Accountant vs Actuary

Accountant vs Actuary | Accounting Smarts
Charles Hall

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Charles Hall

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November 11, 2021

Most of us know about accountants, but there's another type of financial guru that people aren’t aware of: actuaries. But what’s the difference between the two?

Most of us know about accountants, but there's another type of financial guru that people aren’t aware of: actuaries. But what’s the difference between the two?

Actuaries estimate the financial impact of different events that could potentially occur by analyzing statistics and estimating risks. On the other hand, Accountants deal with the financial impact of events that have already occurred in the past to inspect their accuracy and integrity.

If you're looking for a profession in the financial business that involves numbers, statistical analysis, financial reporting, and other quantitative tasks, an actuary or an accountant might be a good fit. Both jobs help businesses make key financial decisions. Although both accounting and actuarial sciences are concerned with crunching numbers, there are stark distinctions between the two professions.

Our experts have years of experience in both the accountant and actuarial professions at various levels. This includes working with individuals who just started their career as well as fully-qualified and experienced professionals who have been in the business for a long time. So, without further ado, let's start with this accountant vs. actuary comparison.

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Accountants Vs Actuary – A Comparison

Actuaries

Actuaries use thousands of pieces of data to determine the probability that an event will occur in future and quantify the financial impact of the occurrence. This enables them to figure out the estimated cost or revenue from the outcome.

Their statistical and analytical skills make them highly crucial to the operations of insurance companies and many leading institutions. An actuary analyzes data to solve real-world problems. They analyze historical data to forecast and assess new dangers, then help to mitigate those risks by implementing financial safeguards.

For instance, an actuary working in the life insurance industry will have to estimate the expense of sum assured and premiums sustained in the event of the death of a policyholder.  

Accountants

Conversely, accountants help organizations reconcile internal financial data such as investments, payroll, customer and client transactions, and other expenses in a broader capacity than actuaries.

Accountants are critical to the success of any company. They keep track of how much money is coming in and out of a company or organization. They examine profit and loss, assess the financial health of their customers, whether it is a company or an individual, and offer the data they require to make business decisions.

They don't make predictions or look into the future like actuaries do. An accountant creates financial reports, such as balance sheets and income statements. These reports detail how much money was generated and spent over the course of a year, as well as the company's net income (or loss).

An accountant, for example, will know how much money was received for items and services during the fiscal year. They'll be able to see how much the business spent on payroll, supplies, and other costs.

Qualifications

Accountants

A graduate may opt to pursue a professional designation from a professional association or a certification organization after obtaining a bachelor's or master's degree. Each certification has its own criteria. The most common certification is Certified Public Accountant (CPA), which requires passing the Uniform Certified Public Accountant Examination and is licensed by each state or territory. Individuals who choose to enter into the field of accounting must clear four CPA exams in order to qualify.

Apart from CPA, accountants can also pursue the following certifications:

  • Auditor of Information Systems Certification (CISA)
  • Management Accountant (CMA) (CMA)
  • Internal Auditor Certification (CIA)

You can choose to specialize in various sectors, such as taxation, environmental accounting, managerial accounting, forensic accounting, or internal audits, among others. Regardless of specialization, the exams are similar.

CPA demands intense preparation. Before passing all the exams, most candidates study for 20 to 30 hours each week for four to six months consecutively. Furthermore, most states require individuals to have at least 150 credit hours and a bachelor's degree before taking the CPA exams. As part of these 150 hours, you must also have 20 hours of accounting study subjects, 10 units of ethics, 24 hours of business subjects, and 24 hours of accounting subjects.

An accountant studies for at least 7 years to become a certified CPA.

Actuary

Applicants must have a solid foundation in actuarial science, economics, calculus, corporate finance, computer science, statistics, and mathematics in order to work in the insurance industry.

In order to become an actuary, you must pass seven or ten professional exams, depending on the role you wish to take on. Chartered Enterprise Risk Analyst (CERA) certification requires passing 7 exams, whereas the Fellowship of Society of Actuaries (FSA) requires passing 10 exams. Exams, fellowships, and ongoing education requirements are all part of the procedure to obtain these qualifications.

Actuaries are recognized as professionals by two organizations:

The Society of Actuaries (SOA)

This is a professional organization that certifies those who operate in the fields of finance, investments, health insurance, and life insurance. The SOA offers six certification paths, ranging from individual life and annuities to corporate finance.

The Casualty Actuarial Society (CAS)

The second organization, CSA, certifies actuaries for property and casualty risk for businesses and governments.

An actuary studies for SOA or CAS certification for 6 to 10 years to become fully qualified.

Daily Responsibilities of an Accountant

  • Auditing and evaluating financial operations in order to give recommendations for enhancing business procedures, such as cost reduction and profit increase
  • Managing financial statements and submitting them to regulators, taxing authorities, and oversight bodies
  • Tax planning, preparation, and calculation
  • Organizing and coordinating financial documents

Daily Responsibilities of an Actuary

  • Creating proposals and recommendations based on data, financial, and statistical analysis
  • Calculating the likelihood of an event or action, as well as the consequences
  • Examining insurance contracts in order to reduce risk and boost profits
  • Creating findings reports that explain how calculations were made

Career Scope

Accountant

Accounting has a broad reach that includes individuals and families, financial organizations, government, trade, and other areas. Many people believe that accounting's scope is restricted to the financial transactions of a business. This, however, is not the case.

