Executive Summary

Change is in the air for the leading accounting firms; four of the so-called Big Six have announced plans to merge. Ernst & Young will join forces with KPMG Peat Marwick, and Coopers & Lybrand will partner up with Price Waterhouse. The two combined firms will pose a formidable challenge to the hegemony of Deloitte & Touche and Arthur Andersen, which have been the two largest accounting firms in L.A. County over the past several years. Deloitte & Touche, however, has denied rumors that it might merge with Arthur Andersen.

Although the number of accounting professionals employed at the 50 largest firms in L.A. County has been going up, the number of certified public accountants has actually declined over a four-year period. There are currently 6,209 accounting professionals and 2,488 CPAs employed at the 50 largest firms, compared to 5,257 and 3,177 in 1994.

This is a result of the changing nature of tax services that the Big Six firms offer. These services require more lawyers and computer specialists than the traditional CPAs, according to John Cardis, vice chairman and office managing partner of Deloitte & Touche.

There has also been an increase in the number of non-accounting professionals, such as consultants, over the past four years. Whereas the 50 largest firms reported a total of 1,405 non-accounting professionals in 1994, the number was up by 84 percent this year to 2,586.

The Pacesetter:

Deloitte & Touche, the U.S. subsidiary of Deloitte Touche Tohmatsu International, has consolidated its position as the largest accounting firm in L.A. County. The 1,065 accounting professionals employed by the firm represent a 55 percent increase since 1994. The average increase in accounting professionals for the 50 largest firms in L.A. during this period was 18 percent.

This month, Deloitte & Touche was ranked No. 14 on Fortune magazine's list of the 100 best companies to work for. That designation and the firm's employment growth are not unrelated, according to Vice Chairman John Cardis. The firm's efforts to create an agreeable place to work have enabled it to attract and retain employees in an increasingly tight market noted for its high turnover.

Cardis is not overly concerned about the imminent merger of four of his competitors. Going by his own experience of the 1989 merger of Deloitte, Haskins & Sells and Touche, Ross & Co., Cardis expects it to take four to five years before the new firms have sorted through their internal affairs and are able to expand their operations.

Meanwhile, the firm is especially interested in growing its client base among middle-market companies, which form the backbone of the local economy.

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