Need a new auditor? Key considerations in making the right decision

  By Scott McClelland, CPA and Keith Hendrix, CPA

Auditors are not all the same. In fact, selecting the right auditing firm is an important decision that can have a profound impact on your business.

The right auditor serves as a sounding board for your ideas; suggests recommendations to enhance your operations and control systems; warns of potential pitfalls and inspires confidence in your financial results with your financial institution, investors and partners.

Sound like your current relationship? If not, here are 10 important considerations when selecting a new auditing firm.

1) Seek out recommendations from other similarly sized companies. These recommendations will provide you with valuable insights about a firm’s reputation and its ability to meet the needs of a company of your size and operational level.

2) Obtain referrals from your financial institution or investors. These professionals provide capital to business leaders like you based on an auditor’s report, so it is always a good idea to make sure they are comfortable with the expertise and integrity of your auditing firm.

3) Ask your other trusted business advisors. Most likely your attorney, insurance broker or other professional service provider has established relationships with auditing firms and can provide you with advice on who may be best suited for your business.

4) Select a firm that will invest time in learning your business. A good auditing firm will ask: what keeps you up at night? In order to be highly effective and efficient, your auditors must understand your business. In your preliminary discussions, pay attention to how much the auditing firms talk about themselves versus how much they talk about your business, needs and issues.

5) Choose a firm that has experience in your industry. Inside knowledge of your industry will give your firm greater insight on how to approach your company’s audit. Also, a firm with experience in your industry may provide you with valuable benchmarking information that could help enhance your operational results.

6) Consider the firm’s comprehensive resources. The complexity of your business and its evolution over time may require resources over and above an audit. Be sure to inquire about the full scope of solutions offered by your firm, keeping in mind the auditor’s independence obligations.

7) Take into account the firm’s locations. If your company has offices in other regions or countries, you will want to consider how these locations will be served. Many firms are members of national and international associations and can help meet your needs through these affiliations.

8) Ask for the firm’s most recent peer review report. In general, most firms are required to undergo peer reviews of their auditing practices  every three years. The reviews are designed to test a firm’s quality control standards and practices. Inquire as to the firm’s internal quality control programs.

9) Factor in cost. Ask prospective firms to supply you with an estimate of how long an audit will take and how much it will cost and how  unanticipated issues will be addressed. A word of caution: audits are not commodities. The cost should not be an overriding factor in and of
itself; consider the value of the services being delivered.

10) Establish a trusted relationship. Your auditing firm is involved in the most intimate details of your business finances. You must select an audit team with whom you can establish rapport. You are looking for a trusted advisor with whom you can build a long-term relationship. Evaluate their responsiveness and availability to get the right people to address concerns in a timely manner.

Scott McClelland, CPA (smcclelland@elliottdavis.com or 803.255.1465) and Keith Hendrix, CPA (khendrix@elliottdavis.com) are audit shareholders with Elliott Davis, LLC.