Accounting, also known as accountancy, is the measurement, processing, and

communication Communication (from la, communicare, meaning "to share" or "to be in relation with") is usually defined as the transmission of information. The term may also refer to the message communicated through such transmissions or the field of inqui ...

of financial and non financial information about economic entities such as businesses and

corporation A corporation is an organization—usually a group of people or a company—authorized by the state to act as a single entity (a legal entity recognized by private and public law "born out of statute"; a legal person in legal context) and ...

s. Accounting, which has been called the "language of business", measures the results of an organization's economic activities and conveys this information to a variety of stakeholders, including

investor An investor is a person who allocates financial capital with the expectation of a future return (profit) or to gain an advantage (interest). Through this allocated capital most of the time the investor purchases some species of property. Type ...

s, creditors,

management Management (or managing) is the administration of an organization, whether it is a business, a nonprofit organization, or a Government agency, government body. It is the art and science of managing resources of the business. Management includ ...

, and

regulators Regulator may refer to: Technology * Regulator (automatic control), a device that maintains a designated characteristic, as in: ** Battery regulator ** Pressure regulator ** Diving regulator ** Voltage regulator * Regulator (sewer), a control de ...

. Practitioners of accounting are known as accountants. The terms "accounting" and "

financial reporting Financial statements (or financial reports) are formal records of the financial activities and position of a business, person, or other entity. Relevant financial information is presented in a structured manner and in a form which is easy to un ...

" are often used as synonyms. Accounting can be divided into several fields including

financial accounting Financial accounting is the field of accounting concerned with the summary, analysis and reporting of financial transactions related to a business. This involves the preparation of financial statements available for public use. Stockholders, ...

management accounting In management accounting or managerial accounting, managers use accounting information in decision-making and to assist in the management and performance of their control functions. Definition One simple definition of management accounting is th ...

, tax accounting and

cost accounting Cost accounting is defined as "a systematic set of procedures for recording and reporting measurements of the cost of manufacturing goods and performing services in the aggregate and in detail. It includes methods for recognizing, classifying, al ...

. Financial accounting focuses on the reporting of an organization's financial information, including the preparation of

financial statement Financial statements (or financial reports) are formal records of the financial activities and position of a business, person, or other entity. Relevant financial information is presented in a structured manner and in a form which is easy to un ...

s, to the external users of the information, such as investors, regulators and

suppliers In commerce, a supply chain is a network of facilities that procure raw materials, transform them into intermediate goods and then final products to customers through a distribution system. It refers to the network of organizations, people, activ ...

; and management accounting focuses on the measurement, analysis and reporting of information for internal use by management. The recording of financial transactions, so that summaries of the financials may be presented in financial reports, is known as bookkeeping, of which

double-entry bookkeeping Double-entry bookkeeping, also known as double-entry accounting, is a method of bookkeeping that relies on a two-sided accounting entry to maintain financial information. Every entry to an account requires a corresponding and opposite entry t ...

is the most common system.

Accounting information system An accounting as an information system (AIS) is a system of collecting, storing and processing financial and accounting data that are used by decision makers. An accounting information system is generally a computer-based method for tracking acco ...

s are designed to support accounting functions and related activities. Accounting has existed in various forms and levels of sophistication throughout human history. The double-entry accounting system in use today was developed in medieval Europe, particularly in

Venice Venice ( ; it, Venezia ; vec, Venesia or ) is a city in northeastern Italy and the capital of the Veneto region. It is built on a group of 118 small islands that are separated by canals and linked by over 400 bridges. The isla ...

, and is usually attributed to the Italian mathematician and Franciscan friar Luca Pacioli. Today, accounting is facilitated by

accounting organizations Accounting, also known as accountancy, is the measurement, processing, and communication of financial and non financial information about economic entities such as businesses and corporations. Accounting, which has been called the "language ...

such as standard-setters,

accounting firms Accounting, also known as accountancy, is the measurement, processing, and communication of financial and non financial information about economic entities such as businesses and corporations. Accounting, which has been called the "language ...

and

professional bodies A professional is a member of a profession or any person who works in a specified professional activity. The term also describes the standards of education and training that prepare members of the profession with the particular knowledge and skil ...

. Financial statements are usually audited by accounting firms, and are prepared in accordance with

generally accepted accounting principles Publicly traded companies typically are subject to rigorous standards. Small and midsized businesses often follow more simplified standards, plus any specific disclosures required by their specific lenders and shareholders. Some firms operate on th ...

