Coopers & Lybrand and Price Waterhouse

And Then There Were Five

T he Big 6 are about to become the Big 5. Coopers & Lybrand and Price Waterhouse announced plans to merge their practices, effective early 1998. Nicholas G. Moore, chairman of C&L International, will be the new entitys chairman and James J. Schiro, chief executive officer of PW, will be its CEO. The merger is subject to approval by the firms partners and by regulators.

The resulting practice will become the largest in the world, surpassing Arthur Andersen. Judging from both firms 1996 figures, the combined firm will have $11.8 billion in revenues, 8,557 partners and over 129,000 employees.

What it means
"When the story broke, I was meeting with a group of financial executives from around the world," Gary J. Previts, professor of accountancy at the Weatherhead School of Management, Case Western Reserve University, Cleveland, told the Journal. "And one of the executives turned to me and said, Slim pickins. His point was that global enterprises now will have fewer suppliers to choose from for a wide variety of services. However," he continued, "its becoming more expensive for service entities, such as CPA firms, to exist in an increasingly complex global environment. Firms at this international level are still seeking an optimal size—and that size is going to be larger."

"Im not surprised at all," J. Curt Mingle told the Journal. A member of Clifton, Gunderson LLC, in Ephraim, Wisconsin, Mingle was chairman of the American Institute of CPAs special committee on regulation and structure of the profession. "It was inevitable and makes all the sense in the world," Mingle said, noting that a need for increased resources, especially people, led to this merger. "Right now theres a shortage of talent for entry-level and experienced positions. You need a lot of resources to perform services at the Big 6 international level. Maybe the world doesnt need six firms providing the same services." He pointed out that the United States used to have 12 major automakers. Now it has only 3—an "economy of size." He predicted that in the next decade it will be the Big 4, with perhaps 15 regional firms. Previts and Mingle agreed more mergers would take place among the top 20 firms.

Although Mingle thinks the merger was in both firms interests, an immediate result could be some defections of staff and partners. For example, in a city where one firms office is much larger than the others, the staff at the smaller office may feel overwhelmed when combined and seek positions at other firms. "Midsize firms such as ours may look for dissatisfied staff and partners—even whole offices," Mingle said. Clifton, Gunderson has about 120 partners.

"In the end, I dont think the merger means much of a change for the profession," he said. "At our firm and others of a similar size, well continue to work with entrepreneurs and family-owned businesses while the Big 5 continue to work with the multinational giants. This merger simply makes that breach wider."

Business/Industry Article Best of Year

"G etting Beyond Counting, a wake-up call to accountants that tells them to move beyond working exclusively with historical data, has received the Lawler Award for best Journal of Accountancy article of the year. Authors William L. Reeb, CPA, and Michaelle Cameron, PhD, received a plaque and a check for $500 each for their December 1996 article. Saying up front that bean counting comes uncomfortably close to describing the tasks management accountants have performed historically, the article advises CPAs to take on roles as artists, educators and visionaries. One of the Journals editorial advisers called the article an excellent vision of what accountants should be.

Reeb is a shareholder in the firm Winters, Winters and Reeb, in Austin, Texas, and a member of the American Institute of CPAs management consulting services executive committee. Cameron is assistant professor of marketing at Saint Edwards University, Austin.

The award is named after John L. Lawler, a former Journal editor and AICPA senior vice-president. The winning article is chosen each year by the magazines editorial advisers.

New NASBA Chairwoman to "Sell" UAA

S arah G. Blake became the 1997-98 chairwoman of the board of the National Association of State Boards of Accountancy at its 90th annual meeting. The chief executive officer of Technology Management & Development Inc., a small technology consulting company in Tucson, Blake had served on the board for nine years and is a past chairwoman of the Arizona state board.

She takes the helm at a key point for NASBA and the American Institute of CPAs: The boards of both organizations have approved a newly revised version of the Uniform Accountancy Act (UAA). "One of my key tasks this year will be getting it adopted in as many states as possible," she told the Journal. "Theres an especially strong push for the UAA, a sense of urgency." The AICPA and NASBA joint implementation committee will concentrate first on states with the most CPAs. "The majority of CPAs—if not most states—should be working under the UAA within two years," she said. "I believe CPAs around the country generally accept the UAA." She predicted some states would adopt certain provisions, such as substantial equivalency, early and come back to others later. "Thats an especially important provision," she continued, "because it will pave the way for CPAs to form Internet practices and send workpapers by e-mail across state lines."

Other issues
"I dont think many state boards have a truly clear definition of what it means to protect the public," she said. NASBA, whose charter calls for it to enhance the effectiveness of state boards, will be issuing a report that will help answer the following questions:

  • Whom are the individual state boards protecting?
  • What are the limits of the boards protection?
  • Who is the public?

One issue Blake would like to explore, for example, is the amount of "red tape" involved in the licensing and regulation process. "All this bureaucracy is not in the public interest. Maybe state boards should insist on more sophisticated computer systems, so CPAs can handle registration online." She said that a state board should be there for all the CPAs in its state and not see itself solely as a disciplinary body for the handful who dont follow the rules.

Blake said NASBA also would keep an eye on the new Independence Standards Board and planned to create a committee to comment on ISB issues.


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