegal financial activities. Forensic accountants draw on law knowledge as well as accounting abilities, and may work with law enforcement and lawyers. They may also appear as expert witnesses in trials.
Included in the realm of public accounting are Certified Public Accountants (CPAs), though CPAs can also be employed in the private sector. The CPA designation is applied to public accountants (PAs) who have passed the Uniform Certified Public Accountant Examination to become nationally certified, as well as becoming licensed by their state.
Management accountants are also called private accountants, or cost, industrial or corporate accountants. Rather than offering their services to the general public, this type of accountant is employed by a business or agency for the purpose of recording and analyzing the company's financial data. The accountant uses this data to carry out tasks such as asset management, budgeting, performance evaluation and cost management. They are often involved in budgeting for the release of new products, as well as in preparing financial data for investors and tax authorities. As opposed to public accountants, management accountants primarily look at past and current data in order to plan for the future.
Certified Public Accountants can be employed by the private sector in positions such as Chief Financial Officer (CFO) or CEO, provided they are fully skilled in business practice.
Governmental accounting is a form of public accounting, applied to government agencies and private businesses that are subject to government regulations. Accountants in this field perform public accounting duties for these agencies, making sure revenues and expenditures are carried out according to law. Accountants employed by the Federal Government can be part of the IRS, or can be involved in budgeting and government asset management.
Internal auditing accountants review their company or firm's financial management practices, checking for mismanagement, fraud and waste. They evaluate the company's budgeting and management systems and operations for performance, efficiency, and compliance to laws and regulations. Under this designation, internal auditing accountants may specialize in areas such as information technology auditing, compliance auditing or environmental auditing.
Accounting job titles
These agents are usually accountants, but not necessarily. EAs represent taxpayers before the IRS, and must pass an exam administered by the IRS. This is a popular type of accounting for new entrants in the field.
This is an entry-level position within the field of accounting, but bookkeeping is one of the most valuable services accountants can provide, as all other data depends on the accuracy of bookkeepers' work. Bookkeepers record all financial business transactions implemented by a company, keeping all financial data in organized ledgers, which they update and check regularly. They are responsible for balancing these ledgers against the company's assets, making sure every dollar is accounted for.
Another entry-level accounting job, the role of a clerk is to maintain ledgers and prepare financial reports, reporting financial data to the management. This type of accounting can be repetitive and mundane, but is useful for learning the processes of a company's accounting department. The clerk's role usually leads to higher positions within an accounting department.
Accounting directors are responsible for managing the activities of lower accountants, clerks and bookkeepers. They handle such business needs as payroll, cost accounting and other administrative tasks, and report to higher management within the accounting department.
This job title refers to a management-level accountant within a company or organization who oversees the accounting activities within the organization. These accountants oversee the company's internal accounting controls, ensuring they function properly, and is responsible for creating and enacting policies and practices within the accounting department. The controller usually reports to the Chief Financial Officer.
The CFO is a high-level accountant whose job it is to analyze the financial risks within a business or firm. They receive data from the business's accounting and finance department, using it to assess the wisdom of future financial undertakings on a company-wide level and reporting financial data to higher management. The CFO is usually part of a firm's board of directors, and reports directly to the Chief Executive Officer (CEO).