The Second Six: Ready to Step Up?

The largest of the Group B accounting firms are facing new challenges and enjoying new opportunities.

Only a decade ago, an article that mentioned the largest public accounting firms in the United States would most likely refer simply to the Big 8. Today, after several mergers and one very high-profile departure, we’re down to the Big 4.

Some of the Big 8 may be not only gone, but forgotten. (Sure you can name them all? Give yourself until the end of this article, where you’ll find a complete list). But now, other names are growing in renown:

  • Grant Thornton, headquartered in Chicago
  • BDO Seidman, Chicago
  • BKD, Springfield, Missouri
  • Crowe, Chizek and Co., Indianapolis
  • McGladrey & Pullen, Bloomington, Minnesota
  • Moss Adams, Seattle

These firms, which we call the Second Six, are the largest of what are often referred to as the Group B accounting firms. They’re a distinct size down from PricewaterhouseCoopers, Deloitte & Touche, Ernst & Young, and KPMG, all of which have annual revenues exceeding $3 billion and professional staffs more than 10,000 strong. By comparison, Grant Thornton (number 5 on the top 100 list, and thus the largest of the Second Six) had annual revenues of $433 million for the fiscal year ending last June; its professional staff numbers about 1,900.

Are any of the Second Six in position to move up in the rankings?

Pick Up the Pieces

Andersen’s connection with Enron, and its consequent bankruptcy filing, left a taint on the entire industry, but at least it provided a direct benefit to those firms that now serve former Andersen clients. Many of the larger clients fled to one of the remaining Big 4 firms, but the Group B firms saw their share of new business, too. Doug Bennett, director of accounting and auditing at Springfield, Missouri-based BKD (number 7 on the top 100 list), says that after “the Andersen filing we saw opportunities for new business, and we picked up a few companies,” some of which were “just too small for the Big 4.”

A bigger boon to the Group B firms — at the expense of the Big 4 — is the Sarbanes-Oxley Act of 2002. Sarbanes-Oxley enumerates many prohibited activities that auditors cannot perform for their audit clients. For Crowe, Chizek and Co. (number 8), those restrictions have provided “opportunity in areas where the Big 4 are conflicted from doing work,” according to CEO Mark Hildebrand. One of the first accountancies to offer IT consulting services, Crowe Chizek is now picking up other consulting work from Big 4-audited companies being forced to seek those services elsewhere — “things like risk management, systems, tax work, and internal audit,” says Hildebrand.

In addition to Big 4 hand-me-downs, Sarbanes-Oxley also entails more work for Group B firms on the audit contracts they already have; how much more is the question. Only last month the Securities and Exchange Commission adopted the final rules on auditor independence to fulfill requirements of Sarbanes-Oxley. And while Hildebrand is “certainly seeing some companies responding very quickly,” many smaller companies — that is, the clients of the Group B firms — are taking a more deliberate approach.


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