An Update on Sole Practitioners
How are sole practitioners conducting their practices today? Gail Eynon, assistant professor, Kevin T. Stevens, assistant professor, and John M. McEnroe, Ledger & Quill Alumni Professor, DePaul University, Chicago, offer highlights based on a survey of CPAs that they conducted. The sole practitioner's business environment has changed dramatically in the last 20 years. For example, the ethical standards governing all CPAs have been evolving since 1972, when the American Institute of CPAs ended restrictions against competitive bidding. Since that time, the rule restricting advertising was dropped (1978), open solicitation of clients was allowed (1979) and, in 1988, certain contingent fee arrangements were permitted and a new AICPA Code of Professional Conduct adopted. Many of these changes helped sole practitioners build a client base, but they also increased competition. When combined with the decreased demand for traditional accounting services, the result was lower prices for these services. This has forced some small practitioners to offer new types of services and employ various marketing techniques. For example, some local CPA firms are now providing tax advice at $3 to $4.50 per minute through the use of "900" phone lines. To examine several aspects of the sole practitioner's environment, we conducted a survey of 1,000 sole practitioners from around the nation and received 215 responses. The survey covered ethical perceptions, marketing techniques, billing and collection procedures and other aspects of a sole practitioner's business. Exhibit 1 at right shows the demographic characteristics of the sole practitioners surveyed. The average respondent had nearly 12 years' experience as a sole practitioner and a base of 258 clients that yielded about $155,000 in 1991 billings. Even though sole practitioners are said to be working longer hours for reduced fees, over 50% said they nonetheless would recommend solo practice as a career to other CPAs. ETHICAL PERCEPTIONS The survey asked respondents to reply to statements on ethics issues based on their own perceptions rather than by reference to the AICPA Code of Professional Conduct. Exhibit 2 below lists the results. It has been 15 years since the advertising rules were revised, and almost 71% of the respondents agreed that CPA advertising was ethical, while significantly fewer (47%) considered open client solicitation to be ethical. The results also disclosed that 86% of the sole practitioners surveyed never used contingent fee arrangements and that over 93% never paid or received any kind of referral fees. To compete effectively for new clients, sole practitioners are being forced to consider selling more types of products and services, such as valuation and litigation services and accounting systems installation. …