by Glenn Cheney
Boston -- These are the best of times and the worst of times for local and regional CPA firms.
In the wake of the Sarbanes-Oxley Act, new opportunities abound for smaller firms to capture business trickling down from the Big Four — but so do the dangers of navigating in uncharted waters. PCPS, the organization of the American Institute of CPAs that protects the interests of these firms, has never faced such a challenge in the face of fast and radical change.
These times of change come as Richard Caturano, president of Boston-based Vitale, Caturano & Co., assumes the chair of the PCPS executive committee.
Caturano said he has never seen a time of greater opportunity for PCPS and the profession.
“This is a perfect assignment for me,” Caturano said from his office at Vitale, Caturano & Co., New England’s largest regional accounting firm, which roughly doubled in size in a two-year period. “We have a lot of issues we can really sink our teeth into, where we can really get involved and make a big difference. This is something I really enjoy doing, real hands-on kind of stuff. It’s high-level in the sense that we have to think outside the box a little and come up with new ideas, and it’s hands-on because we need to execute those ideas.”
The first step will be at the level of ideas. This month, the PCPS executive committee is scheduled to hold a strategy-planning meeting where they will identify and prioritize the major issues that they intend to deal with, then plan how to deal with them.
Caturano sees the country’s non-Big Four CPA firms picking up a lot of new business as the Big Four shoulder the new responsibilities that are mandated under Section 404 of the Sarbanes-Oxley Act and Statement of Auditing Standards 99, on fraud detection and prevention. The bigger firms are also expected to rush into the high-profit services related to initial public offerings.
As these new activities and restraints consume the resources of the large firms, Caturano said, they will begin to pass down those clients who are the least profitable. But new business can mean big challenges and bewildering complications.
Caturano predicted that the largest 100 firms would pick up most of the business coming down from the Big Four. Their capacity to handle the new business will not increase proportionately, however, so other business will trickle down to smaller firms.
Risky clients would comprise a disproportionate part of this trickle-down business. When the larger firms disassociate themselves from certain clients, they will probably slough off the clients that are most likely to create legal or accounting problems.
“As the larger firms push down clients, they might be pushing down the least profitable clients, but you can also be sure they will be pushing down those who represent the most risk,” Caturano said. “We want to make sure the smaller firms are in a position to stand up to that risk and deal with it appropriately. There’s a whole bunch of information on that problem we need to get out to smaller firms.”
PCPS is already aware that tax services are the bread and butter of smaller firms and that tax codes continue to become more complex. Meanwhile, the economy appears to be expanding, which will further increase opportunities and workloads for accounting firms. The increase in work, however, is not being matched by the supply of new professionals coming into the field.
“We are looking for ways that PCPS can supplement the services of the AICPA’s tax division,” Caturano said. “We’re looking for ways that smaller firms can get more support.”
PCPS is about to release a new product that small firms can use to promote tax services. The program includes a slide show for clients and local business associations.
Caturano also wants to see PCPS defend the interests of smaller firms as state boards consider whether to require that audits of nonpublic companies meet the demands and standards of the Sarbanes-Oxley Act and the Public Company Accounting Oversight Board.
One important message that Caturano wants to broadcast far and wide is the important role of small firms in the guidance of the AICPA.
“There has been a misperception that the AICPA is run by the larger firms and that they receive favorable treatment,” Caturano said. “My observation is that nothing could be further from the truth. If you look at the AICPA governing Council, you find that most of the representation is from smaller firms. So we at PCPS want to make sure that the interests of smaller firms are being looked after. We’ve been very aggressive in that area over the past few years.”
PCPS has long known that smaller firms face a problem finding qualified staff. To help, PCPS is working on a new product, a “mentor tool kit” that will help firms develop in-house training programs.
“Rich is a real leader,” said Jim Metzler, the AICPA’s vice president of small firm interests. “He is very innovative. He’s a great listener and has a genuine interest in making a difference. He’s not afraid to take a chance. He’s a peacemaker. He’s a real leader.”
Bill Balhoff, who preceded Caturano as PCPS chair, expressed great optimism for the new chair.
Balhoff said that Caturano’s biggest challenge would be to address the diverse interests of the local and regional firms. He will need to continue to provide benefits for firms of all sizes, while communicating the value of the benefits and of membership in PCPS.
“Rich will be successful at achieving this goal because he is skilled at listening to firms’ concerns,” Balhoff said. “He has a unique ability to use that information to create a vision that embraces all of the values firms need to justify their membership. He will be able to communicate that vision effectively because he is an articulate spokesman who understands the needs of firms practicing in our current environment.”
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