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8668.0 - Accounting Practices, Australia, 2001-02  
Latest ISSUE Released at 11:30 AM (CANBERRA TIME) 28/05/2003   
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  • Explanatory Notes

INTRODUCTION

1 This publication presents results from a survey of Accounting Practices for the reference year 2001-02. This is the fourth time the ABS has conducted this survey. Previous statistics were released for 1987-88, 1992-93 and 1995-96.


SCOPE

2 The scope of the survey was all employing units on the ABS Business Register, classified to class 7842 - ACCOUNTING SERVICES of the Australian and New Zealand Standard Industrial Classification (ANZSIC). ANZSIC class 7842 consists of businesses mainly engaged in providing accounting, auditing or bookkeeping services. The scope was then broadened to capture other business or administrative service units (refer paragraphs 3-4) to form an accounting practice. These additional units drawn from other ANZSIC classes included non-employing units.


STATISTICAL UNIT

3 The statistical unit used to represent businesses, and for which statistics are reported, is the accounting practice. Many accounting practices consist of a single entity. Other practices consist of more than one entity (e.g. accounting firm and a service entity, such as an administration or service company or trust, and possibly other business entities such as an auditing firm or consulting firm).

4 For the purposes of this survey, where a practice was conducted through an accounting firm and a separate service or other entity, these entities were consolidated and treated as one practice if the service entity provided resources to a single accounting practice. Where a service entity provided services to more than one accounting practice, the service entity was excluded from the results presented in this publication.


COVERAGE

5 The frame used for Accounting Practices, like most ABS economic surveys, was taken from the ABS Business Register. The ABS Business Register is primarily based on registrations to the Australian Taxation Office's Pay As You Go Withholding (PAYGW) scheme (and prior to 1 July 2000, the Group Employer (GE) scheme). The frame is updated quarterly to take account of new businesses and businesses which have ceased employing.

6 Businesses which have ceased employing are identified when the Australian Taxation Office cancels their PAYGW registration (or previously their GE registration). In addition, from July 1999 to the end of June 2000, businesses which did not remit under the GE scheme for the previous five quarters were removed from the frame. A similar process has recently been adopted to remove businesses which do not remit under the PAYGW scheme.

7 The introduction of The New Tax System has a number of significant implications for ABS business statistics, and these are discussed in Information Paper: ABS Statistics and The New Tax System (cat. no. 1358.0) and Information Paper: Improvements in ABS Economic Statistics [Arising from The New Tax System] (cat. no. 1372.0).


IMPROVEMENTS TO COVERAGE

8 Data in this publication have been adjusted to allow for lags in processing new businesses to the ABS Business Register, and the omission of some businesses from the register. The majority of businesses affected, and to which the adjustments apply, are small in size.

9 Adjustments have been made to include new businesses in the estimates in the periods in which they commenced operations, rather than when they were processed to the ABS Business Register. Adjustments of this type will continue to be applied in future periods.

10 For more information on these adjustments, please refer to the ABS publication Information Paper: Improvements to ABS Economic Statistics, 1997 (cat. no. 1357.0).


COMPARISON WITH OTHER ABS STATISTICS

11 Annual data for the accounting services industry is published in Australian Industry (cat. no. 8155.0). There are important differences between the statistics published in the Australian Industry and Accounting Practices publications and users should use caution when making comparisons between the two sets of estimates. The estimates in the Australian Industry publication provide a consistent annual measure of economic activity by industry (as defined by the ANZSIC), which allows the analysis of year on year change in key data items in the accounting services industry.

12 The Australian Industry publication presents summary statistics for detailed ANZSIC industry classes. The aims of the publication are to show the relative importance of each industry class to the Australian economy, and to allow patterns of change or growth to be analysed across detailed segments of the Australian economy. The industry estimates presented in Australian Industry are used in the compilation of the National Accounts, and in the derivation of economy-wide indicators such as gross domestic product (GDP).

13 The Accounting Practices publication complements the annual series of key data items for the industry with a detailed examination of the structure of accounting practices involved in accounting services for the reference year of the survey. Accounting Practices has a focus on the accounting practice, rather than the business entity that is used to compile ABS industry statistics. The practice is used as the statistical unit in order to provide a more complete description of the structure of businesses involved in accounting services and the economic activity generated by accounting practices. This is done by including administrative service units and other practice entities in the survey although they might be coded to ANZSIC classes other than ACCOUNTING SERVICES (ANZSIC Class 7842).

14 The main differences in estimates between the two surveys are:

  • the statistical unit used in Accounting Practices was the accounting practice, hence consequent inclusion of non ANZSIC class 7842 entities, such as administrative service units that related to an accounting practice; and
  • greater coverage of non-employing units in Australian Industry.


