What are the differences between an Accountant, Tax Consultant and an Auditor in Israel?
The idea of this article arose as a result of communication with our new client. Being a native of the post-Soviet space, he considered that all specialists that are involved in accounting and taxes in Israel are accountants by default. And he was very surprised that his previous accountant does not bear any responsibility for errors in tax reporting, and is not even authorized to communicate with the tax authorities on the affairs of his company. This is why we propose to clarify the difference between an accountant, a tax consultant and an auditor. And also to consider in which situation, the competence of which specialist will be enough to solve your tax issue.
In accounting (the Hebrew hashbonot or in the vacancies the English term ‘bookkeeper’ is often used) usually there are three categories of specialists, or, as they say in Israel, sug 1-2-3. Training for SUG 1 and 2 takes about four months and as a result, the specialist will be trained to work in special computer programs, be able to close internal accounting reports, i.e. register cash transactions (issue and pay bills), document income and expenses (keep records of receipts of sales and expenses), keep records of receipts and expenses (takbulim veshlyumim). Typically, an accountant with a level of 1-2 is an employee who combines several different simple functions in a company, or is an assistant in the accounting department of a large company. Learning for SUG 3 is only possible for those who have completed SUG 1-2, and after that have at least one year of work experience in their specialty in Israel. Accounting experience in other countries in this situation does not count, i.e. not relevant. So, after working for at least a year, a specialist can go through SUG 3, as well as learn other additional accounting specialties. For example, accounting is additionally studied for logistic companies and other specific activities. Separately, there is a “payroll” block (a payroll accountant). The issue of wages is relevant for any organization, because this knowledge and skills are very in demand by employers. Training for SUG 3 can last from six months to a year and a half, depending on the amount of knowledge that a specialist wants to master. Accountants with sug 1-2-3 as a rule, provide services to small businesses on outsourcing, and work for hire in audit firms with tax consultants. In enterprises in the form of LTD, they, under the control of the auditor, conduct all internal business accounting, prepare regular reports for Mas Akhnas, Maam and Bituah Leumi, and are engaged in calculating salaries. Experienced accountants can hold leadership positions, as well as help in the preparation of the annual report of the company. But the accountant is not responsible for the content (and errors) in the reports and does not have the right to represent the company to tax authorities. Only the tax consultant and the auditor have this right.
Tax consultant (yoets mas)
Training in the specialty of a tax consultant takes two years. Difficult exams are taken, and at least one year of experience is required. Typically, a licensed company is a freelance specialist who is engaged by a company or individual to advise on various tax issues. The tax consultant can draw up and file a property declaration, annual report of the company, represent its clients in Mas Ahnasa, Maam and Bituach leumi through a power of attorney. But, in fact, this specialist can only work with Esek Patur and Esek Murshe. He cannot sign the financial statements of Hevra Baam, cannot conduct an independent verification and attest to it. For this level of tasks, an auditor is needed.
The law sets rather strict requirements and restrictions on the future auditor: age – from 23 years, without a criminal record, and has never been bankrupt. Studying for an auditor is characterized as extremely difficult and exhausting. The training lasts four years and takes place in two stages: for three years, the student receives basic knowledge and a bachelor’s degree in the profession, plus an additional year for which he masters all the missing knowledge to prepare for external exams and obtain a license. In the final year, two difficult exams are taken at the audit board of Israel. The first exam directly in the specialty of accounting, finance and auditing, and the second in ethics. And only after a two-year internship, the auditor receives a license and can start his own practice. As you can see, in order to obtain an auditor license, the applicant goes a long and difficult way. Strict selection, high standards of training and practice allow the auditor to get the most in-depth knowledge about all the intricacies of Israeli, tax and financial legislation as well as the nuances of doing business. The auditor is solely entitled to audit the balance sheets of limited liability companies or Hevra Baam. The main task of the auditor is to provide correct information about the state of affairs in the company and thereby prevent the possibility of making erroneous decisions by managers or creditors. The auditor’s signature on the report is a guarantee that the books of the audited company are compiled and maintained in accordance with the law and that they comply with all standards, and also reflect the truth about the financial situation of the company. This is a very important issue that affects business development. Indeed, based on the results of the audit, the founders or shareholders, potential buyers, creditors, banks and other related organizations make decisions, for example, regarding the beginning, continuation or termination of cooperation with this company.
Why a business should not save on bookkeeping?
All that the auditor does for Esek Patur and Esek Murchet is with the use of meuhadim, additional services. A private entrepreneur does not have an urgent need to work specifically with an auditor, but when your income-expense accounting and annual reports are supervised by a specialist of the highest category- this allows you to be rest assured that the correct bookkeeping for correctly calculated, optimized and paid taxes takes place. And most importantly – the businessman is freed from the need to communicate with the tax authorities. All communications at a professional level leads to the auditor. Each level of specialists – from an accountant to an auditor has certificates, diplomas and if a client doubts that he has a hashbon in front of him, then he can ask him to provide a diploma or check by license number on the website of the audit board of Israel.