The CPA trend is considerably more accelerated than the other leading professions and the population as a whole. The CPA is the most prestigious member of the accounting profession. He has status and enjoys privileges above those held by other accountants and auditors. Status reflects itself in a superior earning power and the opportunity to occupy high-level positions in industry, government, and public accounting.
The privileges include the right to practice public accounting, i.e., offer professional accounting and auditing services to client organizations and the public. This privilege is vested in law. All states have adopted an accountancy act which regulates the practice of public accountancy. Some pertinent excerpts from the California Accountancy Act illustrate the degree to which accounting services are regulated: No person shall engage in the practice of public accountancy in this State unless such person is the holder of a valid permit to practice public accountancy issued by the board...
[A] Person shall be deemed to be engaged in the practice of public accountancy within the meaning and intent of this article:
- Who holds himself or herself out to the public in any manner as one skilled in the knowledge, science and practice of accounting, and as qualified and ready to render professional service therein as a public accountant for compensation; or
- Who maintains an office for the transaction of business as a public accountant; or
- Who offers to prospective clients to perform for compensation, or who does perform on behalf of clients for compensation, professional services that involve or require an audit, examination, verification, investigation, certification, presentation, or review, or financial transactions and accounting records; or
- Who prepares or certifies for clients reports on audits or examinations of books or records of account, balance sheets, and other financial, accounting and related schedules, exhibits, statements, or reports which are to be used for publication or for the purpose of obtaining credit or for filing with a court of law or with any governmental agency, or for any other purpose; or
- Who, in general or in an incident to such work, renders professional services to clients for compensation in any or all matters relating to accounting procedure and to the recording, presentation, or certification of financial information or data...
Public accounting practice is categorized by a small number of large firms on the one hand and a large number of small firms on the other. The tendency in accounting, as with other contemporary firms and institutions, is toward larger
The propensity toward larger service units in accounting is a concomitant of the surge toward larger organizations in general. As a business extends nationally it requires the services of a national CPA firm which has offices in most major cities. Similarly, as a business grows in complexity it requires a much broader range of specialized services than can be furnished by the typical small CPA firm. We turn now to a closer look at accounting practice as it exists in the large and small service unit.
The growth in management advisory services particularly is impressive. Those who staff the management consulting departments come increasingly from disciplines other than accounting. Many of these specialists do not possess the CPA certificate, yet they play a significant role in the forward thrust of the profession. Resolved, that non-CPA associates on the staffs of public accounting firms who meet educational, technical, and moral standards equivalent to those of present Institute members should be brought into a professional relationship with the Institute.
To date, non-CPA specialists have been unable to become partners of CPA firms, but some firms have created the category of principal to cater to the need for top non-CPA executive talent. Further, the ability to incorporate in some states creates positions and titles quite different from those of the conventional partnership.
CPA firms, in common with most professional organizations, are partnerships. Management of the partnership vests in a committee of senior partners, which in certain firms is referred to as the board of directors. The chief executive officer is referred to as chairman or managing partner. The last expression must be viewed in its context, for there are managing partners in charge of local offices, districts, regions and, finally, of the firm as a whole.
The professional staff is divided functionally into the three principal service areas of auditing, taxes, and management advisory services. The audit function is viewed as pivotal, with the responsibility for all services rendered to a client resting finally with an audit partner.
The chain of command ranges downward from partner-"manager- senior-"junior (or staff) accountant. Typical progression between ranks is: junior to senior, 2-3 years; senior to manager, 2-3 years; and manager to partner, 4-6 years. Heavy emphasis is placed on training, performance evaluation, and career planning at all levels.
As a staff accountant, you will work on a number of different assignments during the course of a year, acquiring a diversity of business experience, and developing the creative ability to handle more complex auditing situations while assuming some supervisory duties. As you work for different people, people who share your challenges, you will find each helping you to develop your talents. This on-the-job training gives you the guidance necessary to stimulate independent thinking and decision making as part of your professional development within the firm and the profession. It also helps you prepare for your CPA examination.
In a relatively short time, you should develop an expanding knowledge of auditing techniques and accounting principles. You would normally be performing as a senior accountant in two to three years, in charge of the fieldwork on several audit engagements, and supervising the work of staff accountants. As one of the firm's key supervisors, you will then be responsible for the planning and direction of audits under the general supervision of a manager. You will deal with more and more complex auditing and accounting problems, and will be called upon to discuss these matters with client executives. This position enables you to demonstrate your ability to perform as an independent professional.
The next step in your advancement with the firm-to manager-is usually accomplished in four to six years after joining the staff, or two or three years after becoming a senior. As a manager, you will direct several engagements simultaneously, and will be in a position of as much responsibility as a financial officer of a large company. You will spend much of your time in consultation with partners and with client executives.
Each year a number of managers are admitted to partnership in Price Waterhouse. As a partner you will have met with distinction all the requirements of the accounting profession in general and of Price Waterhouse in particular. You then carry the ultimate responsibility for the best possible service to clients, and for the administration of the firm. You contribute to the formation of policies and the solution of problems which affect the firm, and often the profession as a whole. As a partner, you share all the satisfactions and rewards of a top executive in today's business world.
It is a distinguishing characteristic of Price Waterhouse that there is only one class of partners and, although they are from varied backgrounds, with few exceptions, all of them have advanced through each of the stages previously described.
The firm has no minimum of either age or length of service for admission to the partnership and, although it usually requires 10 to 12 years of experience, there have been a number of exceptions with fewer years of service. Currently individuals are being added to the partnership when still in their mid-thirties, some even earlier. It to inability to grow technologically and geographically with the client's development.
Apart from displacement, Burton and Roberts have shown that changes of auditors among larger corporations are relatively rare, and are most often caused by a change in management. The SEC now requires written notice of, and justification for, a change in auditors. The public accounting firms which are affected by these actions are, in most cases, invited to respond.
While not seeking to minimize the trauma of displacement, the more pressing challenge facing the small CPA firm arises from the rapidly developing computer technology. Inexpensive computerized accounting services, including time-sharing, have now appeared and will expand rapidly, displacing much of the write-up (bookkeeping) services which now account for a high proportion of the income of the local CPA firm.
Interestingly, bookkeeping and tax services can be furnished without certification, and efforts to bring these services within the licensing framework have been unsuccessful. The role of the local firm in a computerized age requires careful planning and analysis. Obviously, more training in systems analysis and computer technology appear to be prerequisites for local practice of the future. Many local CPA firms are modernizing their services.
