Major Issues for the CPA Profession - Essay Example

The Certified Public Accountant (CPA): Sundry Issues   Brief Background   In an article written by Flesher, Previts, and Flesher, it was mentioned that April 17, 1896 marked the passage of the first legislative enactment calling for the creation of the Certified Public Accountant (CPA). However, it was actually years hence when accounting organizations became existent in the United States. As early as 1884, practicing accountants have began to associate themselves with each other. Initially called the Institute of Accountants and Bookkeepers, the CPA has since then evolved into a more complex and systematic organization bearing witness to the ever-increasing demand in auditing and other accounting needs (Flesher et al. 265).    The Wisconsin Statistical Database maintained that an accountant is considered to be practicing the duties of a Certified Public Accountant when:    a)      a person conducts himself in a manner conducive to the attribution that he is skilled and knowledgeable in accounting or when he holds himself as one licensed to conduct related services all for compensation; b)      the person occupies an office to conduct his services as a certified public accountant undertaking employment for the practice of accounting;   c)      the person conducts himself as a professional certified public accountant capable of conducting audit of financial transactions and he puts forward his services to the public for compensation;   d)     the person creates statement of audit, balance sheets and other financial documents in behalf of a client that are to be submitted in compliance to a state regulation, for legal purposes or any other related cause; e)      the person provides professional service to clients in exchange for money after rendering services about any matter relating to accounting;    f)       the person affixes his name or any trade or assumed name attributable to him for the attestation in a particular document made by him. As a title, the CPA is equivalent to a designation conferred to an individual who has successfully hurdled an examination administered by the state (Carter 19). This means that a student with a degree in Accounting is not automatically deemed a CPA as he must first pass a test, in some cases a series of exams to be able to receive such title. Additionally, individuals seeking to take the said examination must possess certain pre-requisites such as on-the-job experience, bachelor's degree, relevant trainings and other key requirements set by the state or the instrumentality made responsible for such (Carter 16).    Relatively speaking, the Accounting graduate is not precluded from performing accounting duties absent the CPA title. However, there are certain responsibilities that only a CPA can perform (Lee 292). Lee states in his work that primarily, the duties of a CPA revolve around the rendering of financial audit services and public accounting. This pertains to the task of the CPAs to attest to the truthfulness and veracity of a submitted financial document and the statement's proper adherence to the rules and guidelines set under the Generally Accepted Accounting Principles (GAAP). Private corporations are the primary receptacle of CPAs as they often serve as business consultants, finance managers, accounting supervisors and even high-ranking officers such as Chief Executive Officer (CEO), Chief Operating Officer (COO) and Chief Finance Officer (CFO) (Lee 292). As CPAs, their responsibility is not directly with the public (Moehrle 13). CPAs serve their duties in furtherance of the goals of society relative to moral and consciousness accounting of corporate entities' financial statements and records. That is, the work of CPAs is skewed towards public service though it is delineated and offered by a private corporate business (Moehrle 13). This concept is best illustrated by the duty of CPAs to prepare income tax statements of individuals and corporations. While this duty is conferred to the CPAs by a private entity, the ultimate goal of this practice is the proper and exact reporting of private individuals and enterprises of their earnings to which the viable working of the government highly depend on.    Dale L. Flesher, in his work entitled "Profiling the New Industrial Professionals: The First CPAs of 1896-97," mentioned several areas where a CPA can exercise his profession. To wit: corporate finance or governance; estate planning; financial accounting, analysis and/or planning; forensic accounting; tax preparation and planning; management consulting; and, information technology.    Benefits of Being a Certified Public Accountant (CPA)   Being conferred with the CPA title is a major plus for individuals seeking to advance their professional career in the auditing industry. Oftentimes, individuals seeking to gain their CPA licenses are Accounting graduates immersed in the accounting and finance world and as such, they are either in need of a career promotion or work differentiation.    