Accounting, also known as accountancy, is the process of recording and processing information about economic entities, such as

business Business is the practice of making one's living or making money by producing or Trade, buying and selling Product (business), products (such as goods and Service (economics), services). It is also "any activity or enterprise entered into for ...

es and

corporation A corporation or body corporate is an individual or a group of people, such as an association or company, that has been authorized by the State (polity), state to act as a single entity (a legal entity recognized by private and public law as ...

s. Accounting 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 on capital, return (profit) or to gain an advantage (interest). Through this allocated capital the investor usually purchases some species of pr ...

creditor A creditor or lender is a party (e.g., person, organization, company, or government) that has a claim on the services of a second party. It is a person or institution to whom money is owed. The first party, in general, has provided some propert ...

management Management (or managing) is the administration of organizations, whether businesses, nonprofit organizations, or a Government agency, government bodies through business administration, Nonprofit studies, nonprofit management, or the political s ...

, and regulators. Practitioners of accounting are known as

accountant An accountant is a practitioner of accounting or accountancy. Accountants who have demonstrated competency through their professional associations' certification exams are certified to use titles such as Chartered Accountant, Chartered Certif ...

s. 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 interchangeably. Accounting can be divided into several fields including

financial accounting Financial accounting is a branch of accounting concerned with the summary, analysis and reporting of financial transactions related to a business. This involves the preparation of Financial statement audit, financial statements available for pu ...

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 U.S. tax accounting refers to accounting for tax purposes in the United States. Unlike most countries, the United States has a comprehensive set of accounting principles for tax purposes, prescribed by tax law, which are separate and distinct f ...

and

cost accounting Cost accounting is defined by the Institute of Management Accountants 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 includ ...

. 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 A supply chain is a complex logistics system that consists of facilities that convert raw materials into finished products and distribute them to end consumers or end customers, while supply chain management deals with the flow of goods in distr ...

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

bookkeeping Bookkeeping is the recording of financial transactions, and is part of the process of accounting in business and other organizations. It involves preparing source documents for all transactions, operations, and other events of a business. T ...

, 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 to a ...

is the most common system.

Accounting information system An accounting 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 accountin ...

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 ( ; ; , formerly ) is a city in northeastern Italy and the capital of the Veneto Regions of Italy, region. It is built on a group of 118 islands that are separated by expanses of open water and by canals; portions of the city are li ...

, and is usually attributed to the Italian mathematician and Franciscan friar

Luca Pacioli Luca Bartolomeo de Pacioli, O.F.M. (sometimes ''Paccioli'' or ''Paciolo''; 1447 – 19 June 1517) was an Italian mathematician, Franciscan friar, collaborator with Leonardo da Vinci, and an early contributor to the field now known as account ...

. Today, accounting is facilitated by accounting organizations such as standard-setters, accounting firms and professional bodies. 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 t ...

(GAAP). GAAP is set by various standard-setting organizations such as the

Financial Accounting Standards Board The Financial Accounting Standards Board (FASB) is a private standard-setting body whose primary purpose is to establish and improve Generally Accepted Accounting Principles (GAAP) within the United States in the public's interest. The Secur ...

(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 Northwestern Europe, off the coast of European mainland, the continental mainland. It comprises England, Scotlan ...

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

(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 through late antiquity. The span of recorded history is roughly 5,000 years, beginning with the development of Sumerian cuneiform script. Ancient h ...

civilization A civilization (also spelled civilisation in British English) is any complex society characterized by the development of state (polity), the state, social stratification, urban area, urbanization, and symbolic systems of communication beyon ...

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. One early development of accounting dates back to ancient

Mesopotamia Mesopotamia is a historical region of West Asia situated within the Tigris–Euphrates river system, in the northern part of the Fertile Crescent. Today, Mesopotamia is known as present-day Iraq and forms the eastern geographic boundary of ...

and is closely related to developments in

writing Writing is the act of creating a persistent representation of language. A writing system includes a particular set of symbols called a ''script'', as well as the rules by which they encode a particular spoken language. Every written language ...

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

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: m ...

; there is also evidence of early forms of

in ancient

Iran Iran, officially the Islamic Republic of Iran (IRI) and also known as Persia, is a country in West Asia. It borders Iraq to the west, Turkey, Azerbaijan, and Armenia to the northwest, the Caspian Sea to the north, Turkmenistan to the nort ...

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

auditing 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 al ...

systems by the ancient

Egyptians Egyptians (, ; , ; ) are an ethnic group native to the Nile, Nile Valley in Egypt. Egyptian identity is closely tied to Geography of Egypt, geography. The population is concentrated in the Nile Valley, a small strip of cultivable land stretchi ...

and Babylonians. By the time of Emperor

Augustus Gaius Julius Caesar Augustus (born Gaius Octavius; 23 September 63 BC – 19 August AD 14), also known as Octavian (), was the founder of the Roman Empire, who reigned as the first Roman emperor from 27 BC until his death in A ...

