Public Accounting Explained Thoroughly
A lot of the well-developed companies conduct their accounting themselves. They compile financial reports, deal with taxes, manage funds and review all of the above themselves. However, it’s not always done this way.
Either because it’s simpler, cheaper, more effective, or simply because there’s a lack of certified accountants, a lot of the companies employ the help of public accountants. They aren’t associated with the company directly and don’t count as their employees.
Instead, the business delegates some accounting activities to the firm that provides these services. They can’t provide all of them simultaneously due to legal limitations, so you’ll mostly have to choose between the audit companies and accounting firms (at least in the US).
What is Public Accounting?
Generally, public accounting is any accounting that you delegate to the public rather than deal with it yourself. Letting someone not associated with your company and not on your payroll do your taxes is also public accounting. However, people usually mean a more professional type of this service.
There are many specific public accounting firms, and although initially, you could only purchase audit services (an independent specialist would see whether you did your accounting right), there are now more niche types, including:
- Financial counseling. They provide you advice on how to better manage your finances, including what you can do to make accounting job more efficient.
- Tax accounting. These firms manage tax returns and everything else related to this type of liability.
- Audit accounting. They usually get access to your financial statements and see whether they are done correctly.
- Everyday accounting. These firms do most of the day-to-day accounting work you would be doing anyway.
Market overview
There aren’t too many companies that do all of that simultaneously, mostly because it’s just too much work, but also because you need to be a part of PCAOB to conduct audit services in the USA, and that usually restricts them from doing anything else except auditing.
Similarly, accounting firms that provide any of the other services don’t do audits (at least in the US). That’s why this market is so rich, flexible, and sometimes expensive. However, public accountants also usually bring expertise and experience with them compared to the people you could hire as bookkeepers.
There are many certified accountants that you can ask to go through your financial reports or even file them. That being said, if you were to go for an audit option, you would usually have to pay more than you would for other services because certified audit providers also need to pay their own commissions for their work.
This market is oversaturated, however, and you can easily find cheaper options. Sometimes it may even be cheaper to hire one of these independent accountants, although it really depends on a lot of factors, including:
- Ease of work
- Market characteristics
- Remove work vs. in-house work.
Obviously, it may be much safer and cheaper to just hire accountants full-time rather than trust professionals that won’t stay with you anyway. That being said, you may hire both for peak efficiency.