CPA or Big 4 (2 Viewers)

[seremify007]

I'm too too knowledgeable in this area so my question might sound really stupid but if the Big 4 is only a stepping stone to a higher paying job then doesn't that mean there are bigger companies than the big 4? I'm a big confused.

Companies, corporations, private sector, commercial, etc... in this context refer to normal businesses which have a Finance and/or Accounting department which is not their core business (i.e. it's a cost centre). E.g. Telstra, Commonwealth Bank, Fairfax, etc...

Big 4, and other accounting or professional services firms are providers of accounting and other business-related services to aforementioned companies (as well as other groups/categories such as high net worth individuals, small companies, etc..). In this field, the accountants who are out doing client work are the ones who are the core business of the firm and thus bring in the revenue. Or another way to look at it is, it will be the people who do accounting who are the masses compared to other non-accounting roles.

Sorry for the poorly simplified explanation but that's the easiest way I could think of to word it.

 

[fatbastard]

Well I've personally never done the actual recruitment process myself but a few of my colleagues have been asked by HR to help out with the application screening process.

Big 4 accounting firms look for people who have strong academics, usually credit (65%+) average (however, that isn't to say they've never hired people with less than 65% - it just depends on the entirety of your CV), prior work experience during their tertiary studies (doesn't have to be in accounting roles, but at least some indication that they are not just book worms, as they want to hire someone who can handle working full-time and studying their CA) and extra-curricular activities such as executive positions in Tertiary clubs or volunteering work. However, I must state that for roles especially in Corporate Finance, you would need to have at least 75%-80%+ average to have a chance (what you would expect from IBs because most of the candidates that apply for Corporate Finance will most likely apply there). For those that intend to work in Corporate Finance in Big 4 accounting firms next year, there are very limited positions in each firm e.g. 3-6 (max) - usually taken up by interns. I know because I work in Corporate Finance at one of the Big 4s and I've heard rumours that the intake is limited.

Usually for Big 4 accounting firms there is a screening program (like those of many Big 4 banks and IBs), which pick up specific words that they feel is key to a candidate. There is no way in hell a HR person can sit through 3000-4000 applications within 1 week and give you a call back to say you've got an interview.

In the interview, there is a "100-point system" (or similar) that is used by the interviewer to assess whether or not you are the correct fit to the role and to the firm. This usually means that the firm's "culture and key values" are a set of criteria, which you're assessed against. At the end of the day, the interviewer is looking for someone that they can work with.

In next years recruitment drive (graduates for 2010), there will DEFINITELY be far less positions available to graduates because of the credit-cruch hitting corporate earnings, hence Big 4 accounting budgets and profits. In addition, IBs are not hiring as many due to their international counterparts culling staff and a flow-on effect of "potential" IB candidates flooding to Big 4 accounting roles. If I were a penultimate year student wanting to work in Big 4 accounting, I would be gunning for an internship position at a Big 4 accounting firm to secure a place as a graduate in 2010. I personally think the markets will be depressed for 1-2 years.

 

[Vagabond]

Big 4 Audit is relatively unaffected by the credit crisis...

It's the advisory wings that are seriously in the fetal position.

Remember that audits are recurring and mandatory.

 

[ifsonotso_100]

Aren't fees which are negotiated affected by the credit crisis?

 

[Vagabond]

Fees are inflexible downwards

 

[fatbastard]

All areas are affected by the credit crisis, especially Advisory areas, which depend on the market to perform well for their division to do well. That isn't to say that during market downturns these areas don't make money through divestitures, PE funds snatching up cheap companies etc.

Audit is less impacted during a downturn, however, yearly audit fees will be put under pressure due to the argument of "learning curve", and cost cutting (easiest way to cut costs is to cut audit related fees because it is more of a statutory provision, instead of a strategic service). Financial Services audit has been hit pretty hard due to the credit crisis. We have seen in the UK and US that our Financial Services audit and assurance practice is not hiring or promoting people. Furthermore, the need for IFRS and Sarbanes-Oxley work has died down in Australia, hence the need for audit and assurance related services around those areas have pretty much died. Back in 2005 when IFRS and Sarbanes-Oxley were introduced there was a hiring frenzy. I foresee that there will be a similar situation in the US, as there will be a significant shortage in qualified accountants in IFRS in the US for the next few years because the US have recently announced that they will gradually transition from US GAAP to IFRS.

