How Small Firms Capitalize on Sarbanes-Oxley

Source: Journal of Accountancy

Small firms can evaluate internal controls, especially those of service organizations, and can be involved after the initial Sarbanes-Oxley deadline. Ongoing engagements after the initial reporting deadline include additional internal control implementation and remediation, and ongoing testing requirements. Changes in software needs also offer opportunities.

Many public companies are outsourcing the internal control implementation requirements because they don’t have the internal resources.

Small firms often have the necessary audit skills to do this work and can offer more active partner involvement. It may help to form alliances with other firms and attorneys that work for public companies. When CPA firms refer this work to others, the referring firm typically retains the tax work.

Internal control testing and audit preparation work performed prior to the work of the outside auditing firm can be valuable work performed by smaller firms.

Marketing activities have resulted not only in work as described above, but also in audits of public companies. Many firms have terminated their public company audit work and have referred the clients to other small firms.

Benefit plan audits have also proved profitable for small firms, as the larger firms find themselves unable to handle all their work. They also have discontinued work for some private companies, non-profits, and governments. All these may prove to be highly valued clients for local firms.

Here are some marketing ideas that were successful for smaller firms:

• Advertising in local business journals
• Mailings to public companies
• a mailing tube with monogrammed socks
• golf balls and tees with the firm logo
• white papers
• Telemarketing
• Networking with Big Four partners
• Approaching clients, bankers, attorneys, benefit plan administrators, and insurance companies, telling them about the firm’s services and asking for referrals
• Talking to CFOs and board members of public companies over lunch

Firms that have campaigned for engagements related to Sarbanes-Oxley, have been offered opportunities for a wide variety of work in other areas:

• Tax work
• Accounting, including write-up work
• Inventory
• Reconciliations
• IT
• Outside CFO services
• Valuation,  including intangibles
• Due diligence
• Advice to audit committees
• Financial services
• Work involving subsidiaries   

From Journal of Accountancy, September 2005. For the complete article, click on the following link: http://www.aicpa.org/pubs/jofa/sep2005/dennis.htm.