A Closer Look at Accountancy

Accountancy has a long and involved history that began during the Sumerian time in Mesopotamia. During this time, agriculture was the driving force behind the need to maintain records that accurately showed how much of a specific agricultural product was in stock as well as how much it was worth. Hence, accountancy was born.

Accountancy in a very simplistic form is also mentioned in the New Testament within the Book of Matthew (Matt. 25:19) as well as in the Quran (Quran 2:282). In addition, a book written in the twelfth century by Ibn Taymiyyah describes detailed accounts of Muslims using accounting systems in the mid-seventh century.

Accountancy Today

Today, the basic concept of accountancy remains the same as it was in its earliest times. At its most basic core, accountancy involves measuring and disclosing financial information. It may also involve provisioning goods or money.

Those who engage in accountancy are referred to as accountants. The financial information that is recorded and disclosed by accounts is generally done for managers, tax authorities, investors, or any one else that may need to make a decision based on this financial information.

Due to the fact that accountancy is at the root of nearly every business decision, it is often referred to as the "language of business". This is because accountancy isn’t just about crunching numbers, it is also about communicating financial activity as well as interpreting the information.

Types of Accountancy

There are many different branches of accountancy in use today. These include:

* Auditing
* Bookkeeping
* Chartered accountant
* Cost accounting
* External accountancy
* Financial accounting
* Forensic accounting
* Internal accountancy
* Lean accounting
* Management accounting
* Private accountancy
* Public accountancy
* Taxation

Financial accountancy is one of the most well known forms of accountancy. With this branch of accountancy, the financial information of a business is carefully recorded, summarized, classified, interpreted, and then communicated. In the case of public companies, this information is generally made available to the public.

Management accounting involves using financial information within the organization in order to assist with decision making. This information is generally kept confidential and can only be accessed by a small group of people, which are generally those that are responsible for decision making.

Tax accounting is another specialized area of accountancy. An accountant that deals in tax accountancy helps ensure that individuals and businesses are in compliance with tax regulations as they apply to a particular jurisdiction.

Although auditing is considered to be a branch within the field of accountancy, many view it as a separate discipline. External auditing and internal auditing are each subcategories of the auditing process. With external auditing, an independent auditor examines the financial statements of an organization as well as its accounting records in order to determine if the organization has been truthful in reporting its financial status.

Internal auditing, on the other hand, is usually completed by auditors that are actually employed by the company, though it may be carried out by external professionals that have been contracted for the work. This form of auditing is generally performed in order to provide information to the organization's management team.

Professional Accountancy Organizations

Accountants are professionals that perform accountancy in all of its various forms. A number of professional accountancy bodies exist around the world that determine the standards individuals must achieve in order to be employed as accountants.

Many of the professional accountancy bodies allow their members to utilize specific titles that indicate their qualification or their membership levels. The most commonly recognized level of accountant is the CPA, or Certified Public Account. Other titles include the CGA (Certified General Accountant), the ACMA (Management Accountant, which may also be referred to as an FCMA or an AICWA), and the FCA (Chartered Accountant, also known as a CA or an ACA).

The American Institute of Certified Public Accounts, or the AICPA, is the largest professional organization of CPAs within the United States. Approximately 40% of its 330,525 members are involved with public accounting such as taxation, auditing, general business consulting, accounting, personal financial planning, business valuation, and business technology. In addition, the majority of the members of AICPA in either a government capacity, with an industry, or within an education field.

The primary role of the AICPA is to enhance and promote the accounting profession. In order to accomplish this, the Institute provides benefits to its members, prepares CPA examinations, establishes professional standards for CPAs, provides technical support to its members, operates an extensive public relations program, provides the academic community with support, and represents the field of accountancy before federal agencies and Congress.

Meeting the Requirements of Becoming an Accountant

The Uniform CPA Exam is developed by the AICPA. This examination is one of the most respected of entry-level professional licensing examinations currently used in the United States. The test was once offered only twice per year and took two days to complete, but can now be taken on a computer in a testing center.

Each state has established its own criteria when it comes to experience and education required to receive a CPA license. Every state, however, requires successful completion of the AICPA exam as part of its requirements.

The AICPA also establishes professional and technical standards that are generally accepted for CPAs. At one time, the AICPA had almost complete control when it came to these standards, but this power was transferred in the 70s when the Financial Accounting Standards Board (FASB) was formed.

In the early 2000s, additional changes were made in regulations when the U.S. Securities and Exchange Commission was formed. This allowed the government to take a larger role in enforcement of certain standards in a method that a non-governmental association such as AICPA could not accomplish. Nonetheless, the AICPA still plays a large role in enforcement of firm practice and ethics as well as monitoring of the standards.

Accountancy continues to evolve since its early days when it comes to how it is carried out. Nonetheless, the basic premise of monitoring and tracking finances remains much the same.