Accounting

Industry Overview

It’s not your father’s accounting industry anymore. Today’s CPAs aren’t just spending their days pounding out numbers on a calculator. Sure, number-crunching is still a big part of the job. However, there have been big changes to this industry, between corporate scandals and the new slew of laws that resulted. More firms are moving into the business consulting arena, providing management consulting services and even some limited legal services. It’s a whole new ballgame.

Once upon a time, the industry was dominated by a group of firms called the Big Eight. Their main business focus was auditing public companies. Relative to other industries, accounting was a nice, steady industry, with modest but predictable profits. Accounting firms had a reputation for humility, discretion, and high ethics.

During the early days of the tech boom in the early 1990s, though, the major accounting firms started making enormous profits from IT consulting work and began looking at auditing as a way to build relationships that might lead to much more profitable consulting engagements. When they were caught, the major accounting firms were battered by a maelstrom of bad press that continues to this day.

Today, thanks to industry consolidation and the collapse of Arthur Andersen due to the misdeeds of Arthur Andersen accountants working on Enron’s books, the Big Eight has become the Big Four: Deloitte Touche Tohmatsu, whose U.S. accounting arm is called Deloitte & Touche; Ernst & Young; KPMG; and PricewaterhouseCoopers. But Andersen wasn’t the only major firm implicated in accounting scandals of the early 2000s. Deloitte & Touche, Ernst & Young, KPMG, and PwC have all faced legal heat in recent years thanks to accounting misdeeds.

In terms of how would-be accountants are being affected by the scandals, the accounting industry is refocusing on ethics. There is also an increased focus on hiring accountants with real-world business experience in addition to formal accounting education. Of course, since 2002’s Sarbanes-Oxley Act (or “Sarbox”)—which restricted the amount of time senior accounting executives can spend working with a single audit client, created a new accounting industry oversight board called the Public Company Accounting Oversight Board, and introduced new regulations to which public companies (which comprise the bulk of the audit clients at big public accountancies)—there have been some major changes in the way that firms do business.

A note: Big Four public accounting firms—which focus on auditing clients’ financial statements (thus verifying for investors that clients are being forthright about their financial health) but also include non-audit lines of business such as actuarial work (risk analysis and management), tax consulting, human resources management, and merger and acquisition advice—are not the only career option for accountants. Many accountants work for mid-tier public accounting firms, such as Grant Thornton or Moss Adams, or for smaller firms; for government entities; or for corporations’ in-house accounting or internal-audit departments. Many others go into business for themselves.

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