Understanding and
Using CPA Services
How
To
Choose
a CPA
Questions and Answers for Business
Owners and Individuals
Are you making the
most of the services a certified public accountant
has to offer?
These trusted advisers can work as partners, offering
valuable advice on all your financial needs. Along
with a tradition of serving companies and individuals
with competence, integrity and objectivity, CPAs
possess the up-to-the-minute skills and training
needed to translate increasingly complex information
into information critical to making informed decisions.
If you haven't already used these services, it's
time to find out more about how these highly trained
practitioners can expand your financial horizons.
If you have worked with CPAs in areas with which
they are traditionally associated -- such as tax
and accounting services -- you may be surprised to
learn about the many other types of engagements they
perform. CPAs have the financial and technological
expertise to address a broad variety of business
and personal issues. They can help you make sense
of a changing and complex world.
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Why Should You Choose
a CPA?
One advantage of working with CPAs is that they speak
your language. These professionals live and work
in your community and grapple with the same economic
issues you do. Each practitioner is trained to complete
tasks as complex as evaluating a business's options
for global expansion and as simple as routine tax
preparation. Because they apply their skills every
day in real-life situations, they are adept at untangling
financial as well as non-financial puzzles and illustrating
the total picture with clarity and objectivity Whether
you are struggling with questions about how to chart
the future of a rapidly growing company or trying
to finance a child's education, a CPA can help you
assess your options.
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What Is a CPA?
CPAs are distinguished from other accounting practitioners
by strict licensing regulations. To become a CPA,
it's necessary to pass a rigorous two-day national
exam and meet stringent experience requirements
in addition to completing a five-year course of
study in a college or university To maintain their
licenses, CPAs pursue continuing professional education
that keep them current with the latest business
and related issues. When you work with a CPA, you
can be assured that he or she has mastered a significant
body of knowledge. CPAs advise individuals, businesses,
financial institutions, not-for-profit organizations
and government agencies on a wide range of financial
and related matters.
CPAs are governed by a strict code
of professional ethics that emphasizes their commitment
to serve the public and protect the public interest.
One of the most demanding found in any field, this
code embodies the hallmarks of the accounting profession:
competence, independence, objectivity and integrity.
CPA firms regularly undergo independent
reviews by their peers in the profession to ensure
their services and procedures meet high quality control
standards.
Finally, CPAs are consistently on the
cutting edge of the financial world, leading the
way in the technology revolution and continually
seeking valuable, new information-based services
that will benefit individual and business clients.
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What Services Do
CPAs Offer to Businesses and Individuals?
CPAs are very good at anticipating and creating opportunities
for their clients. They might be able to help you
lower your tax burden or take advantage of an overlooked
business option. Business owners and managers consult
CPAs for help in creating strategic plans, updating
technology systems and assessing new opportunities,
as well as for auditing and accounting services.
Audit clients can be assured of confidentiality because
of the strict code of conduct that CPAs follow Individuals
turn to CPAs for assistance with tax preparation
as well as with personal finance issues such as retirement
and estate planning and investment decisions. Here's
a review of some of the services CPAs offer.
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Audits,
Reviews and Compilations
These
important
services
include
the
following:
Financial Statement audits of public
companies. The Securities and Exchange Commission
requires companies that sell stock to the public
to issue annual financial statements that have
been audited by independent CPAs. These audits
provide reasonable assurance to investors and other
users of financial information, such as banks and
financial analysts, that the financial statements
are reliable.
Audits of small and closely held
businesses. Many smaller organizations call
on CPAs to audit their financial statements to
provide them with the type of assurance usually
required to obtain bank loans and to offer management
vital information for internal decision making.
Reviews. This service and compilations
are widely used by privately held companies. In a
review, the CPA applies analytical procedures to
a business's financial statements and makes inquiries
of management in order to issue an accountant's review
report on the company's financial statements, An
accountant's review report may be used by a variety
of third parties, including creditors or regulatory
agencies.
Compilations. In a compilation
engagement, the CPA assembles financial statements
using the client's data but does not provide assurance
on the financial statement. Compilations are useful
in assisting small, nonpublic companies in the preparation
of their financial statements.
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Tax
Assistance
Not only do CPAs prepare tax returns for businesses
and individuals, but they also help them chart and
implement tax strategies. A CPAs suggestions for
timely, prudent financial steps can help minimize
taxes and enhance investment prospects. CPAs also
represent taxpayers before the tax authorities --
during a tax audit by the IRS, for example -- and
provide consulting on tax strategies and other issues.
A 1998 federal law created a confidentiality privilege
between clients and CPAs who represent them before
the IRS in most matters.
Personal
Financial Planning
CPAs offer clients objective, independent assistance
in creating financial plans designed to preserve
and increase assets, and they help in planning for
important life events.
A CPA can provide guidance in:
- Estate planning. Your CPA can develop
a plan that will limit estate taxes while preserving
assets for your heirs. For businesses, CPAs can
create viable succession plans and help address
special family concerns.
- Retirement planning. A CPA can determine
the amount of savings and investment returns
that will be necessary to reach your goals for
a financially secure retirement and can offer
investment planning guidance.
- College funding. In recent years, soaring
tuition costs have turned financing a college
education into a major financial challenge. CPAs
can help project future college costs, develop
a sound investment plan and offer advice in navigating
the financial aid process.
- Risk management. Sound financial planning
includes making sure you have adequate insurance
coverage. A CPA can help you assess your current
level of coverage; identify gaps in life, health,
disability, long-term care and property insurance;
and develop a plan to fill them.
- Investment planning. CPAs provide varying
levels of investment services. Whether you are
looking for information about your choices, guidance
in choosing a money manager or help in selecting
specific investments, there's a CPA who can do
the job.
