What Is a Public Accounting Firm and What Do They Do?

Public accounting firms provide financial and advisory services to businesses, individuals, and other entities. These independent firms offer expertise to help clients manage financial health and navigate complex regulatory environments. Their work supports informed decision-making and contributes to financial transparency and stability in the marketplace.

Understanding Public Accounting Firms

Public accounting firms are independent professional service organizations, offering specialized financial expertise to a diverse external clientele. Their fundamental role involves upholding financial transparency and integrity. A defining characteristic is their strict adherence to independence, meaning they avoid conflicts of interest with clients. This ensures their financial opinions and advice remain unbiased and reliable for stakeholders who rely on accurate financial reporting.

Professionals within public accounting firms are Certified Public Accountants (CPAs), licensed individuals who must meet rigorous education, examination, and experience requirements. CPAs are bound by a stringent code of ethics, such as the American Institute of Certified Public Accountants (AICPA) Code of Professional Conduct, which mandates principles like integrity, objectivity, and professional competence. This commitment to ethical conduct and independence distinguishes public accounting firms from internal accounting departments, which primarily serve a company’s internal management needs. Public accounting firms provide a crucial layer of assurance that financial information is credible and adheres to established accounting principles and regulatory guidelines.

Key Services Provided

Audit and Assurance Services

Audits involve an independent examination of a company’s financial statements to express an opinion on their fair presentation according to a financial reporting framework like Generally Accepted Accounting Principles (GAAP). These engagements provide stakeholders, such as investors and lenders, with confidence in the reliability of reported financial information. The audit process includes evaluating internal controls, testing transactions, and reviewing financial disclosures. Beyond full financial statement audits, assurance services encompass reviews, offering a lower level of assurance, or agreed-upon procedures tailored to specific client needs. Publicly traded companies are legally required by federal securities laws to have their annual financial statements audited by independent public accounting firms.

Tax Services

Tax services assist individuals and businesses in navigating complex federal, state, and local tax regulations, aiming for compliance and efficiency. This includes preparing tax returns for individuals (Form 1040) and corporations (Form 1120). Public accounting firms also provide strategic tax planning advice, helping clients structure financial activities to optimize tax outcomes within legal frameworks, identifying opportunities for deductions and credits. They advise on the tax implications of significant financial events. These firms represent clients during tax examinations or disputes with tax authorities like the Internal Revenue Service (IRS).

Advisory/Consulting Services

Advisory services extend beyond traditional accounting functions, offering strategic guidance to improve business performance and address complex challenges. This involves areas like risk management, where firms help identify and mitigate financial or operational risks. They also assist with technology implementation, guiding clients through new software adoption to enhance operational efficiency. Other advisory offerings include business valuation for mergers and acquisitions, forensic accounting to investigate financial fraud, and financial planning for individuals or corporate entities.

Internal Structure and Professional Roles

Public accounting firms operate with a hierarchical structure that supports professional growth and efficient service delivery. Entry-level staff accountants perform detailed tasks like preparing workpapers, verifying transactions, and assisting with data collection for audit or tax engagements. They learn foundational accounting principles and firm methodologies under supervision.

As professionals gain experience and demonstrate competence, they advance to senior accountant roles, where they begin to manage smaller engagements, supervise junior staff, and take on greater responsibility for the accuracy and completeness of workpapers. Managers oversee multiple client engagements, review the work of senior and staff accountants, and serve as primary contacts for client communication regarding engagement progress and technical matters.

Senior managers often handle more complex engagements and may specialize in particular industries or service lines, acting as a bridge between partners and engagement teams. Partners represent the highest level within the firm, responsible for cultivating and maintaining client relationships, business development, and setting the firm’s strategic direction. They bear ultimate responsibility for the quality of services rendered and sign off on audit opinions or significant tax and advisory engagements, ensuring compliance with professional standards and regulatory requirements.

Client Engagement and Industry Specializations

Public accounting firms serve a broad spectrum of clients, ranging from sole proprietors and small businesses to large multinational corporations, government entities, and non-profit organizations. They adapt their services to meet the distinct financial reporting, tax, and advisory needs of each client type, recognizing that a startup’s requirements differ significantly from those of a publicly traded company. Many firms develop specialized expertise in particular industries to better understand and address the unique challenges and regulatory environments prevalent in those sectors.

For example, a firm might have dedicated teams focusing on healthcare, technology, manufacturing, or financial services, with in-depth knowledge of industry-specific accounting rules and tax implications. This specialization allows them to provide more precise, relevant advice and proactive solutions tailored to their clients’ specific contexts. Building long-term client relationships involves understanding a client’s business, anticipating needs, and providing consistent, high-quality service, including insights into emerging trends and regulatory changes.