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The importance of credentials in public accounting.

Currently, in the practice of public accounting, the role of professional credentials has become increasingly important. In practice, we compare compensation and client impact as methods of judging our credentials. Whether a certified public accountant (CPA), public accountant (PA), enrolled agent (EA), accredited tax advisor (ATA) or accredited tax preparer (ATP), it is only natural that this question from time to time would arise.

We are living in a rapidly evolving society. If one were looking for a method of selecting a qualified individual, the question may naturally be, "Does the individual have professional licenses or means of showing his or her professional status?" In this regard, the public accountant would fair much better with credentials.

It is my expressed opinion that in our society, the professional credentials are invaluable as a means of communicating to the general public and all others that one is a competent, qualified person. The credential is the starting point and in a nutshell tells others the individual has technical training and has proven his/her competency. Professional credentials in public accounting are important for numerous reasons. To start, these credentials are recognized by the federal and state governments. It is not that mere recognition makes one infallible or gives one special powers but rather the credential is a reference point or benchmark in order that the government may know with whom they are dealing.

Another element has to do with identifying the general type of work the individual does. It sets the accountant apart as one dealing with financial matters rather than retail or production. Along with recognition and identification, professional degrees or certificates are important for other reasons. They indicate to others that one is qualified, either through formal education or on-the-job training. Education is a critical step in earning a credential. Additionally, most professionals with credentials are required to continue their education. To maintain credentials, one must keep abreast of current developments in the field of accounting and up-to-date on what is "going on" in the profession. Seminar attendance along with class sessions not only keep one up-to-date but also give an advantage over others without this training. Credentials help to make this readily apparent. The last element, and one not to be overlooked, is that most certificates require that the individual be ethical and of good character. This ingredient strives to provide the public with the very best people in the field and disciplines those who would choose to disregard the rules. It is interesting to note that credentials even tell others of one's character and behavior. As we view the importance of our professional credentials in public accounting, let's take a look at four areas:

1. The enrolled agent,

2. The practicing accountant,

3. The student of accounting and

4. Accreditation.

These areas are subtitled as case studies for easy reference.

The Enrolled Agent

Let's take a brief look at the term "agent". Historically, this term was used to designate an employee of the Internal Revenue Service who went about auditing records and tax returns of businesses and individuals. Over the years it has maintained a somewhat negative connotation as an agent's report usually meant additional tax, interest and penalty. This negative connotation, unfortunately, has been carried over to the enrolled agent. In reality, the enrolled agent is not employed by the Internal Revenue Service but rather by the taxpayer. He or she represents clients before the IRS in the capacity of a "referee". He or she sits in on an audit to ensure the taxpayer's rights are being upheld, and blows the whistle on any aspect which seems unfair or in which an unfair advantage may be taken. Often, the mere presence of the enrolled agent gives confidence to the taxpayer and alerts the auditor that a knowledgeable person is present who will advise the taxpayer of tax terms, rights and obligations under current tax law.

The enrolled agent's duties include helping the taxpayer prepare financial statements presented to the IRS, negotiating payment arrangements and keeping the taxpayer aware of new developments in regard to his tax situation. The enrolled agent performs a unique and necessary function.

The second aspect of this case study is found in the question, what is an enrolled agent? To answer this question, some background information is necessary. At the outset, to become an enrolled agent, one must pass a two-day examination covering federal taxation. The exam itself is broken down into four parts covering

a. Individuals;

b. Sole Proprietorships and Partnerships;

c. Corporations, Fiduciaries, Estate and Gift Tax; and

d. Ethics, Recordkeeping Procedures, Appeal Procedures, Exempt Organizations, Retirement Plans, Practitioner Penalty Provisions and Research Materials and Collection Procedures.

This exam is given once a year by the Internal Revenue Service. From the titles on the exam, one can easily see that it is a most thorough testing of one's knowledge of federal taxation. Incidentally, it is interesting to note that the fail rate on this exam is nearly 75%. After passing this exam, the individual is issued a certificate and an enrollment card by the Treasury Department. Also, continuing education requirements in taxation are mandatory to keep this credential and registration is every three years.

From this brief look at the enrolled agent, one can gain a better understanding of a relatively new status in the field of accounting. Perhaps, one may even say enrolled persons are somewhat of a specialty in public accounting.

The Practicing Accountant

A young man or woman becomes interested in public accounting. He or she goes to school to learn more about accounting and continues to grow in knowledge of the field. It is inevitable somewhere along the line that the question of credentials will be brought up. An accountant's credentials are as important to him as the term "doctor" is to the medical person. It tells others about the type of work he does, the areas in which he is interested and it separates him or her from other areas of work. In this article, my purpose is not to qualify one certificate as better than another, but rather to suggest to persons in public accounting the importance of having credentials.

