When deciding upon which field of study to pursue within accounting, the decision may come down to working in public accounting or private accounting. In essence, public accounting involves being an independent third party that examines the financial statements and supporting systems of client companies to see if their financial statements fairly represent the results, financial position, and cash flows of the clients.
Private accounting is entirely different, since it involves setting up systems and recording business transactions that are aggregated into financial statements. Based on these general conceptual views of the two areas, the following differences can be defined between public accounting and private accounting:
Training. A public accountant is trained in the analysis of accounting systems, collecting evidence, and testing to see if assertions are correct. A public accountant also has considerable knowledge of the accounting standards for the accounting framework that applies to the financial statements of clients. A private accountant is trained in the processing of business transactions, such as billings and accounts payable, and his or her knowledge may be limited to the areas of accounting for which they are responsible.
Experience. A public accountant may have experience in multiple industries, depending on the range of clients. A private accountant is more likely to have a limited span of knowledge that may be confined to a single industry.
Certifications. A public accountant may be certified as a CPA (certified public accountant). A private accountant does not require certification, though several certifications are available for private accounting, such as the certified management accountant, certified internal auditor, and certified fraud examiner.
Career path. The career path of a public accountant is to advance through the positions of auditor and audit manager to eventually become an audit partner. An audit partner is expected to manage audit relations and bring in new business. The career path of a private accountant can begin in one of several specialty areas and advance into an assistant controller position, with eventual promotion to controller and then to chief financial officer (CFO). The CFO position is responsible not only for all internal accounting functions, but also treasury, risk management, and investor relations.
Work environment. The work environment for the public accountant can be difficult, since it involves travel, long hours, and sometimes spotty working conditions with tight deadlines. The work environment for private accounting is much more stable, possibly with no travel, a fixed work location, and regular hours.
Resume impact. The name of a large international auditing firm on a person's resume is considered a major career enhancement. This may not be the case for private accounting, since most jobs are with smaller companies whose names are not well known outside of their industries or geographical niches.
Social skills. Both kinds of accounting demand social skills, but of different types. A public accountant must be able to interview clients regarding their systems, and politely discuss possible system failures (essentially criticizing the work of clients). A private accountant needs to work with other parts of the company to develop or revise accounting systems and supporting procedures. The first case can be more confrontational, while the latter case can be more collegial. An introvert working in public accounting can have a more difficult time, due to the social and confrontational aspects of the work.
Job satisfaction. Bluntly stated, many people do not like to work in the public accounting field because they find that passing judgment on the work of other accountants is not fulfilling. Conversely, job satisfaction tends to be higher in private accounting, where accountants are creating business transactions and reporting on the results of a business.
In general, the examination role that is central to public accounting tends to make this area much less satisfying as a long-term career for an accountant, but is useful for obtaining a broad base of experience in the early years of a career. Private accounting tends to be more satisfying, which can lead to longer-term employment.