Accounting or accountancy is the measurement, processing, and communication of financial information about economic entities such as businesses and corporations.The SEC requires public companies to hire external accounting firms to audit their financial statements. Accounting firms specialize in other financial tasks, such as tax, management consulting, mergers and acquisitions and forensic accounting.
Public accounting firms typically employ Certified Public Accountants (CPAs) that work in the areas of audit, tax and management consulting. Four firms, called the Big Four, are the largest companies in the public accounting industry. These are Ernst and Young, PricewaterhouseCoopers, Deloitte Touche Tohmatsu and KPMG. Public companies hire these and other firms to complete accounting tasks required by the SEC.
Tax accounting firms focus on tax preparation and planning for companies of all sizes, and also for individuals. Tax accounting firms usually hire CPAs. Tax accountants must keep up with current tax laws. The Internal Revenue Code establishes tax laws for individuals and businesses. Tax laws differ from Generally Accepted Accounting Principles (GAAP). Many tax accounting firms require their employees to periodically take continuing education courses to stay abreast on changing tax laws, accounting software and tax planning strategies.
Forensic accounting firms use accounting skills and legal policies to uncover fraudulent and illegal activities. Public and private companies hire forensic accounting firms to investigate financial records. At times forensic accountants work with local and federal law enforcement. When an employer or federal agency takes legal action against individuals involved in corporate fraud, the courts may call upon forensic accountants to testify as expert witnesses.
Bookkeeping firms complete fundamental accounting tasks for small and medium-sized companies. No certification is required for bookkeepers, although they may seek certifications. Bookkeeping firms are usually small companies with only a few employees. Services provided by bookkeeping firms include accounts receivable, accounts payable, bank reconciliation, credit sales reconciliation, financial statement preparation and preparation of accounting write ups. Additional services offered by bookkeeping firms include payroll, small business tax preparation and loan package preparation.