(GAAP). GAAP is set by various standard-setting organizations such as the Financial Accounting Standards Board (FASB) in the United States and the Financial Reporting Council in the

United Kingdom The United Kingdom of Great Britain and Northern Ireland, commonly known as the United Kingdom (UK) or Britain, is a country in Europe, off the north-western coast of the European mainland, continental mainland. It comprises England, Scotlan ...

. As of 2012, "all major economies" have plans to

converge Converge may refer to: * Converge (band), American hardcore punk band * Converge (Baptist denomination), American national evangelical Baptist body * Limit (mathematics) * Converge ICT, internet service provider in the Philippines *CONVERGE CFD s ...

towards or adopt the

International Financial Reporting Standards International Financial Reporting Standards, commonly called IFRS, are accounting standards issued by the IFRS Foundation and the International Accounting Standards Board (IASB). They constitute a standardised way of describing the company's f ...

(IFRS).

History

Accounting is thousands of years old and can be traced to

ancient Ancient history is a time period from the beginning of writing and recorded human history to as far as late antiquity. The span of recorded history is roughly 5,000 years, beginning with the Sumerian cuneiform script. Ancient history cov ...

civilization A civilization (or civilisation) is any complex society characterized by the development of a state, social stratification, urbanization, and symbolic systems of communication beyond natural spoken language (namely, a writing system). ...

s.Robson, Keith. 1992. "Accounting Numbers as 'inscription': Action at a Distance and the Development of Accounting." ''Accounting, Organizations and Society'' 17 (7): 685–708. The early development of accounting dates back to ancient

Mesopotamia Mesopotamia ''Mesopotamíā''; ar, بِلَاد ٱلرَّافِدَيْن or ; syc, ܐܪܡ ܢܗܪ̈ܝܢ, or , ) is a historical region of Western Asia situated within the Tigris–Euphrates river system, in the northern part of the ...

, and is closely related to developments in

writing Writing is a medium of human communication which involves the representation of a language through a system of physically inscribed, mechanically transferred, or digitally represented symbols. Writing systems do not themselves constitute h ...

counting Counting is the process of determining the number of elements of a finite set of objects, i.e., determining the size of a set. The traditional way of counting consists of continually increasing a (mental or spoken) counter by a unit for every ele ...

and

money Money is any item or verifiable record that is generally accepted as payment for goods and services and repayment of debts, such as taxes, in a particular country or socio-economic context. The primary functions which distinguish money are as ...

; there is also evidence of early forms of bookkeeping in ancient

Iran Iran, officially the Islamic Republic of Iran, and also called Persia, is a country located in Western Asia. It is bordered by Iraq and Turkey to the west, by Azerbaijan and Armenia to the northwest, by the Caspian Sea and Turkmeni ...

,Oldroyd, David & Dobie, Alisdair: ''Themes in the history of bookkeeping'', The Routledge Companion to Accounting History, London, July 2008, , Chapter 5, p. 96 and early auditing systems by the ancient Egyptians and

Babylonians Babylonia (; Akkadian: , ''māt Akkadī'') was an ancient Akkadian-speaking state and cultural area based in the city of Babylon in central-southern Mesopotamia (present-day Iraq and parts of Syria). It emerged as an Amorite-ruled state c. 1 ...

. By the time of Emperor

Augustus Caesar Augustus (born Gaius Octavius; 23 September 63 BC – 19 August AD 14), also known as Octavian, was the first Roman emperor; he reigned from 27 BC until his death in AD 14. He is known for being the founder of the Roman Pr ...

, the Roman government had access to detailed financial information.

Double-entry bookkeeping Double-entry bookkeeping, also known as double-entry accounting, is a method of bookkeeping that relies on a two-sided accounting entry to maintain financial information. Every entry to an account requires a corresponding and opposite entry t ...

was pioneered in the Jewish community of the early-medieval Middle East and was further refined in

medieval Europe In the history of Europe, the Middle Ages or medieval period lasted approximately from the late 5th to the late 15th centuries, similar to the post-classical period of global history. It began with the fall of the Western Roman Empire a ...

. With the development of

joint-stock companies A joint-stock company is a business entity in which shares of the company's stock can be bought and sold by shareholders. Each shareholder owns company stock in proportion, evidenced by their shares (certificates of ownership). Shareholders are ...

, accounting split into

and

. The first published work on a

double-entry bookkeeping system Double-entry bookkeeping, also known as double-entry accounting, is a method of bookkeeping that relies on a two-sided accounting entry to maintain financial information. Every entry to an account requires a corresponding and opposite entry to ...

was the '' Summa de arithmetica'', published in

Italy Italy ( it, Italia ), officially the Italian Republic, ) or the Republic of Italy, is a country in Southern Europe. It is located in the middle of the Mediterranean Sea, and its territory largely coincides with the homonymous geographical ...

in 1494 by Luca Pacioli (the "Father of Accounting"). Accounting began to transition into an organized profession in the nineteenth century, with local

in England merging to form the Institute of Chartered Accountants in England and Wales in 1880.