Having reached the CPA level is an achievement in itself. That is, after struggling to attain a degree in Accounting, CPA holders additionally have to battle it out with a state-administered examination where only a very small percentage survives (Flesher et al. 253). In this regard, possessing the CPA license is a cause of pride and a concomitant source of bragging privileges. Moreover, being conferred with the title is being associated with high mathematical skills and quantitative knowledge (Carter 22). As such, whether the CPA is seeking to be promoted in a current job or is searching for employment, being deemed a CPA is a major credential booster.    Likewise, being a CPA will allow the Accounting graduate to perform certain responsibilities that are not among the duties of an accounting staff (Carter 22). Oftentimes, the signature of a CPA is necessitated in submitted financial documents whereas a mere staff is precluded from executing such matters. In this regard, the duties open to a CPA is more encompassing than a general accounting staff. Lee (2009) lists down seven benefits of being a CPA. These are: (1) prestige, respect and reputation; (2) money and financial satisfaction; (3) job satisfaction and a variety of work; (4) career security; (5) personal growth; (6) abundant job opportunities; and, (7) the GO places campaign. The prestige, respect and reputation attributed to CPAs stems from their knowledge in the principles and complexities of the quantitative field. CPAs often enjoy admiration from their peers and clients. The money and financial satisfaction is highly regarded as the primary cause of accountants to aspire for the title. However, this financial gain is equivalent to a great responsibility. CPAs also enjoy a variety of work often the source of great job satisfaction. That is, they perform several tasks in pursuance of their accounting duties. This includes the conduct of tax advisory services, business consultation, auditing, international financial reporting and management consultation. In terms of career security, there is an ever increasing demand for CPAs. Lucrative positions are always available. The personal growth associated with becoming a CPA is seen in two prongs. First is that due to the relative stability the job provides and the financial rewards allow the CPA to enjoy the finer things in life. That is, CPAs are able to afford better as they are capable of spending more. Secondly, CPAs are able to improve their general perspective and personality due to the relative knowledge associated with the job. Likewise, their skills are honed which invariably leads them to the attainment of more skills. Job opportunities are abound for CPAs. The demand is high and there appears no satisfaction as more and more enterprises and individuals are seeking their assistance. In the United States, the AICPA launched the 'GO Places' campaign detailing the benefits that may be reaped from a career in accounting. This program is seen as a positive approach in helping to alleviate poverty by introducing alternatives in to a person's chosen career. All in all, the CPA path appears to be promising as the opportunities are limitless. Add this to prestige and sustainability of demand, then the other professions pale in comparison to an illustrious career in accounting.   After CPA - Future   The opportunities open to CPAs are limitless. This is due to the fact that CPAs are easy to place in the business setting. That is, there are a myriad of positions that may be filled out by these licensed accountants. Morgan International, in their research, summarizes the viability of this career into four factors: (1) career stability, (2) compensation, (3) increased mobility; and, (4) continued career growth opportunities. Through this, it becomes evident that the life after the attainment of the title is a long way from being over.   The CPA may opt to enter any field in the private business or public sector. The doors opened to a CPA are as varied as the responsibilities are distinct. Morgan International further stated that there are eight areas to which a CPA may devote his time. These are: (1) Environmental, General, International, or Forensic Accounting; (2) Tax and Financial Planning; (3) Consulting Services; (4) Financial Analysis; (5) Internal Auditing; (6) Audit and Assurance; (7) IT Services; and, (8) College and University Instructor.   The fact that there exists a variety of areas to which a CPA may conduct his profession is an attestation to the viability of this field. Also, the fact that there is a relative continuum in the fiscal and economic progress of nations due to clamor for the top spot in the international arena is a good sign that being a CPA is a boon (Lee 294). This is for the reason that there is a competitive demand for CPAs locally and abroad as this particular field can adapt in any location. Likewise, the fact that systems and processes are becoming complex by the day, learned individuals in the field of commerce, finance and IT are in great shortage as entities are struggling to establish their businesses in this fast globalizing world (Lee 295).   All in all, being a CPA in this era is certainly a beneficial advantage as the possibilities open to them is endless. That is, as much as the areas to explore are varied, the longevity of the demand for such individuals is likely to subsist far longer than anyone can imagine.   