Large opportunities for small firms.

• Author: Dennis, Anita

Although the Sarbanes-Oxley Act of 2002 has restricted the services that some CPA firms can provide, it has also created opportunities for firms of all sizes in all areas of expertise. Here's some guidance offered by two practitioners whose firms have positioned themselves to seize such opportunities.

Although the Sarbanes-Oxley Act of 2002 has changed the landscape for many corporations and their auditors, some practitioners may be unaware of the opportunities it has created for small firms. If your market area is home to public companies, your firm may be in line to benefit. This article, based on an interview with Richard Caturano, CPA, president of Vitale, Caturano & Company in Boston; and David Morgan, CPA, co-managing partner of Lattimore Black Morgan & Cain in Nashville, tells what small practitioners need to know to position themselves to serve this expanding market.

Services needed

The Sarbanes-Oxley Act has generated demand for compliance work related directly to the act's requirements; for other services that auditors can no longer offer to audit clients; and for engagements for smaller clients that larger firms may no longer choose to offer.

* Section 404 compliance. The act's Section 404 focuses on companies' internal controls and financial reporting procedures. Auditors cannot help their clients with much of the compliance work that the section requires. Consequently, a second CPA firm will be needed for these services. Morgan notes that such engagements are excellent ones to schedule during a firm's nonpeak period as a way to balance the workload.

* Audit working paper preparation. Many companies will need accounting assistance for projects that their auditors can no longer perform for them, such as cash reconciliations, intercompany account reconciliations, and depreciation schedules.

* Business valuation. In addition to the appraisals that companies normally need for various business reasons, Financial Accounting Standards Board (FASB) Statements of Financial Accounting Standards No. 141, Business Combinations, and No. 142, Goodwill and Other Intangible Assets, both carry new valuation requirements that will spur demand for further services. Since a public company's audit firm can't perform these engagements, small firms with valuation practices can position themselves to serve this market.

* Tax. Small firms may be called on to perform tax work for company executives and assist with projects such as corporate tax accruals.

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