6 Fundamental Questions for Finding a Great Auditor By Dan Rullamas, Talbot, Korvola & Warwick, LLP
Auditors are a great front line defense in an ever increasing war against fraud, lapping, schemes, scams, and cons. They are the independent assurance that gives your organization the credibility your creditors and the citizens you serve, deserve. The mere presence of an auditor reviewing expense reports, testing internal controls, performing surprise cash counts, and asking difficult questions can be enough to make an employee think twice about stealing your company’s assets. An audit cannot fully guarantee that your financial statements are free from error or fraud, but by hiring a reputable audit firm, you can be certain that you have provided your organization with significant protection against the ever increasing threat of dishonest practices. There will come a time when selecting a new audit firm is in the best interest of your organization. Finding and selecting a new audit firm can be a time intensive task, but taking the time will give you a significant return on your investment in future years. The cost of hiring a new audit firm can be expensive. To fully quantify the cost, a decision maker must consider the time she will spend away from her regular duties conducting research, checking references, and interviewing prospective audit firms; not to mention the time employees will spend with the new audit team explaining the organization, processes, and financial procedures. Considering these factors, the cost of an audit quickly increases beyond the actual fee. The cost of changing audit firms can be minimized by selecting a firm that you expect to work with for several years. Seek out and select a firm with a reputation for providing quality work, exceptional service, and is someone you can easily work with. A good way to develop a list of prospective audit firms is to contact other entities of similar size and type, and discuss the entities’ experiences with their past and present audit firms. Once you have a list of potential audit firms you are ready to do some research. A good place to start is by visiting the web sites of each firm. Get a feel for their company culture, industry experience, and determine what sets them apart from other audit firms. Contact the top firms and screen them based on the 6 Fundamental Questions for Finding a Great Auditor. 1. Experience – When shopping around you should first identify what kind of services you will need and what additional services you may require in the future. Once you know what you need you will be able to make a better decision about the experience your auditor needs. You should seek a firm that specializes or has enough specific government experience to ensure that they won’t be learning your business at your expense. Look for a firm with an excellent reputation of integrity and service. 2. Clients - Find out which clients the audit firm has gained and lost during the past year. Determine the reasons they gained or lost these clients by contacting the clients and asking questions. This may prevent you from having to recruit another audit firm in the near future. 3. Audit Team - Find out which staff members will be working directly with your entity if the firm is hired. Ask the firm to provide biographies of the partner, manager, and senior accountant that will be working on your audit. It’s important that you’re able to work well with your main contacts at the firm. Sit down and talk with the partner and manager
before making your decision. They should be genuinely interested in your business and understand your goals. Find out what percentage of the audit firms’ employees are Certified Public Accountants. This indicates the level of experience the firm has, as well as the firm’s commitment to constant improvement. If possible, meet the professionals that will be working on your audit. Since an audit can be a time intensive and sometimes frustrating process, it will be much smoother if you find them pleasant and easy to work with. Finally, go to your State Board of Accountancy website and check to see if these professionals have received any complaints or disciplinary actions. 4. Know the fees - This seems obvious, but in order to get a good sense of market rates for audit services ask the firm to break down their numbers. Ask for their billing rates, out of pocket expenses, and cost of additional services. Also, try and make sure to get some sense about future increases. Some firms may have a much lower price during the first year of the engagement only to plan on raising fees in subsequent years. 5. Check references – Always check references. When checking references ask if the auditors came prepared. Did they provide regular updates over the course of the audit and did they understand the client’s business? Make sure to ask if there were any unexpected charges at the end of the audit. It’s important to choose a firm that’s there for you, not just for your money. 6. Service – The best value you can get from an audit firm is superior service. Having an audit firm that is oriented towards customer service can make or break your audit experience. When I think of good service, Les Schwab Tire Center comes to mind. If you’ve been there, you know they come running to assist you when you drive into their parking lot. They’re interested, listening, and ready to help however they can. A good audit firm will apply this same ideology in helping you achieve your goals. They should be easy to contact and have timely communication throughout the year and not just during your audit. They should be prepared and ready to help however they can. Exceptional service shows that they care, and if it’s not provided you will probably be searching for a new auditor in the near future. The bottom line - Over the past decade, instances of fraud within governments have increased dramatically. Oftentimes these acts are committed by smart, educated, and highly trusted individuals. Many of these frauds have gone undetected for many years, and many more continue to go undetected. In order to counter that risk in your organization it’s important that leaders use due diligence to find the right audit team. It can be a time consuming process, but by addressing the 6 Fundamental Questions for Finding a Great Auditor you will greatly improve your chances of finding an audit team that adds value to your organization.
About the author: Dan Rullamas is a professional with Talbot, Korvola & Warwick, LLP in Lake Oswego. Dan is a member of the assurance team, providing services directly to local governments as well as other clients.
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