Preview

The Differences Between Public and Private Accounting

Good Essays
Open Document
Open Document
1199 Words
Grammar
Grammar
Plagiarism
Plagiarism
Writing
Writing
Score
Score
The Differences Between Public and Private Accounting
-------------------------------------------------

The differences between public and private accounting
In order to understand the difference between public and private accounting, we must first understand what accounting is. Accounting is simply an information system used to identify and communicate financial information to users of that information. Accurate, reliable and pertinent information is extremely important in evaluating a company’s financial position in order to attract investments. The accountant’s role is to ensure, that the information presented is in fact a truthful representation of the company. Falsifying information, whether intentional or not can have serious, even legal implications for the accountant. That’s why accountants are very concerned with ethics.
Public accountants are those accountants who provide services such as auditing, tax and financial planning to corporations. These accountants do not work for the organizations they provide these services for; rather these organizations are considered clients of the public accountants. They work outside of the corporation, if you will. Private accountants on the other hand, work for an organization or within a company’s accounting department. There are pros and cons to both facets of accounting; we will consider a few to construe the major differences between the two.
To begin with, let’s look at the functional differences between the public and private accounting. Even though private accountants may produce internal audits, it is required, by law, that public accountants audit a company’s financial records and issue an unqualified opinion in order for those records to be accepted as true representation of that company’s financial position. Following the Enron scandal, accounting principles have become more stringent. As such, public accountants must be aware of the dynamic changing environment in which they operate. Public accountants are credited with this extra responsibility

You May Also Find These Documents Helpful

  • Good Essays

    It is important to the account profession because companies were required to have met certain conditions or face the consequences. The Act requires all public companies to create an audit committee, which will be part of the board of directors, and will need to include at least one accountant or someone who is “financially literate” and knows what he/she is doing at all times. It also requires public companies to hire outside firms to perform their financial audits on an annual basis, no company can use the same firm for more than five years at a time, allowing a different set of eyes to look at their financial statements and taking away the risk of fraud.…

    • 980 Words
    • 4 Pages
    Good Essays
  • Good Essays

    References: Boynton, W. C., & Johnson, R. N. (2006). Auditing and the Public Accounting Profession—…

    • 396 Words
    • 2 Pages
    Good Essays
  • Good Essays

    There is the Public Company Accounting Oversight Board that is a private-sector, non-profit corporation created by the Sarbanes-Oxley Act, a 2002 US Federal law, to oversee the auditors of public companies. Its stated purpose is to protect the interests of investors and further the public interest in the preparation of informative, fair and independent audit reports. The Securities and Exchange Commission’s mission of the U.S. Securities and Exchange Commission is to protect investors, maintain fair,…

    • 825 Words
    • 4 Pages
    Good Essays
  • Better Essays

    The profession of accounting includes many different job settings. The main fields for accounting include public, private, and government accounting. Public accountants work on a fee for service basis, either independently or as a member of an accounting firm. They are then hired by individuals or businesses for the purposes of preparing financial statements, auditing, tax preparation, and investigations. (1) Private accountants are employed by companies, for which they develop and maintain the financial records. (1) Government accountants are federal or state governmental employees whose jobs include keeping the financial records of governmental agencies as well as audits of private companies. In the federal government they may be employed as bank examiners, IRS agents, or investigators in addition to more traditional accounting positions. (1)…

    • 1020 Words
    • 5 Pages
    Better Essays
  • Satisfactory Essays

    1-23 (Organizations associated with the public accounting profession) Several private and public sector organizations are associated with the profession. Listed below are activities pertaining to these organizations.…

    • 441 Words
    • 2 Pages
    Satisfactory Essays
  • Satisfactory Essays

    I believe that a professional accountant is a fiduciary that is to act in the public interest instead of a businessperson pursuing profit. Accountants have schooled for many years and are licensed through the State. As a professional accountant there are many rules and regulations that must be understood and followed. Professional accountants are morally and ethically required to work in the best interest of the public. If an accountant is professional and ethical, he or she would not falsify financial statements or tax returns to allow for higher profits for the accountants employer, customer, or even themselves. Accountants must understand that proving to be an ethical, professional accountant with great morals will actually prove to be profitable. The accountant’s reputation plays a large role in the corporation’s reputation.…

    • 273 Words
    • 2 Pages
    Satisfactory Essays
  • Powerful Essays

    Career Exploration

    • 1715 Words
    • 7 Pages

    Accounting is basically a service activity. Its purpose is to provide quantitative information that principally used by the managers, investors, tax authorities, and other decision makers to make the financial decisions within companies, organizations, and public agencies. Accounting is also widely known as the “language of business.” An accountant measures, communicates, and interprets financial activities. They prepare financial statements or reports for individuals, businesses, government agencies, or other non-profit organizations. They use the accounting systems to categorize the expenses and income to the typical groups. They also keep tract of the money received or paid out to see if the transactions are accurate and complete. Accountants are familiar with the computer operation. They use the computers, accounting software, calculators to prepare the financial statements and carry out the statistical interpretation. They require to make many various reports such as assets and liabilities, loss and profit, or other…

    • 1715 Words
    • 7 Pages
    Powerful Essays
  • Satisfactory Essays

    Financial accounting creates reports that reflect the business’ financial health for external users.These include balance sheets, income statements, and statement of cash flow.…

