Number crunchers are all shook up.

The booming real estate industry has had a knock-on effect on the traditional role of the accounting industry--and the number crunchers are beginning to feel the pressure, according to some.

The real estate boom has seen different types of companies investing in real estate, as well as an increase in joint ventures between real estate developers and investment trusts and hedge funds, making deals even more complicated. As these deals and the roles of those involved in real estate change, so does the role of the accountant.

"Joint venture agreements have far more complex income tax allocation provisions, which really attempt to have the tax aspect of the deal mirror the economic arrangements of the party," said Mike Rosenberg, a partner at Margolin Winer & Evens LLP.

"It has put a greater burden on the accounting profession to create greater levels of financing sophistication to understand transactions and to understand accounting as well as tax gratifications of these joint transactions." According to Dale Reiss, global director of real estate, hospitality and construction at Ernst & Young, because of the increased investment in real estate from external capital markets, real estate has become a very attractive investment for those who previously had not been in the market.

These companies dabbling in real estate for the first time require more attention from their accounting firms. Accountants are now asked to walk these clients through every aspect of the business, from leasing to buying and selling to financing.

"You need to almost start them in the business. So now you're going from the relationship of accountant and tax provider to advisor," said Robert DeMeola, partner in the real estate practice at J.H. Cohn.

With the changing real estate market in New York, DeMeola says accountants are also helping companies decide whether to enter or leave the market, as well as predicting trends and the next hot areas for development. "We're dealing with operational, projection and financial questions," he said.

The changes in the role of the accountant have required them to have increased specialization, particularly in the field of real estate.

Some of the specialty services firms now offer include valuation, process for acquisitions and sales, tax planning on sales and acquisitions and equity structuring for acquisition of properties. One major service accountants can offer real estate companies is cost segregation studies. This allows buyers of existing buildings or those constructing new buildings to gain tax benefits by obtaining larger depreciation deductions on those properties.

This increased knowledge needed to work as an accountant in real estate has also changed the college degree requirements of potential accountants.

Not only are more and more accounting firms encouraging their employees to get master's degrees, but the requirements have been changing, on a state by state basis, for the number of hours needed to take the CPA exam. The hours have increased from 120 to 150 hours or from four years in an undergraduate program to five. These changes go into effect in New York this year. These extra hours will include more finance, management and business courses.

"It's become increasingly important for accountants to have a financial background in order to understand the time and value of money, as well as the financial engineering of a transaction," Rosenberg said. "It enhances their ability to render the services they're being called upon to perform because it isn't just debits and credits anymore.

"People are required to understand the economics of the deal, how financing is structured, how parties envision various risks and rewards.

As real estate becomes more and more institutionalized and Wall Street plays more of a role with joint venturing, the structuring becomes more sophisticated and requires a more in-depth knowledge of finance."

Of course, this required extra schooling has had a negative effect as well, being one of several factors that have been causing a major shortage of accountants.

Because accounting majors are required to stay in school for an extra year, there have been fewer actually entering the field. There has also been a decline in students interested in accounting.

Many opt to attend law school upon graduating from an undergraduate program, or enter the financial services field, where they make more money and the job and hours are less tedious.

"The truth is, people don't really feel it's worthwhile to go to college an extra year because the job is very rigorous and difficult," said Neil Sonenberg, senior partner at Rosen Seymour Shapps & Martin.

"Accountants have to work a lot of hours. It's very brutal and punishing. During the tax season, we work 60-65 hours a week, sometimes 75-80 hours.

"The truth is, it's truly a grueling experience. That's why younger people aren't very attracted to the accounting field."

This has led to fierce competition between firms for experienced accountants. Companies are looking to hold onto the people they have, while others are looking to lure them away.

Firms are trying to offer more employees attractive and competitive fringe benefits, as well as sign-on bonuses and health care coverage, than the other companies.

Some firms bring in accountants from other countries during the tax season.

They are also actively recruiting on college campuses as well as holding open houses at their offices where prospective recruits can tour the offices and speak with employees.

"We're starting to see a marriage of human resources and marketing in many firms, because now you really need to reach out in the industry and not just put ads in the classifieds," said Luis Portiansky, marketing director at Margolin, Winer& Evens LLP. "We are reaching out to industry groups, accounting societies, alumni associations at universities and any other organization where we are able to get in front of potential recruits. Everybody is becoming much more proactive with how they're doing their recruiting."

Smaller firms, with less time and money to recruit employees, are at a great disadvantage. According to some in the field, this has led to these smaller firms being tempted to cut too many corners in their day-to-day business.

"Smaller firms don't usually follow generally accepted auditing standards and this negatively affects the jobs," Sonenberg said.

"A typical audit of a real estate client requires a solid 10 days. These other firms typically do it in two to three days."

He said that while his company might charge $35,000, the smaller firms drop their prices to as low as $5,000, attracting companies interested in saving money. The difference is that the larger firms will likely do a much more thorough job. "Our firm has a 100-page audit program, developed and modeled for specific real estate jobs."

He added that his firm has found some clients' bookkeeping close to a million dollars off.

"When these things blow up in their faces, do you think shareholders will care they saved a few thousand dollars?"

"The fallout from Enron and Arthur Andersen has left four big firms to do the work. Now you have the next tiers overly-saturated with work," according to Robert Reitman, chair of the Real Estate Committee, New York State Society of Certified Professional Accountants.

"The smaller firms are grabbing onto the lower end of the middle market, doing purely commodity type work, and some are undercutting the work. You're in business to make a profit. With such a low fee, you only have so much time and corners do get cut. Smaller firms don't have the resources, so they have to cut corners."

Reitman advises that before hiring an accounting firm, businesses should ask for references and speak to the firm's other clients.

The Sarbanes-Oxley legislation passed in 2002 in reaction to the headline-grabbing finance scandals has increased the attention on the accounting profession.

This law requires all businesses to document records of all financial transactions for auditing purposes. Most in the industry believe the new law could eventually control the number of smaller firms under-pricing jobs and cutting corners.

Ironically, though, these same accounting scandals have increased interest in accounting as a profession, resulting in an increase in accounting majors.

"The industry was all over the news. People got to see what a firm really did, and this started enrollment to increase," DeMeola said.

"They understood what accounting really was. Now enrollment has increased, so hopefully the shortage will be gone in a couple of years."

He added, "Inherently, the shortage would be over when more people graduate. But they will just be backfilling needs.

"I don't think there will ever be a surplus. It will just get to a point of equilibrium or stability."