What Accountants Should Know about Becoming a CPA

There are many advantages to entering the field of finance. The information one can apply to their own personal financial life is priceless in that being financially savvy can help one set themselves and their families up for long-term financial success. Accountants and CPAs make up some of the smartest and most well informed financial minds in the US. There is a bit of a misconception as to the functions accountants perform compared to that of a CPA. CPAs can be accountants but not all accountants can be CPAs.

An accountant is the individual who looks over and looks after one’s financial records. It’s common for accountants to have a solid working knowledge of a business owners cash flow cycles, equity, balance sheets as well as preparing financial reports for stake holders. Accountants are not regulated by their state of residency nor are there any specific education requirements. On the other hand, a CPA is a professional who is regulated by their state of residence, has passed each section of the Uniform CPA Exam as well as having the actual CPA license. Many times it is mistaken that passing the CPA Exam qualifies applicants for licensure. This is not the case. There is a specific process of applying for the CPA exam and for licensure. As a result, CPAs are trusted more than an accountant in financial matters. In addition, the benefits that CPAs enjoy are astronomical compared to that of the average accountant.

Below, find an infographic containing all you should consider before becoming a CPA.

Benefits of becoming a CPA infographic
Infographic by Bisk CPA Review. Learn the streamlined process of sitting for the CPA exam.


Three Questions with Gregg L. Nelson

With the Securities and Exchange Commission’s (SEC) decision on the possible incorporation of International Financial Reporting Standards (IFRS) into the US system still outstanding, many are wondering about the implications for their work and organizations.

Gregg L. Nelson, vice president of accounting policy and financial reporting for IBM Corporation, shares his thoughts on this important matter. He also explains how accounting and finance professionals might benefit from attending the 18th Annual NYSSA International Financial Reporting Conference & Workshops from Jan. 8-10, 2013 in New York City.

Gregg is one of a number of prestigious speakers who will be sharing their expertise at this important conference, which is presented by IASeminars and the New York Society of Security Analysts (NYSSA). Other conference speakers include senior representatives from the International Accounting Standards Board (IASB), Financial Accounting Standards Board (FASB), SEC, Public Company Accounting Oversight Board (PCAOB), etc.

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Forensic Accounting Careers

You probably already know that being a CPA can be a lucrative and rewarding career. But did you also know that there are specializations within the CPA profession? Forensic accounting is one such specialty area. Forensic accounting, also referred to as financial forensics, is a career in demand within the CPA profession, which focuses on litigation and investigation. Yes, it is similar to what you might see in popular crime television shows like Law and Order, CSI, and so forth.

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When Accounting Fraud Brings Down the House of Cards

Certified Public Accountants, in spite of the trade or business, have a responsibility to uphold the very best standards of ethics and professionalism. CPAs are usually viewed as one of the foremost trusted professions within the world. They are additionally among the foremost regulated professions, the requirements to obtain the CPA designation being one of the most stringent (including having to complete a series of education and knowledge requirements before being allowed to take a seat for the US CPA Exam). Even once they pass the CPA Exam, they must maintain their education through continuing professional education as regulated by their state board of accountancy. Additionally, if they are a member of a state CPA society and/or the American Institute of CPAs, they need to maintain higher levels of CPE and a code of professionalism.

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Common Mistakes Made by First-Year CPAs

As with anyone new to a career, you’re bound to make a mistake or two. CPAs are no exception. You can learn, study and pass the Certified Public Accounting exam, but that doesn’t mean you’ll be able to practically apply that knowledge in the real world. Here are a few of the common mistakes that first year CPAs make that you can be aware of and ideally, avoid. Many of these common mistakes will be covered in your CPA exam review course.

  1. Treating sales as revenue before the product is delivered. Sales do not count as income until the product or service has been delivered to the purchaser. Counting sales as revenue before they are realized can cause business decision makers to think the company is more profitable than it is and make false projections. Only count sales as revenue when the product or service has been delivered.

  2. Confusing profits for cash flow. Track what a business is spending and selling. Just because there may be a profit, does not mean there is cash to pay bills. Make sure you are presenting the full picture to your clients or employer so they can make the right decisions by analyzing the profit-debt ratio.

