Industry conclusion: time for deductions.

Local accounting firms continue to slough off professional staff, but don't count them out: It's done in the name of advancing technology and efficiency.

This year, the number of local math mavens at the area's largest firms hit a nine-year low of 1,028. The industry peaked in 1990, with 1,342 professionals.

The shedding of accountants is not surprising, said Katherine Leonard, a board member of the San Diego chapter of the California State Society of CPAs.

San Diego's struggling economy is a factor in the loss of professionals, Leonard said.

"The accounting industry saw what was happening (to the economy) and they downsized just like everybody else," she said.

The San Diego Business Journal's List of Largest Accounting Firms is ranked by local professionals. That includes partners, CPAs and senior and junior accountants. It does not include non-accounting professionals like attorneys.

Leonard said computer technology also played a major role in the reduction of accounting professionals.

Technological advances make it more affordable and practical for accountants to leave large firms and start their own businesses, she said.

For example, Leonard, who owns her own CPA firm, said she uses a CD-ROM of tax codes for reference. Less than five years ago, a library would be needed to house the volumes of tax codes now on disk.

These same technological changes have enabled large accounting firms to shrink due to increased efficiency, she said.

Their revenue may be growing because of efficiency, Leonard said. But, when the business is more efficient, the work can be done by a smaller population of CPAs, she added.

According to The List, out of 25 firms, only nine showed growth in professionals this year.

One of those, West Turnquist & Schmitt, reported phenomenal gains, a 50 percent increase over last year's 18 accountants. This propelled the company from No. 18 last year to No. 11.

Jim West, the firm's managing partner, agreed with Leonard that the accounting profession has been concerned with over-staffing for the last few years.

Those days are over at West Turnquist & Schmitt, he said, adding, "We just had to increase our staff to keep up with the work."

West said the economy is improving and that means more work. The business is from existing clients that are growing as well as from new clients, he said.

The firm's tax business is expanding substantially, said West. So are the non-profit and construction areas of the practice, he added.

West also agreed with Leonard that smaller accounting firms are popping up. Unfortunately, there are so many entrepreneurial firms in business, there may be too many CPA houses, he added.

The proliferation of small accounting firms may lead to more consolidation in the future, he added.

Thefeld Finch & Abrams, No. 13, illustrates the flexibility of the industry. Last year the firm was listed as Kuhn & Thefeld at No. 14.

Since then Steve Kuhn left the firm to start him own firm, said J.D. Hurley, Thefeld company tax manager.

Lisa Finch was promoted to partner after 10 years with the firm, and Jay Abrams was brought on board to do litigation support and business valuations, he said.

Currently, there is enough business to support smaller firms. Hurley said the CPA firms are getting more business from companies that used to be with the "Big Six" firms, the six largest international accounting companies. These firms take the top spots on The List, respectively: Deloitte & Touche; KPMG Peat Marwick; Arthur Andersen; Price Waterhouse; Ernst & Young; and Coopers & Lybrand.

The advantage of the Big Six is that they audit public companies, Hurley said. Wall Street financial underwriters prefer one of the top firms to audit a company going public because of the financial risks involved, he said.

General accounting work like bookkeeping or tax preparation is up for grabs, he said. That is why more companies are moving to the smaller houses. They can provide the same service as the big houses at a savings, he said.

"Businesses can pay 10 to 30 percent less at a smaller accounting firm," said Hurley.

This savings is attracting business to Goodsell Morris & Lofgren, No. 21. The firm reported a 7 percent gain in professionals.

Co-owner Bob Lofgren said the biggest source of new business is from clients that used to be with larger firms.

Lofgren agreed with Hurley that clients can save money by going with smaller firms. He said businesses can save about 40 percent when they move from a big house to a smaller CPA firm.

Lofgren said the Big Six are probably not affected by clients shifting some business to smaller firms. The Big Six will always have the advantage of doing audits, he said. "They are probably doing pretty good in terms of initial public offerings."

KPMG Peat Marwick, No. 2, is the Big Six accounting house on The List with the most losses in professional staff.

The firm reported a 14 percent decline in its accounting staffers this year.

David Down, the firm's managing partner, said KPMG reflects the business climate of San Diego.

"As business environments expand and contract, so typically do KPMG's offices," Down said.

He also cited technological advances as a reason for downsizing.

"The expanded use of technology has allowed us to deliver the same level of service in both audit and tax with fewer people," he said.

When asked if boutique accounting firms are winning business away from the Big Six, Down said the smaller houses fill an important niche in the profession, however the two counting houses serve different functions.

"In general, boutiques provide a very different service than multibillion-dollar international firms," Downs said.

He said KPMG's strength is breadth, depth, and resources. He added that the larger houses and smaller firms often refer work to each other.

Calderon Jaham & Osborn, No. 13 last year, chose not to participate this year.