HISTORICAL COMPARISONS

15 While comparisons are made between 2001-02 survey results and earlier iterations of the Accounting Practices Survey, the reader should bear in mind that the survey has not been designed to support accurate estimates of change, and should exercise caution when comparing 2001-02 results to earlier surveys. The effect of sampling variability on historical comparisons is discussed in paragraph 28.

16 Changes have been made to category names and question wording relating to the fields of accounting and other related professional work. Prior to 2001-02, practices were asked to report for the fields of work general business and personal accounting and taxation. These categories have been redesigned to collect a clear income split for business and personal work, instead of an accounting and taxation split. All other fields of work are conceptually the same as for previous surveys. However the category titles and the wording of the definitions and survey questions have been updated to better describe the concepts and terms that are used.

17 The 1992-93 survey used a different source for identifying the population of accounting practices from the source used in 1995-96 and 2001-02. As a result it is now considered that the 1992-93 survey probably overstated the number of small accounting practices though the impact on other estimates is small.

18 Some of the estimates that are cited from the 1992-93 and 1995-96 surveys have not previously been published. These estimates have been derived by adjusting the estimates produced from these surveys to be comparable to the 2001-02 estimates and are as follows:
  • Income from accounting and other related professional services. Income from accounting and other related professional services is derived from published 1992-93 and 1995-96 estimates by adding income from accounting services to income from management consulting and computer consulting services. The change in focus from accounting services to accounting and other related professional services has been made in recognition of the growing importance of consultancy work to accounting practices.
  • Percentage contribution of fields of work. Percentage contributions of individual fields of work to total accounting practice income have been derived for 1992-93 and 1995-96. The contributions previously published for 1992-93 and 1995-96 were expressed as a percentage of accounting services income only, not total income.


RELIABILITY OF THE DATA

19 When interpreting the results of a survey it is important to take into account factors that may affect the reliability of estimates. Such factors can be classified as either sampling or non-sampling error.

20 The estimates in this publication are based on information obtained from a randomly selected stratified sample of accounting practices in the Australian business population. Consequently, the estimates in this publication are subject to sampling variability, that is, they may differ from the figures that would have been obtained if all units had been included in the survey. One measure of the likely difference is given by the standard error (SE), which indicates the extent to which an estimate might have varied by chance because only a sample of units was included.

21 There are about two chances in three that a sample estimate will differ by less than one SE from the figure that would have been obtained if all practices in Australia had been surveyed, and approximately 19 chances in 20 that the difference will be less than two SEs.

22 Sampling variability can also be measured by the relative standard error (RSE), which is obtained by expressing the SE as a percentage of the estimate to which it refers. The RSE is a useful measure in that it provides an immediate indication of the percentage errors likely to have occurred due to the effects of random sampling, and this avoids the need to refer also to the size of the estimate.

23 The following table contains estimates of RSEs for a selection of the statistics presented in this publication.


STANDARD ERRORS FOR TABLE 1 SUMMARY OF OPERATIONS

Estimate
value
RSE
Units
(2001-02)
(%)
SE

Practices at end June
no.
9,860
1.8
177.5
Employment at end June
Practising accountants
no.
46,474
2.6
1 208.3
Other staff
no.
34,653
3.3
1 143.5
Total
no.
81,127
2.5
2 028.2
Income
Income from accounting and other
related professional services
$m
7,537.2
2.5
188.4
Other income
$m
170.3
5.3
9.0
Total
$m
7,707.5
2.5
192.7
Expenses
Labour costs
$m
3,669.2
2.5
91.7
Other expenses
$m
2,607.3
2.6
67.8
Total
$m
6,276.6
2.4
150.6
Operating profit before tax
$m
1,446.3
4.7
68.0
Operating profit margin
%
18.8
3.1
0.6
Industry value added
$m
5,753.2
2.6
149.6
Return per accountant
$m
73.1
1.9
1.4



24 As an example of the above, an estimate of total income for the accounting services industry in 2001-02 is $7,707.5m and the RSE is estimated to be 2.5%, giving a SE of approximately $192.7m. Therefore, there would be two chances in three that, if all units had been included in the survey, a figure in the range of $7,514.8m to $7,900.2m would have been obtained, and 19 chances in 20 (i.e. a confidence interval of 95%) that the figure would have been within the range of $7,322.1m to $8,092.9m.

