CPA Practices
Industry Profile Report
Dive Deep into the industry with a 25+ page industry report (pdf format) including the following chapters
Industry Overview Current Conditions, Industry Structure, How Firms Operate, Industry Trends, Credit Underwriting & Risks, and Industry Forecast.
Call Preparation Call Prep Questions, Industry Terms, and Weblinks.
Financial Insights Working Capital, Capital Financing, Business Valuation, and Financial Benchmarks.
Industry Profile Excerpts
Industry Overview
The 52,200 CPA practices in the US provide accounting, tax preparation, and auditing services to businesses, non-profit organizations, and individuals. Tax preparation and tax planning work for organizations and individuals comprise about one-third of overall CPA client fees, but are typically over half of client fees for smaller firms. Tax work is about evenly split between individuals and organizations. An additional 36,500 solo accountants operate with no employees and generate $2 billion in annual revenue. CPAs are licensed by their State Board of Accountancy.
Changing Tax Laws and Accounting Standards
Keeping up with changes in complex tax laws and accounting rules is a major challenge for CPA practices, particularly smaller ones.
Liability Exposure
Difficult economic times can cause business owners to blame their advisors for financial difficulties.
Industry size & Structure
The average CPA practice has $2.6 million in annual revenue and 11 employees.
- There are about 52,200 CPA firms in the US operating about 55,000 locations and generating about $132 billion in annual revenue.
- Any accountant filing a report with the SEC is required to be a Certified Public Accountant (CPA).
- About 85% of firms have less than 10 employees.
- An additional 34,900 establishments are owner-operated with no employees. These solo accountants generate $2.2 billion in annual revenue.
- CPAs are licensed by their State Board of Accountancy. All States require passage of the Uniform CPA Examination prepared by the American Institute of Certified Public Accountants (AICPA) for licensing. Less than half of candidates pass all four parts of the exam on their first try.
- Nearly all States require CPAs to complete a specific number of continuing education hours before their license can be renewed.
Industry Forecast
CPA Practices Industry Growth
Recent Developments
Sep 23, 2024 - Sept 23, 2024 – Finance Teams Embrace AI
- In a recent Gartner survey of 121 finance leaders, 58% of respondents said their finance organizations are using AI. In a similar survey in 2023, only 37% of those surveyed said their finance departments were leveraging AI. Two-thirds of finance leaders surveyed said they were more optimistic about the potential impact of AI than they were a year earlier. The leading use case for AI implementation in finance is intelligent process automation (44% of finance organizations), which uses the AI capabilities of existing automation tools, including robotic process automation. Other key use areas include anomaly and error detection in large datasets (39% of finance organizations) and analytics and financial forecasting (28% of finance organizations). While finance leaders have made progress in implementing AI, their top challenges are data quality and availability, and attracting enough AI talent.
- In September, PricewaterhouseCoopers (PwC) said it would lay off about 1,800 workers, the company’s first such move since 2009, according to The Wall Street Journal. PwC said it would also restructure its technology group amid a slow demand for some of its advisory services. The reductions will include associates and managing directors in the firm’s business services, and audit and tax segments, and about half the cuts will be for positions outside the US. PwC noted that, unlike its Big Four accounting firm peers, it has not laid off US-based workers over the past four years. The move by PwC comes as some professional services firms have seen demand for certain services soften amid high interest rates and a sluggish economy.
- A talent shortage in the finance and accounting industry is prompting many CFOs to outsource some accounting functions, according to a recent survey by accounting outsourcing firm Personiv and reporting by CFO.com. About 90% of CFOs surveyed said they already rely on outsourcing to complete all their accounting and finance tasks. Accounts payable is the most commonly outsourced accounting function, with 65% of finance leaders saying they outsource in that area, followed by accounts receivable (48%), and cash application (31%). More than two-thirds of CFOs said they are currently attempting to hire staff accountants, 43% are trying to fill senior accounting positions, and 24% need to fill tax accountant roles.
- In a review of public company audits by the Big Four accounting firms, the Public Company Accounting Oversight Board (PCAOB) found the level of shortfalls unacceptable, according to The Wall Street Journal. The PCAOB recently reported on its review of 230 Big Four audits of public companies’ 2022 financial statements and found an overall deficiency rate of 26%. A deficiency indicates instances where the auditor’s opinions are not sufficiently supported by evidence. EY had a deficiency rate of 37%, down from 46% from the previous year, but it still had the highest rate among its Big Four peers. KPMG’s deficiency rate was 26% compared to 30% a year earlier. PwC had a deficiency rate of 18% compared to 9% the prior year, and Deloitte’s rose from 17% to 21% over the same period. The PCAOB’s Chair said that while there were some indications of improvement, the deficiency levels were unacceptable and that more improvement was necessary.
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