Deloitte Shows the Big 4 are Getting the Message

In a move that some would have viewed as astonishing before the accounting scandals that rocked the markets in recent years, Deloitte has dropped Margo Caribe as an audit client.  Its rationale behind the decision is the company was unable to meet a number of the requirements of SOX’s stringent 404 provisions.  Its violations included a lack of an adequate internal fraud detection and little segragation of duties.  Kudos to Deloitte for dumping a client it did not feel would remain a going concern.  One would hope that the firm, along with the rest of the Big 4, would do the same regardless of the size of the company.

That second point is the crux of the matter: is there any business rationale for a tiny company with less than $10M in revenue, hiring more people to segragate duties when such an action would presumably lower its profits significantly?  Clearly, SOX does need to be adjusted to take this into account.  If this is not done, either small companies will go private or shift their listings to less stringent foreign markets.

Check out the story at CFO.com.

The Big 4 on Facebook?

During a recent session of perusing Facebook, I came a cross a rather interesting development.  It seems that Ernst and Young has set up a sponsored group on the immensely popular social networking site.  The aim seems to be recruiting college grads into the firm.  The group has over 3000 members as of today and most posts to its discussion boards consist of wide eyed college grads looking for information on EY’s popular internship program.  I have to say, its a very interesting approach to recruitment and I commend the firm for going after students where they live online.  One wonders if this site has helped anyone get a job at EY or if it will have an impact on campus recruitment. 

Blogged with Flock

Big Accounting Firms Among Top Post-College Employers

In BusinessWeek online’s 2006 Best Places To Launch a Career ranking, accounting firms fared quite well. Deloitte and Touche ranked #3, Ernst and Young at #12, KPMG at #15 and surprisingly Grant Thornton makes the list at #34. Conspicuously absent from the list is PricewaterhouseCoopers. In my view, it is not at all surprising that these firms are ranked so highly on this list considering the sheer amount of fresh college grads the Big 4 absorb on annual basis. For instance, KPMG alone is said to be hiring 5200 new grads, an extraordinary number, especially in comparison to a company such as General Electric, which is only bringing on a little over 800. More college grads go work for the Big 4 on the aggregate than for any other industry on the list, so there is a natural inclination for students to report that they favor their own future employer.

The survey also lists some of the interesting perks available to new recruits. EY now has 3 permanent long weekends on its schedule while KPMG is offering a whopping 25 days of paid vacation! As far as I know, there is no firm that can boast such a massive pay package.

Here’s the link to the list.

Blogged with Flock

You mean autonomy and high pay helps retain talent?

What did the recruiters tell us initially?  That people are the most important asset of this accounting firm and that work/life balance is a priority.  The reality is that we work extremely long hours for relatively low pay.  The same can be said for nearly all professional service firms.  At the same time, these firms complain that they have experienced high turnover levels over the last few years.  The solution?  Higher pay and more autonomy.  Duh!

Check out David Teece’s (a prof at UC Berkeley biz school) ideas on how to retain top talent and how one prof service firm implemented it and has had great success.

http://money.cnn.com/magazines/business2/business2_archive/2006/07/01/8380225/index.htm

Blogged with Flock

How to buy an accounting practice

The latest issue of CA Magazine has a great piece on how to go about buying your own practice. Its a great exit strategy from either the boredom of industry or the long hours of public. For me, starting my own practice is my ultimate goal just because of the freedom and earning potential. I mean, who wants to work for years making money for someone else when you can do it for yourself!

Here’s the link.

http://www.camagazine.com/index.cfm/ci_id/30964/la_id/1.htm

How to keep the smart people in public accounting

To: Partners at public firms, big and small
Re: Your staff retention issues

So, you’re wondering how you can keep the brightest accountants from jumping ship to industry. Well, the reason is quite simple and you are probably aware of it: the compensation is better in industry. There is however, another reason that came to light when I was chatting with a lawyer working for one of the largest law firms in the country was telling me how one of the real incentives at his firm is the clarity in terms of the partnership track. Instead of partners secretly plotting who will get made partner at accounting firms, his firm ensures the process is open and transparent.

