Certified Public Accountant (CPA)
In
the United States a Certified Public Accountant (CPA) is a person who has been
licensed by their State Board of Accountancy to practice public accounting The
following article focuses on U.S. policy.
Other countries have equivalent accounting organizations, education
standards, and other requirements for certification. For instance, Canada certifies accountants
under two categories; (1) Certified General Accountants (CGA), and (2)
Certified Management Accountants (CMA).
CPAs vs. Independent Non-Certified Accountants
Essentially, non-certified accountants can
simply hang up their shingle and open their doors for business. For instance, there are three main types of
financial statements that can be prepared by accountants: (1) audited, (2)
reviewed, (3) compiled.
Only a CPA can prepare an audited financial
statement. A report is then issued by
the auditing accountants stating whether they found the information contained
in the financial statements to be presented fairly, in all material respects.
In addition, only a CPA can prepare a reviewed
financial statement. Both CPAs and non-certified accountants, including
bookkeepers, can prepare compiled financial statements. This means that, if you want to have your
financial statements audited or reviewed, you must have a CPA perform that
work. Obviously, those services cost more
than a compiled financial statement. Most
small businesses will never need to have their financial statements audited or
reviewed.
Market conditions have brought on the use of
non-certified accountants because, characteristically, CPAs charge more for
their services than non-certified accountants and bookkeepers. Many small business owners do. A non-certified accountant can prepare a simple
financial statement that amply provides the information necessary to file a tax
return. In most cases, banks accept a
compiled financial statement, prepared by an outside accountant, whether a CPA
or not.
This has created the so called “turf battles”
in some states between CPAs and non-certified accountants. In California, there are approximately 20,000
non-certified, independent accountants. There
are expert CPAs and inexperienced CPAs. Obviously,
it is the same for non-certified accountants and bookkeepers. QUESTION: Do I Need An Accountant?
Does your business needs an outside
accountant? If you require an audited or
reviewed financial statement, then, yes, you need a CPA. Whether your accountant is a CPA is up to
you. If you solely rely on your
accounting staff or accountant for completely accurate financial data, then you
are asking for trouble. The language of
business is accounting knowledge.
One scenario, if you can afford it, is to hire
an internal accounting staff to prepare financial statements on a monthly basis
and have an external accountant check them over. There are numerous ways to work with an
accountant. Regardless, you should learn
enough about accounting to be able to communicate intelligently with your
accountant. What does the accountant
know about raw materials, work-in-process, and finished goods inventory
accounting? Perhaps a smaller firm with
four or five accountants who are all seasoned veterans might work better.
Is your accountant too busy to talk to
you? Situations may arise where you need
information immediately to make an important business or tax decision, will
your accountant respond quickly? Billing practices vary from firm to firm. For instance, an accountant might charge $200
a month to prepare a monthly financial statement but charge $100 an hour for
special projects. >>>
(Summary by Oni Zamroni, from John
W. Day, MBA)