  3. Dipping into cash reserves. Your business clients may be inclined to dip into their cash reserves and make a large equipment purchase or the like. While they will be able to claim depreciation over the years, it will hurt them when tax time comes around. Instead, encourage your client to take out a short-term loan or even lease the equipment if it will need updates over time. Leasing compared to outright purchasing can be of great benefit as there is no large sum of cash required nor do you have to pay for maintenance, etc. Weigh these options and present them both to your clients. Clients like options.

  4. Not reserving enough to pay estimated taxes. Many of your small-business or self-employed clients may be required to pay estimated taxes throughout the year. Make sure these clients have an accurate system that encourages them to put aside the necessary funds to pay their quarterly estimated taxes.

  5. Poor accounting system. Typical in small-business or self-employed environments, it is important to advise your clients on an appropriate accounting system if you are not involved in the day-to-day. They need to be able to record their deposits and expenses while maintaining a record of the transaction with ease. As a CPA you are in the perfect position to advise them on the proper method and software.

  6. Deducting expenses inappropriately. There is a right way and a wrong way to record tax deductions. Especially when it comes to clients with a small business. For example, you can save your client a lot of money by deducting business-related travel expenses as a business expense, versus as an unreimbursed employee business expense.

  7. Passive loss rules. If your client receives a K-1 from any investment, including a business, make sure they are not being limited by the passive loss rules. An active business owner should not be subjected to the passive loss limitation rules. This could mean the difference in thousands of dollars on your client’s tax return.

  8. Failing to elect real estate professional status. If your client is involved in real estate investment, be sure you have filed an election with the status noted. This status will allow your client to take advantage of a number of specific real estate investment deductions. If you miss this election, you cannot file an amended return down the road to correct. Any of those potential deductions are lost. Be sure to file the election for your real estate professional clients.

  9. Missing carry-forward tax benefits. Some tax credits or deductions can be carried forward to the next tax year if your client cannot use them in the current tax year. However, many professionals often forget about these carry-forwards a year later. Be sure you keep accurate records and are carrying forward your client’s tax credits and deductions where necessary.

  10. Not planning ahead for taxes. Tax time is a great time to sit down with your clients and plan for the future. There are only so many deductions and credits that can be taken advantage of without planning. Take some time with your client to analyze their current, past, and future tax and financial situation and determine where they can save on their taxes in the future.

These are 10 of the most common mistakes first-year CPAs often make. By focusing on the needs and goals of each client, and by following the suggested practices of both the National Association of State Boards of Accountancy (NASBA) and the American Institute of CPAs (AICPA), you will be acting well within your professional limits and will almost always satisfy your client(s) or employer.

–Grant Webb, Bisk Education. Bisk has been training accountants and financial professionals for more than 40 years. For questions or comments, Grant can be reached on Twitter @grantwebb2.


Implications of New Accounting Standards

Accounting standards are modified on a regular basis and several changes will affect your analysis of financial statements in the coming months.  To put them into perspective, you might first ask yourself some other questions:

  • How does your organization approach such changes in accounting standards?
  • What does that say about your investment process?

Continue reading "Implications of New Accounting Standards" »


Majority of US Finance Professionals Expect the Global Economy to Stagnate or Deteriorate

EfinancialCareersIs it time to stop thinking globally, and to start focusing locally? That’s more or less the consensus among more than 3,700 professional accountants who believe not only has international trade continued to dry up, but that the global economy will continue to erode while those industries that focus domestically will inspire greater confidence.

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‘Tis Always the Season for CPAs


For finance professionals with a CPA and an auditing or consulting background, it couldn’t be a better time to look for a new post, says Drew Reina, managing director for Accounting Principals, an accounting and finance recruitment and staffing firm.

Whether it’s a role in compliance, corporate finance, risk or internal audit, CPAs with a Big Four pedigree appear to be layoff proof. According to Reina, internal auditors are certainly in great need, and many of his clients are looking for people with three to seven years of experience.

“There’s a lot of growth in that area, and there’s a consistent response from my clients," he tells eFinancialCareers.

