Question

(1) Elaborate on some of the different ways by which certified public accountants (CPAs) can advise public listed companies seeking to grow and add value?

(2) Outline four possible accounting related functions which can be undertaken in house within public listed companies and, for each function, identify the specific tasks that could be carried out in that role;

Answer 1

(1): CPAs can advise public listed companies in several ways which will enable these companies to grow and add value. First of all CPAs can evaluate the different financial ratios of listed companies like its liquidity ratio, solvency ratio, profitability ratio, efficiency ratios etc. and then determine the areas of concern and the areas in which a company will have to improve. This quantitative analysis will help the company with regards to business planning in future. Secondly CPAs can assess the internal control levels at public listed companies. Internal control is a process which helps an organization achieves its objectives toward operational efficiency and effectiveness. Internal control helps in risk mitigation by detecting and preventing fraud. Thirdly CPAs can chart out the progress of the company from a financial perspective and then avoidable expenses can be determined which will eventually improve the company’s ROI. Thus CPAs can help to reduce business expenses, manage cash flow in a structured manner, and leverage financial information for the purpose of fine-tuning business strategy.

(2): Four possible accounting related functions which can be undertaken in house within public listed companies and the specific tasks related to it are:

(i): Payroll accounting – This function of accounting deals with payments of salaries and wages to employees, withholding of taxes etc. The different tasks will consist of preparing salary statements, maintaining payroll related accounts, reconciliation of accounts etc.

(ii): Management accounting – This involves analysis of the financial and operational results of the company. The task is to look at opportunities to improve the results and financial position of the company. Aspects that will be looked in management accounting are capital budgeting, transfer pricing analysis etc.

(iii): Tax accounting – This accounting related function looks at compliance with tax laws. This function involves tax planning. The focus is on Internal Revenue Code (IRC) and not on GAAP or IFRS.

(iv): Internal auditing – This entails examination of the various processes and controls of a company with the purpose of determining and then correcting weaknesses and mismanagement. The tasks consist of fraud detection, legal and regulatory compliance, process assessments, risk assessments and internal control assessments.