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We offer a broad range of services for business owners, executives, and independent professionals.Contact
Did you know that 65% of failed entrepreneurs name financial mismanagement as the key reason for their undoing?
Mismanaging finances can be lethal for operations. This is one of the areas where a CPA can help.
Are you wondering if you need to hire a CPA to help you manage your business or personal finances? If so, you may also be wondering what does a CPA do, and how do their capabilities differ from a regular accountant.
Below is a list of all the functions CPAs can fulfill on both a business and a personal level. Keep reading to find out whether a CPA's expertise is what you need.
To understand how CPAs differs from regular accountants, let's quickly answer the question, "what is a CPA?"
CPAs are accountants who have undergone additional studies and passed the rigorous CPA licensing examination. The term CPA stands for Certified Public Accountant.
CPAs are legally licensed to perform audits and reviews. They also have a broader knowledge of tax codes and are recognized as experts by the IRS.
In short, CPAs are the 2.0 version of regular accountants and are legally recognized as the top pros in their field.
One of the primary tasks of a CPA is reviews and audits. If you are wondering what can a CPA do that an accountant can't—these are two functions that CPAs are licensed to carry out which regular accountants are not.
During audits and reviews, a CPA investigates an organization's financial records and statements. They work to ensure that no material misrepresentation has been made. All public businesses are required by law to have independent audits done.
In some cases, non-profits are required to have audits as well. This generally happens when they reach certain revenue levels or receive federal grants above a stipulated threshold.
Private businesses, on the other hand, do not require audits. However, as a private business owner, you might still wish to have an audit done by a CPA. Audited books can help you attract investors, secure loans and funding, and weed out fraud and erroneous accounting practices.
Having independent audits done can also reduce the chance of the IRS auditing you when tax time rolls around.
If your business doesn't require independent audits, you can also choose to have a CPA conduct a review. Reviews are less extensive than audits. They're also cheaper.
Although not as in-depth as audits, businesses can also use reviews to provide reasonable proof of materially accurate records to stakeholders and financial providers.
Besides conducting audits and reviews, CPAs are also able to file reports with the Securities and Exchange Commission (SEC). This is another thing that regular accountants cannot do.
Besides auditing financial records, some CPAs also draw up financial statements and reports. This is a function that a regular accountant, or even a bookkeeper, can carry out as well.
However, with their extended knowledge of generally accepted accounting principles (GAAP), a CPA may be able to optimize your financial reports for better decision-making.
Another important role CPAs carry out is tax preparation and the filing of business tax returns. This is also a task that non-certified accountants can undertake.
Once again, however, a CPA may be able to better handle tax returns if they are complex, as their knowledge of the tax codes is more extensive.
Besides this, a CPA is also legally recognized by the IRS. This means they can represent your business in any potential disputes with the IRS (more on this below).
Speaking of taxes, another invaluable service that many CPAs provide is tax planning.
Thanks to their in-depth knowledge of tax codes and regulations, CPAs can help you make financial decisions to reduce your tax burden in the future.
Want an example? Say your business is planning to dispose of a fixed property it owns. If the property has appreciated in value, this might trigger a capital gain that attracts a tax liability.
However, through thorough planning, you may find that your business could reduce this liability by incurring inevitable and planned capital losses. These can then be used to offset the gain and reduce your tax burden.
Tax planning strategies such as this can save a business or individual substantially in taxes over time.
Lastly, besides saving you financially, savvy tax planning also ensures that you and your business are operating in a tax compliant manner at all times.
Earlier on, we talked about how CPAs are licensed to carry out audits and reviews. Adults and reviews form part of what's known as "assurance services."
Assurance services act to provide "assurance" that a company is complying with any necessary rules, guidelines, or policies. These services can be used for both internal and external assurance.
Besides audits and reviews, other assurance services CPAs carry out include revisions of:
Assurance services are typically used by businesses.
We mentioned above that CPAs can represent you or your company before the IRS. This is another function that only they can provide, as they are legally recognized by the IRS.
If you enter into a dispute with the IRS, having a CPA represent you can be invaluable. Because CPAs have a thorough understanding of tax laws, they will be more able to defend your case. Unless you yourself are a tax expert, defending your own dispute can put you at an extreme disadvantage.
This is similar to how having an attorney on your side increases your chances of a successful court case. In the same way, having a CPA ups your chances of successfully resolving a tax dispute.
Take note that un-certified accountants can't represent you to the IRS. However, CPAs aren't the only people who can carry out this role. Attorneys and enrolled agencies can also act in representation roles with the IRS.
Not only can CPAs assist you with tax planning, but they can also carry out financial planning for your business. As mentioned earlier, financial planning is vital for almost any business.
Thorough financial planning helps maintain adequate cash flow and, ultimately, guards against financial failure. It is also a vital component in scaling and growth. Financial planning acts as a road map for businesses and helps to establish targets, milestones, budgets, and more.
Additionally, financial planning is not just important for businesses and companies. It is also valuable for individuals. Many of us assume that one has to have a large number of assets to require a personal financial advisor.
This, however, isn't the case. If you want to plan for your retirement, for your child's education, strategize how to meet investment goals, or plan a comprehensive estate that will benefit your loved ones—then personal financial planning services can prove indispensable.
Besides conducting CPA specific tasks such as audits, many CPAs are also responsible for overseeing financial functions within companies. They may oversee areas such as payroll and ensure that bookkeepers and other financial staff are carrying out their roles correctly.
Although CPAs can do bookkeeping, they hardly ever carry out this role, as they are overqualified for these types of routine tasks.
Another service CPAs may offer is litigation consulting. In litigation proceedings, CPAs can provide advice and analysis to help companies further their cases.
Along with this, CPAs offering litigation consulting may also help attorneys prepare lines of cross-examination, analyze and prepare trial exhibits, and corroborate testimony given by other expert witnesses.
Some CPAs also specialize in forensic accounting. This is also known as fraud auditing and investigative accounting. It is used to uncover things like fraud and embezzlement.
By leveraging their accounting, auditing, and investigative experience, CPAs can comb through a business's books to spot any suspicious financial activity.
If you are wondering what can you do with a CPA that you can't with a regular account, this is another area where CPAs are usually the best choice.
In practice, a CPAs often carry out many of the same things that a non-licensed accountant might do. Thanks to their extensive training and knowledge of tax law, they may be better qualified to handle some of these common accounting tasks, such as tax preparation and planning.
What's more, CPAs are also licensed to undertake some functions regular accountants aren't. This includes audits and reviews, filing of reports with the SEC, and representation before the IRS.
Additionally, because they're licensed and recognized experts in their field, CPAs can also give reliable financial planning advice, both for business and personal purposes.
Now that you know the answer to "what does a CPA do?" do you feel you're in need of CPA services?
If so, you are in the perfect place. Here at Pacific Accounting Group, we provide CPA advice and services that you can trust. Our team of CPAs operates to a superior level of accountability and quality. We are highly responsive and won't leave you hanging for an answer or outcome.
If you choose to work with us, you will receive close personal and professional attention.
If you have any questions or would like to schedule an initial consultation, contact us today.
At Pacific Accounting Group, serving your financial interest is our top priority. We take your success and security very seriously. Whether you're an individual, small business, or large corporation, we want you to know that you're never just a number to us.
Please fill out the contact information form and let us know how we can be of service. We will respond promptly and will happily discuss your needs and answer any questions in order to determine how we can best serve you going forward.
Thank you for visiting. We look forward to working together!