Famous Personalities that are Certified Public Accountants   The Colorado Society of Certified Public Accountants lists down the following personalities:   (1) Gibby Haynes, the lead singer of the punk band "The Butthole Surfers"   Gibby Haynes attended the Trinity University in San Antonio. In addition to Haynes' achievement as a CPA, the punk virtuosity of this singer is further obscured by being the captain of his school's basketball team and the president of his fraternity. But Haynes' apparent dual personality as a hot punk singer and a star pupil is made even more pronounced when he was named 'Accounting Student of the Year.'   (2) Chuck "The Iceman" Liddell, mixed martial artist   In 1995, Chuck "The Iceman" Liddell is a former Ultimate Fighting Championship light heavyweight champion who graduated with a Bachelor of Arts Degree in Business/Accounting from the California Polytechnic State University. Lidell's priority in school was actually sports. However, his head for numbers earned him his degree and helped him in managing several businesses after his retirement from the UFC.   (3) A.C. Connor (a.k.a. D-Lo Brown), professional wrestler   Before D-Lo Brown entered the WWF ring, he worked as a fulltime CPA. He received his accounting degree from the University of Maine.   (4) John Grisham, novelist   The famous novelists and recipient of the Peggy V. Helmerich Distinguished Author Award was initially reticent to schooling. Grisham drifted from the Northwest Mississippi Community College to the Delta State University before he going to the Mississippi State University in 1977 where he received his degree in accounting. Grisham then opted to continue to law school and eventually became a tax lawyer. However, Grisham's real passion was in writing mystery novels as he was able to sell two million copies of his book on a first printing garnering him a Galaxy British Book Awards along with Tom Clancy and J. K. Rowling.    (5) Bob Newhart, comedian   George Robert Newhart, or Bob Newhart is an American stand-up comedian known for his portrayal of Dr. Robert "Bob" Hartley on the 1970s sitcom The Bob Newhart Show and then as innkeeper Dick Loudon on the 1980s sitcom Newhart. However, before Newhart entered the showbiz limelight, he worked as an accountant for United States Gypsum.    (6) Kenny G, jazz artist   Kenny G, or Kenneth Bruce Gorelick, is an accounting student of the University of Washington before he became the sensation that he is. Gorelick even graduated magna cum laude in his chosen field while playing saxophone professionally.    (7) J. P. Morgan, banker and financier   Before becoming an international tycoon, J. P. Morgan started his career as a junior accountant on Wall Street. However, the death of his father became the catalyst in Morgan's life as a finance mogul as he brought their family business into the international level and made a name for himself.    (8) Walter L. Morgan, founder of the Wellington Fund   Morgan is considered as one of the pioneers of the mutual fund industry when he instigated the establishment of the Wellington Fund, the flagship fund for the Vanguard Group of Investment Companies. Morgan is a CPA by profession and made a name for himself in the field through the concept of mutual funds.   (9) Others   Several other famous personalities are CPAs. From the business sector, there is Arthur Blank, the co-founder of Home Depot and owner of the Atlanta Falcons. From the music industry, Tim DuBois, the song writer of the Alabama hit Love in the First Degree. Walter Diemer, the inventor of bubble gum was also a CPA. Kevin Kennedy, the former Texas Rangers Manager, Ray Wersching, the former San Francisco field goal kicker and Marcus O’Sullivan, a famous track and field player are all CPAs.   The CPA Exam    According to the American Institute of Certified Public Accountants (AICPA) there is a need to administer a CPA exam to set certain standards in the field (Moehrle 15). This apparent delimitation is endeavored so as to control and monitor the practice of providing auditing services, tax practices, business valuation, financial planning and consulting, and professional ethics. AICPA further maintained that the exam given to aspiring students are set to test their levels of communication, research abilities, analysis, judgment and understanding.    There are four areas in the CPA exam (Moehrle 22). These are: (1) auditing and attestation; (2) financial accounting and reporting; (3) regulation; and, (4) business environment and concepts. The first are, pertains to the students' knowledge of general accounting matters such as auditing procedures and the application of the 'generally accepted auditing standards' (GAAS). The second area relates to accounting principles, theories and concepts including the 'generally accepted accounting principles' (GAAP) and other basic skills. Likewise, the financial accounting and reporting area seeks to ascertain the students' knowledge of the GAAP and its applicability to enterprises, whether private entities or the public sector. The third area, the regulation, measures the knowledge of the students' of taxation law, professional and business ethics and practical application of these concepts. The final area refers to the general conduct of business and accounting implications. This is often measured through the application of knowledge in business planning and financial consulting.    