, the Roman government had access to detailed financial information. Many concepts related to today's accounting seem to be initiated in medieval's Middle East. For example, Jewish communities used

in the early-medieval period and Muslim societies, at least since the 10th century also used many modern accounting concepts. The spread of the use of

Arabic numerals The ten Arabic numerals (0, 1, 2, 3, 4, 5, 6, 7, 8, and 9) are the most commonly used symbols for writing numbers. The term often also implies a positional notation number with a decimal base, in particular when contrasted with Roman numera ...

, instead of the Roman numbers historically used in Europe, increased efficiency of accounting procedures among Mediterranean merchants, who further refined accounting in

medieval Europe In the history of Europe, the Middle Ages or medieval period lasted approximately from the 5th to the late 15th centuries, similarly to the post-classical period of World history (field), global history. It began with the fall of the West ...

. With the development of joint-stock companies, 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 a ...

was the ''

Summa de arithmetica Summa and its diminutive summula (plural ''summae'' and ''summulae'', respectively) was a medieval didactics literary genre written in Latin, born during the 12th century, and popularized in 13th century Europe. In its simplest sense, they migh ...

'', published in

Italy Italy, officially the Italian Republic, is a country in Southern Europe, Southern and Western Europe, Western Europe. It consists of Italian Peninsula, a peninsula that extends into the Mediterranean Sea, with the Alps on its northern land b ...

in 1494 by

(the "Father of Accounting"). Accounting began to transition into an organized profession in the 19th century, with local professional bodies in England merging to form the

Institute of Chartered Accountants in England and Wales 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 December 2024, it has over 210,000 memb ...

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 north-west coast of continental Europe, consisting of the countries England, Scotland, and Wales. With an area of , it is the largest of the British Isles, the List of European ...

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 pe ...

(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 Colloquial, Popular, Spoken or Vernacular Latin, is the range of non-formal Register (sociolinguistics), registers of Latin spoken from the Crisis of the Roman Republic, Late Roman Republic onward. ''Vulgar Latin'' a ...

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 "

" 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 languages, Italic branch of the Indo-European languages. Latin was originally spoken by the Latins (Italic tribe), Latins in Latium (now known as Lazio), the lower Tiber area aroun ...

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. To This may refer to generally agreed-upon sequences of sounds used in speaking a given word or all language in a specific dialect—"correct" or "standard" pronunciation—or si ...

and in

orthography An orthography is a set of convention (norm), conventions for writing a language, including norms of spelling, punctuation, Word#Word boundaries, word boundaries, capitalization, hyphenation, and Emphasis (typography), emphasis. Most national ...

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 may relate to a fundamental truth or proposition that serves as the foundation for a system of beliefs or behavior or a chain of reasoning. They provide a guide for behavior or evaluation. A principle can make values explicit, so t ...

and procedures of accounting"; it also refers to the job of being an

. Accountancy refers to the occupation or

profession A profession is a field of Work (human activity), 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 ...

of an accountant, particularly in

British English British English is the set of Variety (linguistics), varieties of the English language native to the United Kingdom, especially Great Britain. More narrowly, it can refer specifically to the English language in England, or, more broadly, to ...

Topics

Accounting has several subfields or subject areas, including

taxation A tax is a mandatory financial charge or levy imposed on an individual or legal person, legal entity by a governmental organization to support government spending and public expenditures collectively or to Pigouvian tax, regulate and reduce nega ...

and

accounting information system An accounting 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 accountin ...

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 changes 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 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 Cost–benefit analysis (CBA), sometimes also called benefit–cost analysis, is a systematic approach to estimating the strengths and weaknesses of alternatives. It is used to determine options which provide the best approach to achieving benefits ...

, 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.

Intercompany accounting

Intercompany accounting focuses on the measurement, analysis and reporting of information between separate entities that are related, such as a parent company and its subsidiary companies. Intercompany accounting concerns record keeping of transactions between companies that have common ownership such as a parent company and a partially or wholly owned subsidiary. Intercompany transactions are also recorded in accounting when business is transacted between companies with a common parent company (subsidiaries).

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 inaccurate, closed-minded, prejudicial, or unfair. Biases can be innate or learned. People may develop biases for or against an individ ...

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, Information Processing and Management, store, and information distribution, distribute information. From a sociotechnical perspective, info ...

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 suit ...

(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 only one person and in which there is no legal distinction between the owner and the business entity. ...

partnership A partnership is an agreement where parties agree to cooperate to advance their mutual interests. The partners in a partnership may be individuals, businesses, interest-based organizations, schools, governments or combinations. Organizations ...