 

[CommandaHD]

Audit is less impacted during a downturn, however, yearly audit fees will be put under pressure due to the argument of "learning curve", and cost cutting (easiest way to cut costs is to cut audit related fees because it is more of a statutory provision, instead of a strategic service). Financial Services audit has been hit pretty hard due to the credit crisis. We have seen in the UK and US that our Financial Services audit and assurance practice is not hiring or promoting people. Furthermore, the need for IFRS and Sarbanes-Oxley work has died down in Australia, hence the need for audit and assurance related services around those areas have pretty much died. Back in 2005 when IFRS and Sarbanes-Oxley were introduced there was a hiring frenzy. I foresee that there will be a similar situation in the US, as there will be a significant shortage in qualified accountants in IFRS in the US for the next few years because the US have recently announced that they will gradually transition from US GAAP to IFRS.

What do you mean by this.
a. Do you try to imply that audit services provided to the big companies will be cut short in the upcoming year OR
b. Auditor appointed by shareholders and companies will be paid less.

I'm doing company law and the Corporation Act specified that company appointing an auditor is a must or the companies commit a breach and consequences will follow.

 

[fatbastard]

I mean both (a) and (b) if I haven't interpreted your question incorrectly.

Audit related services is wide and varied. What is stated in the CA Act 2001 for auditor appointment is primarily related to financial statement audits (i.e. the auditor providing an "opinion" based on the financial statements being "true and fair", which is submitted to the PBAC (Public Board Audit Committee)). If you read the Annual Financial Report (AFR) there is a listing of the all fees charged to the corporation by the Big 4 firm, including the "audit fee", non-audit related fees (e.g. tax, transactions, etc).

Recent issues with Opes, Centro, MFS and other high profile corporations have put more pressure on Big 4 firms to justify their significant financial statement audit fees they charge. There is therefore pressure put on the CFO and the PBAC to justify the fees they pay for audit and other audit related services if it doesn't mitigate the financial statement risk.

There are other audit and assurance related services on top of financial statement audits such as risk management (assessing treasury risk management), further risk services (internal controls improvement) work, etc. not on top of the opinion relied upon by financial statement audits, which may be cut due to a down turn in the economy (i.e. corporations will go for the bare minimum service required). No matter what happens, if there is a downturn in the economy everyone is affected in one or many ways.

However, one can argue that recent scandals like the rogue trader from SG and NAB's FOREX scandal has placed greater importance on improving internal controls within a corporation - hence work in these areas could improve (dunno just depends on what the corporations want). On a whole, Big 4 will still make money no matter what type of environment the economy is in. It's just that they probably won't make as much as they would like! haha

NB: If a Big 4 is conducting the financial audit of one firm, it cannot conduct Internal Audit work, unless it is used as a reliance for less substantive work and reliance upon for the final year end financial audit.

 

[~shinigami~]

Companies, corporations, private sector, commercial, etc... in this context refer to normal businesses which have a Finance and/or Accounting department which is not their core business (i.e. it's a cost centre). E.g. Telstra, Commonwealth Bank, Fairfax, etc...

Big 4, and other accounting or professional services firms are providers of accounting and other business-related services to aforementioned companies (as well as other groups/categories such as high net worth individuals, small companies, etc..). In this field, the accountants who are out doing client work are the ones who are the core business of the firm and thus bring in the revenue. Or another way to look at it is, it will be the people who do accounting who are the masses compared to other non-accounting roles.

Sorry for the poorly simplified explanation but that's the easiest way I could think of to word it.

Wow, I feel kinda dumb because even with that simplified explanation, I'm still having a hard time understanding. Maybe if I come back and read it later, then it'll be a bit clearer.

Thanks for the explanation though.

