What does an accountant do everyday?
By Chris Baskerville, Chartered Accountant, 15+ years in corporate reconstruction
This is an interesting question and one I have asked myself while starring out the window above my desk, day dreaming at work (I hope my bosses don’t read this).
My fellow accounting colleagues understand that the number one conversation killer at a social function is when we are asked: “what do you do?” resounding with: “I am an accountant”. That response kills conversations faster than light exiting a room once you flick the switch off.
I have since learnt to say (when asked what I do): “I am an accountant with a twist”. The next obvious question is then: “what is the twist?” (assuming they didn’t fall asleep or politely feel the need to top up their full drink). You can then salvage a conversation thereafter.
In broad terms:
“accountants record transactions in a way that provides meaningful information to a decision maker”
Having said that, today’s accountant goes well beyond the simple recording of transactions to a more “trusted advisor” role, where people rely on your advice to make informed decisions. This means, accountants are becoming more knowledgeable about business on a holistic level (meaning to understand all areas of business, not just the books of account).
As laws change and become more complex, particularly from a superannuation (401k) and taxation point of view, so too does the role that accountants play.
The best way to really answer this question would be through a handful of scenarios based on the different segments that make up the “accounting industry”, to see the breadth of scope of today’s accountant. Typically, an accountant has to make a choice as to where they wish to specialize fairly early on in their career:
Taxation
The best taxation advisers are accountants. I have at times relied more on the advice of an accountant than a lawyer when it comes to taxation law.
Accountants understand and, more importantly, interpret the taxation laws very well. Just about every transaction that a business does has a taxation consequence. Good accountants know this and guide business in the right direction.
Even more importantly, tax planning plays a vital role of a good accountant, especially in the lead up to the end of the financial year.
Good accountants can find ways to minimize the tax to be paid through a number of strategies (Note: to minimize tax is fine, to avoid tax altogether is not).
Knowledge of taxation is the cornerstone of the accounting foundation.
Audit and Assurance
Accountants verify that the information provided in a financial report (particularly for entities that are listed on a stock exchange) is a true reflection of that entity.
Many transactions that large businesses will enter into will seek guidance from the auditor, particularly as to how the transaction should be disclosed in the financial statements and how that transaction should be properly recorded to ensue compliance.
Given the public interest, especially relating to publicly listed companies, the auditor bears a heavy burden of responsibility.
Good auditors know how to hunt down information to independently verify what has been disclosed.
Financial Reporting
Accountants prepare financial reports for an entity that allows the users of those reports to make informed decisions. The key financial reports are:
- Profit and Loss statements;
- Balance Sheet;
- Statement of cash flow; and
- Disclosure notes to the financial statements.
Good accountants in this area understand the relevant Accounting Standards, the Generally Accepted Accounting Principles and the International Financial Reporting Standards.
Management Accounting
“Management accounting is a profession that involves partnering in management decision making, devising planning and performance management systems, and providing expertise in financial reporting and control to assist management in the formulation and implementation of an organization’s strategy”
In contrast to financial accounting, management accounting is:
- primarily forward-looking, instead of historical;
- model based with a degree of abstraction to support decision making generically, instead of case based;
- designed and intended for use by managers within the organization, instead of being intended for use by shareholders, creditors, and public regulators;
- usually confidential and used by management, instead of publicly reported;
- computed by reference to the needs of managers, often using management information systems, instead of by reference to general financial accounting standards.
Insolvency and Business Reconstruction
Accountants in this segment are very effective problem solvers with entrepreneurial flare. Some days you are given the reins of a business in distress (i.e., has run out of money and cannot pay their bills) and are meant to trade on that business in the hope of finding a buyer. Some days you are simply given some assets to sell. Other days, there is nothing there and you need to investigate where the property or money went and ‘claw it back’.
Most accountants in this field are considered quasi-lawyers given their extensive knowledge of corporations law, property law, taxation law and other general business laws.
The best accountants in this field understand the technical legal position and apply very commercial thinking in their business dealings.
As business and industry gets more and more complex, particularly with the global reach of commerce, so too will the roles of accountants. The professional accounting bodies (Chartered Accountants and CPAs) are continually updating their training programs to adapt to this changing business environment.
