| accounting firm for two years; and, acquired five | | | | have to conform because the State Board of |
| hundred hours of auditing time to earn their certification. | | | | Accountancy (regulatory agency that issues the |
| In addition, they are required to complete a certain | | | | certificates) periodically reviews their work and, if |
| number of hours of continuing education to maintain | | | | certain procedures are not followed, the practitioner's |
| their license. | | | | license could be put in jeopardy. At the same time, |
| Whoa! Why is it that one individual has to go through | | | | many small businesses have limited funds, so naturally |
| rigorous testing and on-the-job training to become | | | | seek ways to save on accounting fees. Many small |
| certified to practice accounting and another can | | | | business owners do their own books during the year. |
| practice accounting without any formal training? It has | | | | They then try to get a financial statement prepared as |
| to do with the concept of "free enterprise". Remember | | | | quickly and inexpensively as possible by a professional |
| the old adage, "Caveat Emptor"? It means, "Let the | | | | at the end of the year in order to file their tax returns. |
| buyer beware". In other words, it is the buyer's | | | | A non-certified accountant can prepare a simple |
| responsibility to choose a qualified professional. | | | | financial statement that amply provides the information |
| But, there are some legal restrictions that define the | | | | necessary to file a tax return. This is not to say that |
| range of services that can be performed for certified | | | | non-certified accountants will use any information that |
| and non-certified accountants. For instance, there are | | | | is given to them. At minimum, deposits and cash |
| three main types of financial statements that can be | | | | disbursement information should be verified by a bank |
| prepared by accountants: (1) audited, (2) reviewed, (3) | | | | reconciliation. A good accountant will question the client |
| compiled. | | | | for some kind of documentation if the figures seem |
| Only a CPA can prepare an audited financial | | | | unreasonable. In most cases, banks accept a compiled |
| statement. This process requires the CPA to | | | | financial statement, prepared by an outside accountant, |
| methodically examine and test the financial records of | | | | whether a CPA or not. |
| a company. A report is then issued by the auditing | | | | This has created the so called "turf battles" in some |
| accountants stating whether they found the | | | | states between CPAs and non-certified accountants. |
| information contained in the financial statements to be | | | | These battles have been fought all the way to the |
| presented fairly, in all material respects. | | | | states' supreme courts. Usually the issue involved is |
| In addition, only a CPA can prepare a reviewed | | | | the use of "commercial free speech". This is because |
| financial statement. The review process is less | | | | some CPAs don't want non-CPAs to be able to call |
| involved than an audit but some testing is done to | | | | themselves "accountants". In some cases, they don't |
| verify information. The CPA issues a report describing | | | | want non-CPAs to be able to even use the word |
| the scope of the review, its limitations, and findings. | | | | "accounting". In Maryland, CPAs lost the battle. In |
| Both CPAs and non-certified accountants, including | | | | California, a compromise was reached whereby |
| bookkeepers, can prepare compiled financial | | | | non-CPAs are required to disclose that they are |
| statements. A report is issued with compiled | | | | non-certified on any literature where they refer to |
| statements indicating that no auditing or review | | | | themselves as an "accountant". Bookkeepers are |
| methods were used and that the financial statements | | | | unaffected because it is understood that a |
| were compiled using information provided by | | | | bookkeeper is not a CPA. |
| management. | | | | In California, there are approximately 20,000 |
| This means that, if you want to have your financial | | | | non-certified, independent accountants. They like to call |
| statements audited or reviewed, you must have a | | | | themselves "independent" because they are free from |
| CPA perform that work. Obviously, those services | | | | the restrictions of the state boards and the American |
| cost more than a compiled financial statement. Your | | | | Institute of Certified Public Accountants (AICPA). Most |
| circumstances may dictate a need for such services. | | | | of these 20,000 people also prepare income taxes. |
| For example, it may be a requirement for a bank loan | | | | The bottom line is that in all professions one finds |
| to have your financial statements audited. Or, other | | | | individuals who provide varying degrees of quality |
| partners or stockholders may insist that the books be | | | | work. All lawyers must past the bar examination. That |
| audited or reviewed in order for them to feel secure in | | | | doesn't guarantee they will be good lawyers. It is no |
| their investment. Usually, these are businesses that | | | | different with CPAs. There are good ones and bad |
| have a substantial net worth. Most small businesses | | | | ones. There are expert CPAs and inexperienced |
| will never need to have their financial statements | | | | CPAs. Obviously, it is the same for non-certified |
| audited or reviewed. | | | | accountants and bookkeepers. It is simply a matter of |
| Market conditions have brought on the use of | | | | human nature. |
| non-certified accountants because, characteristically, | | | | Visit the Knowledge Galaxy website to learn about |
| CPAs charge more for their services than | | | | good engagement gifts, engagement gift etiquette, |
| non-certified accountants and bookkeepers. CPAs are | | | | engagement presents, how to dye hair, hair dying tips , |
| also bound to follow precise standards when preparing | | | | hair dye care and other information. |
| financial statements, driving their costs higher. They | | | | |