July 23, 2007

Audit Cycle

New Ernst & Young Boss Plans Hires, Eyes Smaller Clients

By Jessica C. Lee

Michael Bertolino has big shoes to fill.

He took over this month as managing partner of Ernst & Young LLP’s Irvine office, the county’s No. 2 accounting firm after the Costa Mesa office of Deloitte & Touche USA LLP, which, alone among the Big Four, also has a consulting practice.

Bertolino took over from Sally Anderson, managing partner of the Irvine office for seven years. Anderson was the only woman to locally head a Big Four firm, or any major accounting firm here for that matter.

Anderson, who helped boost E&Y’s profile here, now is a senior client adviser at the firm. She plans to retire next year.

“Sally’s put together an incredible practice,” Bertolino said.

He takes over a growing, busy operation where the biggest challenge is hiring people quickly enough. For the past few years, helping companies comply with 2002’s Sarbanes-Oxley accounting reform act has driven E&Y and the other big firms.

Sarbanes-Oxley still is a big source of work for E&Y. But “what’s keeping us most busy is the growth of clients and globalization of the business world,” he said.

Bertolino previously was a partner at E&Y’s San Diego office. He recently moved from Encinitas to San Juan Capistrano.

He’s worked at the firm for 21 years and held various positions, including tax director and head of international tax practice for the Pacific Southwest area.

He had a brief stint at Coopers & Lybrand before it combined with Price Waterhouse in 1998 to form PricewaterhouseCoopers LLP.

Bertolino has worked with U.S. and global companies in a range of industries, including biotechnology, technology and consumer products.

“Orange County is new territory for me but it’s a good fit because I’ve dealt with the types of companies in this region,” he said.

Bertolino has his challenges.

One is the accounting industry’s brain drain and the need to bring in fresh blood, according to Frumi Rachel Barr of Frumi & Associates LLC, a Newport Beach-based executive coaching company that works with accounting firms.

“Attracting and retaining employees is one of the biggest problems facing the (accounting industry),” Barr said. “It’s getting increasingly difficult for firms to attract new talent.”

E&Y has 396 local workers, up 1% from a year ago. Rivals Deloitte & Touche, PricewaterhouseCooper and KPMG LLP grew at a faster pace, by 5% to 7% in the past year (see accounting firms list, page 35).

“The thing that keeps me up at night is hiring and retaining,” Bertolino said. “The war for talent is very real, so we have to work harder to differentiate ourselves.”

E&Y has been hiring, he said. Some local recruits wind up in San Diego and Los Angeles to expose them to the firm and his clients, he said.

“In OC, we increased our campus hires by about 20% this year,” Bertolino said.

Earlier this year, E&Y became the first employer to create a profile for recruiting on the social networking site Facebook.com (see story, page 33).

The move shows E&Y can reach out to recruits in new ways, he said.

E&Y has hired more than 5,500 college students firmwide this year, according to Bertolino. That includes interns and full-time workers. The firm’s college hiring has increased every year for the past five years, he said.

E&Y recruits from California State University, Fullerton, the University of California, Irvine, Chapman University in Orange and the University of Southern California in Los Angeles, he said.

Technology is another issue for E&Y and the rest of the Big Four, according to Barr. Big accounting firms with major offices in OC are having a hard time incorporating more computers and software into their offices because they’ve grown so rapidly in the past few years.

“A lot of the big OC firms are considering going to paperless office solutions, working on their disaster recovery programs and are incorporating state of the art systems to help with their accounting,” Barr said. “The problem lies in the fact that they have to retrofit now.”

Bertolino said he hopes to add more smaller companies as clients.

“What they bring to the table is huge,” he said of smaller companies. “A lot of them become the Googles, the Broadcoms and the Allergans of today.”

There’s opportunity. Starting this year, smaller public companies have to start complying with Sarbanes-Oxley (see story, page 28).

“It’s very important for us to focus on them aggressively with or without Sarbanes-Oxley,” Bertolino said.

Some smaller companies left the Big Four as firms focused on big companies needing to comply with Sarbanes-Oxley in 2004 and 2005.

“There’s no doubt Sarbanes-Oxley has led to an increased workload for auditors,” Bertolino said. “That said, we never have left our focus on venture-backed, entrepreneurial companies.”

Part of the challenge is in finding smaller companies that could use the services of a Big Four firm, he said. E&Y’s annual Entrepreneur of the Year awards help build relationships, Bertolino said.

The son of Italian-American parents from Mobile, Ala., Bertolino earned his bachelor’s in accounting and a minor in computer science from San Diego State University.

He comes from a military family. Father Joseph, was an Army officer. Brother, Stephen “Tony” Bertolino, died in 2003 leading an Army truck caravan in Iraq.

“My family is very proud of my brother’s leadership and service to our nation,” he said.

One of six kids, Bertolino moved around a lot and adapted to the military brat lifestyle. His mom Mary was an opera singer.

He thought he would follow in his dad’s footsteps and join the Army after high school. He also tinkered with the idea of getting into the restaurant business.

“My background was very blue collar,” he said. “My parents never really pushed me to go to college because they expected me to join the military.”

Bertolino pumped gas at age 16 and started working at restaurants at 17.

Then he said he met a friend’s father, who was an accountant. His perspective changed.

“I realized that I wanted to do more, so I just worked really hard to get to that goal,” Bertolino said.

His parents were less than thrilled. They accepted it over time, he said.

“But I’ll never forget the day when they realized that what I do matters,” Bertolino said. “It feels good to know that the people you care about are proud of you.”

Bertolino is an avid cyclist. In 2004, he and wife Carol rode parts of the Tour de France route before and after the riders themselves rode through.

He and Carol, who he calls “the CEO of our family,” are expecting a son this year.