Custodial and investment accounting are two different types of accounting methods that are related, but that their difference is one of comprehensiveness. Simply put, an investment accountant has a much broader purview than the custodian. The custodian, on the other hand, serves as the “honesty police” for the firm as a whole. He cares only about the integrity, not activity, of the investments in the firm.
Custodians serve to guard the assets of a corporation or institution like a university. A custodian serves as a position of trust. Making money and recording that income is not the job of the custodian. Rather, custodial accounting guards the books from fraud, misrepresentation and, most importantly embezzlement.
An investment accountant has a broader job that that of a custodial accountant. The concern here is about the actions and consequences of investments and investment policy. In general, custodial accountants serve as subordinates to the investment accounting staff. The custodian serves to provide reliable data to the investment team, including accounts and brokers, where applicable.
An investment accountant keeps track of the ability of an asset to make money. Records of income and investment types are the main duty of the investment accountant. He can also serve as a guide and adviser to the rest of the investment team. A custodian, however, is a position of trust. The custodial accountant must have a moral reputation that is beyond reproach, since he must report data to the investment team, as well as make certain that assets the investment team works with retain their integrity.
In a normal business environment, the custodial accountant reports to the investment accountant. This is because the investment accountant has more responsibility than the custodian and, more importantly, he is in charge of the records that prove the profitability or losses of the firm. The only time this hierarchy is reversed is when there is a discrepancy -- particularly involving the integrity of assets. If the custodial accountant fears embezzlement or any other kind of dishonesty, management relies o the custodian to build a case. When a custodial accountant fears skimming off the asset profits, then the investment team answers to him.
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