There are several different types of accounting firms in the United States. Accounting firms can be classified in several ways such as: the number of staff employees, the number of offices, revenues, services provided or whether they are domestic or international. This article will break accounting firms down by specialty or the services they provide. The different types of accounting firms include: full service firms, tax firms, audit firms, risk management or internal control firms, outsourced service firms and business development firms.
Full-Service Accounting Firms
Full-service accounting firms provide a wide variety of services. Ernst & Young (E&Y) is one of the Big-4 accounting firms, referring to one of the four largest U.S. accounting firms, that provides multiple services. E&Y provides tax, audit, risk management, business development and executive coaching services. The firm has a presence on every continent, with exception of Antarctica. There are many firms, both large and small, that operate multiple departments. All of the large multinational firms operate in this manner. Many of the larger domestic firms offer a variety of services as well. These firms tend to do better in a recession due to the diversified group of services that they provide and the broad sector of clients that they service.
Tax firms provide tax services only. These kinds of firms usually choose to specialize in one niche market. Tax firms can be sub-categorized into firms that offer individual tax services, business tax consulting, and high net-worth tax consulting. Many tax firms even have a division that works within the tax-specific areas of estate planning. H&R Block is a tax firm that primarily provides tax compliance services to individual tax filers. Although the company does complete business returns as well, that is not what they are known for. Specialty tax firms, like Margolis, Phipps & Wright in Houston, Texas, provide high net-worth tax consulting services to wealthy individuals. Firms choose to specialize in federal, state, sales and use, franchise, securitization, property and many other areas of tax compliance. The market is as diverse as it is competitive.
Audit firms all do primarily one thing: they audit company financial statements and issue opinions on those audits. However, audit firms could be broken down into sub-categories such as governmental audit, nonprofit audit, SEC audit and private equity audit firms. Then there are specialty audit firms that perform, 401(k) and pension audits. Audits are conducted in many different areas, including: financial, operational, information technology and compliance issues. The latter audits are conducted by Certified Public Accountant (CPA) firms that provide external audit services. Most private and all public companies have annual audits. Private equity firms commission audits on their companies to ensure that they are being managed properly. Public firms are required to undergo a public audit once per year. This audit is published with the Securities and Exchange Commission. This process is meant to protect the investment community from fraudulent companies.
Risk Management Firms: Internal Controls
Internal controls and risk management firms offer internal audit services. An example of an internal controls firm is Protiviti. Protiviti, owned by Robert Half International (NYSE: RHI), offers internal control audits and consulting to ensure that a company has a system of checks and balances in place in relation to its accounting infrastructure. They also offer business evaluation and risk management services. Mercer, owned by Marsh & McLennan (NYSE: MMC) offers forensic accounting services. They too are a risk and business evaluations firm.
Outsourced Accounting Firms
Outsourced accounting service firms act as a company’s accounting department. They provide the accounting service, and in some cases the contractors, that complete all of the accounting work either at their location or at the client’s site. The accountant or accountants remain employees of the accounting firm but complete the accounting for the client. These firms may offer services that include: full-cycle accounting service, Chief Financial Officer (CFO) services or simple business development services. The CFO service is a high level executive product that allows the firm to oversee the work completed by the company’s in-house accounting staff.
Bookkeeping firms operate in every city, small town and rural setting in America. Some states do not allow the word "accounting" to be used in the company's name unless they are a CPA firm. However, bookkeeping firms serve a very important sector of our business community, the small business owner. They provide everything from monthly write-up bookkeeping to tax compliance services. Small businesses do not always have the resources to hire an in-house accountant or accounting staff. The bookkeeping firm acts as the accounting department for the small business owner. This keeps the business organized and financially responsible.