, and

limited liability company A limited liability company (LLC) is the United States-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 or body corporate is an individual or a group of people, such as an association or company, that has been authorized by the state to act as a single entity (a legal entity recognized by private and public law as "born out of s ...

and personal 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 A lawsuit is a proceeding by one or more parties (the plaintiff or claimant) against one or more parties (the defendant) in a civil court of law. The archaic term "suit in law" is found in only a small number of laws still in effect today. ...

. "

Forensic Forensic science combines principles of law and science to investigate criminal activity. Through crime scene investigations and laboratory analysis, forensic scientists are able to link suspects to evidence. An example is determining the time and ...

" 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 include the

American Institute of Certified Public Accountants The American Institute of Certified Public Accountants (AICPA) is the national professional organization of Certified Public Accountants (CPAs) in the United States, with more than 428,000 members in 130 countries. Founded in 1887 as the Americ ...

(AICPA) and the other 179 members of the

International Federation of Accountants The International Federation of Accountants (IFAC) is the global organization for the accountancy profession. Founded in 1977, IFAC has 180 members and associates in 135 jurisdictions, representing more than 3 million accountants in public prac ...

(IFAC), including Institute of Chartered Accountants of Scotland (ICAS), Institute of Chartered Accountants of Pakistan (ICAP),

CPA Australia CPA Australia ("Certified Practising Accountant") is a professional accounting body in Australia, originally founded as the "Incorporated Institute of Accountants" in 1886. As of 31 December 2020, it has 168,736 members in 150 countries and regio ...

, Institute of Chartered Accountants of India,

Association of Chartered Certified Accountants The Association of Chartered Certified Accountants (ACCA) is the global professional accounting body offering the Chartered Certified Accountant qualification (CCA). Founded in 1904, It is now the fourth-largest professional accounting body ...

(ACCA) and

(ICAEW). Some countries have a single professional accounting body and, in some other countries, professional bodies for subfields of the accounting professions also exist, for example the Chartered Institute of Management Accountants (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 The American Institute of Certified Public Accountants (AICPA) is the national professional organization of Certified Public Accountants (CPAs) in the United States, with more than 428,000 members in 130 countries. Founded in 1887 as the Americ ...

) and chartered accountant.

Firms

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

s audited by a qualified auditor, and audits are usually carried out by accounting firms. 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 LLP 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 corpo ...

Deloitte Deloitte is a multinational professional services network based in London, United Kingdom. It is the largest professional services network in the world by revenue and number of employees, and is one of the Big Four accounting firms, along wi ...

Ernst & Young EY, previously known as Ernst & Young, is a multinational corporation, multinational professional services partnership, network based in London, United Kingdom. Along with Deloitte, KPMG and PwC, it is one of the Big Four accounting firms, Big F ...

KPMG KPMG is a multinational professional services network, based in London, United Kingdom. As one of the Big Four accounting firms, along with Ernst & Young (EY), Deloitte, and PwC. KPMG is a network of firms in 145 countries with 275,288 emplo ...

and

PricewaterhouseCoopers PricewaterhouseCoopers, also known as PwC, is a multinational professional services network based in London, United Kingdom. It is the second-largest professional services network in the world and is one of the Big Four accounting firms, alon ...

. The demise of Arthur Andersen following the

Enron scandal The Enron scandal was an accounting scandal sparked by American energy company Enron, Enron Corporation filing for bankruptcy after news of widespread internal fraud became public in October 2001, which led to the dissolution of its accounting ...

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 t ...

(GAAP) are accounting standards issued by national regulatory bodies. In addition, the

International Accounting Standards Board The International Accounting Standards Board (IASB) is the independent accounting standard-setting body of the IFRS Foundation. The IASB was founded on April 1, 2001, as the successor to the International Accounting Standards Committee (IASC). ...

(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 (IESBA) sets the internationally appropriate principles-based ''Code of Ethics for Professional Accountants''; the International Accounting Education Standards Board (IAESB) sets professional accounting education standards; and International Public Sector Accounting Standards 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 (USA), also known as the United States (U.S.) or America, is a country primarily located in North America. It is a federal republic of 50 U.S. state, states and a federal capital district, Washington, D.C. The 48 ...

the

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

US GAAP Generally Accepted Accounting Principles (GAAP) 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 United States. The Financial Accountin ...

, and in the

the Financial Reporting Council (FRC) sets accounting standards. However, as of 2012 "all major economies" have plans to converge towards or adopt the IFRS.

Education, training and qualifications

Degrees

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

or a

master's degree A master's degree (from Latin ) is a postgraduate 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 prac ...

