Getting value from your audit
When I was an auditor, we made no money on the first years of an audit because we spent most of our time figuring out what was going on. After a few middling years, we were familiar enough to run a really efficient audit, thus we made all our money in those later years. It is for this reason that when faced with re-tendering your audit you will typically be able to extract a ferociously competitive deal from your present auditor. Don’t be fooled, you should change auditors anyway.
It is in those early years, when an auditor is trying to understand your business, that you get the best value from the service. An audit is really only a fresh pair of independent eyes. You want those eyes to be as wide as possible otherwise the risk is that they sleep-walk through it. Anyway, an audit is a hygiene factor, it is necessary to protect against negative consequences but it won’t provide positive ones.
That said, there are lots of useful things you can expect from the audit partner of an accounting practice. Extracting this value is mostly done outside the formal confines of the audit, so the first thing you should expect from your audit partner is an invitation to lunch!
One of the most valuable aspects of your accounting firm is that, unless they are small, they will have seen many clients and have a deep well of comparisons from which they can benchmark. So the second thing you should expect from your audit partner is candour. What is their view of your finance director? How are other firms addressing some of the problems you face?
If they are good at their job, your audit partner should be plugged directly into several valuable regional and national networks. If you’re in a small city or town, they should be part of the local great and good, which can be helpful sometimes when you need to get things done. If you’re in a city, they should be a reliable source of good contacts for other professions such as banks, lawyers, etc. Accountants don’t have reputations as clubbable guys but the third thing you should expect from your partner is contacts and invitations to interesting events (not the sporting variety).
Even in well run companies, things do go wrong from time to time. Your auditor has invaluable insights to the underbelly of your business, the bits you don’t get to see. It makes accountants a good source of the sleeves-rolled-up, practical type of consultancy that will get you out of trouble. Less so the more strategic advisory roles of the big brains in the likes of Boston Consulting Group and McKinsey. Ultimately, you want from your audit partner the same things that you want from the partner of any professional services firm: the willingness to put their best people on your job.
Most of the value I’ve described are by-products of the audit process and not core to the basic service. An audit has limited value for well-run firms other than assurance for their external stakeholders. If you aren’t getting of any of these things, or you aren’t interested in free consultancy, retender your audit every 5 years as a matter of routine. At least you’ll be maximising the benefits from the audit service you’re actually paying for.