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EXPLANATORY NOTES


SUMMARY OF FINDINGS


INTRODUCTION

This publication presents the results of the 2001-02 Accounting Practices Survey. This survey is conducted periodically by the ABS to provide a detailed measure of the financial and business structure of accounting practices operating in Australia. The main focus of the survey is on understanding aspects such as the composition of the income earned by accounting practices, details of the expenses incurred and the characteristics of the workforce.

The statistical unit used to represent businesses, and for which statistics are reported, is the accounting practice. An accounting practice can be a single legal entity, operating independently of any other business entity, and directly employing any staff that are practice employees. A practice can also be a collection of legally distinct business units that support or work with each other to generate income for the practice. For example, a practice may comprise an accounting firm (e.g. a sole proprietor or a partnership), and a separate service entity that may be the legal employer of administrative support staff employed by the practice. Separate divisions or branches of an accounting practice may also establish separate legal entities, for example there may be a separate business entity for an auditing firm, or a business consulting firm. The practice has been established as the statistical unit for the survey in order to consolidate the full scope of the business operations and employment into a single unit. Service entities providing services to more than one accounting practice were excluded from the results of this survey. Further information can be found in paragraphs 3-4 of the Explanatory Notes.


Structure of accounting practices

At the end of June 2002 there were 9,860 accounting practices operating in Australia, employing 81,127 persons.


Income

Accounting practices generated $7,707.5m in income in 2001-02, representing an average of $95,000 per person employed. In 2001-02, the industry value added (IVA) was $5,753.2m, or 0.8% of gross domestic product (GDP). Return per accountant in 2001-02 was $73,100.

Whilst comparisons with results from earlier surveys are useful as they provide an indication of the extent of change over time it is important to note that the survey was not designed to provide highly accurate estimates of change, so any comparisons made to previous surveys should be used with caution. Estimates of change can be subject to high levels of sampling error, changes to coverage, and minor changes to question wording. Further information can be found in paragraphs 5-10 and 15-18 of the Explanatory Notes.

Taking into consideration these limitations, the 2001-02 survey results suggest that accounting practices experienced a period of strong growth between 1995-96 and 2001-02. Accounting practice income increased 56.1% over this period, and had an average growth rate of 7.7% per annum.

One likely explanation for the strong growth observed is increased demand for accounting and other related professional services as a result of the introduction of Australia's new taxation system on 1 July 2000. Another likely contributing factor is a change in the diversity of the range of professional services offered by accounting practices. In particular, the income earned from the provision of management and business consulting services has increased since 1995-96.


Profitability

Accounting practices recorded an operating profit before tax of $1,446m in 2001-02. This represented an operating profit margin of 18.8%.


Despite a growth in the activity of accounting practices, profitability declined since 1995-96, decreasing 0.6 percentage points from 19.4%. Profitability continued a decline since 1992-93 when the operating profit margin was recorded at 20.5%.


Employment

Employment in accounting practices increased by 21.5% between 1995-96 and 2001-02, which was equivalent to an average annual growth rate of 3.3%. Of the 81,127 persons working in accounting practices at the end of June 2002, 57.3% were practising accountants.


Expenditure

Accounting practice expenditure was $6,276.6m in 2001-02. Labour costs dominated accounting practice expenditure comprising 58.5% ($3,669.2m) of all expenditure.

SUMMARY OF OPERATIONS
					Average
					annual
				Percentage	percentage
	Units	1995-96	2001-02	change	change
Practices at end June	no.	8,389	9,860	17.5	2.7
Employment at end June
Practising accountants	no.	na	46,474	na	na
Other staff	no.	na	34,653	na	na
Total	no.	66,792	81,127	21.5	3.3
Income
Income from accounting and other related professional services(a)	$m	4,778.3	7,537.2	57.7	7.9
Other	$m	160.8	170.3	5.9	1.0
Total	$m	4,939.1	7,707.5	56.1	7.7
Expenses
Labour costs(b)	$m	2,255.5	3,669.2	62.7	8.4
Other	$m	1,765.6	2,607.3	47.7	6.7
Total	$m	4,021.1	6,276.6	56.1	7.7
Operating profit before tax	$m	954.6	1,446.3	51.5	7.2
Operating profit margin	%	19.4	18.8	. .	. .
Industry value added	$m	na	5,753.2	na	na
Return per accountant	$m	na	73.1	na	na