What is a CPA?

A CPA – Certified Public Accountant – is a financial professional who speaks the language of business. CPAs provide the advice and information businesses and people need to make important financial decisions. They help their clients make sound financial judgments by analyzing and interpreting data, projecting “what if” situations, and explaining and assisting with compliance of complex laws, rules, and regulations. CPAs help their clients to maximize their profits and make the most of their opportunities.


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How can accounting help me make money?

Quite simply, accounting tells you if you are making money. If you create a profit and loss statement each month, you can ascertain your position quickly. If you are losing money, you can make changes in your operations, such as increasing prices or reducing expenses, to correct the situation long before the year’s end and ensure that your overall year will still be profitable.


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Can’t I just write checks, make deposits, and file taxes?

If you don’t do any accounting, then that’s probably all you’re doing—making deposits, writing checks, and paying taxes, but not making any profit! Even in a very small business you need to be in control of your expenses. This doesn’t just mean having the money, it means knowing what portion of your revenue gets spent for what purposes. What percentage of revenue do you spend on marketing each month? What about labor? What about supplies? If you don’t track and control these expenditures, you are not managing your business—you are just blindly hoping there might someday be a profit.


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Can’t I hire a bookkeeper to do the accounting for me?

A good bookkeeper or even a good accounting software program can help you organize your accounting quickly. But you still need to understand the basic principles of accounting. This will allow you to use the information supplied by the bookkeeper or software program intelligently, enabling you to make the changes in your business that will keep it on track toward success and profitability.


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What’s more important, income statements or balance sheets?

At the risk of sending all accountants into apoplexy, I feel that the income statement is the more important document. The income statement tells you if you are making money and delineates your costs and expenses.


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How can a balance sheet help me?

A balance sheet shows you how your assets are being used. For instance, from a balance sheet you should be able to tell whether or not your inventories are too large, whether your receivables are growing, or whether your ratio of debt to equity is getting too high.


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Do I really have to understand the different depreciation formulas?

Not at all. Let your accountant figure these out, precisely, at the end of the year. Just plug “ballpark” numbers into your monthly profit and loss statements if you like.


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Do I really need to create a balance sheet each month?

If your business is really small, you can manage it fine without creating a balance sheet each month. But any size business, including a part-time one, needs to create a good profit and loss statement each month. And, if inventories or accounts receivables are important in your business, balance sheets will clearly point out any significant fluctuations that you should be aware of.


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What is forensic accounting?

Forensic means relating to the legal matters. Legal matters involve law enforcement, court litigation, legal disputes, and so on.


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What's Required to become a forensic accountant?

Most forensic accountants have accounting degrees. Many forensic accounting professionals also obtain professional certification, either the Certified Fraud Examiner or the CPA.


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Why is Forensic Accounting the hottest area of accounting and rated as one of the most secure careers for the future?

The United States has shifted toward an information economy. Forensic accounting professionals are experts in ferreting out information.


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About Forensic Accounting

Forensic accounting financial investigative specialists work with financial information for the purpose of conveying complicated issues in a manner that others can easily understand. While some forensic accountants and forensic accounting specialists are engaged in the public practice of forensic examination, others work in private industry for such entities as banks and insurance companies or governmental entities such as sheriff and police departments, the Federal Bureau of Investigation (FBI), and the Internal Revenue Service (IRS). Opportunities for qualified forensic accounting professionals abound in private companies, particularly with the passage of the Sarbanes-Oxley act (SOX). CEOs must now certify that their financial statements are faithful representations of the financial position and results of operations of their companies and rely more heavily on internal controls to detect any misstatement that would otherwise be contained in these financials. Thus, publicly held companies are likely to see the necessity for forensic accounting as a part of a strong internal control effort to comply with governmental and market demands for accurate reporting. Beyond SOX, forensic accountants who work for private companies help prevent and detect misuse of company resources. Historically, forensic accountants who work in public practice were often called after owners suspected that fraud has been committed. Now, recent major corporate scandals have prompted business owners to turn to Forensic Accountants for proactive fraud checkups. The fraud these specialists are looking for is usually one of two general types: financial statement fraud or theft of assets (these two types can co-exist in the situation in which management has taken assets and misstated financial statements to cover up the defalcation). To uncover financial statement fraud, the forensic accountant often analyzes the financial statements by using ratio analysis and certain data-mining techniques such as Benford’s Law, a procedure used to determine the likelihood that data have been altered. Other procedures performed include inspection of documents and records and the conduct of interviews with persons who would have knowledge about any fraud that’s occurred. The occupational fraud committed by employees usually involves the theft of assets. Embezzlement has been the most often committed fraud for the last 30 years. Employees may be involved in kickback schemes, identity theft, or conversion of corporate assets for personal use. The forensic accountant couples observation of the suspected employees with physical examination of assets, invigilation, inspection of documents, and interviews of those involved. Experience on these types of engagements enables the forensic accountant to offer suggestions as to internal controls that owners could implement to reduce the likelihood of fraud. At times, the forensic accountant may be hired by attorneys to investigate the financial trail of persons suspected of engaging in criminal activity. Information provided by the forensic accountant may be the most effective way of obtaining convictions. The forensic accountant may also be engaged by bankruptcy court when submitted financial information is suspect or if employees (including managers) are suspected of taking assets. Divorce attorneys may call on forensic accountants to determine whether assets are being understated or liabilities are overstated. For example, a restaurant owner’s wife suspected that he was understating profits for the purpose of effecting a lower martial settlement in a divorce action. The husband claimed that his restaurant was not as profitable as other restaurants in the areas because he prepared sandwiches using more meat than did other restaurant owners. The forensic accountant bought sandwiches at several randomly selected times and weighed the meat. He found that the average weight of meat used on the sandwiches equaled the weight used in other restaurants in the area – in other words, the husband wasn’t telling the truth. In addition to these activities, forensic accountants may be asked to determine the amount of the loss sustained by victims, testify in court as an expert witness and assist in the preparation of visual aids and written summaries for use in court. To be successful at this high level of super sleuthing, then, the forensic accountant needs knowledge of fraud schemes, investigation techniques, and the law to fulfill the expectations of his or her client or employer.


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