 

[seremify007]

In next years recruitment drive (graduates for 2010), there will DEFINITELY be far less positions available to graduates because of the credit-cruch hitting corporate earnings, hence Big 4 accounting budgets and profits. In addition, IBs are not hiring as many due to their international counterparts culling staff and a flow-on effect of "potential" IB candidates flooding to Big 4 accounting roles. If I were a penultimate year student wanting to work in Big 4 accounting, I would be gunning for an internship position at a Big 4 accounting firm to secure a place as a graduate in 2010. I personally think the markets will be depressed for 1-2 years.

Disagree (at least for audit) purely because we're always growing, there's always more rules/standards/requirements to be enforced and if anything, winning (or losing) large audit clients is more likely going to have an impact on recruitment numbers than the credit crisis itself.

That being said, some of the Big4 firms had hgih retention levels with the offers to vaccies so that would reduce the number of new grads being recruited.

Aren't fees which are negotiated affected by the credit crisis?

Fees aren't calculated on the client's revenue/profits AFAIK. They're based on required hours and required staff to complete the audit; and this usually increases year-on-year with CPI increases unless there has been a reduction in work required (e.g. an entity was sold?), increased efficiencies elsewhere (e.g. streamlined or integration of systems, outsourcing of certain audit work to other country's) or something along those lines... but I'm not an expert in fee negotiation (at least for audit).

Advisory and consulting divisions however as mentioned above is having a bit of trouble.

However, one can argue that recent scandals like the rogue trader from SG and NAB's FOREX scandal has placed greater importance on improving internal controls within a corporation - hence work in these areas could improve (dunno just depends on what the corporations want). On a whole, Big 4 will still make money no matter what type of environment the economy is in. It's just that they probably won't make as much as they would like! haha

NB: If a Big 4 is conducting the financial audit of one firm, it cannot conduct Internal Audit work, unless it is used as a reliance for less substantive work and reliance upon for the final year end financial audit.

Nothing to stop us providing our own findings as part of a management letter or support to assist the client in improving their own systems. Nothing also stopping us from working with the company's own IA function.

Wow, I feel kinda dumb because even with that simplified explanation, I'm still having a hard time understanding. Maybe if I come back and read it later, then it'll be a bit clearer.

Thanks for the explanation though.

Basically just wanted to differentiate between the two categories. One category are the businesses and companies which do something (e.g. make a product, sell a service, etc..), and the other category is the professional services firms which offer guidance/assistance to these companies whether by choice or as required by law.

Use this as a really simplified example. You're a chef. You want to open a new restaurant but dont know how to run a business, your taxation requirements, your reporting requirements, etc... so you find yourself someone who knows about those things to help you with that. That's what a professional services firm does (in basic terms).

 

[Suvat]

Wow, I feel kinda dumb because even with that simplified explanation, I'm still having a hard time understanding. Maybe if I come back and read it later, then it'll be a bit clearer.

Thanks for the explanation though.

Simplest explanation possible:

Inhouse accountant = you employ a full time nanny who lives in your house and does everything from cooking, cleaning, childminding (replace with journal entries, reconciliations, composing and checking financials etc)

Chartered firm = you pay a professional housekeeper who comes in for a few hours every week to clean the house and/or perform other tasks which a full time nanny would do. That housekeeper also services other homes in your street/suburbs.

However, assume your house needs a 'health inspection' from the local council every year. In this case, ONLY the external housekeeper is able to perform the inspection and report to the council that everything is in order (or fked up). That is essentially what auditors do.

 

[~shinigami~]

Basically just wanted to differentiate between the two categories. One category are the businesses and companies which do something (e.g. make a product, sell a service, etc..), and the other category is the professional services firms which offer guidance/assistance to these companies whether by choice or as required by law.

Use this as a really simplified example. You're a chef. You want to open a new restaurant but dont know how to run a business, your taxation requirements, your reporting requirements, etc... so you find yourself someone who knows about those things to help you with that. That's what a professional services firm does (in basic terms).

