Financial Accounting

Managerial and Financial Accounting Report

"Businesses exist because accountants facilitate them (Brower, 2006)." There are two different types of accountants, managerial and financial. There are many similarities and differences between these closely related professions. Managerial accountants are governed by the Institute of Management Accountants and financial accountants are governed by the American Institute of Certified Public Accountants. During the course of this paper the similarities and differences of financial and managerial accountants will be discussed. In addition, the code of ethics of the Institute of Management Accountants will be explained and the reports each type of accountant prepares will be described.

The main differences of managerial and financial accountants are the people they prepare accounting reports for. Managerial accountants are the accountants that provide information and reports to people inside the organization. Without managerial accountants, managers would not have the information to make informed decisions about the company. Financial accountants are the accountants that provide information and reports for people outside the organization. Investors need reports and information in order to make educated investing decisions and governing bodies need reports and information in order to enforce laws and accounting regulations. The two sides of the profession are similar because they are both interested in presenting the company in the best possible financial light. In recent years ethics in accounting has become a major topic in the profession. It has become so important due to the recent accounting scandals. Because of these scandals and the importance of ethics, both sides of the profession have rules and codes of ethics and conduct the group members must adhere to in order to maintain their certification. Reporting is another area that managerial and financial accountants differ. Managerial accountants prepare reports for their company's management. They prepare budgets, cost flow analysis, and profitability forecasts, just to name a few. Financial accounts prepare audited financial statements, tax returns and many other analytical type reports for investors and government bodies.

The Institute of Management Accountants and the American Institute of Certified Public Accountants both have their own standards of ethics that members have to follow in order to be considered ethical and fair. For the purposes of this paper, the focus will be the Institute of Management Accountants standards of ethics. As a professional organization, the AICPA helps CPA's live up to their time-honored commitment to public interest. (The CPA Letter, July 2006). The Institute of Management Accountants has four standards of ethics that must be followed by the group members. The Institute of Management Accountants website lists the standards as follows: competence, confidentiality, integrity, and credibility. The first standard, competence, is explaining that group members must have a certain level of professional knowledge in order to perform their job accurately and timely. In order for members to keep up to date with the changing accounting rules, they must frequently participate in further education beyond the requirements for certification. The second standard, confidentiality, is telling members that they have to keep client information confidential unless a legal or government body requires the information. The third standard, integrity, is explaining that members should avoid conflicts of interest and to always keep the businesses best interest in mind