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Explain the role of accounting in society.

An accounting career can take you to the top of the business world. BusinessWeek studied the backgrounds of the chief executive officers (CEOs) of the 1,000 largest public corporations. More CEOs had backgrounds in accounting than any other field. Exhibit 1.6 provides additional detail regarding the career paths followed by these executives.

What do accountants do? Accountants identify, record, analyze, and communicate information about the economic events that affect organizations. They may work in either public accounting or private accounting.

Public Accounting

You are probably familiar with the acronym CPA. CPA stands for certified public accountant. Public accountants provide services to various clients. They are usually paid a fee that varies depending on the service provided. Services typically offered by public accountants include (1) audit services, (2) tax services, and (3) consulting services.

• Audit services involve examining a company’s accounting records in order to issue an opinion about whether the company’s financial statements conform to generally accepted accounting principles. The auditor’s opinion adds credibility to the statements, which are prepared by the company’s management.
• Tax services include both determining the amount of tax due and tax planning to help companies minimize tax expense.
• Consulting services cover a wide range of activities that includes everything from installing sophisticated computerized accounting systems to providing personal financial advice.

Exhibit 1.6	Career Paths of Chief Executive Officers
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All public accountants are not certified. Each state government establishes certification requirements applicable in that state. Although the requirements vary from state to state, CPA candidates normally must have a college education, pass a demanding technical examination, and obtain work experience relevant to practicing public accounting.

Private Accounting

Accountants employed in the private sector usually work for a specific company or nonprofit organization. Private sector accountants perform a wide variety of functions for their employers. Their duties include classifying and recording transactions, billing customers and collecting amounts due, ordering merchandise, paying suppliers, preparing and analyzing financial statements, developing budgets, measuring costs, assessing performance, and making decisions.

Private accountants may earn any of several professional certifications. For example, the Institute of Certified Management Accountants issues the Certified Management Accounting (CMA) designation. The Institute of Internal Auditors issues the Certified Internal Auditor (CIA) designation. These designations are widely recognized indicators of technical competence and integrity on the part of individuals who hold them. All professional accounting certifications call for meeting education requirements, passing a technical examination, and obtaining relevant work experience.

Exercises  1-1A, 1-25A, 1-1B, 1-25B

Problems  1-27A, 1-27B