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 an ...

job positions, and some employers prefer applicants with advanced qualifications. 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 of the UK is available after gaining a degree in finance or accounting. A

doctorate A doctorate (from Latin ''doctor'', meaning "teacher") or doctoral degree is a postgraduate academic degree awarded by universities and some other educational institutions, derived from the ancient formalism '' licentia docendi'' ("licence to teach ...

is required in order to pursue a career in accounting

academia An academy (Attic Greek: Ἀκαδήμεια; Koine Greek Ἀκαδημία) is an institution of tertiary education. The name traces back to Plato's school of philosophy, founded approximately 386 BC at Akademia, a sanctuary of Athena, the go ...

, for example, to work as a university

professor Professor (commonly abbreviated as Prof.) is an Academy, academic rank at university, universities and other tertiary education, post-secondary education and research institutions in most countries. Literally, ''professor'' derives from Latin ...

in accounting. The

Doctor of Philosophy A Doctor of Philosophy (PhD, DPhil; or ) is a terminal degree that usually denotes the highest level of academic achievement in a given discipline and is awarded following a course of Postgraduate education, graduate study and original resear ...

(PhD) and the

Doctor of Business Administration The Doctor of Business Administration (DBA) is a terminal degree in business administration. The DBA is classified as a research doctorate or professional doctorate depending on the granting university and country where the degree was awarded. ...

(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 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, also known as professional education, is learning that leads to or emphasizes education in a specific professional career field or builds practical job applicable skills emphasizing praxis in addition to the transferabl ...

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

and subject to its disciplinary procedures. In the

, the requirements for joining the

as a

Certified Public Accountant Certified Public Accountant (CPA) is the title of qualified accountants in numerous countries in the English-speaking world. It is generally equivalent to the title of chartered accountant in other English-speaking countries. In the United Stat ...

are set by the Board of Accountancy of each

state State most commonly refers to: * State (polity), a centralized political organization that regulates law and society within a territory **Sovereign state, a sovereign polity in international law, commonly referred to as a country **Nation state, a ...

, 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 to ...

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

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 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 systematic and rational form of abstract thinking about a phenomenon, or the conclusions derived from such thinking. It involves contemplative and logical reasoning, often supported by processes such as observation, experimentation, ...

or substantiating ideas in mathematical terms"; interpretive 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 research, which emphasizes the role of power and conflict in accounting practice;

case studies A case study is an in-depth, detailed examination of a particular case (or cases) within a real-world context. For example, case studies in medicine may focus on an individual patient or ailment; case studies in business might cover a particular fi ...

;

computer simulation Computer simulation is the running of a mathematical model on a computer, the model being designed to represent the behaviour of, or the outcome of, a real-world or physical system. The reliability of some mathematical models can be determin ...

; 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 fi ...

.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 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 Research, academic research and scholarship. Most academic work is published in academic journal articles, books or Thesis, theses. The part of academic written output that is n ...

than their

business school A business school is a higher education institution or professional school that teaches courses leading to degrees in business administration or management. A business school may also be referred to as school of management, management school, s ...

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 development, energy, Commodity, commodities, and services company based in Houston, Texas. It was led by Kenneth Lay and developed in 1985 via a merger between Houston Natural Gas and InterNorth, both re ...

, auditing firm

, the telecommunications company

WorldCom MCI, Inc. (formerly 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 telecommunicatio ...

, Qwest and

Sunbeam A sunbeam, in meteorological optics, is a lightbeam, beam of sunlight that appears to radiate from the position of the Sun. Shining through openings in clouds or between other objects such as mountains and buildings, these beams of light scatter ...

, among other well-known corporations. These problems highlighted the need to review the effectiveness of

accounting standards 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 t ...

, auditing regulations and

corporate governance Corporate governance refers to the mechanisms, processes, practices, and relations by which corporations are controlled and operated by their boards of directors, managers, shareholders, and stakeholders. Definitions "Corporate governance" may ...

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, March 2006) p. 41
UFM.edu.gt
/ref> The

deeply influenced the development of new

regulations Regulation is the management of complex systems according to a set of rules and trends. In systems theory, these types of rules exist in various fields of biology and society, but the term has slightly different meanings according to context. Fo ...

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 Bankruptcy is a legal process through which people or other entities who cannot repay debts to creditors may seek relief from some or all of their debts. In most jurisdictions, bankruptcy is imposed by a court order, often initiated by the deb ...

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, w ...

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 Protectio ...

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.Kellogg School of Management, Evanston, Illinois, February, 2005) p. 5

Fraud and error

Accounting

fraud In law, fraud is intent (law), intentional deception to deprive a victim of a legal right or to gain from a victim unlawfully or unfairly. Fraud can violate Civil law (common law), civil law (e.g., a fraud victim may sue the fraud perpetrato ...

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 care expected to be exercised in similar circumstances. Within the scope of tort law, negligence pertains to harm caused by the violation of a duty of care through a neg ...

. 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 Administrative theory fi:Laskentatoimi