Without revenue from Andersen Consulting, which split from the firm in a bitter divorce that ended in August, Andersen dropped to No. 5 in the annual ranking of firms by U.S. net revenue. PwC logged $8.30 billion in U.S. net revenue, trailed by Deloitte & Touche ($5.84 billion), KPMG ($4.74 billion), Ernst & Young ($4.27 billion) and Arthur Andersen ($3.6 billion). Grant Thorton remained the sixth largest accounting firm with $416 million, followed by BDO Seidman ($412 million) and McGladrey & Pullen ($127 million).

Each year, Atlanta-based Public Accounting Report surveys the nation's largest accounting firms about their domestic and global revenues, practice breakdowns, staffing numbers and other key indicators.

PwC's reign at the top could be short lived, however, as it leans toward a public offering or sale of its consulting business, either of which would cut into future revenues. PAR predicts Deloitte & Touche would take over the No. 1 slot, while KPMG would drop to No. 5 without revenue from newly public KPMG Consulting.
 
BDO Seidman logged in the fastest growth rate with 38.3 percent more U.S. net revenue, attributed to a 43 percent increase in its tax practice. PwC followed BDO Seidman with a 16 percent increase, just ahead of KPMG with a 14.9 percent increase.

The survey's more gloomy numbers were found in the national firms' growth rate. The average growth rate of 13 percent lags behind last year's 18.2 percent. For the second straight year, the average growth rate has been below the previous year's percentage.

"I would bet that it would decline (again) this year," said Jon McKenna, executive editor of Public Accounting Report.

The U.S. firms that reappeared on the 2001 survey (McGladrey & Pullen was not on last year's list) combined for $27.56 billion in U.S. net revenue, compared to last year's $31.29 billion.

The decline in revenue, McKenna said, is partly a result of firms selling off their consulting groups. Along with the much-publicized Andersen split, Ernst & Young sold its consulting group to Cap Gemini last March. More of the same activity is expected as accounting firms look for capital, whether it is in the public market or sale on consulting businesses. Ironically, McKenna said the firms' growth strategy might be in future consulting.

"My money is on their rebuilding the consulting practices," he said.

Hiring and turnover also seem to be a major hurdle for accounting firms. The average number of U.S. non-partner professionals at Big Five firms fell by 2 percent, while the average at second tier firms fell 20.1 percent, according to the survey.

"That seems to be the one that never goes away," McKenna said. "I see no end to that."

-- By Dan Engel

Send comments to dane@pro2net.com.

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