Professional Services Monitor: Today

For the third consecutive year, the Ames Research Group has completed a comprehensive survey of tax service market share and trends. After covering the Fortune 1000 in 2004 and 2005, the 2006 Big Four Tax Services Research Survey draws on interviews from more than 300 tax directors and other executives from among 1,000 middle-market US companies. The survey determines which firms are providing tax services to each company. Furthermore, these tax executives also offered their assessment of leading firms‚ brand strength, and the key issues facing the tax services industry.
Ernst & Young was the single or co-leader in four of seven tax service lines studied, with Deloitte leading one service line. These results match not only trends ARGI found in tax services among Fortune 1000 companies, but E&Y and Deloitte’s strong results in tax also seem consistent with their performance in audit services as shown in ARGI’s Big Four Quarterly Competitive Summary.
With this third survey, Ames Research Group has now completed more than 700 interviews with tax directors at the largest 2,000 US companies.

The full press release is available for download as a PDF.

CRN.com ran an article this week, “Dell’s Long Relationship With PwC Facing A Tough Test,” discussing Dell’s ongoing SEC investigation and resulting delay in issuing financial statements, and the potential impact on the company’s twenty-plus year relationship with PricewaterhouseCoopers.
The article notes PwC’s attest requirements under SOX 404, the fact that Dell’s CFO is a former Price Waterhouse partner, and PwC’s $22 million in fees from Dell. Most interesting, however, was a quote from John Carney, a former SEC and U.S. Justice Department attorney and a now partner in the firm Baker & Hostetler.

“The financial statements are the responsibility, first and last, of management,” Carney said. “That’s the law of management. That’s the law (in) securities. The auditors are there in a watchdog capacity.” The auditor is tasked with determining whether the financial numbers Dell reports are a good indication of what’s really happening.

“There’s no way Pricewaterhouse knows as much as the client,” Carney said. “It’s not always fair to hold them accountable. . . They are not guarantors.”

Such as statement describing some limitation of an auditor responsibilities has gone out of vogue. Coming from a former SEC lawyer makes it even more remarkable.

Ames Research Group this week released the latest Big Four Quarterly Competitive Summary, covering competitive auditor change activity between the fourth quarter of 2005 and third quarter of 2006. 
 This report covered nearly 440 events involving Big Four firms.  ARGI research covers both public and privately-held companies.
Ernst & Young continues to perform well in winning new work and doing so efficiently.  E&Y won the most new clients during the 12 months covered, and the firm won almost 50% of the engagements on which it proposed. 
Deloitte’s engagement success rate, or “batting average” fell slightly.  However, Deloitte continues to narrow its net loss in clients over a 12-month period.  Since 2003, the Big Four have collectively lost clients, but Deloitte has moved back towards a net gain quicker than the other firms.
KPMG dropped slightly in its invitation and engagement rates, but also improved slightly on its net client loss.
PricewaterhouseCoopers trails the rest of the Big Four by a significant margin in both invitations and successful engagements, and continues to have a large net loss in market share.