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Highlights

1. The Canadian accounting services industry enjoyed another prosperous year in 2006. Operating revenue reached $11.1 billion in 2006, up 12.1% over 2005. This jump comes on the heels of substantial growth of 13.7% in 2005.
2. In 2006, as in previous years, the bulk of the industry’s revenue came from the traditional accounting services fields. Thus, audit and assurance services accounted for 30% of all operating revenue, followed by taxation services (25%), compilation and review services (16%) and bookkeeping and payroll services (11%). Less traditional sources of revenue included consulting services at 7%, insolvency and receivership services at 3%, and other products and services at 8%.
3. Ontario businesses continued to account for the largest portion (44%) of the industry’s operating revenue, followed by firms in Quebec (19%), British Columbia (14%) and Alberta (14%). Quebec’s share of operating revenue has remained stable in recent years, while Ontario’s share has slowly declined. For their part, Alberta and British Columbia have experienced gains.
4. Most provinces posted strong gains in their operating revenue from 2005 to 2006, with Alberta (+25%), Newfoundland and Labrador (+17%) and British Columbia (+14%) seeing the largest growth. In contrast, growth in Saskatchewan (+12%), Manitoba (+12%), Quebec (+11%) and Ontario (+9%) was more modest.
5. The accounting services industry consists of a small number of very large firms, which earn substantial revenue, and a large number of small firms, which generate much more modest revenue. In 2006, the 20 largest firms generated 49% of the industry’s operating revenue and 47% of its operating profit, shares that have remained steady since 2004. However, the 9.1% growth in operating revenue posted in 2006 by the 20 largest firms was well below the 15.1% increase reported by all other firms in the industry.
6. Salaries, wages and employee benefits is the only major operating expense item. It represented $4.1 billion in 2006 or slightly more than half (52%) of all operating expenses. The total cost of compensation would have been much higher had it included the compensation of about 13,500 partners and owners who work in their own accounting businesses.
7. The industry’s before tax operating profit margin has remained relatively stable since 2001 but it declined slightly from 30.1% in 2005 to 29.6% in 2006.