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I’m a CPA, and I’m also a consultant or business advisor. What’s the difference, and why do CPAs make great consultants? I receive this question quite often from family, friends, and others in my professional network. So, I thought I would answer it here in more detail.
Consultants provide analysis, expert opinions, and recommendations to organizations or individuals based on their in-depth knowledge. Business consultants troubleshoot and provide strategies to help prevent problems and improve business performance.
In my opinion, CPAs make the best business consultants or advisors. And here are my reasons why:
Just like many professions, it takes a lot of hard work and dedication to become a Certified Public Accountant (CPA). After passing the Uniform CPA Examination (a 16-hour test comprised of four challenging sections), a candidate must obtain the required experience in order to be accepted by their state Board of Accountancy. But in my opinion, it’s the experience alone that elevates a CPA from other financial professionals and consultants.
CPAs utilize proper accounting practices to ensure compliance with federal and state regulations. It’s standard practice for CPAs to possess a detailed understanding of Generally Accepted Accounting Principles and financial reporting. In addition to their exceptional knowledge of compliance requirements, CPAs can use their software training and in-depth understanding of business processes to detect as well as prevent fraud or theft for their employers or clients.
With their expertise and sharp skills, CPAs can apply the latest innovations in technology designed specifically for accounting to whatever business or financial issue they encounter, such as software that enables quick statements and reports, new filing processes, as well as providing quick and easy access to your business’s financial information.
Many accountants possess a detail-oriented personality trait that links them to a common saying, “Finding a needle in a haystack” — or, in accountant-speak, the ability to find the missing penny.
When preparing financial statements and income tax returns, CPAs are responsible for ensuring accuracy and avoiding errors of any kind. Making the smallest of mistakes can cause serious issues for an employer or client, so CPAs who value their reputation always triple check their work.
CPAs never take anything at face value and will always be willing to check the source to ensure accuracy of information. For financial statements and income tax return purposes, CPAs are given various documents and supporting documentation, and they have the ability to decipher not only the content of the documents but also its source.
The ability to analyze, interpret, and share the story behind the numbers and the capacity to know the general ledger inside and out are treated as a badge of honor. Their curiosity and professional skepticism often help CPAs uncover the truth of the situation. CPAs make sure the numbers work out and get all the information they need to solve a problem.
These skills are useful beyond tax and audit work for regulatory purposes. By digging into the financial records of a business, a CPA consultant can identify strengths and weaknesses, diagnose areas of waste, pinpoint and track important metrics, spot challenges that may be holding a company back, and determine strategies to increase growth. All of these consulting services can help a business reach its goals and thrive.
CPAs are often viewed as an elite group of service professionals. Ethical requirements are a big factor supporting that reputation. Whether someone is born to be an accountant through family tradition, or they discover a love for math and problem solving through education, character and a moral compass are vital.
Young CPAs experience this firsthand once they pass the Uniform CPA Exam. Not only is the exam made up of four separate sections, but an applicant must also pass an ethical assessment as a part of the application process with their state board of accountancy. In addition to state boards, CPAs must adhere to the principles of the Code of Professional Conduct of the American Institute of Certified Public Accountants. These principles of professional conduct include integrity, public interest, objectivity and independence, and due care.
The relationships that CPAs develop with their clients are deep and long standing. Oftentimes, it takes either a retirement, death, or other large life event for clients to look elsewhere once they have established a relationship with their accountant. Giving another person your financial documents may feel like giving your medical records to your doctor. Most people are private with their personal and business finances, so it’s important to make sure that the person you entrust with knowing the ins and the outs of your business has moral integrity. If you engage a CPA as a business consultant, you can rest assured that you’re in good hands.
When conducting an audit, a large part of a CPA’s job is to learn about their client’s internal controls sufficiently enough to plan the audit while identifying the relevant risk factors. The CPA must understand each component of the client’s financial reporting controls. This includes the control environment, risk assessment process, information system, and the client’s method of monitoring of those controls.
In order to gain this understanding, the CPA typically performs a walkthrough to observe the internal controls with the process owners. When doing so, the CPA not only learns about the significant process that they’re observing, but they also absorb the valuable information of the specific procedures the process owners follow, the systems the business uses, and the way in which data flows throughout the organization.
Over time, knowledge accumulates into expertise. After working on similar engagements for various clients, the CPA builds a foundation of best practices and can drive value to their clients with observations and recommendations based on their significant experience in business process improvement and efficiency.
Each industry and client may be different and pose different challenges. But a CPA’s business acumen — obtained through planning audits, learning numerous internal control structures, and observing copious overall business environments — is extremely valuable and tough to come by with just a general consultant.
If you’re a business owner or executive looking to engage a consultant, you can’t go wrong by choosing a financial consultant who is also a CPA. CPAs can use their experience with a variety of technical accounting issues and specific reporting and regulatory requirements to provide solutions for whatever situation you or your business is facing. CPAs can see the story behind the numbers and use their broad industry knowledge and business process experience to determine strategies to help owners and executives achieve their goals.
Delap is an award-winning, fully integrated financial services firm in Oregon. Our expert team of talented CPA professionals offers a full range of accounting, business advisory, and business consulting services to companies across a wide spectrum of industries.