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Accounting addresses the measurement, aggregation, and evaluation of economic information useful for decision making. Because decision makers are outside the firm (e.g., shareholders, creditors, regulators) and inside the firm (e.g., managers, auditors, tax professionals), accounting is divided into more manageable areas of study. Auditing uses established methods of testing and confirming financial information prepared by managers and is conducted by an independent third party who attests to the reliability of financial reports that are to be disseminated outside the enterprise. Financial accounting is concerned with the needs of external users of firm-related, audited financial information, which is prepared and presented according to Generally Accepted Accounting Principles (GAAP) in the US or some other authoritative guidance with which the reporting entity must comply. Managerial accounting focuses on the needs of managers in their roles as decision makers, planners, and evaluators of business objectives, relying on internal, proprietary firm information. Tax accounting identifies tactical and strategic issues related to prudent financial planning and cuts across an enterprise's operating and financial activities. Because accounting is the language of business, successful managers must be knowledgeable and discerning consumers of accounting information to understand and present their own business goals and performance and to evaluate and judge other entities from an independent perspective. |
