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Subject Topic: * Is the CPA for me? (Topic Closed Topic Closed) Post ReplyPost New Topic
  
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db729
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Joined: 22 Apr 2010
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Posted: 10 Sep 2012 at 16:50 | IP Logged  

ebitda wrote:

Another thing I should bring up is capital budgeting, which involves financial modeling to see whether a project or capital expenditure is worth undertaking. At my company, this is a broad function that falls under the general corporate finance department, and I believe some of it is done by the business development group. You will be calculating NPV's, IRR's, and all that good stuff, which I'm guessing is the kind of modeling you're talking about. A CFA is good to have for these, but it also probably depends on how heavy the modeling is (i.e., does it require the skills of an investment banker, or are general skills sufficient?) and how often the company needs this type of work done (e.g., daily analysis or on an ad-hoc project basis).

While it would be cool to have a job that explores them all, in reality I don't know of too many jobs where you can wear multiple hats like that, especially larger companies, where the functional departments usually have a fine line of who does what. It might be different for different people, but I was using my company as a model, so I hope it gives you a good idea about what to expect.



ebitda is pretty spot on with what he said. Any type of analysis work for purposes of evaluating whether a transaction makes sense (whether it's for CapEx, divestitures, acquisitions, etc), a CPA isn't very helpful at all. Typically these responsibilities fall under the Corporate Finance (i.e. Corporate Development or Business Develoment) or sometimes Treasury department, which tends to be filled with ex-bankers and occasionally ex-consultants. It's because 1) CPAs/Big4 have no transactional experience, meaning they've typically never been involved in any of those type of work, especially when it comes to acquisitions. The only CPAs that come remotely close to working on a M&A are the Transaction Services/Transaction Advisory Services of Big 4, but even then they're involved in supporting accounting due diligence. They really not involved in actual valuation or M&A process. 2) Accountants can't model and have very little knowledge of corporate finance and valuation concepts. You might know a little from classes, but no real experience.

I've also never really seen any jobs that let's you wear multiple hats like that. I've seen FP&A guys eventually move into a CorpDev role, but that's pretty rare, usually after years of experience and promotions. I think I've only come across one instance where a Big 4 TS/TAS senior manager go into CorpDev. But yeah like I said, typically filled with ex-bankers or ex-consultants (although ex-consultants tend to gravitate towards business development than corporate development).

Virgil wrote:

In fact, the ex director of internal audit (not a CPA, but MBA-Finance)
was promoted and assigned to Corp Develop director. They eventually
hired an ex-Big 4 CPA for the internal audit director. So the CPA in
that company was viewed much like an accounting designation.

I also spoke to someone years ago that told me they preferred not to
hire accountants/auditors to Financial Analyst roles because of their
lack of familiarity with finance, and their propensity to struggle with
financial modeling.


Also very true. Not sure why someone with MBA-Finance decided to go into IA- why waste $200K to go to MBA when you could have just done Big 4 + CPA for the Internal Audit position. Then again, he did move into Corp Dev, which is probably what he wanted to do with MBA (I digress). Point being, Big 4 + CPA has always been a very common path into IA like Virgil mentioned. I always see either someone start in IA out of school through on campus recruiting or go into IA from public accounting.

For the record, accountants really do suck at financial modeling and lack familiarity with finance. Not necessarily a bad thing, but you just don't come across that type of work in Big 4 or in industry accounting department. When I was doing audit, any type of valuation work was done by 3rd party specialist or our internal Valuations department. The auditors just "signed off" on the numbers if it came from a reputable source and it tied to the financials. A manager or above might have a decent grasp of what the valuations mean at a high level, but I doubt they'd understand the mechanics of the inputs and how it affects the outputs.
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Virgil
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Joined: 24 Sep 2011
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Posted: 13 Sep 2012 at 02:08 | IP Logged  

"Not sure why someone with MBA-Finance decided to go into IA- why
waste $200K to go to MBA when you could have just done Big 4 + CPA
for the Internal Audit position"

He went to a small school in a small market.

"Then again, he did move into Corp Dev, which is probably what he
wanted to do with MBA "

Yup. The IA role is considered a springboard position into other parts of
the company. Little weird independence-wise, but great if you want to
move laterally.

"For the record, accountants really do suck at financial modeling and
lack familiarity with finance."

Ugh...do we ever. Apparently, even the valuation work done at a Big 4
is mediocre compared to the top dogs.

"I've also never really seen any jobs that let's you wear multiple hats
like that."

I've seen it a couple of times in small public companies. IA to Treasury,
IA to Corp Develop., Corp Develop to Controller/Corp. Develop Lite.
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