Smaller Accounting Firms Reap the Benefits of New Mandates

Midsize firms are more than happy to scoop up the audit clients being rapidly discarded by the larger accounting firms, the East Bay (CA) Business Times reported.

With the large firms focused on the more lucrative consulting work-which limits their ability to audit the same clients under Sarbanes-Oxley Act rules-midsize firms are filling the gaps in audit and other areas.


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The RINA Accountancy Corp. of Oakland is a good example of a company experiencing a boom in business. The firm, which employs 65 people, focuses and private and family-owned businesses.

Managing partner Jim Kohles said his firm now counts among its clients several private companies that used to be big-firm clients.

"Big accounting firms have decided to focus mainly on Sarbanes-Oxley compliance work and they have raised their prices 140 percent," Kohles told the Business Times. "They are literally telling long-term clients that they would rather do compliance work for big public companies than auditing private businesses."

The consulting firm Corporate Executive Board recently conducted a survey that found the average increase in audit fees among the big four accounting firms was 100 percent. A Massachusetts firm that tracks auditor changes, AuditAnalytics, reported in November that the nation's seven largest accounting firms either resigned or were dismissed by 526 clients in the first nine months of 2004, the Business Times reported.

Kohles predicts that if current trends continue, his company will have more work than it can handle and he sees the accounting market being transformed by the new laws.

"Our hope is that privately held business will see the benefit of being with a firm of our size and stay with us," Kohles said. "I think Sarbanes-Oxley work is going to peak and start to decrease in the next 18 months and I am not sure firing your long-term clients is a good strategy at all but that is essentially what the big accounting firms are doing."

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