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Consulting
Services
CPAs play a vital role in helping businesses make
better use of their resources and increasing their
efficiency and profitability Because CPAs work with
a variety of companies on a broad range of issues,
management often seeks their technical knowledge
and business experience. Some of the consulting engagements
in which CPAs are involved include:
- Developing accounting and other internal information
systems.
- Reengineering a company's finance function.
- Installing, upgrading or assessing computerized
information systems.
- Accumulating, analyzing and reporting financial
and operational information for management decision
making.
- Assessing a business's system of internal
control.
- Performing special studies of finance, inventory,
cost accounting, credit and collection.
- Assisting with loans and letters of credit.
- Advising on mergers, acquisitions and business
expansions.
- Offering advice on expansion into international
markets.
- Structuring transactions for capital markets
to meet financing needs.
- Working with legal experts in litigation
that involves financial and other issues.
- Helping to address human resources concerns,
such as recruitment, training, benefits and retirement
systems and outsourcing.
- Determining the value of businesses and estates
for insurance or tax purposes.
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Assurance
Services
CPAs can also provide a variety of new types of
emerging services that are designed to improve
the quality of information or its context for decision-makers.
This information can be financial or nonfinancial,
historical or prospective. The American Institute
of Certified Public Accountants (AICPA) has established
a strategic initiative to broaden the utility of
the existing Professional Standards used by auditors
in an effort to begin offering these services.
The dynamic developments in this field of assurance
services demonstrate the profession – ability
to satisfy cutting-edge market needs as they occur.
One of the new assurance services currently
being performed by CPAs is engagements to provide
assurance to consumers who engage in electronic commerce
on the World Wide Web. Although use of the World
Wide Web has significantly expanded in the past few
years, many consumers are still reluctant to buy
goods and services over the Internet because they
are required to reveal personal and financial information
online or they are unsure of the business practices
of a company that conducts business on the Internet.
CPAs are now able to provide assurance to these consumers
regarding the integrity, security, privacy and reliability
of the systems and tools used in electronic commerce
through the new CPA WebTrust service.
CPAs will also be equipped to offer
a number of new assurance services in the near future.
This diverse range of services will include engagements
to provide assurance to senior management of companies
and other interested third-parties on the reliability
of computerized information systems (Systrust Services
to services designed to provide personalized financial
and nonfinancial services to elderly citizens (ElderCare
Services).
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How Should I Choose
a CPA?
First, decide what you want from your CPA. While
all CPAs meet the same basic education, training
and licensing requirements, not all provide the same
range of services. Analyze your present and future
financial needs, considering these kinds of questions:
Will you need help with personal financial
issues, individual or corporate tax returns, retirement,
estate or college planning? Are you seeking investment
help?
- Do you need financial statements prepared
for your business? Must those statements be audited
or reviewed? Will you need special financial
reports for government agencies?
- Do you want help preparing a personal or business
loan application?
- Will your business need specialized services,
such as technology installations, strategic planning,
electronic commerce assurance or cost management
studies?
After you have determined your goals,
the next step is to seek recommendations from people
who might have consulted with CPAs for similar reasons.
You might turn to friends and relatives, colleagues
and business contacts or to other professionals,
such as bankers, attorneys and insurance agents.
CPAs are also listed in phone directories, and most
state CPA societies offer help in locating practitioners.
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How Can I Tell If
a CPA Is Right for My Needs?
Once you have outlined your personal and business
objectives, set up an interview appointment and be
prepared to ask specific questions. Following
are some key ones:
- Are you a certified public accountant? Since
this designation is awarded only to people who
have passed a rigorous two-day national exam
and stringent state licensing requirements, it
offers assurance that a CPA has developed technical
mastery of financial concerns.
- Are you licensed to practice in my state?
This is particularly important if you are working
with someone in a neighboring state.
- What are your training and experience in the
areas most important to me? While all CPAs have
a thorough knowledge of business and tax issues,
many have further training in specific areas
of practice. Ask prospective CPAs about their
background in the disciplines that concern you
and how much of their business is devoted to
these areas.
Consider, too, whether the person's
business style and attitude match your own, be it
formal or informal, conservative or aggressive. A
long-term working relationship between you and your
CPA can offer you an informed, consistent approach
to personal and business financial issues, so compatibility
is important.
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What Do CPAs Charge?
There are no fee schedules common to the profession.
CPAs normally base their fees on the time required
to perform services, the type of services required,
the prevailing costs in the community, the CPAs
level of expertise and the complexity of the work.
Talk frankly with your CPA about fees.
Different types of services command different rates
because of the expertise level of the people who
perform them. Find out how much you will pay for
the tasks done by a staff accountant under the supervision
of a CPA, by a higher level employee such as a supervisor
and by a manager or partner of the firm.
CPAs and clients often sign engagement
letters before work is performed to avoid misunderstandings.
The engagement letter describes in
detail the services to be rendered, fee ranges and
other terms and conditions of the engagement.
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How Can I Get the
Most Value from a CPA's Services?
CPAs have these suggestions on how you can make the
best use of their services and get the most value
for your money:
- Be prepared to discuss your plans and objectives.
CPAs can most effectively advise you and serve
your best interests when they understand your
goals.
- Gather all relevant personal and business
financial information so you can give the CPA
a clear picture and ask specific questions.
- Be clear and candid about what you expect
from the CPA's services.
- To save yourself unnecessary fees, keep good
records and avoid using the CPAs professional
time for routine work.
- Keep your CPA informed of changes in your
professional and personal life. A marriage or
divorce, the birth of a child, an inheritance,
a career change or a generous bonus can have
a significant impact on your tax liability and
financial goals.
Copyright American
Institute of Certified Public Accountants, New
York, NY
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