About the expert
Dr. Linda Burilovich is a CPA and professor of accounting at Eastern Michigan University. Previously, she spent five years in a field auditor position with the Internal Revenue Service.
Burilovich has been published in The Tax Adviser.
Question #1: Many students initially aren't sure about the differences between accounting and finance. In your opinion, what is the primary difference between the two?
"The primary difference between accounting and finance is best described by considering their major functions within a business environment. The role of the accountant is to facilitate credible and useful disclosures of information used by management, and external stakeholders such as shareholders, creditors and regulatory agencies. Certified Public Accountants attest to the credibility of information contained in the financial statements of a company. To do this, they perform an audit, which is essentially a series of tests to provide assurance that the information disclosed by the company regarding its assets, liabilities and income is reasonably accurate. The accountant must be concerned with the safeguarding of financial records and assets. This is known as Internal Control and must be closely examined when an accountant is preparing to attest to the credibility of a company's financial statements. Because of their close examination of financial data, accountants also assume the role of tax preparation. Most of the information provided in published financial statements is also used to prepare a company's tax returns. Thus, this function naturally falls to the accountant. In addition to auditing and tax, some accountants are experts in managerial accounting which involves the production of information to be used in various manufacturing and budgeting decisions. These accountants must become familiar with a company's manufacturing process in order to provide the appropriate information used in making these decisions.
Financial analysts and executives are concerned with the management of assets (primarily financial assets) in such a way as to maximize wealth and maintain solvency. Meeting these objectives requires skill in the area of budgeting, investing, portfolio management and protection of assets. The financial analyst must make decisions as to what are the best investment alternatives. This means they must be well trained in evaluating risk and return and able to determine the best use of assets to yield the highest return or profit. These skills can be employed in managing the assets of a company or brokering for individual investors. Financial advisers often work with individuals to develop financial planning that will manage their wealth through retirement and estate planning.
Although the role of accountants and financial executives differ within the functions of business, they are closely related. The financial analyst often relies on information that is produced by the accountant and thus there is a significant interaction between these two disciplines."
Question #2: How might these differences affect student's education and career paths after graduation?
"Finance majors are generally eligible for jobs as stock brokers, budget analysts, financial analysts (of companies or markets), treasurers and many positions available in the banking industry. In addition, finance specialists tend to move to executive positions in the corporate environment.
Accounting majors are generally eligible for jobs as an auditor, a tax specialist, or a consultant. The career path of an accountant is ultimately influenced by whether they become a CPA. This designation allows them to conduct audits and attest to the credibility of financial information. Because they acquire unique knowledge of the inner-workings of a business through the process of producing or auditing the financial information of a company, accountants are often asked to consult on various processes and transactions that are significant to the success of business. This broad exposure to all facets of a business has resulted in many accountants becoming CEOs. Accountants are also sought after by many government agencies, especially the Internal Revenue Service and General Accounting Office."
Question #3: What do you think are the skills that are the most important for accounting or finance majors to be successful in their respective careers OR educational careers?
"It is most important for business professionals to have good communications skills. This is especially true for accounting professionals who must not only communicate effectively with clients but readily interpret the rules that apply in various business settings. For example, financial statements must comply with Generally Accepted Accounting Principles, tax returns must comply with the Internal Revenue Code and its underlying regulations, and other regulatory reports are often governed by legal rules that must be interpreted in the process of their preparation.
Other necessary skills include a proficiency in technology and good understanding of quantitative analysis. Students who also develop their interpersonal skills and professional profile ultimately tend to have the most career success. Two areas that have acquired significant prominence over the last decade include global awareness and a set of ethical values. In both accounting and finance there must be a continuing personal development in these areas if an individual wishes to pursue a successful career in today's business environment."
Question #4: What advice would you give to students preparing for the CPA exam or CFA exam?
"Best advice -- Study, study, study! It is generally best to take either of these exams as soon as possible after completing the educational requirements to sit for the exam. It should be understood that most students who pass these exams also complete a review course prior to sitting for the test. These courses are focused on the specific areas to be tested. Review courses usually include practice exams which are important, not only because they test the student's knowledge of exam material, but because they provide opportunity to become accustomed to working at a pace that will allow completion of the exam within the allotted time.
The CPA Exam includes four major areas of testing: Auditing and Attestation, Business Environment and Concepts, Financial Accounting and Reporting, and Regulation. These four sections represent a total of 14 hours of testing.
The CFA Exam includes sections that test ethics, securities analysis, corporate finance, economics, quantitative methods, financial reporting and analysis, equity investments, fixed income, derivatives, alternative investments, portfolio management and wealth planning. It is offered annually at test centers in June and progressive levels must be passed sequentially."