In the broadest sense, accountancy covers four major activities:
- Audit and accounting
- Tax and legal services
- Corporate finance and business recovery
- Consultancy services
However, the two key areas accountancy firms really tend to focus on are audit and accounting, and tax services, and this is where many firms draw the majority of their income from, in addition to the provision of legal services to a lesser extent.
Auditing is usually carried out by the medium to large accountancy firms because the process requires several specially trained, skilled staff; these are known as auditors. Auditing is not provided by many smaller accountancy firms because of the costs involved. All auditors are accountants, although not all accountants are auditors as not all accountants have the necessary skills and qualifications required to be an auditor.
Some of the largest firms in the industry also offer management consultancy services, which have become increasingly common and lucrative in the current market and, as such, are earmarked as a key growth area by many firms.
The largest four accountancy firms in the UK - PwC, Deloitte, KPMG and EY - are collectively known as the ‘Big Four’. This is terminology that will appear throughout this report. They dominate the accountancy market, particularly in the area of auditing - they were the auditors for more than 90% of FTSE 100 companies in 2014.
Auditing and Accounting
Auditing and accounting consists of the preparation and presentation of annual accounts for individual companies. These reports must be reported in accordance with the company’s Memorandum of Association, in addition to being recorded in such a way that they comply with relevant tax law, company law and various reporting standards.
Good accountancy practice is essential in the setting out of a company’s accounts in order that the report gives a ‘true and fair view’ of the company’s financial situation within the accounting period. However, exactly what is deemed ‘true and fair’ is a matter of some debate, especially given the context of the recession and the subsequent economic gloom that has followed. For example, arriving at a true and fair view of a company’s assets when the value of many assets held by companies is either falling or volatile is a particularly complex issue which auditors have faced of late.
Annual accounts have to be prepared not just by limited companies; small- and medium-sized enterprises (SMEs), as well as partnerships, charities, sole proprietors and trusts must also prepare annual accounts, and many use accountancy firms for this purpose.
The auditing process as a whole has become much more onerous and complex since the 1990s as the regulations which govern auditing and auditors have increased.
Tax and Legal Services
Tax and legal services make up a large proportion of the revenue and activities of accountancy firms. Such services include advice on how to deal with new tax legislation which arises from the Government’s annual Budget, as well as providing advice relating to other legislation that may have implications on taxation.
Tax and legal services also come into play in cases where a company may have overseas subsidiaries, which results in a number of different taxation considerations having to be taken into account. Tax planning and tax strategy are also included under this umbrella, which may include advising clients on how to minimise their tax liabilities.
Both individuals and businesses make use of the tax and legal services accountants provide. Accountants are well placed to advise on ways to minimise the tax burdens on individuals and businesses in areas such as income and inheritance.
Corporate Finance and Business Recovery
Corporate finance and business recovery focuses on a wide array of specialist business services. These include:
- Share Issues
- Stock Market Flotations
- Project And Structural Finance
- Mergers And Acquisitions
- Management Buy-Outs (MBOS)
- Large-Scale Leasing
- Debt Management
- Private Finance Initiative (PFI) Activities
- Insolvency, Administration And Receivership.
Accountancy firms come into play when, for example, companies seek to issue shares through public flotation or raise funds through a rights issue. Furthermore, companies involved in mergers or acquisitions, whether they are the acquirer or the firm being acquired, usually require the services of an accountant. On such occasions, the accountancy firm will exercise ‘due diligence’ in the process.
Accountancy firms have seen the benefit of the current economic climate not only in the fact that more companies are seeking the aid of accountants in order to lessen cost burdens and streamline operations, but also because of the increase in business insolvencies. This has provided more work for the corporate finance and business recovery sector of the market. However, the fees for services related to insolvency are not as high as for other aspects of work that accountants carry out.
Many accountancy firms offer consultancy services, although the nature of these services varies. Some firms offer business consultancy, while others offer management consultancy and some provide a mixture of the two. Larger firms offer what is deemed ‘business advisory services’ rather than consultancy services.
In the most general terms, consultancy means advising clients on how to manage their business and, as such, covers activities such as business strategy, financial management, IT, human resources (HR), production and marketing. SHOW LESS READ MORE >
1. Introduction & Definition
- Report Coverage
- Market Sectors
- Auditing And Accounting
- Tax And Legal Services
- Corporate Finance And Business Recovery
- Consultancy Services
2. Executive Summary
3. What’s Key In The Market?
- Key Drivers
- Market Trends
- Auditing Market Becomes Less Static
- Continued Tax Clampdowns And Further Pressure In The Audit Market Sees Greater Diversification
- Employment Shortfall: The ‘Brain Drain’
- Forensic Accountancy
- Rise In Mergers
- Economic Trends
- Market Position
- How Robust Is The Market?
4. Market Size, Segmentation & Forecasts
- Market Size & Segmentation
- The Total Market
- Market Sectors
- Future Trends
- Future Economic Trends
- Forecast Total Market
- Market Growth
- Overseas Trade
5. Strengths, Weaknesses, Opportunities & Threats
- Reforms From Graham Review Into Pre-Pack Administration Implemented
- Devolving Tax Powers
- Accountants And Advisers Required For Auto-Enrolment
- Landlords Ltd
- Corporate Insolvencies
- Business Investment
- US Companies And Tax Inversions
- Islamic Finance And Sharia Law
- Employment Trends
- Carbon Emissions Reporting
- Solicitors Regulation Authority Decides To Cease Regulating Insolvency Practitioners
- Tax Legislation
- EU Accounting Directive
- Audit Exemption Threshold
- EU Introduces Us-Style Chapter 11 Corporate Insolvency Proceedings
- Alternative Business Structures
7. Company Financials
8. Further Sources
- Government Publicationsother Sources