.01 An independent auditor's report contains an opinion as to whether the financial statements present fairly, in all material respects, an entity's financial position, results of operations, and cash flows in conformity with generally accepted accounting principles. An identification of the applicable financial reporting framework is required (see paragraph .08e of the AS 3101, The Auditor's Report on an Audit of
Financial Statements When the Auditor Expresses an Unqualified Opinion). The purpose of this section is to explain the meaning of "present fairly" as used in the phrase "present fairly . . . in conformity with generally accepted accounting principles." In applying this section, the auditor should look to the requirements of the Securities and Exchange Commission for the company under audit with respect to the accounting principles applicable to that company. [.02]
[Paragraph deleted.] .03 The independent auditor's judgment concerning the "fairness" of the overall presentation of financial statements should be applied within the framework of generally accepted accounting principles. Without that framework, the auditor would have no uniform standard for judging the presentation of financial position, results of operations, and cash flows in financial statements. .04 The
auditor's opinion that financial statements present fairly an entity's financial position, results of operations, and cash flows in conformity with generally accepted accounting principles should be based on his or her judgment as to whether (a) the accounting principles selected and applied have general acceptance; (b) the accounting principles are appropriate in the circumstances; (c) the financial statements, including the
related notes, are informative of matters that may affect their use, understanding, and interpretation (see paragraph .31 of AS 2810, Evaluating Audit Results); (d) the information presented in the financial statements is classified and summarized in a reasonable manner, that is, neither too detailed nor too condensed (see AS 2810.31); and (e) the financial statements reflect the underlying transactions and events in
a manner that presents the financial position, results of operations, and cash flows stated within a range of acceptable limits, that is, limits that are reasonable and practicable to attain in financial statements.1 [.05] [Paragraph deleted.] .06 Generally
accepted accounting principles recognize the importance of reporting transactions and events in accordance with their substance. The auditor should consider whether the substance of transactions or events differs materially from their form. [.07] [Paragraph deleted.] .08 The auditor should be aware that the accounting requirements adopted by regulatory agencies for reports filed with them may
differ from generally accepted accounting principles in certain respects. Paragraph .04 of AS 3310,Special Reports on Regulated Companies, and AS 3305, Special Reports, provide guidance if the auditor is reporting on financial statements prepared in conformity with a comprehensive basis of accounting other than generally accepted accounting principles. [.09-.18] [Paragraphs deleted.]
Specialized fields in accounting have emerged as a result of economic, industrial, and technological developments in business. Let's go through the different branches of accounting and see what they specialize on.
1. Financial Accounting
Financial accounting involves recording and classifying business transactions, and preparing and presenting financial statements to be used by internal and external users.
In the preparation of financial statements, strict compliance with generally accepted accounting principles or GAAP is observed. Financial accounting is primarily concerned in processing historical data.
2. Managerial Accounting
Managerial or management accounting focuses on providing information for use by internal users, the management. This branch deals with the needs of the management rather than strict compliance with generally accepted accounting principles.
Managerial accounting involves financial analysis, budgeting and forecasting, cost analysis, evaluation of business decisions, and similar areas.
3. Cost Accounting
Often times considered as a subset of management accounting, cost accounting refers to the recording, presentation, and analysis of manufacturing costs. Cost accounting is very useful in manufacturing businesses since they have the most complicated costing process.
Cost accountants also analyze actual costs versus budgets or standards to help determine future courses of action regarding the company's cost management.
4. Auditing
External auditing refers to the examination of financial statements by an independent party with the purpose of expressing an opinion as to fairness of presentation and compliance with GAAP. Internal auditing focuses on evaluating the adequacy of a company's internal control structure by testing segregation of duties, policies and procedures, degrees of authorization, and other controls implemented by management.
5. Tax Accounting
Tax accounting helps clients follow rules set by tax authorities. It includes tax planning and preparation of tax returns. It also involves determination of income tax and other taxes, tax advisory services such as ways to minimize taxes legally, evaluation of the consequences of tax decisions, and other tax-related matters.
6. Accounting Information Systems
Accounting information systems (AIS) involves the development, installation, implementation, and monitoring of accounting procedures and systems used in the accounting process. It includes the employment of business forms, accounting personnel direction, and software management.
7. Fiduciary Accounting
Fiduciary accounting involves handling of accounts managed by a person entrusted with the custody and management of property of or for the benefit of another person. Examples of fiduciary accounting include trust accounting, receivership, and estate accounting.
8. Forensic Accounting
Forensic accounting involves court and litigation cases, fraud investigation, claims and dispute resolution, and other areas that involve legal matters. This is one of the popular trends in accounting today.
Focusing on a Specialization
If you want to focus on a specialization, you may want to consider obtaining an accounting certification in your chosen field. It will give you an edge over those who are uncertified. Due to the increasing population and demand for competitive professionals, you need to step it up a little to get recognized.
Some of the most famous certifications include the Certified Public Accountant (CPA), Certified Management Accountant (CMA), Certified Internal Auditor (CIA), Certified Financial Planner (CFP), and Certified Information Systems Auditor (CISA).
Key Takeaways
Branches of accounting:
- Financial accounting
- Management accounting
- Cost accounting
- Auditing
- Taxation
- Accounting Information Systems
- Fiduciary Accounting
- Forensic Accounting
In practice, there are many accounting certifications that focus on specific branches, such as the CMA, CPA, CIA, CISA, etc.
Web link
APA format
Types of accounting / branches of accounting (2022).
Accountingverse.
//www.accountingverse.com/accounting-basics/types-of-accounting.html
Next Lesson
→
Previous Lesson
←
Chapter Outline
≡