Etymology

Both the words accounting and accountancy were in use in

Great Britain Great Britain is an island in the North Atlantic Ocean off the northwest coast of continental Europe. With an area of , it is the largest of the British Isles, the largest European island and the ninth-largest island in the world. It i ...

by the mid-1800s, and are derived from the words ''accompting'' and ''accountantship'' used in the 18th century.Labardin, Pierre, and Marc Nikitin. 2009. "Accounting and the Words to Tell It: An Historical Perspective." ''Accounting, Business & Financial History'' 19 (2): 149–166. In

Middle English Middle English (abbreviated to ME) is a form of the English language that was spoken after the Norman conquest of 1066, until the late 15th century. The English language underwent distinct variations and developments following the Old English ...

(used roughly between the 12th and the late 15th century) the verb "to account" had the form ''accounten'', which was derived from the Old French word ''aconter'',Baladouni, Vahé. 1984. "Etymological Observations on Some Accounting Terms." ''The Accounting Historians Journal'' 11 (2): 101–109. which is in turn related to the

Vulgar Latin Vulgar Latin, also known as Popular or Colloquial Latin, is the range of non-formal registers of Latin spoken from the Late Roman Republic onward. Through time, Vulgar Latin would evolve into numerous Romance languages. Its literary counterpa ...

word ''computare'', meaning "to reckon". The base of ''computare'' is ''putare'', which "variously meant to prune, to purify, to correct an account, hence, to count or calculate, as well as to think". The word " accountant" is derived from the French word , which is also derived from the Italian and

Latin Latin (, or , ) is a classical language belonging to the Italic branch of the Indo-European languages. Latin was originally a dialect spoken in the lower Tiber area (then known as Latium) around present-day Rome, but through the power of the ...

word . The word was formerly written in English as "accomptant", but in process of time the word, which was always pronounced by dropping the "p", became gradually changed both in

pronunciation Pronunciation is the way in which a word or a language is spoken. This may refer to generally agreed-upon sequences of sounds used in speaking a given word or language in a specific dialect ("correct pronunciation") or simply the way a particular ...

and in

orthography An orthography is a set of conventions for writing a language, including norms of spelling, hyphenation, capitalization, word breaks, emphasis, and punctuation. Most transnational languages in the modern period have a writing system, and ...

to its present form.

Terminology

Accounting has variously been defined as the keeping or preparation of the financial records of transactions of the firm, the analysis, verification and reporting of such records and "the

principles A principle is a proposition or value that is a guide for behavior or evaluation. In law, it is a rule that has to be or usually is to be followed. It can be desirably followed, or it can be an inevitable consequence of something, such as the law ...

and procedures of accounting"; it also refers to the

job Work or labor (or labour in British English) is intentional activity people perform to support the needs and wants of themselves, others, or a wider community. In the context of economics, work can be viewed as the human activity that contr ...

of being an accountant. Accountancy refers to the

occupation Occupation commonly refers to: *Occupation (human activity), or job, one's role in society, often a regular activity performed for payment *Occupation (protest), political demonstration by holding public or symbolic spaces *Military occupation, th ...

profession A profession is a field of work that has been successfully ''professionalized''. It can be defined as a disciplined group of individuals, '' professionals'', who adhere to ethical standards and who hold themselves out as, and are accepted by ...

of an accountant, particularly in

British English British English (BrE, en-GB, or BE) is, according to Lexico, Oxford Dictionaries, "English language, English as used in Great Britain, as distinct from that used elsewhere". More narrowly, it can refer specifically to the English language in ...

Topics

Accounting has several subfields or subject areas, including

, auditing,

taxation A tax is a compulsory financial charge or some other type of levy imposed on a taxpayer (an individual or legal entity) by a governmental organization in order to fund government spending and various public expenditures (regional, local, o ...

and

accounting information system An accounting as an information system (AIS) is a system of collecting, storing and processing financial and accounting data that are used by decision makers. An accounting information system is generally a computer-based method for tracking acco ...

s.Weber, Richard P., and W. C. Stevenson. 1981. "Evaluations of Accounting Journal and Department Quality." The Accounting Review 56 (3): 596–612.

