Going it alone is tough in the accounting profession. Better connections, improved ability to handle inter-regional and international business, better employee recruiting, and greater operating efficiencies are just a few of the elements needed to continue a healthy upward curve. Gaining these advantages, however, isn’t always easy. That is why many firms make the choice to join either an accounting network or an accounting association.No matter where a business is located or what niches and industries it serves, becoming part of a network or reaching out for an association affiliation can provide the tools to build a stronger business.

Membership in one of these groups can provide some of the following benefits:

* Benchmarking. Determine how your business measures up with other successful firms in the industry.

* Inbound business referrals. Get new business leads from firms whose quality you can trust, because you know them as part of your network.

* Geographic reach. Get greater access to regional and international experts that you may not have locally.

* Niche coverage. You are an expert in your niche to be called upon, and you can tap other firms’ niche experts.

* Best practices. Learn how to streamline and improve operations from top to bottom.

Joining a network or association can make a tangible difference in a firm’s future, but how does one choose which group to join? There are many different options to choose from, each with its own benefits and limitations. The following provides some guidelines as to how to make the best membership decision for your firm.


Over the past four decades, accounting networking groups and associations have evolved. There are now several different operating models:

* The “Mother Ship.” Under this structure, member firms meld into the identity of the organizing firm, or mother ship, in virtually every sense. The mother-ship firm may provide guidelines and operating procedures for member firms to follow, and most firms change their names to include the mother-ship firm. The dual purpose of the model is to provide service and guidance to member firms while simultaneously providing referrals and a source of income for the mother-ship firm. Governance of the affiliation is provided by the mother-ship firm, with potential input from its members. Grant Thornton’s alliance and Moore Stephens follow this model to varying extents.

* Nonprofit, member-owned. Under this structure, member firms remain strictly independent and do not share common operating procedures. The entity exists strictly for benchmarking, information sharing and education purposes. Member firms are the owners of the entity, and exercise governance through boards and committees over a paid staff. Dues are assessed, but no profits are derived by the group. AGN, IGAF Worldwide and PKF North American Network follow this model.

* Independent, for-profit. This structure is similar to the nonprofit model above, with the exception that oversight is provided by a company owner, often with input from an advisory board. TIAG follows this model.


The 2003 scandal surrounding Italian dairy giant Parmalat and accounting group Grant Thornton, in which over $9 billion in assets vanished, could mark a change for associations around the world, regardless of their chosen operating model.

The firm directly involved in the crisis was Italy’s Grant Thornton SpA, a small member firm of Grant Thornton International. As the crisis unfolded, Grant Thornton declared that the fraud occurred only within that one regional firm, and that Grant Thornton International and its member firms should not be legally liable for Grant Thornton SpA’s actions. To date, many legal jurisdictions have yet to decide whether other Grant Thornton entities should bear some of the liability. The question of association and network structures and the legal liability that comes with membership and centralized administration is in the process of being defined.

During 2006, the International Federation of Accountants, reacting to the Parmalat scandal, as well as to the passage of the European Union’s 8th Directive, set out to define the term “network” as it relates to a group of accounting firms.

Under the IFAC and EU definition, a network is “a structure which is aimed at cooperation and to which a statutory auditor or an audit firm belongs, and which is clearly aimed at profit or cost-sharing or shares common ownership, control or management, common quality control policies and procedures, a common business strategy, the use of a common brand name, or a significant part of professional resources.”

Groups qualifying as a network are subject to new, stringent rules of conduct that include the sharing of client data with a central source, potential of vicarious liability in the event of lawsuits, and much more.

In the U.S., the American Institute of CPAs’ Professional Ethics Executive Committee also is creating a definition for networks, and it will have similar requirements for U.S.-based accounting firms that join a group of peers.

Case law on the issue of vicarious liability is still evolving. Associations and networks are looking at how laws regarding agency, partnership and the tort issue of holding out might cause a liability to be created, even when a firm is uninvolved in the work in question.

Associations and networks have disclaimer language designed to alert the consumer as to the true nature of the relationship among firms within an entity. Some organizations have also taken out vicarious liability insurance coverage to protect themselves, their officers and the members.


With all the vicarious liability issues being sorted out, accounting membership groups of every stripe must now clearly define themselves as an “association” or a “network.” To some extent, the operating model can dictate the camp into which the group falls. There are, however, a number of other subtleties at work, and you should be aware of them before making a decision.

Associations must have an operating model that ensures strict independence between the various member firms. There can be no common naming structure or operation manuals, and the firms cannot present themselves as a common entity to clients. Under this framework, the governing body of the firm association must provide regular “policing checks” to ensure that member firms are not incorrectly representing themselves in their literature, proposals or Web sites.

The association may also need to drop certain services or operations to ensure that strict independence is maintained.

The network model allows for both a common naming structure and common operating procedures across member firms, and the firms are permitted to market themselves as a group entity. In this case, the governing body must engage in regular, formal independence checks between member firms, which include firms providing their client lists to the governing body to ensure that proscribed services for any client are not being performed by firms within the network. As with an association, the network may cease to offer certain services or operations that do not fit within the purview of its operating model.


If you decide to become part of a membership group, you need to evaluate what benefits your firm wants to derive from a membership relationship. If your firm is already part of a group, you will want to review your status to make sure that you are gaining everything you had hoped.

A network may be the best choice for your firm if you are seeking the following:

* A strong brand, with global recognition.

* The ability to market your firm as an integral part of a larger entity.

* The ability to access and benefit from an external operating model for audit, accounting or tax procedures.

An association may be best for your needs if the following matter to you:

* Strong independence of your firm’s brand in its marketplace.

* An emphasis on benchmarking and best practices sharing.

* Intensive education and information-sharing programs.

* Lower overhead and dues costs because of less-intensive administration needs.

With a network, there is a slightly increased risk of vicarious liability; and with an association there is a slightly lesser risk. Whichever you choose, find out whether the group offers your firm specific vicarious liability coverage in the event that a problem does occur with any individual member firm.

Once you’ve decided which overall model is best for you, then review the operating models and start narrowing down which type of group will best suit your firm.

Whether this will be your first foray into joining a membership group, or whether you have decided that it’s time for a change, the final and most important part of your search is getting to know the member firms of the groups that you are leaning toward.

Each association and network has its own personality, based on the cultures of the group’s current member firms. Some associations and networks may be more aggressive than others; some may be more internationally focused; some may be for big firms only; while others may have a strong focus on an entrepreneurial spirit. Only by meeting the partners from the member firms will you have a good feel for where the association is headed and whether your firm will be happy there.

Kevin Mead, CIA, CAE, is the president of IGAF Worldwide. Reach him at kmead@igafworldwide.org. Reprinted with permission from the Pennsylvania CPA Journal.

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