Simplest explanation possible:

Inhouse accountant = you employ a full time nanny who lives in your house and does everything from cooking, cleaning, childminding (replace with journal entries, reconciliations, composing and checking financials etc)

Chartered firm = you pay a professional housekeeper who comes in for a few hours every week to clean the house and/or perform other tasks which a full time nanny would do. That housekeeper also services other homes in your street/suburbs.

However, assume your house needs a 'health inspection' from the local council every year. In this case, ONLY the external housekeeper is able to perform the inspection and report to the council that everything is in order (or fked up). That is essentially what auditors do.

Oh I see now, thanks guys.

What I still don't though is how come people are saying that Big 4 firms don't play high salaries because people just use that as experience to get higher paying jobs elsewhere. Does that mean that an inhouse accountant at a big company such as Telstra would make more than one at a Big 4 firm?

 

[Suvat]

Because at a big 4, you get to work on a range of companies, while inhouse, you only get to work on one (your employer). Since it's unlikely that two companies will do everything exactly the same way, it logically follows that you will get a greater depth of experience working on a range of them, and this experience makes you more attractive to corporations like telstra when you want to move inhouse, because you bring with you the experience of having worked for optus for example.

As for why inhouse accountants make more, the only reason I can think of is that they have to pay a premium to make up for the lack of diversified experiences/training.

 

[ifsonotso_100]

the other reason I'd imagine is that it's easier to measure the value add of auditors but more difficult for inhouse accountants lol. But on a more serious note the reasons for the disparity you'd have to look at the individual company to determine why that's the case.

 

[seremify007]

As for why inhouse accountants make more, the only reason I can think of is that they have to pay a premium to make up for the lack of diversified experiences/training.

I think part of the difference is also attributable to career progression and non-financial benefits.

Career progression being that in big 4 there is a structured promotional plan in place for the accountants whereas in the private sector, your promotional prospects are more dependent on space being made available or new opportunities being created.

On the other hand, don't shoot me for saying this guys, but it's generally thought that working in big 4 is more 'socially enjoyable' with the social calendars, heaps of training (i.e. you get paid your normal salary whilst you attend these training programs) and the general young (and supposedly fun) nature of the people. This could be considered a non-financial benefit to the employee.

That being said, some of the larger financial institutions and banks are trying to adopt a career promotional structure program similar to Big 4 to appeal more to new grads.

 

[seremify007]

What I still don't though is how come people are saying that Big 4 firms don't play high salaries because people just use that as experience to get higher paying jobs elsewhere. Does that mean that an inhouse accountant at a big company such as Telstra would make more than one at a Big 4 firm?

Also note;

1. Small firms don't necessarily pay less than Big firms.
2. Small companies also don't necessarily pay more than big corporations.

 

[~shinigami~]

Wow, the accounting field is fairly complicated, glad I didn't go down that path. No offense but it's just not my cup of tea.

EDIT: It does sounds pretty interesting though.

 

[Minai]

CA is a formal grad diploma in addition to a professional association. Obtaining the qualification involves verbal assessments, written exams, etc.

No verbal assessments per se, it's more like participation marks at focus sessions (seminars similar to tutorials)

As an aside I think the CA program is absolute crap, it has caused me many sleepless nights (for which I never experienced during uni), but I guess the qualification at the end is all that counts.

Thanks for the info Vegabond. About the CA and CPA course, how long does it take to finish each course and how much does each course cost.

Don;t know about CPA but the CA program takes about 1.5-2 years assuming you pass everything and don't take breaks in between, and you are a qualified CA after 3 years of work experience

 

[Suvat]

Is the stuff you learn in CA actually useful?

 

[fatbastard]

Yep I agree. I've never studied so damn hard in my life, until I started the CA.

That's probably a combination of work + study.

Indeed, the modules within CA are definitely harder than what was taught at Uni.

But I also believe that the CA's method of teaching is flawed. Focus sessions are a waste of time - as they're usually time for people to show off their knowledge, especially when they present. In addition, I think the style of questions the ICAA ask in exams is very indirect and stupid.

CA does ADD value, only when you finish it. Overall i think TAX and FIN are the better subjects out of the 5 modules.

That's my 2 cents