Financial accounting

Financial accounting focuses on the reporting of an organization's financial information to external users of the information, such as investors, potential investors and creditors. It calculates and records business transactions and prepares

s for the external users in accordance with

(GAAP). GAAP, in turn, arises from the wide agreement between accounting theory and practice, and change over time to meet the needs of decision-makers. Financial accounting produces past-oriented reports—for example financial statements are often published six to ten months after the end of the accounting period—on an

annual Annual may refer to: *Annual publication, periodical publications appearing regularly once per year ** Yearbook ** Literary annual *Annual plant *Annual report *Annual giving *Annual, Morocco, a settlement in northeastern Morocco *Annuals (band), ...

or quarterly basis, generally about the organization as a whole.

Management accounting

Management accounting focuses on the measurement, analysis and reporting of information that can help managers in making decisions to fulfill the goals of an organization. In management accounting, internal measures and reports are based on cost-benefit analysis, and are not required to follow the generally accepted accounting principle (GAAP). In 2014 CIMA created th
Global Management Accounting Principles (GMAPs)
The result of research from across 20 countries in five continents, the principles aim to guide best practice in the discipline. Management accounting produces past-oriented reports with time spans that vary widely, but it also encompasses future-oriented reports such as budgets. Management accounting reports often include financial and non financial information, and may, for example, focus on specific products and departments.

Auditing

Auditing is the verification of assertions made by others regarding a payoff,Baiman, Stanley. 1979. "Discussion of Auditing: Incentives and Truthful Reporting." Journal of Accounting Research 17: 25–29. and in the context of accounting it is the "

unbiased Bias is a disproportionate weight ''in favor of'' or ''against'' an idea or thing, usually in a way that is closed-minded, prejudicial, or unfair. Biases can be innate or learned. People may develop biases for or against an individual, a group, ...

examination and evaluation of the financial statements of an organization". Audit is a professional service that is systematic and conventional. An audit of financial statements aims to express or disclaim an independent opinion on the financial statements. The auditor expresses an independent opinion on the fairness with which the financial statements presents the financial position, results of operations, and cash flows of an entity, in accordance with the generally accepted accounting principles (GAAP) and "in all material respects". An auditor is also required to identify circumstances in which the generally accepted accounting principles (GAAP) have not been consistently observed.

Information systems

An accounting information system is a part of an organization's

information system An information system (IS) is a formal, sociotechnical, organizational system designed to collect, process, store, and distribute information. From a sociotechnical perspective, information systems are composed by four components: task, people ...

used for processing accounting data. Many corporations use artificial intelligence-based information systems. The banking and finance industry uses AI in fraud detection. The retail industry uses AI for customer services. AI is also used in the cybersecurity industry. It involves computer hardware and software systems using statistics and modeling. Many accounting practices have been simplified with the help of accounting computer-based software. An

enterprise resource planning Enterprise resource planning (ERP) is the integrated management of main business processes, often in real time and mediated by software and technology. ERP is usually referred to as a category of business management software—typically a sui ...

(ERP) system is commonly used for a large organisation and it provides a comprehensive, centralized, integrated source of information that companies can use to manage all major business processes, from purchasing to manufacturing to human resources. These systems can be cloud based and available on demand via application or browser, or available as software installed on specific computers or local servers, often referred to as on-premise.

Tax accounting

Tax accounting in the United States concentrates on the preparation, analysis and presentation of tax payments and tax returns. The U.S. tax system requires the use of specialised accounting principles for tax purposes which can differ from the

(GAAP) for financial reporting. U.S. tax law covers four basic forms of business ownership:

sole proprietorship A sole proprietorship, also known as a sole tradership, individual entrepreneurship or proprietorship, is a type of enterprise owned and run by one person and in which there is no legal distinction between the owner and the business entity. A sole ...

partnership A partnership is an arrangement where parties, known as business partners, agree to cooperate to advance their mutual interests. The partners in a partnership may be individuals, businesses, interest-based organizations, schools, governments ...

, and

limited liability company A limited liability company (LLC for short) is the US-specific form of a private limited company. It is a business structure that can combine the pass-through taxation of a partnership or sole proprietorship with the limited liability of ...

Corporate A corporation is an organization—usually a group of people or a company—authorized by the state to act as a single entity (a legal entity recognized by private and public law "born out of statute"; a legal person in legal context) and r ...

and

personal Personal may refer to: Aspects of persons' respective individualities * Privacy * Personality * Personal, personal advertisement, variety of classified advertisement used to find romance or friendship Companies * Personal, Inc., a Washington, ...

income are taxed at different rates, both varying according to income levels and including varying marginal rates (taxed on each additional dollar of income) and average rates (set as a percentage of overall income).

Forensic accounting

Forensic accounting is a specialty practice area of accounting that describes engagements that result from actual or anticipated disputes or litigation. "

Forensic Forensic science, also known as criminalistics, is the application of science to criminal and civil laws, mainly—on the criminal side—during criminal investigation, as governed by the legal standards of admissible evidence and criminal p ...