What does a practicing accountant do? The myths, misunderstandings and misconceptions are apparent everywhere. In fact, it is extremely difficult to stereotype the accountant in all situations to everyone's approval. And yet, everybody knows what an accountant does! Or, do they? The basic elements of accounting suggest involvement in auditing, tax preparation, write-up work and a wide variety of related tasks. However, the question has been raised as to whether professional credentials are needed to accomplish these tasks. I sincerely believe they are. As the accountant goes to work each day, people see him as a respected member of the community. They know basically what he does and often he is asked questions about his work. The mere mention of the fact that he is certified, licensed or accredited gives him a plus to others that he is knowledgeable, educated and aware of current trends.

The Student of Accounting

Most college business curriculums require at least one course in accounting. At the elementary level, the student is exposed to some of the fundamental elements of basic accounting. Terminology is introduced which will be invaluable as the student progresses through his studies and enters the business world.

For the student who continues in the field of accounting, what types of credentials are available and what do they mean in the job market? At this point, let's list some of these credentials and then proceed to consider some of the elements of each.

1. CPA - these are initials for Certified Public Accountant. To acquire this title, the candidate must pass a uniform examination and meet other educational and experience requirements.

2. PA - these initials stand for licensed Public Accountant. In some states, this certificate was awarded to individuals who demonstrated experience in public accounting and had a certain educational background.

Both the CPA and PA certificates require continuing education credit hours to maintain these certificates/licenses.

3. Enrolled Agent - this title, issued by the Treasury Department, is awarded to candidates who have passed a two-day exam covering-four subject areas dealing with federal taxation. Upon passing the exam, a certificate is issued and continuing education credits in taxation are required to maintain this certificate.

4. Accreditation - this title is issued by a joint affiliation of the National Society of Public Accountants, ACAT and the College For Financial Planning. Currently, two certificates are available - the Accredited Tax Preparer and the Accredited Tax Advisor.

5. Educational Certificates - in accounting, a term being used is "business administration." Hence, the student may acquire a bachelors, masters or doctorate degree in business administration.

What does a student of accounting need to know about accounting as he or she enters the job market? As a practitioner for over twenty-five years, I would suggest some common elements which would be helpful. It would be well if the student knew the following:

1. Once the student has chosen public accounting as his career, does he or she want to work for a small company or a large company?

2. A thorough knowledge of accounting terminology blended with computer terminology.

3. A solid background in fundamental bookkeeping. Familiarity with terms such as chart of accounts, balance sheet, trial balance, debits and credits, subsidiary journals and ledgers. Also, some on-the-job experience would be very helpful.

4. The knowledge of business machines. This would include typewriters, word processors, calculators and some specialized computer training.

5. An understanding of general business and some specialized information about business.

6. He or she should visit a local accounting firm and ask for a short interview to get an idea of what is happening here.

These suggestions should be helpful to the accounting student.

The knowledge of public accounting should be blended with a respect for professional credentials and the time and effort needed to acquire them.


Let's briefly take a look at this credential. Suppose you were looking for some type of recognition in your field. You want others to know that not only are you an accountant but also, a knowledgeable, good one. The College For Financial Planning is one of the most respected organizations in our country. As the name suggests, this educational facility located in Colorado, deals with financial planning. This school licenses CFPs (Certified Financial Planners). The six areas dealt with in financial planning are:

1. Personal Money Management

2. Risk Management

3. Income Tax Planning

4. Investments

5. Retirement Planning

6. Estate Planning

Quite a body of specialized information! The College for Financial Planning is one of the organizations which awards the accreditation certificates. The Accreditation Council for Accountancy and Taxation is the other organization. Together they form an accreditation committee which awards the Accredited Tax Preparer and Accredited Tax Advisor certificates and accounting. To summarize, professional credentials are important to the public accountant. The four case studies we have seen give us a glimpse into public accounting today and demonstrate the importance of our professional credentials. One needs to go forward with a better understanding of accomplishment and continuing need to serve others as a "public accountant" and a person interested in the common good for all.

John R. Williams is a member of the National Society of Public Accountants with a degree in business administration from the University of Indianapolis. Enrolled to practice before the IRS, he is also an accredited tax advisor and tax preparer. He has been in public practice for more than 25 years, and has maintained his PA licensed in Indiana since 1970.
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Author:Williams, John R.
Publication:The National Public Accountant
Date:Sep 1, 1992
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