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2011 Brings Financial Statement Changes

Although the US Securities and Exchange Commission has yet to make up its mind on whether the US will abandon US Generally Accepted Accounting Principles (GAAP) in favor of the International Financial Reporting Standards (IFRS), that doesn’t mean financial statement accounting is standing still. Rule changes and clarifications by various US based accounting standards boards affect a number of areas in US financial statements.

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Solutions for Hedge Fund Managers Considering the GIPS Standards

Although the GIPS standards do not address the particular challenges of hedge funds, claiming compliance is possible and increasingly important for hedge funds. Creation of a client presentation, the process and frequency of portfolio valuation, and net performance stream calculation methodology are some of the issues hedge funds tackle in claiming compliance.

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Financial Reporting Issues Crowd Agenda

To say that vital financial reporting issues are clamoring for attention is a major understatement. Not only are huge accounting convergence projects underway with the Financial Accounting Standards Board (FASB) and International Accounting Standards Board (IASB), but controversies surrounding such issues as bank window dressing and underfunding of public pension are also hitting the business pages.

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CFA Prep Podcast: IFRS Dominates CFA Curriculum

CFA Exam Prep PodcastIn this clip from the CFA Level I Sample Class, instructor Andrew Spieler addresses how the financial reporting transition from US GAAP to IFRS will have a large effect on the CFA Level 1, Level 2, and Level 3 exams. “IFRS is now the dominate part of the CFA curriculum,” Spieler notes. CFA students will need to be prepared in order to manage this transition in the exam.

CFA Podcast: IFRS Dominate CFA Curriculum

EU Banks Sovereign Debt Mystery Deepens

EU Banks Sovereign Debt Mystery Deepens
Just when you thought it was safe to trust European banks again, the Wall Street Journal analyzed recent EU bank stress tests and found that a number of banks underreported their sovereign debt liabilities. Many investors, and EU regulators, were hoping to put the Greek debt crisis in firmly in the rear view mirror, but given the spotty nature of the bank’s disclosures, this may heighten concerns, rather than put them to rest.

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Current Major Differences Between IFRS and US GAAP

At last year's meeting in Pittsburgh, Pennsylvania, representatives of the G-20 renewed their commitment to complete convergence in accounting standards by June 2011—less than two years away. While the group did not explicitly propose worldwide adoption of IFRS (International Financial Reporting Standards), that is the implication, because it hardly seems likely that the rest of the world will drop IFRS in favor of GAAP (US Generally Accepted Accounting Principles). The following table offers a side-by-side comparison of the two standards. 

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SEC in a Quandry over Its Push for IFRS

Illustration by Mark Andresen The seemingly unstoppable juggernaut of US IFRS (International Financial Reporting Standards) adoption has collided with the global financial crisis, one of the few barriers that may be capable of derailing the rush to a single international accounting standard. Adoption of IFRS in the US is now far from a given, and even the roadmap published by the US SEC (Securities and Exchange Commission) in November 2008 has the potential to be sidetracked or possibly abandoned now that President Obama’s administration has taken office.

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Some Mark-to-Market Concerns about Liquidity

This article is in response to Neil O'Hara's "The Unfair Attack on Fair-Value Accounting."

In early April of 2009, FAS 157, the mark-to-market accounting statement, was amended amid great controversy. Depending on the categorization of an asset (as belonging to one of three “levels”), FAS 157 had required firms to value financial assets on a mark-to-market basis. Level three assets such as mortgage-backed securities and collateralized debt obligations were subject to this requirement, even though, unlike traded securities, they did not benefit from liquid markets. The new rule gives firms greater discretion as to how level three assets are valued, and allows them to take into consideration the illiquid market for these securities.

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The Unfair Attack on Fair-Value Accounting

Illustration by Mark Andresen The blame game for the financial crisis has no limits. In an effort to divert attention from their own culpability, bankers who took risks they did not understand and politicians who encouraged mortgage lending to people with shaky credit have pointed the finger at the accountants. Banks faced with severe losses on their structured debt portfolios and other securities pressed regulators to suspend accounting policies that oblige the banks to record these holdings at fair value, which usually means the current market price.