" means "suitable for use in a court of law", and it is to that standard and potential outcome that forensic accountants generally have to work.

Political campaign accounting

Political campaign accounting deals with the development and implementation of financial systems and the accounting of financial transactions in compliance with laws governing political campaign operations. This branch of accounting was first formally introduced in the March 1976 issue of ''The Journal of Accountancy''.

Organizations

Professional bodies

Professional accounting bodies A professional accounting body is an organization or association of accountants in a particular jurisdiction. Usually a person needs to be a member of such professional body to hold out to the public of the jurisdiction as an accountant. The des ...

include the American Institute of Certified Public Accountants (AICPA) and the other 179 members of the

International Federation of Accountants The International Federation of Accountants (IFAC) is the global advocacy organization for the accountancy profession; mainly for the financial accounting and auditing professions. Founded in 1977, IFAC has more than 175 members and associates i ...

(IFAC), including

Institute of Chartered Accountants of Scotland The Institute of Chartered Accountants of Scotland (ICAS) is the world's first professional body of Chartered Accountants (CAs). It is a regulator, educator, influencer and thought leader. ICAS act as a thought leader and voice of the professiona ...

(ICAS), Institute of Chartered Accountants of Pakistan (ICAP),

CPA Australia CPA Australia ("Certified Practising Accountant") is a professional accounting body in Australia founded in 1886. As of 31 December 2020, it has 168,736 members working in 150 countries and regions around the world. CPA Australia currently has 1 ...

, Institute of Chartered Accountants of India, Association of Chartered Certified Accountants (ACCA) and Institute of Chartered Accountants in England and Wales (ICAEW). Some countries have a single professional accounting body (e.g. Brazil) and, in some other countries, professional bodies for subfields of the accounting professions also exist, for example the

Chartered Institute of Management Accountants The Chartered Institute of Management Accountants (CIMA) is the global professional management accounting body based out of the UK. CIMA offers training and qualification in management accountancy and related subjects. It is focused on accountan ...

(CIMA) in the UK and

Institute of management accountants The Institute of Management Accountants (IMA), formerly known as the National Association of Cost Accountants (NACA), is a professional organization of accountants. History IMA was founded in 1919 in Buffalo, New York as the National Associ ...

in the United States. Many of these professional bodies offer education and training including qualification and administration for various accounting designations, such as certified public accountant ( AICPA) and chartered accountant.

Firms

Depending on its size, a company may be legally required to have their

audited An audit is an "independent examination of financial information of any entity, whether profit oriented or not, irrespective of its size or legal form when such an examination is conducted with a view to express an opinion thereon.” Auditing ...

by a qualified auditor, and audits are usually carried out by

. Accounting firms grew in the United States and Europe in the late nineteenth and early twentieth century, and through several mergers there were large international accounting firms by the mid-twentieth century. Further large mergers in the late twentieth century led to the dominance of the auditing market by the "Big Five" accounting firms:

Arthur Andersen Arthur Andersen was an American accounting firm based in Chicago that provided auditing, tax advising, consulting and other professional services to large corporations. By 2001, it had become one of the world's largest multinational corporat ...

Deloitte Deloitte Touche Tohmatsu Limited (), commonly referred to as Deloitte, is an international professional services network headquartered in London, England. Deloitte is the largest professional services network by revenue and number of professio ...

Ernst & Young Ernst & Young Global Limited, trade name EY, is a multinational professional services partnership headquartered in London, England. EY is one of the largest professional services networks in the world. Along with Deloitte, KPMG and Pricewat ...

KPMG KPMG International Limited (or simply KPMG) is a multinational professional services network, and one of the Big Four accounting organizations. Headquartered in Amstelveen, Netherlands, although incorporated in London, England, KPMG is a net ...

and

PricewaterhouseCoopers PricewaterhouseCoopers is an international professional services brand of firms, operating as partnerships under the PwC brand. It is the second-largest professional services network in the world and is considered one of the Big Four accounti ...

. The demise of Arthur Andersen following the Enron scandal reduced the Big Five to the Big Four.

Standard-setters

Generally accepted accounting principles Publicly traded companies typically are subject to rigorous standards. Small and midsized businesses often follow more simplified standards, plus any specific disclosures required by their specific lenders and shareholders. Some firms operate on th ...