The CPA examinations have often been referred to as a necessary obstacle in the field of accounting. The mortality rate in this examination likewise proves the level of difficulty of the test and the commitment of the graduates to attain such title. The CPA exam is among the three requisites in attaining the CPA licensure along with education and work experience.   The exam is in itself composed of multiple-choice questions and scenarios that must be analyzed and resolved. This is the practical application or the case analysis portion of the exam. In the staff of the United States the American Institute of Certified Public Accountants (AICPA) and a number of volunteer members of CPA examination sub-committees make sure that every test question is accurate and relevant. Likewise, they undertake all the necessary preparation so that the exam will structured as to afford the students the best means to assess their knowledge (AICPA).    History of CPA   In 1894, Charles E. Sprague, a member of the Institute of Accounts in New York, circulated a bill stating the necessity of having a professional examination in the field of accounting (Flesher et al. 255). Sprague claimed that the passage of such law in vital for the ethical conduct of auditing and as a means of setting a unified standard in the field. At about the same time, another bill was being prompted by the American Association of Public Accountants (AAPA) clamoring the same standardization in the field of accounting by establishing a unified system of licensure and examinations (Flesher et al. 255). In 1895, a group of accountants, known as the "Committee of 14" met to discuss the two bills. The said committee also set to join the two proposals and establish a detailed bill to be drafted for the legislature. However, this undertaking was unsuccessful (Flesher et al. 255).   In 1896, a similar bill was again submitted and was surprisingly approved unanimously (Flesher et al. 252). The American Association of Public Accountants, under Frank Broaker took grain pains to ascertain the passage of the said bill. However, the old CPA law provided for a "grandfathering" provision which permitted accounting professionals to become CPAs without first successfully hurdling the examinations required. In December 1896, the first CPA exam was administered (Flesher et al. 259).   From then on, the CPA as a means of setting a bar to the accounting profession continued to evolve. From a mere standardization process, the CPA exam has now progressed into a licensing medium separating the eligible from the rest.   CPA vs Masteral Degree in Accounting   A Masteral Degree in Accounting (MAcc) pertains to a graduate professional degree in accountancy that usually runs over a period of one year requiring over 150 semester hours (Lee 292). The MAcc offers a broad curriculum that provides lectures in client management and concepts in business management. MAcc primarily provides the students with lessons in general management and a more in-depth approach to the basic accounting principles. In this regard, possessing a Masteral Degree in Accounting is a feat in addition to the Bachelor's Degree. Likewise, undergoing the schooling for the attainment of a masteral degree would enable the student to be more well-informed and better prepared for the CPA examinations (Lee 295). This then poses as an advantage. However, studying for master's degree would entail costs. Considering that MAcc is a further education, the courses are oftentimes more expensive than courses for a bachelor's degree (Lee 293). In this aspect, getting a master's degree is a little too disadvantageous. The MAcc also provides extra credit or points in terms of academic attainment that is undoubtedly absent in a person with only a bachelor’s degree. On its own, MAcc focuses more on making certain that the students are prepared for the CPA examinations and the Certified Management Accountant (CPA) board. Considering that having earned a bachelor’s degree in accountancy is only a few courses short of attaining an MAcc, having to spend a little bit more seems worth it. Additionally, the students will be made more prepared to take the CPA exam which is the main goal of those who took up accountancy as a degree course. The MAcc offers lessons that cover research, business valuation, cost management, information systems, auditing, policy, taxation and financial and managerial accounting. Comparing the benefits of being a CPA with having a Masteral Degree in Accountacy seem divergent. The fact remains that being licensed as CPA is the goal of many students whether they opt to take the fast route (bachelor's degree) or the long track (bachelor's degree plus master's degree). As such, it would not matter much how a student got their licenses. What matters most is that they have it.   