Business Administration Education Guide

Wednesday, July 23, 2008

Types of Accounting

The field of accounting is divided into four main parts: public accounting, management accounting, governmental accounting, and internal auditing, each with different accounting specialties. Knowing the differences, and what functions each serves, is helpful to anyone pursuing a degree or career in accounting.

Public accounting

Public accounting, is also called "assurance services," and is the broadest, most basic type of accounting. Public accountants work for a client, whether an individuals, a private business, a public firm, a government agency, or a nonprofit organization. A public accounting business can consist of one accountant, several accountants working in partnership, or hundreds of accountants comprising a large accounting firm.

Public accountants carry out many duties ranging from simple tax advice and preparation for businesses and individuals, to consultations in the areas of employee reimbursement and accounting system logistics and design. External auditing is another responsibility taken on by public accountants who review their clients' finance records, making sure statements have been handled correctly before investors and finance authorities. These types of accountants are primarily handling historical financial data, discovering problems or errors in retrospect.

Within public accounting is the area of forensic accounting. Accountants in forensic accounting track white-collar crimes such as securities fraud, money laundering, embezzlement, and other questionable or illegal financial activities by analysing historical financial data. Forensic accountants are equipped with law knowledge as well as accounting skills, often working with law enforcement and lawyers or appearing as expert witness in trials.

Also under the umbrella of public accounting are Certified Public Accountants (CPAs), though CPAs are also employed in the private sector. The designation of CPA is applied to public accountants (PAs) who have become nationally certified by passing the Uniform Certified Public Accountant Examination, in addition to being licensed by their state.

Management accounting

Management accountants are also called cost accountants, private accountants, or industrial or corporate accountants. This type of accountant is employed by a business or agency rather than being available to the general public; their primary function is to record and analyze the company's financial data. This type of accountant uses private financial data to provide services such as asset management, performance evaluation, budgeting and cost management. They are often consulted prior to the release of new products, and can also prepare the company's financial data for tax authorities and investors. Whereas public accountants analyse historical data, management accountants look at current data as well, in order to plan for the future.

Also employed in the private sector are Certified Public Accountants, who can hold such positions as Chief Financial Officer (CFO) or Chief Executive Officer (CEO), provided they are well-rounded in business practice.

Governmental accounting

Governmental accounting is related to public accounting, but it is applied to government agencies and private businesses regulated by the government. Accountants in the field of governmental accounting render public accounting services for these agencies, ensuring financial practices are carried out legally. Accountants employed by the Federal Government can be found in the IRS, as well as in budgeting and asset management departments.

Internal auditing

Internal auditing accountants analyze financial management practices for their own company, watching for financial mismanagement, waste and fraud. They evaluate the performance of the company's management and budgeting operations for efficiency as well as compliance to laws and regulations. Internal auditing accountants may specialize in areas such as information technology auditing, environmental auditing and compliance auditing.

Different accounting job titles

Enrolled agent (EA)

Enrolled agents are usually accountants, but not necessarily. EAs represent taxpayers before the IRS, and must pass an IRS-administered exam before being allowed to practice. This is a popular area of accounting for new entrants in the field.


Though bookkeeping is an entry-level position within the field of accounting, it is one of the most valuable accounting services, because all other data depends on the accuracy of bookkeepers' work. Bookkeepers record a company's financial business transactions, keeping all financial data in organized ledgers, which they check and update regularly. They are responsible for balancing these ledgers against the company's assets, making sure every dollar is accounted for.

Accounting Clerk

A clerk is another entry-level accountant whose role is to help maintain ledgers and prepare financial reports, sending 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 is a good launching pad for higher accounting positions.

Accounting Director

Accounting directors are a step above entry-level accounting positions, as they manage and oversee bookkeepers, clerks and lower accountants. They handle payroll, cost accounting and other administrative tasks, reporting to higher management within the accounting department.

Controller (or Comptroller)

This job title refers to a management-level accountant who oversees the accounting activities within an organization. These accountants supervise the company's internal accounting systems, ensuring they function properly, and is responsible for creating and enacting policies and practices within the accounting department. The controller reports to the Chief Financial Officer.

Chief Financial Officer (CFO)

The CFO is a high-level accountant who analyzes broad-scale financial risks within a business or firm. The CFO receives data handed up from the business's accounting department, using it to assess the wisdom of future financial undertakings on a company-wide level. They often report their financial findings to the company's highest management. The CFO is typically part of a firm's board of directors, reporting directly to the CEO.

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