(GAAP) are accounting standards issued by national regulatory bodies. In addition, the International Accounting Standards Board (IASB) issues the

(IFRS) implemented by 147 countries. Standards for international audit and assurance, ethics, education, and public sector accounting are all set by independent standard settings boards supported by IFAC. The International Auditing and Assurance Standards Board sets international standards for auditing, assurance, and quality control; the

International Ethics Standards Board for Accountants The International Ethics Standards Board for Accountants (IESBA) develops and promotes the International Code of Ethics for Professional Accountants (including International Independence Standards). The IESBA also supports debate on issues related ...

(IESBA) sets the internationally appropriate principles-based ''Code of Ethics for Professional Accountants''; the

International Accounting Education Standards Board The International Accounting Education Standards Board (IAESB) is an independent organisation within the fold of the International Federation of Accountants (IFAC). The board develops guidance to improve standards of education in accountancy. The ...

(IAESB) sets professional accounting education standards; and

International Public Sector Accounting Standards International Public Sector Accounting Standards (IPSAS) are a set of accounting standards issued by the IPSAS Board for use by public sector entities around the world in the preparation of financial statements. These standards are based on Interna ...

Board (IPSASB) sets accrual-based international public sector accounting standards. Organizations in individual countries may issue accounting standards unique to the countries. For example, in Australia, the Australian Accounting Standards Board manages the issuance of the accounting standards in line with IFRS. In the

United States The United States of America (U.S.A. or USA), commonly known as the United States (U.S. or US) or America, is a country primarily located in North America. It consists of 50 states, a federal district, five major unincorporated territori ...

the Financial Accounting Standards Board (FASB) issues the Statements of Financial Accounting Standards, which form the basis of

US GAAP Generally Accepted Accounting Principles (GAAP or U.S. GAAP, pronounced like "gap") is the accounting standard adopted by the U.S. Securities and Exchange Commission (SEC) and is the default accounting standard used by companies based in the Uni ...

, and in the

the

Financial Reporting Council The Financial Reporting Council (FRC) is an independent regulator in the UK and Ireland based in London Wall in the City of London, responsible for regulating auditors, accountants and actuaries, and setting the UK's Corporate Governance and ...

(FRC) sets accounting standards. However, as of 2012 "all major economies" have plans to

towards or adopt the IFRS.

Education, training and qualifications

Degrees

At least a

bachelor's degree A bachelor's degree (from Middle Latin ''baccalaureus'') or baccalaureate (from Modern Latin ''baccalaureatus'') is an undergraduate academic degree awarded by colleges and universities upon completion of a course of study lasting three to six ...

in accounting or a related field is required for most accountant and

auditor An auditor is a person or a firm appointed by a company to execute an audit.Practical Auditing, Kul Narsingh Shrestha, 2012, Nabin Prakashan, Nepal To act as an auditor, a person should be certified by the regulatory authority of accounting and a ...

job positions, and some employers prefer applicants with a

master's degree A master's degree (from Latin ) is an academic degree awarded by universities or colleges upon completion of a course of study demonstrating mastery or a high-order overview of a specific field of study or area of professional practice.

. A degree in accounting may also be required for, or may be used to fulfill the requirements for, membership to professional accounting bodies. For example, the education during an accounting degree can be used to fulfill the American Institute of CPA's (AICPA) 150 semester hour requirement, and associate membership with the

Certified Public Accountants Association The Certified Public Accountants Association (CPAA) (formerly Association of Certified Public Accountants and CPA UK) was formed in 1989 to represent the interests of certain accountants in the United Kingdom. The association's National Administr ...

of the UK is available after gaining a degree in finance or accounting. A

doctorate A doctorate (from Latin ''docere'', "to teach"), doctor's degree (from Latin ''doctor'', "teacher"), or doctoral degree is an academic degree awarded by universities and some other educational institutions, derived from the ancient formalism ''li ...

is required in order to pursue a career in accounting

academia An academy (Attic Greek: Ἀκαδήμεια; Koine Greek Ἀκαδημία) is an institution of secondary or tertiary higher learning (and generally also research or honorary membership). The name traces back to Plato's school of philosophy, ...

, for example, to work as a university

professor Professor (commonly abbreviated as Prof.) is an academic rank at universities and other post-secondary education and research institutions in most countries. Literally, ''professor'' derives from Latin as a "person who professes". Professors ...

in accounting. The

Doctor of Philosophy A Doctor of Philosophy (PhD, Ph.D., or DPhil; Latin: or ') is the most common degree at the highest academic level awarded following a course of study. PhDs are awarded for programs across the whole breadth of academic fields. Because it is ...

(PhD) and the

Doctor of Business Administration The Doctor of Business Administration (DBA) is either a professional doctorate or a research doctorate, depending on the granting university, awarded on the basis of advanced study, examinations, project work, and research in business administrat ...