The lesson? If accounting firms want to keep their top talent around, they should create a more formalized partnership track for those young, extremely ambitious and intelligent people they want to keep to service their clients once they are gone. This would be the perfect incentive for those who WANT to make partner and would make them more willing to give up higher pay elsewhere if they know they have a solid future at the firm.

Where would you want to be a partner?

Inevitably, those of us going into public accounting and want to stay in it for some time will want to become partners. Aside from a big time CFO or VP Finance gigs at a huge company, this is as close to winning the lottery as you can get in the accounting world. But which firm is the best to be a partner at? Which would you prefer? Heard anything about partner comp? Tell us!

Where’s My Blackberry???

For some reason, auditors do not get Blackberrys, unless of course you are a partner. Now, this NEVER made any sense to me. It’s not that I want one just as a status symbol, to be perceived as being important enough to have one (damn you finance people). I feel we need them for practical reasons. Here are a few:

-Auditors, especially those below the rank of Manager, are RARELY at the office where we have high speed access to our email accounts.
-Many of our clients’ IT people are loathe to set up a high speed connection for us, meaning we have to dial in, which is a painfully slow process (imagine 20 minutes of downloading email and splitting a 56K dial up connection with 5 other people)
-We invariably are getting email all day, and the fact that I have no access to it is clearly not a good enough excuse (how else am I supposed to get those firm emails and respond to happy hour invites)
-It’ll make us look cool relative to people in finance
-I can look busy even when I’m just emailing my friends

So, auditors out there, let’s try and convince the firms to get us some BBs. If only for our egos!

If Richter’s a $100 million shop, is public accounting worth it anymore?

For me, the most suprising number up there is RSM Richter’s having nearly $100 million in revenue. Richter’s got about 500 employees and according to their website, 60 partners. That’s about $1.67 million per partner, or $200 000 per employee! I’m thinking that RSM partner comp, all in on average has got to be about $400 000, which rivals what I’ve heard is the $400-500K that Big 4 partners get. These numbers beg the question: is it worth being a Big 4 partner, with all of that liability and the constant pressure of dealing with massive public companies? Personally, I think that increasingly, private is the way to go if you want to practice and become a partner or start an accounting firm. If you don’t want to be a partner and want to use the Big 4 reputation to do something else (i.e. work in industry, get an MBA, switch to finance/consulting, etc.), go for public, but don’t stay too long!

The Rankings

Ever wonder how the various accounting firms stack up? Who’s #1?

Well, here’s a table that shows the top 10 Canadian firms and their respective revenues. This info is for 2005.

1 1 Deloitte & Touche LLP – Toronto 1,151,000
2 2 PricewaterhouseCoopers LLP – Toronto 878,600
3 3 KPMG LLP – Toronto 855,574
4 4 Ernst & Young LLP – Toronto 788,000
5 5 Grant Thornton – Toronto 361,000
6 6 BDO Dunwoody LLP – Toronto 260,892
7 7 Meyers Norris Penny LLP – Calgary 142,664
8 8 Collins Barrow – Waterloo 109,100
9 9 RSM Richter – Montreal 98,000
10 10 PKF Canadian Firms 78,868

http://www.lib.uwo.ca/business/30topaccounting.html#2005

Well, you have got all of the usual suspects up there. To be honest, I never realized that KPMG was so big in Canada, I always assumed they would be ranked 4th, as they are in the US. EY is the smallest of the Big 4 in Canada, whereas in the US it has the most public clients of any of the Big 4 (although it’s probably 2nd-3rd in revenue). Big D still owns its consulting shop outright, so its numbers are higher. Beyond the Big 4 you’ve got good showings from BDO and Grant Thornton.