Academic journal article Journal of Accountancy

Second-CPA-Firm Update: The Sarbanes-Oxley Cloud Has a Silver Lining - Unzip It

Academic journal article Journal of Accountancy

Second-CPA-Firm Update: The Sarbanes-Oxley Cloud Has a Silver Lining - Unzip It

Article excerpt

The Sarbanes-Oxley Act and the PCAOB have created tremendous demand for accounting expertise. That has resulted in opportunities for small firms that can help companies implement the act's ongoing requirements, take on engagements the company auditor may no longer perform or pick up assignments that larger firms forgo because they are too involved in Sarbanes-Oxley-related engagements (see "Small Firms: Think Big!" JofA, Jun.04, page 22, and "Section 404 Opens a Door," JofA, May04, page 55). In many cases, the services required are core competencies, and small firms' competitive rates and depth of knowledge make them strong competitors.

How can small firms position themselves to become the second CPA firm--beyond the auditors--to serve clients' needs? You don't have to reinvent your firm. The services in demand aren't exotic new specialties or complicated compliance services; they're exactly the kinds of engagements small firms have been providing for years. The trick is to understand the new demand for your firm's core competencies and then search out the clients and referral sources that need them. Firms have had a year or more to explore this market, so the JofA spoke to some CPAs with a track record in this area about their experiences. In addition, "Marketing Tips to Success," page 63, offers detailed practice-development advice.

ONGOING OPPORTUNITIES

"We have gotten roughly $1 million in new work in the past year and we expect to get a fairly sizable amount more," says Larry King, CPA, of 75-person KBA Group LLP in Dallas. The largest engagements are implementations related to Sarbanes-Oxley's section 404 and to SAS no. 70, Service Organizations, which involve an auditor's evaluation of a service organization's controls. Once the effort to meet the initial implementation deadline is over, however, further internal control implementation and remediation work may well be a source of ongoing engagements.

"The firm initially saw it as a long-term business opportunity, even beyond the initial surge of implementation," King says, referring to, among other things, the act's ongoing documentation and internal controls testing requirements. "We believe there will be continuing opportunities in internal control work, changing software practices to accommodate the new requirements and other areas. We've also found a big market for internal control outsourcing among companies that don't have the resources in-house to comply with all the requirements." To meet the demand, the firm created a risk advisory services division, hiring a principal in charge of the area and a staff of six that is expected to grow to nine by early 2006.

"We got the work almost exclusively through active marketing, using the tagline 'Cover Yourself." Get SOX,'" King says. "Our marketing director ran ads in the local business journal and did a mass mailing to public companies throughout Texas. We followed up by sending these companies mailing tubes with monogrammed socks in them and some marketing materials." The firm then sent prospects a white paper and another mailing with golf balls and tees with the firm's logo. Those efforts, along with a telemarketing campaign, not only generated significant section-404-related work but also brought in several new clients who had been considering changing auditors.

Now that large companies have generally tackled their initial Sarbanes-Oxley implementation, the firm is fashioning a new marketing campaign to gain work helping companies with ongoing remediation and internal control outsourcing. It also has picked up tax work that companies chose to give to firms other than their auditors. In one case, a company's audit committee was contacted by a whistle-blower; the corporate counsel engaged King's firm to investigate because it could offer an outsider's objectivity. The firm's risk advisory services area also consults with corporate boards and audit committees. …

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