(DBA) are the most popular degrees. The PhD is the most common degree for those wishing to pursue a career in academia, while DBA programs generally focus on equipping

business executives An executive officer is a person who is principally responsible for leading all or part of an organization, although the exact nature of the role varies depending on the organization. In many militaries and police forces, an executive officer, o ...

for business or public careers requiring research skills and qualifications.

Professional qualifications

Professional accounting qualifications include the Chartered Accountant designations and other qualifications including certificates and diplomas. In Scotland, chartered accountants of ICAS undergo

Continuous Professional Development Professional development is learning to earn or maintain professional credentials such as academic degrees to formal coursework, attending conferences, and informal learning opportunities situated in practice. It has been described as intensive ...

and abide by the ICAS code of ethics. In England and Wales, chartered accountants of the

ICAEW The Institute of Chartered Accountants in England and Wales (ICAEW) is a professional membership organisation that promotes, develops and supports chartered accountants and students around the world. As of July 2022, it has over 198,000 members ...

undergo annual training, and are bound by the ICAEW's

code of ethics Ethical codes are adopted by organizations to assist members in understanding the difference between right and wrong and in applying that understanding to their decisions. An ethical code generally implies documents at three levels: codes of bus ...

and subject to its disciplinary procedures. In the

, the requirements for joining the AICPA as a Certified Public Accountant are set by the Board of Accountancy of each

state State may refer to: Arts, entertainment, and media Literature * ''State Magazine'', a monthly magazine published by the U.S. Department of State * ''The State'' (newspaper), a daily newspaper in Columbia, South Carolina, United States * ''Our S ...

, and members agree to abide by the AICPA's Code of Professional Conduct and Bylaws. The ACCA is the largest global accountancy body with over 320,000 members, and the organisation provides an 'IFRS stream' and a 'UK stream'. Students must pass a total of 14 exams, which are arranged across three levels.

Research

Accounting research is

research Research is " creative and systematic work undertaken to increase the stock of knowledge". It involves the collection, organization and analysis of evidence to increase understanding of a topic, characterized by a particular attentiveness ...

in the effects of economic events on the process of accounting, the effects of reported information on economic events, and the roles of accounting in organizations and society. It encompasses a broad range of research areas including

, auditing and

.Oler, Derek K., Mitchell J. Oler, and Christopher J. Skousen. 2010. "Characterizing Accounting Research." ''Accounting Horizons'' 24 (4): 635–670. Accounting research is carried out both by academic researchers and practicing accountants.

Methodologies In its most common sense, methodology is the study of research methods. However, the term can also refer to the methods themselves or to the philosophical discussion of associated background assumptions. A method is a structured procedure for bri ...

in academic accounting research include archival research, which examines "objective data collected from repositories"; experimental research, which examines data "the researcher gathered by administering treatments to subjects"; analytical research, which is "based on the act of formally modeling

theories A theory is a rational type of abstract thinking about a phenomenon, or the results of such thinking. The process of contemplative and rational thinking is often associated with such processes as observational study or research. Theories may be ...

or substantiating ideas in mathematical terms";

interpretive __NOTOC__ An interpretive discussion is a discussion in which participants explore and/or resolve interpretations often pertaining to text (literary theory), texts of any medium containing significant ambiguity in meaning. Education Interpretiv ...

research, which emphasizes the role of language, interpretation and understanding in accounting practice, "highlighting the symbolic structures and taken-for-granted themes which pattern the world in distinct ways";

critical Critical or Critically may refer to: *Critical, or critical but stable, medical states **Critical, or intensive care medicine *Critical juncture, a discontinuous change studied in the social sciences. *Critical Software, a company specializing in ...

research, which emphasizes the role of power and conflict in accounting practice; case studies; computer simulation; and

field research Field research, field studies, or fieldwork is the collection of raw data outside a laboratory, library, or workplace setting. The approaches and methods used in field research vary across disciplines. For example, biologists who conduct f ...

.Coyne, Joshua G., Scott L. Summers, Brady Williams, and David a. Wood. 2010. "Accounting Program Research Rankings by Topical Area and Methodology." ''Issues in Accounting Education'' 25 (4) (November): 631–654. Empirical studies document that leading

accounting journals Accounting, also known as accountancy, is the measurement, processing, and communication of financial and non financial information about economic entities such as businesses and corporations. Accounting, which has been called the "language ...

publish in total fewer research articles than comparable journals in economics and other business disciplines, and consequently, accounting scholars are relatively less successful in

academic publishing Academic publishing is the subfield of publishing which distributes academic research and scholarship. Most academic work is published in academic journal articles, books or theses. The part of academic written output that is not formally pu ...

than their business school peers. Due to different publication rates between accounting and other business disciplines, a recent study based on academic author rankings concludes that the competitive value of a single publication in a top-ranked journal is highest in accounting and lowest in marketing.