With so many changes in today's dynamic world, trade and commerce are continuously developing. Thanks to the advancement of technology, the application of accounting has taken on a new shape.

Accounting is progressing in conjunction with the numerous advancements in trade and commerce, factory and industry, and science and technology.

Being an accountant is not simply sitting behind a desk crunching numbers all day; rather, it's more about being able to interact and collaborate with others, as well as possessing the necessary skills, such as error detection and problem-solving.

Depending on the time of year and the company's needs, accountants may be required to work overtime and on weekends too. Accountants mostly choose to work in finance departments, company accounting, or accounting firms.

According to Discover Accounting, an accountant or auditor working at a reputable company in California can earn up to $127,290 per year. According to the Bureau of Labor Statistics, the median salary for an accountant in 2019 was $71,550.

Actuary

While the majority of the actuaries work for insurance companies, some specialize in enterprise risk management for corporations and investment banks outside of the insurance industry. Actuaries mainly focus on losses associated with natural catastrophes, accidents, and illnesses, and they help insurance firms determine what premiums and coverage to charge clients. They may be required to work long hours or overtime depending on their company's needs.

According to the Bureau of Labor Statistics, the annual salary for an actuary in the United States in 2020 was around $111,030. Actuaries receive a generous compensation in part because only a few people have the patience or ability to study for six years or more in order to pass all of the exams.

Actuaries sometimes work for significantly less than the median pay for the first half of their careers, grinding away until they complete the required qualifications.

In the United States, accountants outnumber actuaries by a large margin. According to sources, actuary positions are expected to rise 20% between 2018 and 2028, while accounting occupations are expected to grow by 6%.

Is It Better to Become An Accountant or An Actuary?

Both career directions are significant in the financial world in their own ways. However, an accountant's obligations and responsibilities are broader, whereas actuaries have precise roles and duties. To be successful in their respective genres, one cannot replace the other and requires a different set of qualifications and skills.

A career as an accountant or an actuary can be very gratifying for people who enjoy math and numbers, but selecting between the two needs careful evaluation of career insights for each sector and reconciling the job criteria of each field with your own interests.

Accountants Vs Actuaries - Quick Facts

Between 2018 and 2028, the following facts and estimates from the US Bureau of Labor Statistics imply that both accountants and actuaries will be in high demand:

  • Accountants are predicted to have 90,700 new job opportunities.
  • 5,000 additional actuarial jobs are likely to become available.

Despite the fact that the predicted job vacancies for accountants are much bigger, the projected job growth rate for actuaries is far higher than the planned job growth rate for accountants. This is because becoming an actuary requires significantly higher certifications and skill-based training than becoming an accountant, and as a result, there are far fewer actuaries than there are accountants.

Applicants with education and training in accounting and actuarial work have good job prospects. The extensive education and training commitment required for both of these professions can be linked to their high demand.

The amount of job options is a significant difference between these two professions. In 2016, the United States had only 23,600 actuaries, compared to 1.4 million accountants and auditors, according to research.

When deciding between a career in accounting and actuarial science, both professions have advantages. Regardless of the path a candidate chooses, extra education and training is an obvious benefit that will help them attain job success.

Which Career Path Should You Choose?

Choosing between the two career choices is essentially a matter of personal preference, as both offer great employment stability and higher-than-average salaries.

A job as an accountant may be beneficial for you if you want to work with known statistics and occurrences or if you desire a position that demands less time to maximize your potential.

On the other hand, a career as an actuary may be beneficial for you if you like to deal with statistical theory and probability to anticipate future occurrences and their related financial hazards, or if you want a higher earning potential even though it will take longer to achieve that potential.

Types of Actuaries

  • Property and casualty insurance
  • Retirement and pension
  • Life insurance
  • Health insurance

Career Paths for Accountants

  • Government Accountant
  • Internal Auditor
  • Financial Planner
  • Managerial Accountant
  • Financial Accountant
  • Forensic Accountant
  • Tax Accountant
  • Public Accountant

Can Actuaries and Accountants Work Together?

Actuaries and accountants can collaborate on different projects. They frequently communicate with one another in insurance firms and consultancies. Valuation actuaries calculate an insurance company's policy liabilities.

In fact, policy liabilities make up the major part of an insurance company's balance sheet because the company has thousands of policyholders counting on it to pay insurance benefits in the long term.

Moreover, the change in insurance obligations from one year to the next is often a significant portion of the company's overall income, which is often stated in the income statements.

As a result, actuaries and accountants frequently communicate, especially when the financial findings of both departments differ.

Charles Hall

Charles Hall

Charles has spent 25 plus years in the world of accounting and business. His experience includes working as a CPA/Auditor international accounting firms. He has worked as a controller and as a COO for small to medium sized companies.

Learn more about Charles Hall