Smaller Accounting Firms in Big Demand

With the Big Four accounting firms busy helping public companies comply with the Sarbanes-Oxley Act, smaller firms are picking up business once dominated by their bigger rivals.

At least two surveys over the last two years show that Big Four accounting firms are losing clients. Some of it is by choice, as the Big Four have had to drop some smaller companies to make sure their big public clients are in full compliance with the corporate reform legislation, especially the rigorous internal control requirements. Some companies, however, are turning to small firms to get closer attention and lower rates.

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The phenomenon extends around the globe. According to the Star Online of Malaysia, business clients are looking for smaller accounting firms that offer quick turnarounds, flexibility and lower fees. Robert Teo, a partner in RSM Group, an international accounting and consulting firm, said RSM in Malaysia changed its structure two or three years ago to a “boutique-sized size and approach.” Star Online reported that RSM is the leading firm for medium-sized companies in the U.S.

Patrick McEvoy of CPA Marketing Best Practices urges small CPA firms to beef up their marketing efforts for 2006 by capitalizing on the value of small firms' personal service and lower rates. He said the Big Four have doubled their rates over the last two years, so companies are open to the idea of switching.

Consider these recent examples:

• CompuDyne, the Annapolis security technology company, dismissed PricewaterhouseCoopers and hired a smaller firm, Aronson & Co., according to the Baltimore Business Journal.
  
• The Warwick Valley (N.Y.) Telephone Company dismissed PricewaterhouseCoopers LLP and hired WithumSmith+Brown PC to audit financial statements and the effectiveness of internal controls.
  
• Cardima Inc., the Fremont, Calif. medical device maker, hired Marc Lumer & Co. to replace BDO Seidman LLP, which recently resigned as Cardima's accounting firm, according to the East Bay Business Times.