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Types of Firms

In order to find the right CPA, one needs to understand the accounting industry. We start with the largest firms and work our way down.

•  The BIG 4 accounting firms: These are the companies that advertise on TV, at golf tournaments and in airports. The names are familiar: Deloitte & Touche LLP, Ernst &Young LLP, KPMG LLP and PricewaterhouseCoopers LLP. These firms are for BIG companies. It is actually easier for a BIG company to find a good accounting firm, because there is just the BIG 4 accounting firms to choose from. Some smaller companies will pay the extra money just to get the expertise of the BIG 4 because they canít find the right firm. However, the BIG accounting firmís fees are very large, ranging from hourly rates of $200 (for a jr. associate) to $800 an hour. And typically, a smaller company will not receive the same customer service as a larger client.

•  The tier two accounting firms: These firms are right below the BIG 4 accounting firms. Some tier two accounting firms include: Grant Thornton LLP, BDO Seidman LLP, and RSM McGladrey LLP. These firms are similar to the BIG 4, but have a smaller client base focus of middle market companies. However, each has a different definition of a middle market company, and they are on a constant search for larger clients. The tier two accounting firm feeís range from $195 to $600 an hour. Smaller companies or middle market companies will go to a tier two accounting firm to get better customer services as they are typically too small for the BIG 4.

•  Regional accounting firms: Regional accounting firms are typically created by ex-Big 4 accountants or local firms that have merged to gain market share. These firms are localized regionally and there are different regional accounting firms throughout the country. However, the regional firms generally only specialize in accounting areas in which the partners have experience. Be sure to ask if they have experience or specialize in your industry.

•  The tier three accounting firms: This new breed of accounting firms has just recently been noticed. The strategy of the third tier firms is very simple, to compete effectively for the middle market clients by delivering better client service then the larger firms, and provide competitive pricing. The tier three accounting firms may also be called boutique accounting firms.

•  Local Accounting firms: These firms are generally smaller local accounting firms that serve clients in a set local market. They typically are focused more on tax preparation services and small audits. They may also provide other services including bookkeeping, compilations, and general accounting. However, some local accounting firms have very good reputations and provide great service. Usually the partners of these firms have come from the BIG 4 accounting firms, and use their expertise to provide services to the smaller clients. But, the good local accountants are hard to find. A good local accounting firm can also be regarded as a boutique firm.

•  Boutique accounting firm: Although this isnít really a separate level of accounting firm, a boutique firm is typically a larger local firm, or a tier three accounting firm. Typically these boutique firms have been created by ex senior CPAís from the BIG 4 accounting firms. So, they typically have received some of the best training, and have probably the best amount of experience for a middle market company that feels they donít need a tier two accounting firm. A boutique accounting firm is the best choice for a client that has graduated from a local accounting firm, but doesnít feel the need for a tier two accounting firm. The boutique firms are hard to find, and they are localized.

•  In General: The accounting industry is similar to most businesses in that they want to make a profit. The larger the firm, the more overhead, so the fees are larger. Also due to Sarbanes-Oxley Act and headlines like Enron, the insurance costs for accounting firms has gone up and thus, so have the fees. Each level of accounting firm has a certain target client. But unfortunately, most accounting firms will try to do all types of services, although they are not an expert in all fields.

The information provided on these web pages is the authorís opinion based on over 14 years in the accounting industry.