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MAS by CPAs for CPAs.

Recent mergers of large and small CPA firms underscore the importance of effective, efficient and economical operations. Firms that can improve operations and reduce costs may feel less pressure to merge with other practices. Often, an outside specialist can help with these improvements.

ACPA--consultant with the appropriate knowledge and experience can create a practice niche by providing needed MAS to CPA firms. Generally, local and regional accounting firms with 10 or more professional and support staff are good prospects for these consulting services.



Two services are particularly appropriate for CPA firms. The first is a broad review of operations, focusing on systems, procedures and internal controls.

A CPA--consultant's expertise can add focus and credibility to an operational review of a firm's internal controls and systems. For example, a knowledgeable practitioner can evaluate the combined impact of two important factors that affect the degree of sophistication and complexity of a firm's internal controls and systems:

* The experience and stability of its staff (measured by using the firm's turnover data).

* The number of clients in high-risk industries and the proportion of riskier services performed.

A firm with little turnover and lower-risk clients would need a control environment very different from one with less experienced staff and higher-risk clients. Any significant changes in the type of clients or staff might require an additional review of control systems.

The CPA--consultant can evaluate the firm's systems in light of the control environment. Are systems being followed? Are they yielding quality work? Would the benefits of changing current systems or developing new ones equal or exceed the costs? The consultant might recommend changes to the existing system or suggest adapting a general system marketed by another firm.

As an outsider working with many other practicing CPAs, the consultant has the objectivity and knowledge of the profession required to recognize a client's true professional needs and meet them. Also, any MAS practitioner who is a specialist in a particular service industry can offer insights into problems of clients in that industry.


Why would CPAs, trained in evaluating internal controls for commercial clients, look to other CPAs for help with their own internal needs? Just as law firms should not represent themselves or physicians treat themselves, so too should CPAs not attempt to analyze all their own needs. For example, many CPAs don't have sizabel professional service businesses as clients and thus aren't familiar with control options in these businesses; a CPA--consultant can offer expertise in this area. In addition, a partnership is a delicate organism. An outsider can offer suggestions that might be rejected if they came from someone within the firm.

Another valuable contribution CPA--consultants can make involves helping firms define, coordinate, prepare and present CPE programs for partners and staff. After becoming familiar with a firm's personnel, work products and client base, a CPA--consultant can provide recommendations on firmwide training, specific CPE needs and general CPE administration.

Consultants can review firm-specific CPE needs, services to industry, staff characteristics and levels and types of services rendered. They can help achieve a balance between the increased emphasis on specialization and the need to understand issues facing other professionals in different service areas within the firm.

One law firm with experience in accountant liability cases recommends that accounting firms devote time and resources to training staff and professionals beyond mandatory CPE levels. Too often, firms consider CPE a costly overhead item with questionable benefits. An outside adviser, often can provide a broader perspective.

Factors to be considered in determining CPE needs include the level and scope of the firm's services, the number of new clients in unfamiliar industries, the number of newly hired accountants, past CPE history and instructional level, as well as state and federal laws or American Institute of CPAs requirements.

This type of MAS engagement may produce a considerable amount of documentation as well as a formal engagement report. CPE courses as well as policy, operating, personnel and forms manuals may be included. Since the outside adviser's primary contact usually is with an administrative or review partner, an MAS engagement for a CPA firm generally is not undertaen during the busiest financial statement review time, which usually follows tax season.


Other reasons more firms are looking to outside CPAs for help include

* Increasingly sophisticated user groups. Investors, lenders and employee groups or their legal or other advisers are more and more knowledgeable about accounting, audit, tax or management services. Consequently, a CPA's work product receives increased scrutiny.

* Standards. More professional standards require increased competency, particularly in accounting, audit and government "yellow book" engagements.

* Training. The shrinking pool of sufficiently trained entry-level personnel and uncertified but qualified senior accountants creates challenging human resource problems that may affect the technical side of a practice. A consultant can advise on the classroom needs of uncertified staff. This will be particularly important in the decade before the 150-hour education requirement for CPAs goes into effect by the end of this decade.

* Changing times. Technical standards and competitive pressures are causing earlier retirement by some partners. An outside adviser can help draft succession or acquisition agreements when changes in the firm are in order.


To succeed as a consultant to accounting firms, a CPA should be very familiar with the problems faced by the local practitioner. Additional experience as an educator, as staff to an accounting organization or as part of the administrative staff of a CPA firm also are useful credentials.

Mailed circulars, telemarketing and similar marketing approaches may bring in some clients, but a satisfied CPA firm client will be the best source of referrals. Firms exchange information with their professional peers on practice improvement efforts that have -- and haven't -- worked for them.

Many CPA firm functions can be enhanced by outside CPA--consultants with the right experience and objectivity. As the profession expands in scope and competitiveness, smaller CPA firms will need increasingly to do what they recommend their clients do--use outside advisers.

James S. Gallagher, CPA, CMA, New Providence, New Jersey, describes management advisory services engagements for CPA firms.
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Article Details
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Author:Gallagher, James S.
Publication:Journal of Accountancy
Date:Jul 1, 1990
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