Scandals

The year 2001 witnessed a series of financial information frauds involving

Enron Enron Corporation was an American energy, commodities, and services company based in Houston, Texas. It was founded by Kenneth Lay in 1985 as a merger between Lay's Houston Natural Gas and InterNorth, both relatively small regional compani ...

, auditing firm

, the telecommunications company

WorldCom MCI, Inc. (subsequently Worldcom and MCI WorldCom) was a telecommunications company. For a time, it was the second largest long-distance telephone company in the United States, after AT&T. Worldcom grew largely by acquiring other telecommunic ...

Qwest Qwest Communications International, Inc. was a United States telecommunications carrier. Qwest provided local service in 14 western and midwestern U.S. states: Arizona, Colorado, Idaho, Iowa, Minnesota, Montana, Nebraska, New Mexico, North Dako ...

and Sunbeam, among other well-known corporations. These problems highlighted the need to review the effectiveness of accounting standards, auditing regulations and

corporate governance Corporate governance is defined, described or delineated in diverse ways, depending on the writer's purpose. Writers focused on a disciplinary interest or context (such as accounting, finance, law, or management) often adopt narrow definitions ...

principles. In some cases, management manipulated the figures shown in financial reports to indicate a better economic performance. In others, tax and regulatory incentives encouraged over-leveraging of companies and decisions to bear extraordinary and unjustified risk.Astrid Ayala and Giancarlo Ibárgüen Snr.: "A Market Proposal for Auditing the Financial Statements of Public Companies" (Journal of Management of Value,

Universidad Francisco Marroquín Francisco Marroquín University (Spanish: ''Universidad Francisco Marroquín''), also known by the abbreviation UFM, is a private, secular university in Guatemala City, Guatemala. It describes its mission as "to teach and disseminate the ethical ...

, March 2006) p. 41
UFM.edu.gt
/ref> The Enron scandal deeply influenced the development of new regulations to improve the reliability of financial reporting, and increased public awareness about the importance of having accounting standards that show the financial reality of companies and the objectivity and independence of auditing firms. In addition to being the largest bankruptcy reorganization in American history, the Enron scandal undoubtedly is the biggest audit failure causing the dissolution of

, which at the time was one of the five largest accounting firms in the world. After a series of revelations involving irregular accounting procedures conducted throughout the 1990s, Enron filed for

Chapter 11 Chapter 11 of the United States Bankruptcy Code (Title 11 of the United States Code) permits reorganization under the bankruptcy laws of the United States. Such reorganization, known as Chapter 11 bankruptcy, is available to every business, wheth ...

bankruptcy protection in December 2001. One consequence of these events was the passage of the

Sarbanes–Oxley Act The Sarbanes–Oxley Act of 2002 is a United States federal law that mandates certain practices in financial record keeping and reporting for corporations. The act, (), also known as the "Public Company Accounting Reform and Investor Protect ...

in the

in 2002, as a result of the first admissions of fraudulent behavior made by Enron. The act significantly raises criminal penalties for

securities fraud Securities fraud, also known as stock fraud and investment fraud, is a deceptive practice in the stock or commodities markets that induces investors to make purchase or sale decisions on the basis of false information, frequently resulting in lo ...

, for destroying, altering or fabricating records in federal investigations or any scheme or attempt to defraud shareholders.Aiyesha Dey, and Thomas Z. Lys: "Trends in Earnings Management and Informativeness of Earnings Announcements in the Pre- and Post-Sarbanes Oxley Periods ( Kellogg School of Management, Evanston, Illinois, February, 2005) p. 5

Fraud and error

Accounting fraud is an intentional misstatement or omission in the accounting records by management or employees which involves the use of deception. It is a criminal act and a breach of civil tort. It may involve collusion with third parties. An accounting error is an unintentional misstatement or omission in the accounting records, for example misinterpretation of facts, mistakes in processing data, or oversights leading to incorrect estimates. Acts leading to accounting errors are not criminal but may breach civil law, for example, the tort of

negligence Negligence (Lat. ''negligentia'') is a failure to exercise appropriate and/or ethical ruled care expected to be exercised amongst specified circumstances. The area of tort law known as ''negligence'' involves harm caused by failing to act as a ...

. The primary responsibility for the prevention and detection of fraud and errors rests with the entity's management.

References

External links

*
Operations Research in Accounting
on the Institute for Operations Research and the Management Sciences website {{Authority control fi:Laskentatoimi