Best Big 4 Accounting Firm - What Are The Differences?

Tim Williams's Profile

Best Big 4 Accounting Firms

I am being asked to "shop for" an audit firm that can handle the growth we plan  to experience. What are the main differences between the big four accounting firms? Are any of them better for technology companies? Or does anyone know of  a regional firm that does well with technology comapnies

 

Answers

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Much depends on what you want. If you want a partner with the full resources of a "big 4" firm behind them, and who may be able to give you a deal on year 1 fees but will be very expensive otherwise, that's the big 4. They all are great firms, although in your case I would look for who's best placed in your market. In the SF Bay Area Deloitte and PwC are 1 and 2, although I'm not certain in which order and for what size companies. Although all 4 firms are more than able to serve you well in almost any need you may have, the top firms simply get more practice. I have worked with both of these firms in the Bay Area and have been very happy with the results.

The flip side is regional firms. The larger regionals will have great partners (many of whom are refugees from the big 4 that wanted to actually have a life - not a bad thing at all) and will offer you a higher level of professional for your money in general, although they can't as easily afford to "buy" your business by discounting the first year heavily. They just don't have the scale and shadow marketing budgets to do that. But you will have readier access to your partner and will, all else being equal, get more senior attention. The only downside with these folks is that if you have really complex or global issues, they may not be as well positioned to handle them. Some great regionals locally are Mohler, Nixon and Williams and Frank Rimerman. There are certainly other great regional firms around, but those are the two I have dealt with directly.

If you are preparing for an IPO in the near future, go big. If not, you will likely save $ and have more partner time going regional. I have had great results with both paths based on CFO-ing a number of companies.

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Member's Profile

Great points, Jeff.

Tim, Proformative has other conversations on this topic, including:

"Looking To Change Auditors"
http://www.proformative.com/questions/looking-change-auditors

if you're considering your accounting firm options, you may also want to take a look at
"Proformative's Accounting Resources Guide:"
http://www.proformative.com/resources/accounting-resources-guide

I hope that helps.

Best... Sarah

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PWC are number 1 by market share, deloitte are heavily discounting fees for market share but service level is patchy depending on partner from my experience, Mohler are a good firm in particular for 401k audits, I work for Rimerman and specialize in start up technology companies so will keep opinion on our work to myself.

Most regional firms are connected worldwide, for example I have worked for our affiliates in London and Australia.

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We started, in my last company, with one of the best Big 4 accounting firms; the experience prompted our CEO to echo my unstated opinion, that I would never work with that Big 4 firm again (or, likely any other unless I had to do so).

They "discounted" the fees, but that was only to bring them closer to the fees that the regionals bid.

The differences that really played out was that as we were a small player, we got handed off between managers at the big firms (for both tax and audit), so there was constant re-learning which ended up costing us significant hours internally and excessive bills externally. Similarly, due to the inconsistent handling, the work product was consistently sub-par.

When we shifted to a regional, the bills plummeted, prior errors were eliminated, and even the board had comments on several aspects of both service and product which were significantly improved.

For us, the lesson was clear. We did not have an imminent IPO (we were acquired, in the end), so we did not need to have a Big 4 involved. Similarly, we were not big enough to get the kind of service that a larger (say $100M+ firm) would get.

I've heard very positive things about Mohler and Frank, Rimerman. We worked with Sensiba in the end, and were very happy with their service but would certainly have considered the other two regionals as well.

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I love the Big 4 industry expertise. I work in insurance, and it makes a huge difference to have a firm that tracks industry issues, already understands a range of actuarial methods, can handle a systems-centric audit, et al. I love McGladrey & Pullen for other services, but for audit I head straight to PWC. Tim is asking for a technology specialist firm. Bio tech? Software of engineering? If you give more specifics you can get better answers.

You might have directors or investors with negotiating clout. I spent a few years in private equity, and we were able to get significant fee discounts through one or two key Big 4 relationships.

Challenge the common wisdom on getting audits. I'm a big believer in audits for companies using other people's money. If the enterprise is closely held by an owner-operator, you are more interested in great tax planning. Get a review or compilation - it might be all you need and will preserve a path back to audited financials if required by some future capital transaction.

Last, GAAP has gone far away from the needs of small businesses. Who was the last board member who read and understood all the footnotes? Find an audit firm that will help people understand the financials, not just audit them. That's usually a particular partner, not a firm.

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I have worked with the Big4 and also with some other national / regional firms. I prefer working with other than the Big4 firms - there are very good other regional and national firms for (sometimes) 50% lesser fees than the Big4. It really depends on the auditing director / manager who you like and who really can help you in various aspects you may have.

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I concur with the overall sentiments- determine there's a benefit to be derived from selecting best Big 4 accounting firms (or Final 4), i.e. an upcoming IPO or your firm plans to be active in M&A activities. For the basic accounting and tax services, a reputable Second Tier or regional firm generally provides a better value for the professional fees paid. Plus, the partners growth goals are
generally lower- less emphasis on selling you consulting service projects!

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I have worked with both the best Big 4 accounting firms and regional firms. I have also “gone out to bid” for these services. The regional firms are typically lower in price and I have chosen them over the Big 4. However, if you foresee some very complicated accounting, issues, there may be reason to explore the Big 4 more deeply. I have found that the Big 4 firms will have the expertise to deal with almost any issue that arises. The regional firms can be good also, but it’s not guaranteed, you will find someone who instantly knows the answer to your questions. I have had good luck with some regionals, while at times I have found gaps in service. With regional firms, you have to speak up to get the right attention to your issues, if there is a shortfall of service

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I item that has not been mentioned is the need check your loan documents most have a requirement that the bank approve the auditor or it states big 4. This is usually not a big deal to negotiate. I have found that as a CFO and major shareholder that the regional firms are a better option. The big item is they seem to have lower turnover in staffing so you do not have to retrain everyone every year. Their fees are much lower, accessibility is easy and in the rare occasion that we have had a issue that was outside of their expertise, they were able to pull in a partner from another firm to assist. Apparently the regional firms have an alliance they can belong to that allows them to access accounting firms in different parts of the country and with different expertise. This was also beneficial for inventory counts at regional locations, instead of spending money flying people around the country they were able to call in people from various firms to run out and observe the inventory. So not much different than the big boys but at 40% the price.

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Another point in favor of Big 4, sort of echoing Pete's comment, is that some investors feel much better with your having a Big 4 firm audit. If you have VCs or PEs bankrolling your company, the moment you say "those #'s are audited by PwC (or Deloitte, etc.)", the conversation is over and you can move on to the next item. Some of these firms require that you use a brand-name firm, most don't. But they all feel better having that name brand cache. Not b/c it will add to your bottom line, but they feel it's a risk reducer.

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