looking for some input from those of you who has gone through the change of auditors. Would be interested in feedback on reasons to change, RFI process, timing, selection criteria.
Looking to change auditors
Just went through this process at my last company. Our new board members requested a change from a small regional audit firm to one of the large "big 4". We found several RPF templates on the internet that we were able to modify to suite our company issues. We allowed each of the firms to meet with our
We went through this process several years ago and ended up switching from a big 4 audit firm to a middle tier audit firm to better match our company size and service level requirements. We had been with Arthur Anderson and we all know what happened there and we followed our partner to E&Y but found we were always at the bottom when it came to level of service and we ended up switching to BDO Seidman. We used a scoring process to try and remove bias from the decision process and developed a weighting system that in the end developed a total score based upon the types of things that were the most important to us (expected service level, timeliness of audit, consistency of audit field staff & manager, reputation of the firm [i.e., small local firm vs. well-known middle market or big 4 firm], and finally audit cost [we did not weight cost the highest). For us, BDO came out on top and I have been very pleased by the decision (not to mention the audit committee of our BOD). We did not bother with an RFQ but interviewed 5 firms and dealt with their audit and tax partners directly. You can't really get an idea of the firm and their unique personality by a written RFQ but you can when you ask each partner the same set of questions that are important to you.
Hope this helps!
Eight years back I changed auditors because like Roseanne my company was growing and needed more diversified expertise from the
1. they gave us 3 fist years discount
2. they were experts in my industry
3. I had business networking relation with one of the local partners.
In retrospect, my company didn’t benefit from the new arrangement. The audit was conducted the same way as the old auditors did. The fees were higher and because my company was mid-size, we were put behind anybody who was bigger or provided more income for E&Y.
I have more input and will be glad to share my experiences with you.
First question...are you a public, private or not-for-profit entity? I've changed auditors in both private and nonprofit organizations. The process is not significantly different (Roseann expressed it well in her comment above) but the organization by-laws and charters are different depending on the entity form so carefully assess who is required to approve the decision to switch.
Give the process a few months to materialize and have a committee on your side to establish a strong interview process for vetting each firm, get a commitment to the audit manager and partner (staff rotate all the time), and a multi-year fee structure.
I agree with many of the above comments. We ran a very deliberate process with RFQ's and several rounds of interviews. We also took the step of visiting the national office of each of the big 4 firms that made the cut to see if any of the firms could differentiate themselves in that regard. This was for a large financial services SEC registrant during a period of time when new and proposed accounting pronouncements were affecting the industry.
Sorry if this seems obvious on the face of it, but having done a few audit firm changes over the decades, I find it most important that the firms I move to have expertise available to me in the areas where I will need it more. Anyone can review policies and receivables, inventory, etc., but if you are a software business, you need 97-2, possibly 09-3 and 08-1 expertise and you need it available. Your lead partner should be highly conversant on the topics as well so he/she can pull in the right assets across the firm, regardless of size, at any time.
Naturally, pricing is important and the "second" tier and even many larger regional firms have great folks (many or even mainly big 4 refugees) and charge less and you will be closer to your partner there b/c there tend to be fewer layers. But going with the big 4 does tend to get stakeholders off your back. That is, when a board member or investor asks who your audit firm is and you answer "PwC" (or Deloitte, E&Y or KPMG) then that's usually the end of the discussion. If it's a firm they don't know, you will spend more time possibly defending not only your choice of
Isn't it sad that "brand name" vs total package of service seems more important to investors or lenders.
Leaving cost aside (and lets not downplay that factor) I want my answers, work, etc performed expeditiously by individuals that know what they are doing and not working soley from the AICPA audit book.
In other words, keep your juniors or bill them out at rock bottom prices, but I was managers and partners keeping extremely tight control of the project.
Quality over Quantity.
Thank you all for the comments. I really appreciate insights and points to consider. We have reviewed our options and timing this year and the Board decided to stay with current auditors for one more round and re-evaluate it again next summer. so I might be back on this subject :)
Before considering changing auditors, have you considered just changing partners? If you change auditors, your old auditor will need to consent to inclusion of any of their work which will add cost and delay to your reporting process for several years. If their service is bad now, just imagine how much worse it might get after you fire them. Many problems can be fixed just by changing audit partners.
Isn't your suggestion akin to going to the partner of your current doctor and asking for an independent assessment?
Both partner (in either scenario) have an overriding prejudice to protecting their investment, the firm.
I guess this may seem trite, but have you done a due diligence on yourself? Most companies change because they are unhappy about the way they feel about their current auditors; service, attention, etc. Before changing, ask yourself if your company is doing evrything to make the audit effective and meaningful. Be sure to check yourself out before you make a change because, as mentioned by others, it it can be expensive and time consuming bringing a new firm up to speed.
The most important factors to be considered
1) The audit appoached followed, the audit fee and how this will add value to your company
2) Assurance that deliverables will be on time
4) Accountants that are warm, approachable and accessible 24 hours
3) Proven ability that those accountants proactively seek out opportunities to minimise tax liabilities
Valuation of illiquid assets is a space where the auditor will call in additional expertise--and charge for that service beyond a fixed-fee audit. You might consider asking to see the candidate's work in a blinded audit of a private company or a published audit of a public company where this issue came up and ask the candidate auditor to describe its processes, timing and cost. This would be a way to expose "quality of audit services" ahead of time.
I would recommend a full RFQ and getting 3-4 firms involved in bidding for your business. In the past, we have run this with multiple firms. Make sure your objectives are clear. Are you dong this for cost reasons or based on lack of appropriate service? If for cost, you would be better off with a mid tier firm. I have changed for lack of service as the Big 4 firm gave little or now service. Although cheaper, the mid tier firms don't have as many experts in certain areas. As far as completing the RFQ, make sure you are open about all data, so you receive an accurate quote. No matter what, you will have cost overruns by the audit team. Get a sense on how they handle them.