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    Debunking Accounting Misconceptions

    What do Phil Knight, the founder of Nike, Inc., and John Grisham, the prolific novelist, have in common? In addition to their acquisition of immense wealth, they both earned accounting degrees before embarking on what turned out to be incredibly successful careers in nonaccounting businesses.

    Contrary to contemporary perceptions, accounting is neither a modern invention nor a narrow field. Moreover, accountants are a diverse group of people who perform critically important roles at all kinds of organizations.

    For example, accountants comprise approximately 15 percent of all Federal Bureau of Investigation (FBI) agents, according to the government agency. They frequently conduct financial investigations for some of the FBI’s most notable cases, including those against terrorist organizations, spies, and organized crime. This isn’t a new phenomenon, either; when the FBI was first created in 1908, bank examiners comprised more than one-third of the agency’s overall investigative team, the FBI notes.

    In addition, another emerging special credential is becoming more important within the accounting profession: the Certified Fraud Examiner (CFE). In fact, the Bernie Madoff $50 billion fraud was uncovered by a CFE.

    Accounting Through the Ages

    Until approximately 500 years ago, a majority of Europeans relied on Roman numerals, which are notoriously difficult to manipulate in even straightforward mathematical equations. Although rudimentary examples of accounting records have been traced back to the time of the ancient Sumerians, true innovation came as a result of the increasing popularity of Arabic numerals.

    In Venice, Italy, at the end of the 15th century, a Franciscan friar named Luca Pacioli (who happened to be Leonardo DaVinci’s math tutor) published a math text that included a chapter devoted to what became known as the “Venice System” of double-entry bookkeeping. Simply put, double-entry bookkeeping requires that every transaction be entered twice to account for the value of the sale and the exchange of the good in question.

    Under the Venetian double-entry bookkeeping system, a shop owner who sold an apple for $5 would note not only that his cash holdings increased (or debited) by $5, but also that his apple inventory declined (credited) by one unit. In this regard, Pacioli’s influence is manifested every day by modern accountants; in fact, the terms “debit” and “credit” are derived from Pacioli’s use of the terms “debitore” and “creditore.”

    Double-entry bookkeeping ultimately served as the basis of modern accounting and has had a profound impact on how commerce is both conducted and measured across the globe. It even has formed the basis for contemporary financial statements.

    Technology and Regulations: The Age of Modern Accounting

    Accounting has evolved significantly since the time of Pacioli, who essentially recorded in words a practice that was becoming more and more popular among merchants of that era. The field has become increasingly advanced, especially over the past 20 years. The proliferation of mobile-device technologies is having a particularly profound effect on the accounting profession.

    Yet the most significant driver of change over the past few decades has come as a result of the Sarbanes-Oxley Act (SOX) in 2002. Much like the accounting failures in the 1920s that led to the enactment of the Securities Act of 1933, SOX was a reaction to scandals that had rocked corporate governance during the late 1990s—including, among others, Enron’s bankruptcy. SOX increased the independence of outside auditors and improved business reporting standards by demanding transparency, enhanced reporting, and stringent auditing guidelines.  

    Since the implementation of SOX, many public companies now work with multiple accounting firms, which is driving demand for qualified accountants, and is bringing a renewed focus to the field. Accounting firms had to hire more employees as they work to comply with the comprehensive legislation included in the sweeping regulatory overhaul, according to “Ripple Effects of the Sarbanes-Oxley Act,” which was originally published in The CPA Journal. In fact, the accounting profession ranks among the best job opportunities for college graduates, according to a recently released report from UC San Diego.

    Technology’s influence has been substantial, as well. As computing power has grown, so too has the accounting discipline, which has become more nimble and fast-paced. What’s more, over the past 5 years “software as a service” (SaaS) offerings such as NetSuite have become ubiquitous. The growing popularity of such advanced, cloud-based tools has meant that accountants have had to further their own learning through continuing education in order to maintain professional proficiency.

    The Need for Continuing Education in Accounting

    With the technological revolution showing no signs of abating, continuing education is an essential requirement for all CPAs, according to the American Institute of CPAs. For accountants who are not yet CPAs, there are multiple kinds of offerings they can pursue as they pursue continuing education, including a Bachelor of Science in Accounting and a Master of Science in Accounting.

    Additionally, graduate certificates in accounting are another way that accountants can enhance their skillsets and improve their value to current and future employers, according to staffing firm Robert Half. These kinds of academic programs explore increasingly important concepts such as financial reporting systems, business law, the latest auditing techniques, and cost accounting. The successful completion of such curriculum also helps accountants prepare for the CPA exam. 

    According to the Occupational Information Network (O*NET), accountants typically exhibit critical thinking, problem solving, mathematical reasoning, and inductive reasoning skills. Moreover, an understanding of compliance software such as Intrax ProcedureNet, as well as tax preparation software like ATX Total Tax Office, is considered industry standard.

    The Future of Accounting

    As long as commerce exists, there will be a need for accountants. According to the U.S. Bureau of Labor Statistics, employment among accountants and auditors is expected to increase by 13 percent between 2012 and 2022—faster than the average rate of all other professions.

    Nevertheless, because organizations are increasingly seeking to hire the best educated, best qualified, and most highly motivated professionals, it’s imperative that accountants continue to advance their knowledge and professionalism if they hope to maintain relevance and differentiation within a competitive labor market.

     

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    Kaplan University cannot guarantee employment or career advancement. National long-term projections may not reflect local and/or short-term economic or job conditions, and do not guarantee actual job growth.

     

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