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An Update on Changes to Financial Statements

Michael Moran, of Goldman Sachs’s Global Markets Institute, kicked off January’s “Changes to 2009 Financial Statements” (an event sponsored by NYSSA’s Improved Corporate Reporting Committee), and he could not have given us a more timely presentation on accounting for transfers of financial assets if he had read an advance copy of the Valukas Report on Lehman Brothers. 

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The G-20 Agenda for Regulatory Reform

Meeting behind impressive security barricades in a revitalized Pittsburgh, Pennsylvania, representatives of the G-20 (Group of 20) nations announced agreements in principal on a number of fronts, including financial services regulation, stimulus efforts, global trade, reallocation of IMF (International Monetary Fund) shares, and rebalancing national economies. The group affirmed its new standing as the global economic forum of record, formally eclipsing the G-7 (Group of 7) and the G-8 (Group of 8).

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A Centralized Solution: Securitization, Rating Agencies, and the Path to Meaningful Reform

The financial crisis has brought to the fore, and indeed accentuated, the inadequacy of both regulatory bodies and our efforts to measure and mitigate risk throughout the financial system—particularly within the realm of structured finance, or securitization. While it is easy to criticize the performance of various market participants, it would be more productive to contemplate the underlying themes that emerged in the wake of this recent crisis. If we can accurately identify the root causes of the problems, we will be better positioned to resolve them.

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A Comparison of the Returns Performance for Reported and Revised Measures of Cash Flow

Cash_Flow_Analytics_webTraditional measures of cash flow are typically based on GAAP-defined calculations of operating cash flow. However, as documented extensively in Financial Warnings (Mulford and Comiskey, 1996), The Financial Numbers Game: Detecting Creative Accounting Practices (Mulford and Comiskey, 2002), and especially, Creative Cash Flow Reporting: Uncovering Sustainable Financial Performance (Mulford and Comiskey, 2005), cash flow measures based on GAAP are easily open to manipulation and, because they exclude the implied cash effects of non-cash transactions, are often misleading. 

Continue reading "A Comparison of the Returns Performance for Reported and Revised Measures of Cash Flow" »


Mending the Seams: International Regulatory Reform

Illustration by Mark AndresenAs the global economy begins to find its way back from the brink following the financial crisis, the impetus is shifting from the day-to-day efforts to keep the system afloat to the long-term fixes that are needed to maintain and increase its stability and flexibility. All eyes are on the national governments and regulators who continue to shape a structure that either will be up to the task of managing an increasingly globalized economy or will fall short of the mark, resulting in the lack of a sustainable recovery, further crises, or both.

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Revisiting StoneRidge: Congress Could Restore Aiders' and Abettors' Liability

A bill introduced to Congress this past summer, and subsequently handed over to a Senate subcommittee for further consideration and/or revisions, could reverse a hotly debated January 2008 US Supreme Court decision. That decision, Stone-Ridge Investment Partners LLC v. Scientific-Atlanta Inc., upheld a lower appeals court’s April 2006 decision that secondary participants in a corporate fraud cannot be held legally liable for their behind-the-scenes participation in the scheme. Their actions, the high court reasoned, were simply too far removed from and could not have been known by investors.

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Entrepreneurial Tip Corner: Ethics is the Cornerstone Principle for All Professionals

Someone once remarked, after seeing a long putt of mine barely drop into the hole for a birdie, “Gravity, not just a good idea, it’s the LAW”. Yes, this was a corny remark, but it certainly can be related to ethics within the professions. Ethics is not just a good idea; it’s the LAW for CFA® charterholders and the CPA profession, as well as many other professions.

Continue reading "Entrepreneurial Tip Corner: Ethics is the Cornerstone Principle for All Professionals " »

Keeping Up With Styles

Standard & Poor'sWhile there is no universally accepted definition of “growth” or “value,” and there is much debate about the merit of adhering to style boxes, style benchmarks serve important benchmarking, risk management, and asset allocation needs by measuring style box movements in a manner congruent with broadly accepted definitions of style factors. Periodic reviews and incremental adjustments at intervals of 5 to 10 years provide a basis for style benchmarks to stay relevant through time. 

Click here to find a case study on the periodic recalibration of style benchmark factors.


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January 7, 2016

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