Job Opportunities for a CPA   A wide range of job opportunities are available to a CPA. Essentially, a CPA may enter public accounting, private accounting or governmental accounting. Felicity Carter, in her work entitled "Accounting Careers: Adding Interest to your Future," lists down several positions open to a CPA. These are: intermediate accountant, consultant, associate director, senior business adviser, finance manager, system accountant, senior business analyst, financial accountant, commercial manager, treasurer and forensic accountant.   The financial prospects present for a CPA seem limitless. Demands remain high and the fields are boundless. Moreover, the knowledge bestowed by such title permits its recipients to thrive across borders. Plus, the career is invariably sustainable through a longer period in time. All in all, possessing the CPA title is a privilege and a gift to be explored and boasted.   Conclusion   Wanting to become a CPA should not end in attending a university and undertaking the necessary course. It should not stop in answering the exam and gaining rightful employment. Becoming a CPA must not be looked upon as a means of being attaining a better future as this is a career as much as it is a commitment.   Primarily, CPAs are responsible for the preponderance of ethical, accountable and conscientious financial reporting of income and liabilities of entities, whether by an individual or a business conglomerate. The signature of a CPA is necessitated to effectuate the contents of a financial report or audit and that such attestation is of great import as it affects the financial stability of the entire nation. That is, by the fact that CPAs perform the audit and ascertains that an individual or a business follows the GAAs or GAAP and that they attest to the veracity and accuracy of the reports they in reality confirm that such accounting is made without error and well within the bounds of law. As such, the taxes, income declared, financial standing and fiscal capacity of the affirmant are concretized. These declarations then become the basis of governmental fees, employee remuneration, investor earnings and similar expenses. These matters are undoubtedly vital transactions that enable the society to function from an economic perspective. That is, through the transfer of appropriate funds to its respective recipients. In this manner, the CPAs serve private interests while operating from a highly public and national level. In this regard, the work undertaken by CPAs is highly essential for the smooth functioning of the society at large.   The nature of the CPA profession as being highly public-oriented necessitates a rigid weeding out process to take out the ones not capable of performing crucial duties. The CPA exam is an impediment utilized to make certain that those who will be conferred with the title are only those with the knowledge and understanding of the course. The mortality rate of the CPA exams is a testament that such profession is much more a vocation and a calling.   But then again, even with the apparent impossibility of gaining the title and the other concomitant difficulties that are sure to come about while struggling to attain it, many people still strive to be deemed CPAs. This may be attributed to the ever increasing demand for such personnel and the great likelihood of career advancement. The fact that CPAs are of universal function, they may operate in any level of the business. Moreover, the relatively applicability of the principles of accounting to any such state or country for that matter allows the CPAs to gain access over a wide variety of nations around the world. This then is another distinct advantage that CPAs have over the other professionals. In this aspect, the CPAs enjoy relative mobility.   True enough, becoming a CPA is a daunting challenge and one that is undertaken only by the keenest of minds and the bravest of the brave. However, looking at the better promises open to them, ordinary Tom, Dick and Harry cannot be blamed to join the tide towards the privilege. While the journey towards the end is an endless struggle for survival, the spot at the finish line is likely to dispel any doubts that one may have in jumping towards its glory. True, the battle is tough, but the success is potent enough to quell any misgivings.               Works Cited American Institute of Certified Public Accountants. Major Issues for the CPA Profession and the AICPA. New York American Institute of Certified Public Accountants, 1984. Print. Carter, Felicity. “Accounting Careers: Adding Interest to your Future.” Australian Career FAQs Pty Ltd. Print. Flesher, Dale, Gary John Previts and Tonya K. Flesher. "Profiling the New Industrial Professionals: The First CPAs of 1896-97." Business and Economic History 25 (1996): 252-266. Print. "Fun Facts & Famous Accountants." Colorado Society of Certified Public Accountants. Web. 14 Oct. 2011. Lee, Tam "The nature of auditing and its objectives." Accountancy 81 (1970) 292-6, 1970. Print. Moehrle, Stephen, Gary John Previts and Jennifer A. Reynolds-Moehrle. The CPA Profession: Opportunities, Responsibilities and Services. New Jersey: AICPA, 2006. Print. Morgan International. CPA: Certified Public Accountant - Be Prepared for your Future. Canada: Becker. Print. Public Oversight Board. Public Oversight Board Report: Scope of Services of CPA Firms. New York: AICPA, 1979. Print. "Chapter 442: Accounting Examining Board." Accounting Examining Board. Web. 14 Oct. 2011. Read More