Accounting Services

Brief Excerpt from Industry Overview Chapter:

Companies in this industry provide services such as auditing, bookkeeping, payroll processing, and tax return preparation. Major companies include the "Big Four" accounting firms: Deloitte Touche Tohmatsu, Ernst & Young, KPMG, and PricewaterhouseCoopers, which all have international operations; other leading companies include US-based Automatic Data Processing (ADP), Paychex, and H&R Block.

Worldwide, the Big Four dominate the market and have expanded in many countries by buying local firms; in countries such as China they have affiliated with local firms. However, concern over the share of the audit market held by the Big Four has led European regulators to propose requiring the firms to separate audit activities from nonaudit activities.

The US accounting services industry includes more than 100,000 firms with combined annual revenue of about $130 billion. Moderate growth is forecast for the next two years. Key growth drivers include increased outsourcing of accounting services and improved economic conditions that increase corporate growth and personal income.

COMPETITIVE LANDSCAPE

Demand for accounting services depends on new business formations, the increasing complexity of corporate business, and higher personal income. The profitability of individual firms depends on the right mix of services and effective marketing. Large firms have advantages in providing wider ranges of services to large corporate clients and having the resources to serve customers with many locations. Small firms can compete effectively by specializing and providing superior service. The industry is fragmented: the 50 largest companies hold just less than...