Your audit needs to be rigorous and challenging but that doesn’t mean it has to be frustrating. To avoid that risk you need to get the tendering process of selecting an external auditor right, narrowing down the options and asking sharp questions to find the perfect fit.
That’s especially true when you consider how time and resource intensive tendering for a new auditor can be, whether it’s the first time you’ve appointed an audit firm or you’re switching auditors, including the process of getting their appointment approved by the CEO and board.
With that in mind, you’ll ideally want to find an auditor you can stay with for several years at least, not only avoiding the difficulty of annual re-tendering but benefiting from the increased efficiency of each audit as they learn your business and you refine the process of working together.
You need to find someone you’ll be able to work with constructively, who is professional, communicates clearly and meets their commitments in terms of deadlines and documentation.
Their job is to subject you to financial scrutiny but their approach to their work shouldn’t otherwise contribute to the burden of a senior management role or interfere with the efficient operation of your business.
A large national or international audit firm typically has a larger pool of staff to draw on, including specialists and trainees, along with well-rehearsed off-the-peg audit processes.
Smaller, local audit firms typically benefit from closer geographical proximity to their clients and a more human, less bureaucratic approach to client relations.
Here are some of the questions you should ask yourself and prospective audit firms in the run up to, and during the tender process for selecting an external auditor.
Due diligence and fees when selecting an external auditor
Before you get in to more abstract matters you’ll want evidence that any firm to which your considering awarding an audit prospective audit firms in the run up to and during the tender process.
- recognised by the appropriate professional bodies
- has staff with the appropriate qualifications
- can provide testimonials from other audit clients and/or contacts for references
It is also worth pinning down the fees and schedule of payments – the last thing you want is an unexpected additional bill at the end of the audit.
Will they understand your business?
Industry knowledge and experience are some of the most important factors finance directors look for in an auditor, especially in specialist sectors.
You not only want to know that your auditor is qualified for the job in general terms, but also that they’re familiar with the area you work in and won’t take a long time to get up to speed with your business.
Think about the potential frustrations during the audit process: do you want to explain the very basics to someone who doesn’t know agriculture from architecture? Or, worse yet, explain the same things to several members of the audit team, multiple times?
Understanding your sector also helps with audit planning – how many people are needed on the team to cover the scale of the job? Will they need transportation between multiple sites? What safety equipment and training might be required for them to carry out the audit function on your property?
It might also make sense to consider an audit firm that matches the size of your own business: how well will a multi national firm understand the challenges faced by a family business in England, for example?
It might also help to consider the decision in the context of your other business practices. If your involvement in the community is an important part of your businesses brand, through recruiting locally or hiring local suppliers, do you want your choice of auditor to reflect this?
Communication is another area to think about. In general, you’ll want to be sure that your auditors are available and responsive, and that they answer phone calls and e-mails promptly.
It is also important to have face to face meetings in the run up to an audit and afterwards. Is this something your potential auditor can commit to?
A dedicated Partner and Manager point of contact to manage the relationship is also a good sign. Conversely, the potential for being bounced from one audit team member or manager to another as staff are moved from job to job, or are simply stretched too thin across multiple contracts, might be a red flag when making your selection.
Ask upfront what information they will and won’t share with you and for a schedule of meetings, reports and other key contact points.
You can get some sense of a prospective auditors communications skills during the tendering process though, of course, everyone is on best behavior at this stage in proceedings.
What’s their process?
You should know what to expect when you’re going in to an audit and get it in writing.
Don’t assume services our outputs will be provided just because your last auditor did so, or because they seem like obvious parts of the service. The last thing you want to be doing under the pressure of the audit is trying to negotiate the terms of the contract.
Another important thing to discuss and agree is the size of the team you’ll be getting for your audit fee and how it will be made up. As a rule of thumb, an audit team with more experienced, higher ranking members will mean less back-and-forth during the final stages when the most senior auditors get involved with the sign-off of the final report.
We also think clients should know what’s expected of them before the audit begins so they have the maximum amount of time to prepare and plan. This helps keep stress levels to minimum all round. So that is another good question to ask a potential auditor.
In general, smaller audit firms are more flexible in their processes than large ones, and are better able to adapt their working practices to suit individual client’s needs. It’s less of a factory production line and generally more tailored to the client’s needs.
What will you get from it?
Many businesses that are required to have an audit think of it as something unavoidable, that just has to be endured, but it can bring enormous benefits.
Getting a second opinion can help you spot problems or opportunities you might not have identified yourself because of your closeness to the business.
A good audit, with clear recommendations in the final report, can also lead to practical improvements in:
- reputation with customers and clients
- director and shareholder confidence
Contact Us to discuss selecting an external auditor
With more than 150 years of accounting experience and offices situated throughout Somerset and Dorset, Albert Goodman is proud to be part of the thriving business community in the South-West.
We know that an audit requires a significant amount of your businesses’s time and resources, so we take a value added approach to help you get as much out of the process as possible.
If you’d like to question us on our audit process using the questions we’ve suggested above, or any of your own, our expert team will be happy to talk.