Technical Accounting – What is it?
The term “technical accounting” refers to the execution, analysis, and oversight of accounting systems within specific corporate contexts. While any accountant should be well-versed in general accounting theory, a technical accountant is required to demonstrate additional competence in the execution of booking transactions within accounting systems, understanding how those transactions will affect the accounting system, and properly assessing whether a transaction is properly entered and generating accurate output. A technical accountant should be able to review previous work (either done by themselves or by others) and readily determine its accuracy. These skills will often drive toward additional roles including the analysis of accounting systems, determining the effectiveness of internal controls, and making recommendations to management regarding potential modifications to an accounting system.
Technical Accounting vs. Accounting
Accounting, as a general term, refers to the idea of aggregating financial (or other) data for the purposes of producing reports to be used by management or other interested parties in evaluating the trajectory and value of an organization or undertaking. Technical accounting refers to the specific efforts, including the entries, adjustments, analyses, controls, and other efforts that go into converting data into useful output.
To make an analogy, baking refers to the activity of taking ingredients and converting them into a loaf of bread. A general theory exists that ingredients are baked and produce a baked good. Technical baking might refer to identifying those specific ingredients, developing the specific enumerated recipe, and ensuring that the baker properly identifies and quantifies each ingredient, sets ovens at appropriate temperatures, and adheres to the appropriate baking time to produce the actual loaf of bread. If a substandard loaf is produced, the technical baker would study the loaf to identify where the failure occurred in the baking system and modify the system accordingly to enable the baker to produce a proper loaf of bread in the future.
Firms, particularly public accounting firms, rely on technical accountants to assist them in evaluating clients’ accounting systems and perform checks of accounting reports to determine whether accounting errors may have occurred. Simple examples of this might be pulling a trial balance and ensuring that it balances, citing balance sheet accounts for appropriate debit or credit balances, or footing ledgers to ensure arithmetical or formulaic accuracy.
Technical Financial Accountant Job Description
Technical accountant job descriptions will generally call for someone who already has accounting experience, has experience in interpreting accounting reports, and experience in reporting in specific areas of business or accounting (such as a specific industry). At an absolute minimum, a technical accountant should be capable of looking at standard GAAP financial statements and drawing conclusions about the trajectory, value, and general financial health of a company.
A technical accountant should be able to use standard data analysis tools and spreadsheet programs (such as Excel) and understand the inner workings of at least a few accounting systems. A job description will likely also call for specific knowledge in dealing with public, private, non-profit, or governmental entities and the associated filings that those various entities might have in a standard situation.
Additionally, the ability to perform accounting research is extremely critical, particularly when working for an accounting firm that has clients in different industries. A technical accountant will need to be able to quickly identify best practices for a client’s given industry and assist in implementing accounting systems that adhere to best practices within that specific industry.
The ability to review output for accuracy is critical. Strong technical accountants can review the work of others and determine whether it passes the proverbial “sniff test” by understanding how granular data fit into the larger context of the organization in question. For example, if a retail sales company shows cost of goods sold that appears too high or too low relative to industry norms as a percentage of revenue, a technical accountant should automatically detect that (by virtue of having technical knowledge of the industry in question) and immediately know of several investigative measures to determine whether the percentage is reflective of an error in the accounting system and, if so, how to mitigate it.
Finally, strong interpersonal skills are required in communicating and documenting work to non-technical colleagues and clients. A technical accountant often spends their time in the fine details of complex accounting systems. Being able to take complicated concepts and communicate them to others in simple terms is extremely important. Additionally, some management of projects or personnel will likely be involved for an individual being referred to as a technical accountant, and the commensurate skills will be required.
Obviously not all technical accountants start off as experts who can do everything a seasoned technical accountant should. Most technical accountants will start off their careers in a junior accountant role learning the general ropes of the industry. Typically, at that phase, accountants are considering whether a more accounting-specific or generally finance-driven career path is better suited to them. If technical accounting is their desired path, they might grow toward that as they demonstrate competence in the appropriate areas.
Typical job titles one might see in technical accounting include Director of Technical Accounting or Senior Technical Accountant. These individuals often oversee teams of accountants who individually assess various areas of accounting systems. More senior technical accountants will work between management and their teams, providing big-picture feedback on accounting systems to the former and reviewing output from the latter, providing guidance in conducting analyses and performing entries, and ensuring strong processes above and beneath them within the accounting structure.
An alternative direction might be to go into an outsourced technical consulting role. These individuals might be hired temporarily by a company to assess the accounting system and provide feedback or specific recommendations. They may also assist in implementing those systems, depending upon the engagement. Consultants may also hire staff beneath them in order to assist on larger engagements.
Technical Accounting Skills
As discussed above, there are many skills a technical accountant should have. Most importantly, they should:
- Have core accounting skills typical of someone who has both significant accounting education and experience;
- Be capable of quickly determining company trajectory and value based on the financial statements;
- Be able to quickly review output for reasonableness;
- Understand deeply how areas of accounting systems interact, know how to analyze the data generated by those accounting systems, and know how to track down and mitigate issues within the accounting systems;
- Know client industry norms to assist in testing for reasonableness and implementing best practices;
- Know the ins and outs of data analysis software (including spreadsheet software) and accounting system software;
- Effectively perform accounting research;
- Manage people and projects and review the work of others, including subordinates or other accountants; and
- Communicate issues clearly with non-accountants and other management-level businesspeople.
Technical Accounting Interview Questions
Typically, an interviewee for a technical accounting role may be asked questions akin to the following:
- In what industries do you have significant accounting experience? Within those industries, was the work you performed related to for-profit, non-profit, public, private, or governmental accounting?
- What accounting reports, including financial statements, have you prepared? Have you ever prepared supplementary statements, consolidated statements, account ledgers, or other management-level reports?
- What filings, including tax and other regulatory filings, have you ever prepared or been a part of preparing? Have you ever assisted in responding to a regulatory challenge of any such filings?
- Have you ever been called upon to build an accounting system for a company or perform significant modification or migration of an existing accounting system? How about internal control procedures, reporting frameworks, etc.?
- What accounting systems and data analysis tools or software have you used in the past? Are there any systems that you prefer to use or with which you have extensive in-depth experience?
- What is your typical process for determining whether the data you are working with is reliable?
- What are the key skills that you believe you have to perform this role well and how do you believe they set you apart from other applicants?
For more general questions you might find in an accounting interview, check out our post on Accounting Interview Questions and Answers.
If you’re interested in pursuing or continuing a career in technical accounting, be sure to check out our job listings!