Are you looking for an oversimplified yet comprehensive comparison on public vs private accounting? You’ve come to the right place.
This guide will look at:
- The definition of public and private accounting and
- The difference between the two subfields
Your decision to pursue a career in accounting most likely comes down to a few major factors, including your goals, personality trait, and overall expectations. Therefore, by learning about the differences between public and private accounting, it becomes easy to determine which career path would be suitable for you.
Let’s get started.
Key Takeaways
- Public accounting focuses on the financial documents that an entity must disclose to the public.
- Private accounting focuses on the financial information within an organization, individual business, or large corporation.
What is Public Accounting?
Public accounting requires an accountant to act as an impartial intermediary. He or she collaborates with multiple companies to scrutinize the financial statements that must go public.
In addition, public accountants assist in the preparation of financial statements, not to mention that they must ensure they provide an accurate and unbiased representation of the client companies’ financial results, position, and cash flows.
The primary objective of a public accountant is to validate financial documents, reports, and disclosures from an external standpoint.
To work as a public accountant, you must hold a Certified Public Accountant (CPA) certification, which is a solid evidence that you possess the necessary qualifications and expertise to fulfill the responsibilities associated with public accounting.
What is Private Accounting?
In private accounting, a company hires an accountant internally to serve as a managerial role, and the work of this accountant is to prepare and analyze the company’s financial statements.
The primary focus of a private accountant is to:
- Establish and maintain internal systems that record business transactions, which ultimately form the foundation for the preparation of financial statements.
- Dedicate their efforts to the specific company they are employed by.
However, third-party public accounting firms can review and audit the financial statements prepared by these private accountants.
The validation performed by these external parties serves as an independent assessment to ensure that the company’s internal accounting practices comply with reporting standards.
By undergoing this review process, private accounting practices gain credibility and provide stakeholders with an added level of assurance regarding the accuracy and reliability of the financial information presented.
What are the Differences Between Public and Private Accounting?
The following table is a summary of the differences between public and private accounting:
| Public Accounts | Private Accounts | |
| Training | Trained to analyze accounting systems and validate financial disclosures | Skilled in recording accounting transactions that form financial statements |
| Educational Qualification | Certification as a CPA is mandatory | Not mandatory to be a CPA, but it’s an added advantage. |
| Travel Requirement | He or she may have to travel to client locations. | He or she typically works in a fixed location. |
| Client Profile | A public accountant has the freedom to serve a diverse range of companies. | He or she works in a specific company as an internal accountant. |
| Work Environment | Often works long hours to meet strict deadlines | Maintains a relatively stable and regular work schedule |
| Character Traits | Proficient in conducting client interviews | Proficient in communicating with various departments within the same company |
Public vs Private Accounting: Key Differences Explained
Now that you have a clear overview of public and private accounting, look at the characteristics that set the two professionals apart.
1. Training
Public accountants undergo training to acquire the skills necessary to analyze the accounting systems and validate their financial disclosures.
They are also required to have a strong understanding of the accounting standards that govern the preparation of financial statements for client companies.
Private accountants receive training that focuses on developing expertise in recording various accounting transactions, such as billings, accounts receivable, and accounts payable.
However, due to the specific nature and scope of their work, the knowledge of private accountants may be limited to certain areas of accounting.
In other words, private accountants may not have comprehensive exposure to all aspects of the accounting profession.
2. Work Environment
Public accountants often gain experience by working with numerous client companies. Along the way, they develop their expertise across different industries.
On the other hand, private accountants focus on the accounting needs of a specific company, resulting in deep knowledge about the industry they serve but limited exposure to other industries in the external environment.
3. Nature of Work
The nature of work for public accountants often involves travel to client locations and long hours to meet demanding deadlines.
On the other hand, private accountants typically have a stable work environment with minimal or no travel, which means they have to adhere to regular work hours at a fixed location.
Public accountants may start their careers as entry-level accountants and progress through senior positions, eventually reaching senior management roles such as an audit partner within the firm.
Private accountants, similarly, begin at entry-level positions but can advance to senior management positions within the company.
4. Accounting Certification
Certification as a Certified Public Accountant (CPA) is a requirement for public accountants, whereas private accountants are not necessarily required to hold a CPA certification.
However, there are other certifications available for private accountants that can enhance their professional credentials.
Final Thoughts
The divergence between public and private accounting becomes evident in the skills developed by fresh graduates who embark on each career path.
Despite their differences, both categories involve similar job activities, skills, and educational requirements.
We hope this post has helped you to understand the differences between public and private accounting. If anything, now it should be easy for you to determine which area to focus your attention and grow your career. And if you need help with accounting, don’t hesitate to get in touch with us.