THE CPA PROFESSION OOD AUDITING INCLUDES GOOD CLIENT SERVICE Arens, Loeb becke C 2000 by Prentice Hall. Inc
Arens, Loebbecke; Auditing, 8/E © 2000 by Prentice Hall, Inc. 2 THE CPA PROFESSION OOD AUDITING INCLUDES GOOD CLIENT SERVICE
Objectiv CERTIFIED PUBLIC ACCOUNTING FIRMS Describe the nature of cpa firms what they do, and their structure. The legal right to perform audits is granted to CPA firms by regulation of each state. CPA firms also provide many other services to their clients, such as tax and consulting services. ★★★★★★★★★★★★ Big 4 International Firms- The four largest CPA firms in the United States are called the" Big Four"international CPA firms 2. National firms - Three CPA firms in the United States are called national firms because they have offices in most major cities 3. Regional and Large Local Firms- There are only approximately 100 CPA firms with professional staffs of more than 50 people 4. Small Local Firms- More than 95 percent of all CPA firms have fewer than 25 professionals in a single-office firm Arens, Loeb becke C 2000 by Prentice Hall. Inc
Arens, Loebbecke; Auditing, 8/E © 2000 by Prentice Hall, Inc. Objective 2 - 1 Describe the nature of CPA firms, what they do, and their structure. CERTIFIED PUBLIC ACCOUNTING FIRMS The legal right to perform audits is granted to CPA firms by regulation of each state. CPA firms also provide many other servicesto their clients, such as tax and consulting services. 1. Big 4 International Firms - The four largest CPA firms in the United States are called the “Big Four” international CPA firms. 2. National Firms - Three CPA firms in the United States are called national firms because they have offices in most major cities. 3. Regional and Large Local Firms - There are only approximately 100 CPA firms with professional staffs of more than 50 people. 4. Small Local Firms - More than 95 percent of all CPA firms have fewer than 25 professionals in a single-office firm
STRUCTURE OF CPA FIRMS Three main factors influence the organizational structure of all firms 1. The need for independence from clients 2. The importance of a structure to encourage competence 3. The increased litigation risk faced by auditors Arens, Loeb becke C 2000 by Prentice Hall. Inc
Arens, Loebbecke; Auditing, 8/E © 2000 by Prentice Hall, Inc. STRUCTURE OF CPA FIRMS STRUCTURE OF CPA FIRMS Three main factors influence the organizational structure of all firms: 1. The need for independence from clients. 2. The importance of a structure to encourage competence. 3. The increased litigation risk faced by auditors
Organizational Structures Proprietorship General Partners hi General corporation Professional Corporation Limited Lia bility Company Limited Lia bility Partnership Arens, Loeb becke C 2000 by Prentice Hall. Inc
Arens, Loebbecke; Auditing, 8/E © 2000 by Prentice Hall, Inc. Professional Corporation Organizational Structures General Corporation Limited Liability Company Proprietorship General Partnership Limited Liability Partnership
TABLE 2-1 Revenue and Other Data for the largest CPA Firms in the united states Percentage of Total Reve nue from A Net Revenue nd Auditing/Taxes/ 1997 size U.S. Only U. S Manage me nt by Reve nue Firm (in S millions) Partners Professional O ffices Consulting Services BIG FIVE Andersen Worldwide 5445.0 32.319 20/14/66 Price waterhouse Cooper $4,844.5 2,439 26.404 21 37/21/42 Ernst Young $4,416.0 2,172 17.845 36/23/41 Deloitte Touche 3,600.0 7 16.426 35/20/4 KPMG 3,000.0 1,600 13.400 41/25/34 NATIONAL Grant Thornton $289.0 1979 42/30/28 McGladrey Pullen $270.1 1.883 45/32/23 BDO Seidman $240.0 299 1.171 42 51/26/23 REGIONAL Crowe Chizek co 97.4 32/18/50 10 Baird Kurtz dobson 90.0 124 567 20 47/30/23 Plante moran s86.9 7 14 57/23/20 Clifton gunderson co s74.8 56/32/12 13 Moss adams 94 451 47/37/16 LARGE LOCAL 50 Follmer, Rudzeqicz Co s18.3 12 148 39/28/33 75 Kaufman rossin co l3.8 64 54/32/14 Rankings reflect merger of Price Waterhouse and Cooper Lybrand to form Pricewaterhouse Cooper. Information Arens, Loeb becke for Pricewaterhouse Cooper is based on separately reported information for Price Waterhouse and Cooper lybrand C 2000 by Prentice Hall. Inc Source: Accounting Today(March 16-April 5, 1998), pp. 18-20
Arens, Loebbecke; Auditing, 8/E © 2000 by Prentice Hall, Inc. 1997 Size by Re ve nue Firm* N e t R e ve nue - U .S. O nly ( in $ millions) Part ners Professional U .S. O ffice s Perce ntage of Total R e ve nue fro m A ccounting and A uditing/Taxes/ M anage me nt C onsulting Se rvice s BIG FIV E 1 2 3 4 5 A ndersen W orldw ide Pricew aterhouseCooper Ernst & Y oung D eloi tte & Touche K PM G $5,445.0 $4,844.5 $4,416.0 $3,600.0 $3,000.0 1,673 2,439 2,172 1,719 1,600 32,319 26,404 17,845 16,426 13,400 9 5 211 8 9 106 130 20/14/66 37/21/42 36/23/41 35/20/45 41/25/34 N A TIO N A L 6 7 8 G rant Thornton McGladrey & Pulle n BD O Seidman $289.0 $270.1 $240.0 278 381 299 1,979 1,883 1,171 4 8 6 4 4 2 42/30/28 45/32/23 51/26/23 R EG IO N A L 9 1 0 1 1 1 2 1 3 Crow e, Chizek & Co. Baird K urtz & D obson Plante & M ora n Clifton G unders on & Co M oss A dams $97.4 $90.0 $86.9 $74.8 $72.0 9 3 124 117 115 9 4 830 567 704 508 451 1 0 2 0 1 4 4 2 1 6 32/18/50 47/30/23 57/23/20 56/32/12 47/37/16 LA R G E LO C A L 5 0 7 5 Follmer, Rudzeqicz & Co K aufman Rossin & Co. $18.3 $13.8 1 2 1 4 148 6 4 2 2 39/28/33 54/32/14 * Rankings reflect merger of Price Waterhouse and Cooper & Lybrand to form PricewaterhouseCooper. Information for PricewaterhouseCooper is based on separately reported information for Price Waterhouse and Cooper & Lybrand. Source: Accounting Today (March 16-April 5, 1998), pp. 18-20 TABLE 2-1 Revenue and Other Data for the largest CPA Firms in the United States