Most area accounting firms experiencing growth: controversy aside, companies add accounts, employees

San Diego Business Journal, August 12, 2002 by Sally Ardizzone

In a year marred by the worst accounting scandals in history, San Diego accounting firms have managed to retain clientele and stay relatively composed.

The top 10 on this year's List of Accounting Finns, with the exception of Pricewater-house Coopers LLP, acquired an average of 16 percent more professionals than last year. Firms were ranked based on the number of local professionals.

A prominent figure nationwide and on last year's List was Arthur Andersen, previously ranked No. 5, with 125 employees. The company closed in May, and many employees were left without a job. Several have latched on with other firms, including Deloitte & Touche, No. 2, and Ernst & Young, No. 3 on The List.

Last year, Ernst & Young had 127 local professionals, and this year it employs 146. Nicole Thomas, area communications manager for Ernst & Young, said about 120 former Arthur Andersen employees were hired in the Pacific Southwest, 10 of whom were in San Diego.

KPMG, No. 1 on this year's List and past several Lists, increased its number of professionals in town from 177 in 2001 to 218 in 2002. David Down, managing partner for KPMG, said the number of new professionals was a combination of former Arthur Andersen employees and accountants from other cities, firms and KPMG offices outside the city.

Down attributes his company's growth to many factors, including increased capabilities in the areas of consumer markets and technology, specifically biotech and telecom.

"We have substantial growth in our practice this year over last year, but only a piece of it has come from, I would say, post-Andersen breakup and Andersen clients. We also have a substantial amount of new work, companies that have located to town, as well as a number of companies that have selected us over other service providers to the extent that our practice has grown," Down said.

* New Firms Join The List

With Arthur Andersen off the the List and Calderon, Jaham & Osborn not participating, PKF and RPR Partners LLP, both of which were unranked last year, made The List. PKF has 14 professionals in San Diego and 7,000 companywide. RPR Partners, whose primary services are tax consulting and compliance, has one office and 13 professionals--up five people from 2001.

Ken Van Damme, a partner for PKF, attributed the increase in professionals to his business doing well overall. He said 75 percent of his client base is real estate and no business has been lost since recent accounting scandals.

J.H. Cohn, No. 24 on last year's List, merged with Harlan & Boettger, No. 17 on last year's List.

This year, J.H. Cohn is No. 12, but said the decision to merge had nothing to do with the accounting scandals. The two merged because one was primarily a tax practice and the other primarily an audit practice; together, the companies had much to gain by joining forces. Michael Stewart, a partner at J.H. Cohn, said, however, the public may start to shy away from the bigger firms.

"We are starting to see some attrition from some of the Big 5 firms, where our clients are migrating to second-tier firms," he said.

Stewart added the firm has not changed any of its procedures since Enron because its procedures were already strict, though he notes most people have a heightened awareness about accounting principles.

"It's a shame what's happened, the image that the profession has right now. Far and away, the vast majority of the accountants are doing a good job for their clients. We have to work extra hard to reassure the public that we are doing a good job and looking out for their interest," Stewart said.

Hutchinson and Bloodgood LLP, which ranked No. 22 this year and No. 19 last year, lost two professionals this year, but said the decrease was unrelated to accounting scandals. The firm's director of taxation services, Tanya Lee Scott, said they have dealt with a few customer concerns but that generally clients are now more alert. Scott and fellow accountants recently addressed legislators in California about their feelings on the subject.

"We came together and did a huge communication-type campaign--e-mail, voice mail, letter writing--to our legislators to let them know that we wanted to see reforms at the national level and not just at the state level. It's worked so far. I think our message is getting out there."