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Special Report: Accounting and Professional Services Non-financial audits are a growing business for the Big Five

They’re not just crunching numbers anymore.

The non-traditional auditing sector has become a big area for the Big Five accounting firms,in many cases this business has been showing double-digit growth in yearly revenue.

Non-financial audits encompass anything that doesn’t appear on a company’s balance sheet. This can include counting ballots for awards shows, providing quality assurance and the huge growth areas of checking the integrity of Web sites and data center security.

“Our entire profession is looking at ways to provide incremental value to our clients beyond the traditional practices,” said Dean Samsvick, managing partner of the Costa Mesa office of New York-based KPMG. “A lot of the focus is on managing risk, and we now have market permission to look at these things. That’s why we’re seeing such a large demand for these services.”

Brian Brown, partner and practice leader for global risk management services for both the Irvine and Los Angeles offices of New York-based PricewaterhouseCoopers, said the high-technology practice was growing 20% to 30% before the tech downturn took hold.

“But we’re still seeing at least modest single-digit growth in all tech security areas,” Brown said.

KPMG’s Samsvick said the area of non-financial auditing is growing 100% per annum at his firm, and that e-commerce security is still big in spite of the dot-com meltdown.

“We’re seeing a tremendous amount of growth in the e-commerce security side as well as in security for data centers,especially those servicing multiple operations,” he said.

Accounting firms that provide this type of auditing typically work to make sure security measures in place function properly. It remains a specialized area.

“There haven’t been a lot of specialists in this area as yet,” Brown said. “We take tech people, train them and roll them out onto these types of auditing jobs.”

Samsvick said fees for the non-financial services are higher than for more traditional areas of accounting where competition is more intense.

“This kind of work is a little more skill-set-driven so you can get better rates,the work has to be more focused on a particular issue,” he said. “Whereas some of our more traditional auditing services are offered by a lot of other firms, so the prices are more market-based than skill-based.”

Aubie Goldberg, a partner at the Century City office of New York-based Ernst & Young, said that this type of accounting practice stems from trust issues.

“It’s nice to know, for example, that the payroll processing company you rely on has an internal system of control that works,” Goldenberg said. “And there are issues around online privacy and e-commerce,typically an objective third-party firm like Ernst & Young is brought in to examine the integrity of a system and then issue a report looking at potential lack-of-trust issues.”

Samsvick said KPMG audits to make sure security control functions are working properly,looking at the system’s availability, security integrity and maintainability. A KPMG-audited Web site gets assurance from KPMG including a certification notice that appears on the site indicating that, based on the audit, that site is functioning appropriately.

Samsvick said that the area is showing high growth because of the higher level of data use now than any other time in history.

“There’s more third-party usage of other people’s data centers and Web sites than ever before,” he said. n

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