When your organization is required to submit a yearly audit, it may make sense to simply shop around for the CPA firm with the lowest price quote; after all, any auditing firm can prepare financial statements, so why pay more than necessary?
The problem with this approach is that it fails to consider the hidden costs and added benefits associated with working with not just any financial services firm, but the right one.
As you evaluate which CPA firm will meet both your budgetary and financial goals, make sure to consider firms that add more value to your organization than they cost.
Costs Beyond the Quoted Fee
The cost of hiring a CPA firm may appear to rest simply on the bottom line: it costs what it costs. However, because no two firms are the same, there’s more to consider than a rigid dollar amount.
Financial Impact on Operations
Audits are a necessary interruption in organizations’ routine, but some CPA firms make the process harder than it needs to be. Long interruptions, constant back-and-forth requests, and the need for supervision all contribute to a loss of productivity that costs an organization precious time and resources. The more stressed and distracted your team members are during an audit, the more expensive the firm is.
Ease of Communication
Though the majority of a CPA firm’s work happens just after the fiscal year end, the engagement can only be completed with a healthy amount of conversation between executives and auditors before, during, and after the audit.
Firms that don’t initiate communication, fail to return phone calls or emails, or procrastinate on your work cost your staff time and energy, further increasing the actual cost of hiring the firm.
If you struggle to communicate with your CPA firm, consider the possible causes of the breakdown. Could it be because the firm lacks resources, experienced staff members, or even the knowledge to serve your organization? Only you can answer this question, so spend time reflecting on why it’s hard to communicate with your auditors and how you may be able to solve the problem.
Consistency of Auditing Staff
Another hidden cost arises when organizations must re-introduce their systems, processes, and financial goals every year because their auditing team keeps changing. An inconsistent staff of CPAs leads to a greater investment of time from your staff, making the audit less efficient each year, when it should really be getting faster and smoother.
Measuring a CPA Firm’s Value
There are many ways for auditors to share their expertise and therefore add value to organizations. However, it seems as if most firms only spend the minimum required effort for their clients instead of exceeding their expectations. This attitude has become the norm not only among CPA firms but also those who hire them, since they no longer believe there’s better service available elsewhere.
Rather than settling for the minimum cost (and therefore minimum value), ask questions to reveal how much value a CPA firm can offer your organization in the following areas.
Expertise in Financial Statement Preparation
It’s an important distinction to make when evaluating CPA firms and those who work in them: are they public accountants who perform audits, or are they full-fledged auditors who are also CPAs?
Though for non-accountants, this may seem like a minor distinction, it can mean a major cost difference in time, effort, and accuracy. Experts bring more value than non-experts in several key ways:
- Auditing specialists pay for continuing professional education (CPE) credits to keep their staff members up-to-date on the latest changes in financial statement preparation
- Auditors pay attention to and update the required language in the reports on the financial statements every year
- Audit experts continually update their internal workpapers to streamline their process, which ultimately saves money for their clients
Ask auditors the number of financial statements they prepare annually, including audits, reviews, and compilations. We’ve seen firms that do not employ audit experts fail peer reviews because their assurance services fall below acceptable standards. Their specialties lie in other areas, which take the majority of their time, effort, and resources, leaving little for the specific task of auditing.
Awareness of Current Industry Trends
As it is with every industry, some CPA firms will be proactive on adopting new procedures and staying up-to-date with current trends, whereas others will fall behind. Ask if the firm you’re working with or evaluating uses the latest technology, software, and professional tools and whether they’re involved in leadership in either their state’s CPA society or the American Institute of CPAs (AICPA).
An even more valuable CPA firm will keep up-to-date with your organization’s industry as well, contributing to policy discussions as a firm, and ensuring your organization takes advantage of every cost-saving measure the industry allows related to financial statement preparation.
In addition, consider asking the following questions to better interpret how the firm understands its own industry and yours:
- How does our organization compare to others in the industry? What are our strengths and weaknesses?
- What makes your firm different from other CPA firms?
- Can you share solutions to risks that apply to our industry or our competitors?
The more in-touch with your organization a CPA firm is, the more value they will be able to add during engagements.
Proactive Approach to Audit Process
As we like to say, any CPA firm can perform an audit, but only a few can make the experience enjoyable. A firm that acts relationally toward your staff members, board of directors, and others is priceless. They won’t show up to your offices eager to catch you making mistakes, but rather look for ways to serve and achieve goals as a team.
During the audit process, the CPA firm should keep you informed of where your audit is in the process, requesting information and responding to your questions promptly.
Finally, firms that make themselves available throughout the year to answer questions and consult on the best course of action will add value to your organization beyond the scope of the annual audit. This results in a huge cost differential between CPA firms who offer this service for free and those who make your organization pay for consultations and phone calls.
When to Choose Value Over Cost
There’s no simple answer to the question, “How much should I pay for an audit?” You should pay for the CPA firm whose value to you outweighs its fees. For some organizations, their internal advisors and committees need very little assistance, so they can afford to pay less for an auditor. Other organizations appreciate extra attention, personable staff members, and extended consultations, which means they should invest in a high-value CPA firm.
If you’re interested, let us show you how our approach to auditing sets Lemler Group apart. Send us a request for proposal (RFP) or contact us today. We’d love to answer any questions you may have about this information and share how we may be able to serve you.