How bookkeepers differ from chartered professional accountants
Running your own business means being responsible for a variety of functions within your company, including your corporation’s finances and tax compliance. However, many small business owners opt to outsource the management of their corporate finances instead of taking it on themselves.
If this is something you’ve looked into, it is likely that you’ve come across services provided by both bookkeepers and chartered professional accountants (CPAs). In your search, you may have even seen these terms used interchangeably and assumed that one is simply a more expensive version of the other.
In reality, however, bookkeepers and CPAs serve very different purposes. While both work with your financial information, the scope of their responsibilities, professional designations, and authority are not the same.
In this article, we’ll break down what each role does and share the key distinctions between the two.
What is a bookkeeper and what do they do?
A bookkeeper focuses on the day-to-day recording of financial transactions for a corporation. Their role is primarily operational, ensuring that a business’s financial activity is accurately captured and properly recorded.
Typical responsibilities of a bookkeeper include:
- Recording income and expenses
- Reconciling bank and credit card accounts
- Maintaining the general ledger
- Preparing basic financial reports (e.g., income statements and expenses)
- Managing invoicing and bill payments
If provided by a non-CPA, bookkeeping services do not include the preparation or review of financial statements in accordance with accounting standards, tax planning, or the provision of professional judgment. These services fall within the scope of a CPA’s responsibilities, depending on the engagement.
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What is a CPA and what do they do?
A CPA is a regulated, licensed, and insured professional with advanced training in accounting, tax, and financial reporting. Federal and provincial bodies, such as CPABC hold chartered professional accountants to certain standards, ethical rules, and ongoing continuing education requirements.
Typical responsibilities of a CPA include:
- Corporate and personal tax filings and compliance
- Tax planning and optimization
- Preparing or reviewing financial statements
- Performing financial statement audits
- Providing advisory and consulting services related to financial matters, business planning, and strategic decision-making
- Ensuring compliance with financial reporting standards, auditing and assurance frameworks, and the CPA Code of Professional Conduct
In Canada, only CPAs are authorized to issue certain reports (including audit, review, and compilation engagement reports) and provide regulated professional accounting services; however, these restrictions can differ by province. This distinction is critical for businesses that require tax filings, assurance, or the types of reporting noted above.
The key differences between the two
The difference between a bookkeeper and a CPA lies in the authority of the roles, which directly impacts the scope of work that these individuals can do for you. A CPA will also meet rigorous standards for education, experience, ethics, and ongoing professional development, as well as carry insurance. To determine if you should use a bookkeeper or a CPA, learn more about who they are and what they do.
How bookkeepers and CPAs can complement each other
In practice, the two roles often work together. Clean, accurate bookkeeping can enable a CPA to provide meaningful analysis, ensure compliance, and offer strategic guidance. That said, many CPA firms also offer bookkeeping services, though it is important to understand that assurance services (audit and review engagements) require the CPA to be independent from the accounting records, so they cannot have been involved in the preparation.
If you’re unsure if a bookkeeper or a CPA can best support your business, we recommend getting in touch with them to better understand what makes the most sense for your corporation. For business owners who have decided to hire a third-party bookkeeper, check out this article on how to choose a bookkeeper (and avoid bookkeeping nightmares).
Disclaimer: This article is not intended as financial advice, and you should not make financial decisions based solely on the information presented.
Amy Rattan, CPA, is a senior accountant with Loren Nancke, who has been a member of the firm since 2012. Amy is known for her analytical and detail-oriented nature, working with many of our clients to help them drive their businesses forward.
Originally published by Loren Nancke Chartered Professional Accountants.