25 The estimates presented in the main tables of this publication are recorded to a high degree of accuracy, to enable estimates to be accurately added together, or otherwise used to derive new statistics or indicators. This precise recording is not meant to imply a high degree of accuracy in the estimates. RSEs should be used as a guide to determine the appropriate degree of precision to use when working with the estimates to draw conclusions. For example, if the estimate of total income of $7,707.5m has a SE of $192.7m and there are two chances in three of the true value lying between $7,514.8m and $7,900.2m, then an appropriate precision to use when citing the estimate is $7,700m. Similarly, most of the estimates presented in this publication are only accurate to two significant figures (estimates in thousands should be rounded to the nearest hundred, estimates in hundreds should be rounded to the nearest ten, and so on).

26 The sampling variability for estimates at the state/territory level is higher than for Australian level aggregates. Within states/territories, the sampling variability, and therefore the RSEs of estimates for smaller states and territories are higher than for the largest states. Survey estimates for the smaller states and territories should therefore be viewed with more caution than those for other states. RSEs for South Australia, Western Australia, Tasmania, Northern Territory and Australian Capital Territory are typically 2-5 times higher than the corresponding national estimate RSEs. RSEs for New South Wales, Victoria and Queensland are typically 1.5-2 times greater than the corresponding national figure.

27 The sampling variability for estimates at the smaller size category level is also higher than for all practice aggregates. Survey estimates for the size categories with fewer than 10 principals/partners should therefore be viewed with more caution than those for all practices. RSEs for estimates relating to practices with one principal/proprietor are typically 1.5-2 times higher than the corresponding all practice estimate RSEs. RSEs for the size categories 2 principals/partners, 3-4 principals/partners, and 5-9 principals/partners are typically 2-7 times greater than the corresponding all practice figure. RSEs for the 10-19 principals/partners category are typically 0.2-0.6 times the corresponding all practice estimate RSE. There is no sampling variability affecting the estimates for 20 or more principals/partners, as all such practices were selected in the survey sample.

28 The sampling variability for estimates of movement or change that are obtained by comparing 2001-02 survey results with previous results are also subject to high levels of sampling variability. The standard error (SE) of the estimate of change is approximately 1.4 times the standard error of the 2001-02 estimate. For example, the survey estimates that total accounting practice income increased from $4,939.1m in 1995-96 to $7,707.5m in 2001-02, an increase of $2,768.4m. The standard error of the 2001-02 estimate of total income is $192.7m. The standard error of the estimate of change is estimated to be 1.4 times $192.7m, or $269.8m. This can also be expressed as a relative standard error of 9.7% of the estimate of change in total income.

29 Errors other than those due to sampling may occur in any type of collection and are referred to as non-sampling error. For this survey, non-sampling error may result from such things as deficiencies in the register of businesses from which the sample was drawn, non-response, imperfections in reporting and/or errors made in compiling results. The extent to which non-sampling error affects the results of the survey is not precisely quantifiable, but its impacts can be broadly identified. Every effort was made to minimise non-sampling error by careful design and testing of the questionnaire, efficient operating procedures and systems and the use of appropriate methodology. Survey estimates subject to a high level of non-sampling error have been suppressed or provided with relevant cautions.

30 Estimates that have an estimated relative standard error between 10% and 25% are annotated with the symbol '^', estimates with an RSE between 25% and 50% are annotated '*', whilst estimates with an RSE greater than 50% are annotated '**'. Caution should be exercised when using these estimates.

31 Where figures have been rounded, discrepancies may occur between the sum of the components and the total. Similar discrepancies may occur between a proportion or ratio, and the ratio of the separate components.


REFERENCE PERIOD

32 Data contained in the tables in this publication relate to all accounting services operations in Australia during the year ended June 2002. Financial estimates include the activity of any accounting practices that ceased or commenced operations during the year. Counts of practices include only those practices that were operating at 30 June 2002. Employment includes only those persons working for an accounting practice during the last pay period ending in June 2002.


ACKNOWLEDGMENT

33 ABS publications draw extensively on information provided freely by individuals, businesses, governments and other organisations. Their continued cooperation is very much appreciated; without it, the wide range of statistics published by the ABS would not be available. Information received by the ABS is treated in strict confidence as required by the Census and Statistics Act 1905.


DATA AVAILABLE ON REQUEST

34 Inquiries about these statistics and more detailed statistics than those presented in this publication should be made by telephoning the contact shown on the front page.


ABBREVIATIONS

$'000thousand dollars
$mmillion dollars
ABSAustralian Bureau of Statistics
ANZSICAustralian and New Zealand Standard Industrial Classification
GDPgross domestic product
GEgroup employer
IVAindustry value added
OPBToperating profit before tax
PAYGWpay-as-you-go withholding
RSErelative standard error
SEstandard error
WPPworking proprietors and principals/partners



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