Role of CPAs in the Overall Economy

Public accounting is a great profession performing a vital function for businesses, not-for-profit organizations and individuals in many different areas of the overall economy. My career was spent as a certified public accountant (CPA) and it was extremely rewarding since I was able to help many clients in many different situations.

CPAs provide independent auditing to assure lenders and investors that companies seeking credit or capital have statements that present fairly the results of its operations and the companies’ financial position and cash flow, that the statements are free from material misstatement, and that the auditors making the attestations are independent. How valid would these assurances be if the company made them without any independent oversight?

Actually, financial assurances go back to the first human writing (around 3400 BCE), where people working in the fields recorded their daily production under the view of an overseer so they could be paid. Moses engaged Ithamar to perform an audit, Mark and Matthew made reference to audits in the 1^st Century CE, and even Chaucer made reference to an auditor in his Canterbury Tales around the same time Venetian businesspeople were developing double-entry bookkeeping, which is the method written about more than 100 years later by Leonardo’s friend Luca Pacioli in 1494 giving Pacioli the designation as the father of accounting. Even Benjamin Franklin referred to having some of his accounts “certified” before presenting them for reimbursement. Accountants have been involved since the beginning of recorded history.

Accounting is the language of business and finance. Money does not get invested, committed or taxed without those involved having an understanding of the underlying activities. Accounting is the means of expressing these activities, and financial statements are how the activities are presented. The statements need to be clear, precise in presentation, make sense, be devoid of ambiguity, conform to an accepted format and be self-checking, i.e., balanced, in a prescribed manner. This takes skill, clarity and a keen understanding of how the underlying transactions flowed and what the financial statements’ intended uses are.

The independent reports of CPAs appear in every public company’s financial statements that are presented to investors and the Securities and Exchange Commission (SEC). These can be easily accessed by putting in your browser the company’s name followed by “annual report” or “10-K.” The 10-K is the full report provided annually to the SEC and includes the annual report plus much more information than is required for the financial statements. Many accountants also develop the added or supplementary financial data in the 10-K, but they are usually not independent auditors. If you are interested in a company, this is where you should start with its financial data. I say start because there is much more information needed in order to understand a company fully. However, the starting point should always be the audited financial statements.

I am proud of the role CPAs play in assuring the flow of independent audited financial statements to owners, investors and customers. suppliers, employees, lenders, governmental agencies and other stakeholders with information they could use to evaluate organizations they are involved with or want to become involved with. This makes our role a key element to the functioning of the overall economy, where smooth access to capital and financing is necessary.