    • 434 Words
    • 2 Pages
    Satisfactory Essays
  • Better Essays

    According to Marshall, McManus and Viele (2004), accounting is “the process of identification, measurement, communication of information about a business for the purpose of making decisions and informed judgment” (p.3). Decision makers look at balance sheets, income statements, changes in the owner’s equity and cash flow statement as documentation of the viability of an entity. Misrepresentation of the financial statements can place doubt of profitability in any company. The need for accountability and regulation of accounting practices is important in preserving trust in the business community.…

    • 1195 Words
    • 5 Pages
    Better Essays
  • Best Essays

    Accountant Responsibility

    • 2438 Words
    • 10 Pages

    Over the past few years we have seen the economy go from a feeling of reaching new heights, to the lowest of lows and with that came the accounting scandals and the need to expand government regulation. In response to the changes in the economy the public wanted accounting standards and government regulation to assist in alleviating the way financials were being reported so the money that was being lost wasn't nearly as detrimental as it looked. The changes in the economy required changes in regulation. The changes in regulation set the need for accountant responsibility to be expanded. This paper is to go into details about the “three major parties” that…

    • 2438 Words
    • 10 Pages
    Best Essays
  • Good Essays

    Like most business professions, there has to be a strong sense of ethics and responsibility. Especially professions like law or public accounting. They must have strong standards of integrity. In public accounting, people rely heavily on the information being provided on companies. Any mistakes or intentional cover up will have high costs to the economy and dire consequences. Even though there are laws and standards that regulate auditing, it does not completely stop or prevent firms from doing immoral acts. Before Sarbanes-Oxley Act of 2002, auditing for both public and privately held companies followed the AICPA 's standards of the 10 generally accepted auditing standards. In the years 2000-2002, there had been an increased of major corporate accounting scandals. Large corporations such as Enron and WorldCom went into bankruptcy by trying to cover up their losses and debt. In response to the all the fraud, the US government passed the Sarbanes-Oxley Act. The Sarbanes-Oxley Act created the Public Company Accounting Oversight Board, or PCAOB, and changed how audits of public companies are being done. The PCAOB adapted the rules and standards of AICPA for auditing and also included auditing of internal control as part of the report, leaving less room for auditors to move around. Here are some of the few companies that led to a drastic change of auditing standards for public companies.…

    • 2721 Words
    • 11 Pages
    Good Essays
  • Better Essays

    Congress passed the Sarbanes-Oxley Act of 2002 in response to financial scandals perpetrated by Enron and WorldCom, and it has had a strong impact on corporate accounting and financial decision-making. This law was intended to enhance financial transparency for publicly-traded companies. The Sarbanes-Oxley Act established new regulations and penalties for public companies to protect investors. In addition, it created the Public Company Accounting Oversight Board, or PCAOB, which is in charge of overseeing, regulating, inspecting, and disciplining accounting firms in their roles as auditors of public companies. This new law has impacted accounting…

    • 2229 Words
    • 9 Pages
    Better Essays
  • Good Essays

    Public Accountant is the profession who perform a broad range of accounting, auditing, tax, and consulting activities for her clients, which may be corporations, government, non-profit organisations or individuals. Some public accountants specialise in forensic accounting. This involves investigating and interpreting white-collar crimes such as securities fraud and embezzlement, bankruptcies and contract disputes. Public accountants are a vital part of any strong business or organisation. They are respected and admired by their peers, clients and social circles; this is also one of the reasons why I have chosen this career. Also the other factors which have made me to choose my goal of becoming the Public Accountant are; career security, there is a shortage of experienced accounting professionals which puts those with their certified public accountant qualifications designation even more in demand. Personal growth, this helps to improve yourself and those around you. Job satisfaction and variety, Accounting is an intensely vibrant field full of opportunities for travel, excitement and job satisfaction which make a positive impression on my colleagues. Furthermore, Public accountant…

    • 918 Words
    • 4 Pages
    Good Essays
  • Good Essays

    Ethics in Accounting

    • 952 Words
    • 4 Pages

    The definition of accounting according to Webster 's dictionary is "the system of recording and summarizing business and financial transactions and analyzing, verifying, and reporting the results." The purpose of accounting is to provide financial and business information to possible investors, current investors, and management so they can make accurate decisions concerning the company. There are four basic statements that accounting provides: the Balance Sheet, the Cash Flow Statement, the Owner 's Equity Statement, and the Income Statement. These four reports provide the perspective of how the organization is maintaining financially. The basis of many decisions will stem from how profitable an organization is and thus it can be tempting to increase the bottom line so the company looks better on paper than what the situation is in actuality. The importance of accounting is that it gives investors the confidence in making a well informed decision and though the accounting reports don 't equate to a sure thing these reports aid in the flow of business. Thus without accurate accounting there would be no way an investor could feel safe or educated in providing monies to an organization. Thus accounting promotes the flow of business. Accounting also is hinged on various people 's monies and so it must be performed with accuracy and integrity. There are many people 's lives and financial well-being at stake and thus there should be a considerable amount of integrity and ethical behavior utilized in accounting.…

    • 952 Words
    • 4 Pages
    Good Essays
  • Good Essays

    1- public accounting firm is a firm that registered by the public accounting oversight board so it provides accounting service to public company.…

    • 1215 Words
    • 5 Pages
    Good Essays