This paper was prepared by our Managing Director, Michael Cherry, as part of his doctoral studies. It serves as a summary of a literature review on the relationship between Australia's public practice accountants and their SME clients, aiming to address the key question - do SMEs consider their public practice accountant to be their most trusted advisor? A brief examination of industry literature in this field reveals the fundamental necessity for public practice accountants to attain the status of trusted advisors. The following examples highlight this need:

USA 'For decades, CPAs in public practice have laid a foundation of trust with clients by competently handling confidential financial data and performing core services such as tax preparation.' [1]

UK 'Accountants are the most valued professional adviser when it comes to business advice, with a fifth of small businesses believing that their accountant provides them with the most valuable business advice.' [2]
Australia 'Accountants remain the trusted advisers to Australian small business with almost 70 per cent of business owners claiming they would consult their accountant on business decisions.' [3]

The term 'most trusted advisor' is a relative one; what does it genuinely mean in absolute terms? Where did it originate? Even if accurate, is it truly significant? What implications does it have for the SME? What should it represent for the SME? How does it affect the public practice accountant? And what should it signify for the public practice accountant?

The current challenges faced by Australian SMEs have been identified as access to funding, regulatory burdens, taxation policy, demand levels, and cost management [4,5,6,7,8]. As demonstrated in the subsequent paragraphs, all of these challenges fall well within the scope of Australia's public practice service offerings, as endorsed by various professional bodies.

Various papers highlighted the importance of the public practice accountant to their SME clients [9,10,11,12,13,14]. The role of the public practice accountant was also explored and shown to include two broad components [9,15,16]:

• Conformance-advice component – statutory/compliance matters such as taxation
• Performance-advice component – noncompliance consulting activities relating to business improvement and growth

Further recent trends within the accountancy sector - outsourcing and offshoring, in particular [17], present opportunities for an increase in the provision of performance related advice by public practice accountants [13].

The literature readily acknowledges public practice accountants as the most prevalent advisors to SMEs, but this in itself does not equate to the most trusted advisor [9,10,11,12,13,14]. However, the literature reviewed also confirms that the advice provided is primarily of a statutory or compliance nature [10,13], with public practice accountants generally not considered for broad-based management issues. This is at odds with the conformance/performance components detailed in the previous paragraph.

There was acceptance of the benefit of advisory work to overall SME performance [10,18]. This further supports the opportunity for public practice accountants to explore broadening of their service offerings to include both conformance and performance components.

This conformance-versus-performance question is further highlighted in the expectations gap identified by several authors [13, 14]. These papers have identified issues relating to accountants’ attitudes towards raising awareness of SME clients to business issues and perceptions by SMEs of the improvement role which accountants can play, as well as differing views on key economic issues and trends.

Investigation into the nature of trust in the B2B service marketing context identified some useful definitions [19], but failed to confirm public practice accountants as SME clients’ most trusted advisors. A general trust of public practice accountants was explained by the self-regulatory nature of the profession, the disciplining nature of financial markets and the circular and self-sustaining nature of professional practices [20]. These works support the notion of accountants as trusted advisors, but not necessarily as most trusted advisors.

The distinction between conformance and performance service offerings by public practice accountants was a particularly notable finding in this review, especially in the context of the identified expectation gaps. Further investigation of such offerings by public practice accountants would be valuable in order to assess any potential connections or opportunities.

Additionally, more work is needed in the broader area of trust to further clarify a trust definition within the context of the public practice accountant-SME relationship, as well as how this trust might be measured.

1. Ferguson, L. (2012, May 1). Gaining (from) your clients’ trust – How CPAs can shift from service provider to essential business adviser. Journal of Accountancy. Retrieved from https://www.journalofaccountancy.com/issues/2012/may/20114885.html.
2. Clarke, M. (2011, July 25). Accountants emerge as businesses’ most trusted advisors. Fresh Business Thinking. Retrieved from https://www.freshbusinessthinking.com/purpose/accountants-emerge-as-businesses-most-trusted-advisors/22730.article.
3. Olsen, D. (2010, July 5). Accountants most trusted advisers to small business. Dynamic Business – News, Opinion, Debate. Retrieved from https://dynamicbusiness.com/topics/finance/finance-cash-flow/accountants-most-trusted-advisers-to-small-business-1771.html.
4. ACCI. (2014, February). ACCI Small Business Survey.
5. AICD. (2013). Key issues to be on top of in 2014. Retrieved 23 April 2014 from www.companydirectors.com.au.
6. CPA Australia, & CGA Canada. (2010). Report of the Forum on SME Issues – Unlocking the Potential of the SME Sector.
7. Griffith, G., & Wilkinson, J. (2012). Small Business in NSW: Statistical Snapshot and Recent Developments. Parliament NSW. https://www.parliament.nsw.gov.au/researchpapers/Documents/small-business-in-nsw-statistical-snapshot-and-r/Small%20Business%20in%20NSW%204.pdf
8. RSM Bird Cameron. (2012). thinkBIG: Connecting you to the issues, challenges and opportunities facing SMEs.
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13. Kirby, D. A., & King, S. H. (1997). Accountants and Small Firm Development: Filling the Expectation Gap. The Service Industries Journal, 17(2), 294–304.
14. Leung, P., Raar, J., & Tangey, G. (2008). Accounting Services and SMEs: An Australian Study. Australia: The Association of Chartered Certified Accountants.
15. CPA Australia. (2014). Definition of a public accounting service. Retrieved 19 April 2014 from www.cpaaustralia.com.au.
16. ICAA. (2013). What is a Chartered Accountant and what makes them different?. Retrieved 19 April 2014 from www.charteredaccountants.com.au.
17. IPA. (2014). What is a public accountant?. Retrieved 19 April 2014 from www.publicaccountants.org.au.
18. Dyer, L. M., & Ross, C. A. (2007). Advising the Small Business Client. International Small Business Journal, 25(2), 130–151.
19. Blois, K. J. (1999). Trust in Business to Business Relationships: An Evaluation of its Status. Journal of Management Studies, 36(2), 197–215.
20. Neu, D. (1991). Trust, Impression Management and the Public Accounting Profession. Critical Perspectives on Accounting, 2(3), 295–313.