Can All CPAs Audit My Financial Statements?
The first things to consider when selecting an auditor are their qualifications and expertise. Not all CPAs and audit firms are alike. Auditors and audit firms have different internal standards and expectations for continuing education, oversight, and independence. Most accounting firms prepare tax returns; however, not all accounting firms are able to issue audit reports.
Should I Just Pick the CPA with the Lowest Price?
It depends. While the goal is to reduce costs for your company, spending more on an audit may be an area where splurging is worth it. An audit report with errors could potentially alter your business’s reputation with your bank or customers that rely on the audited financial statements.
Considering your auditor as a partner in the success of your business is one of the best ways to approach how much you intend to spend on a firm. You should be investing in a relationship with a trusted advisor, not just an audit report.
You should also consider the amount of value you want to receive from an audit firm:
- How frequently will you be able to contact your auditor?
- Will your audit firm be able to educate and inform you about emerging accounting and reporting issues?
- Can your auditor provide assistance in understanding and implementing new standards?
Choosing an audit firm that can help your organization grow, operate more efficiently, and be a business partner rather than a commodity tends to provide the most value. Taking your time to select an auditor at the right price point will be worth it in the long run.
Are All Audits the Same or Does Our Industry Matter?
Different industries can make a big difference for an audit. For-profit organizations such as manufacturers with inventory, equipment, and cost of goods sold, or contractors utilizing a percentage of completion revenue recognition model have differing risks, needs, and audit approaches. Additionally, companies who do business in the global marketplace have specific needs.
Requesting references and asking peers in your industry about firms with excellent reputations is a crucial step in your search.
Does Personality Matter?
Being comfortable talking with your auditor and having confidence in their level of expertise is the best way to make sure your company’s concerns are addressed effectively. During the interview, start evaluating the audit process and ask what will happen if problems occur and who will be the point of contact during the engagement. The ability of the auditor to communicate in a clear, comprehensive, and concise fashion can be indicative of the overall quality of services you will receive. Beware of answers that are too technical, or conversely, don’t provide specifics, as these may be signs that working with that audit firm will be difficult.
Where Can We Find Third Party Information about a Prospective Auditor?
Audit firms that are members of the American Institute of Certified Public Accountants (“AICPA”) are required to have a peer review conducted by an independent CPA firm every three years. In essence, this is an “audit” of the firm’s policies, procedures, and technical competence in performing assurance engagements such as audits and reviews. A letter is issued describing the results of the peer review. It is appropriate to ask for a firm’s peer review letter when you are considering hiring them. Talk to business associates and find out which accounting firm they use and if they would recommend it to others; and more importantly, make your decision based on what your firm values the most.
Choosing an external auditor is no easy task, but proper planning will provide a good start in your search. Consider the topics listed and you’ll be well on your way to building a lasting business relationship.
Why Clayton & McKervey, P.C.?
Clayton & McKervey focuses on working with entrepreneurial, growth-driven, and globally competitive companies. We have strong core values that include “passion to help others succeed,” “performance,” “can-do attitude,” and “fun.” These values, partnered with the quality of our team members, provide the trusted advisor our clients enjoy working with.
