Jobs in accountancy fall into two primary categories:
- Professional services, as carried out by accountancy firms such as the Big 4.
- Industry, working the accounting & finance departments of any other kind of company, where the primary output is not accountancy services (e.g. an accountant working for an insurance company).
Careers in Accounting in the Professional Services Sector
The terms "accounting" and "professional services" are extremely broad, and do not describe the industry accurately. Principally, accounting and professional services (as carried out by the Big 4), consists of the following types of service:
- Audit work, also known as Assurance.
- Tax advice and calculation
- Advisory services for general business strategy/advice.
There may also be a number of other related services that a firm may provide to its clients.
Audit & Assurance: What is Audit?
In the purest sense, auditors assess a set of company accounts to determine if they are a true and fair representation of the company's affairs on the accounts date.
Any company that earns over £10.5million in revenue UK is required to complete an audit by law. The audit provides comfort ('assurance') to the users of the accounts that an independent third party (the auditor) has examined the accounts and agrees with them.
Each individual line in a set of published accounts needs to be tested. Auditors do not test every transaction that led to that figure. Rather they perform two kinds of testing:
- Substantive testing
- Control testing
In substantive testing, an auditor will select a sample of transactions that go to produce a certain figure. For example, if we are testing the sales figure, we might select a number of sales and ask to see evidence of these sales. This might be copies of cheques from customers, purchase orders from customers or correspondence or contracts with customers. Auditors will test enough of these until they feel comfortable that the sales figure is correct.
A control is a process in a company which is designed to reduce the risk of error or fraud. A good example is each payment requires two signatories, one person fills in the cheque and the second person signs it.
In companies where good controls exist, auditors can test the control rather than a sample of transactions. If they are satisfied the control works effectively, they will be comfortable of the final figure. For example, if customers purchase through a website, then the sales figure may be generated by a computer, and the auditors may be comfortable with this.
Common Misunderstandings about Auditors
Auditors do not:
- Look for fraud, although they keep a lookout for it.
- Check every transaction - just the ones that are 'material'.
An audit report is provided with every set of published accounts, where the auditors state their opinion of the accounts, and highlight any issues they had with their audit, if any. Auditors do not work for the client company, they work on behalf of the company's shareholders. Shareholders decide who will be the auditor of the company.
What will I do in my first year as an auditor?
This is a very common interview question.
In your first year as an auditor, you are likely to spend most of your time doing 'ticking' and training. For example, you might have a list of invoices on a spreadsheet, and you will be asked to go and find the invoices in the filing cabinet and agree them to the spreadsheet, documenting any errors or missing invoices. This is 'ticking' and is considered to be quite mundane work.
The training you receive will take up the rest of your time, and you will be required to work in the evenings and weekends to keep up with the courses.
It is worth pointing out that ICAEW ACA and similar exams are substantially harder than university or A-level exams. On average 25% of candidates fail at each sitting.
Considering that accounting firms usually recruit people with strong degrees and A-levels, this demonstrates the difficulty of these exams, and consequently the amount of work required to pass them. Generally speaking, you will have to put your social life on hold during training time.
You will spend almost 100% of your working time at client offices, and very little time at your firms office, and consequently you may have to travel with the UK a fair amount. You are reimbursed your expenses. If you work in financial services audit (audit of insurance, banks etc), this will likely include extended hotel stays as well.
Internal & External Audit
A company will hire internal auditors to audit itself. They do this to maintain a high standard of control inside the organisation, and to reduce the amount of work done by external auditors.
An external auditor is another independent firm that comes in and performs audit work on behalf of the company or its shareholders. Firms such as PricewaterhouseCoopers, Deloitte, KPMG and Ernst & Young are examples of external auditors.
What is Forensic Accounting?
Forensic accounting is a particular form of investigative accounting work which may arise from actual or anticipated litigation.
Forensic accounting departments are specialised and usually have a specialised division within a firm. Conversely, graduates wishing to work in forensic accounting should apply to do so at the application stage as it is unlikely they will be able to switch later on.
Forensic accountants often work in:
More information about forensic accounting can be found here.
Tax, in the case of professional services firms (e.g. the Big 4), refers to corporate tax.
The corporate tax department will perform the following roles:
- Giving tax advice to companies ('Tax consultancy')
- Auditing a company's tax return
- Supporting other departments within the firm who require specialist tax advice as part of a larger project, e.g. an external audit.
Generally speaking, graduates entering tax will sit the ICAEW ACA or equivalent accounting qualification. Some will follow this up with the CIOT CTA (Chartered Tax Advisor), a specialist tax qualification, should they intend to continue their career in tax after completing the ACA.
Graduates working in a tax department will also be required to take additional in-house courses on taxation and tax models in order to develop the higher skills necessary for the job which are not provided during the standard training course.
What will I do in my first year in tax?
Graduates will spend a substantial amount of time training and studying for exams.
Client work will include:
- Checking and documenting tax returns, which includes testing any information that a company has provided to complete its tax return.
- Running tax models and scenarios using Excel and specialist tax software
- General admin work, such as proof reading and writing reports and letters.
Unlike audit, you will be based primarily in your office and will not be required to travel to clients. Although all professional services work is deadline driven, tax consultants may find their hours to be better than those in other service lines, although overtime will still be necessary.
(See also Management Consulting)
Where can I expect to be in 5 years time?
To qualify as an auditor takes 3 years. Reasonable levels of progression for 6 years are:
- Associate Year 1 (Join firm & start training)
- Associate Year 2 (Complete all exams by end of this year)
- Associate Year 3 (Take on additional responsibility and coaching of other associates).
- Executive Year 1 (Qualified as accountant, being in charge of field work at a client)
- Executive Year 2 (Managing audit clients as the primary contact, training for manager level).
- Manager (Managing clients wholly, communicating with partner on client issues).
How much can I expect to get paid?
In 2007, the average starting pay for an auditor in London was approximately £26,500 with benefits. When qualified, you can expect to be paid approximately £40,000. Most graduates leave on qualification and go and work elsewhere, not as an auditor, and receive starting salaries of £50,000 and above.
Should I do this if I want to do investment banking?
Probably not. Although many people have found an inroad to investment banking through accountancy, if you are intending to investment banking all along, you are likely to be better off applying as a graduate and working through.
Should I do this if I want to do consulting?
Possibly. Accountancy provides a solid platform which will give you a great deal of advantages throughout a career in consulting. Although spending two or three years in accountancy before making the switch to consulting will be time consuming, it will make it easier to obtain the very top jobs at top consulting companies.
How quickly can I become a partner?
It has been known for graduates to make it to partner in 10 years, however this is the exception not the rule. 15 years is more reasonable. Partners work exceptionally hard, and are generally the rising stars of the firm. Partner salaries are substantial, however, they are weighted heavily, with most of the profits being distributed to the most senior partners.
For more information about specific companies, have a look at this list of accounting firms. To ask questions about accountancy and professional services companies and interviews, visit the WikiJob forum.