Working With Auditors Doesn't Have to Ruin Your Week
Ok. I just had a terribly frustrating call with auditors. On the phone today, it was obvious that these particular auditors have as much personality as processed American cheese and the same business empathy as a government tax collector.
*Disclaimer – not all auditors have no personality, drive, or compassion.
The Problem: I am trying to get a CPA Compilation done on a construction company’s most recent financials. We need this compilation for a $20 million revenue construction company that is in need of a performance bond. We had a previous bond, but a month ago, we were unexpectedly dropped by our old bonding company, which was exiting the marketplace. Now we need to establish a relationship with the new bonding company so that they can trust us and provide us with a performance bond. The performance bond is needed to win new construction projects. Very directly, we cannot take on any new construction projects without this compilation completed. We have two pending bids that we won but cannot take on without the bond. We need this bond immediately.
There was an initial call with the Audit Partner performing the compilation to review what information he needed, what was missing from the current financials, what information was missing from the current financials but immaterial, and what I had to do to get him information he needed to complete the compilation on an urgent timeline. He agreed that if we could get him all of the items on a 26-item list provided by the next day, we could get everything done within the aggressive one-week time frame needed. We completed 24 of 26 items in the first day, and completed the last two in the following 12 hours. I thought we were done.
But we are now 10 days in, and we just got an updated list of 12 “new” items from the two junior auditors who were assigned to this project. Six of these new items had already been provided but misplaced by the auditors. Two of these items were discussed and determined to be non-essential in the initial call. Four of these items are brand new. So, I immediately called a meeting to discuss why the compilation was not done and figure out where these new items were coming from.
This call did not go well. These two junior auditors would provide no insights on how we could quickly resolve the issues. Their answers sounded like chewing on cardboard. The conversation went like this:
“Well, we need the detail on this $6,000 item,” they said.
“Is it material in a $20 million company?” I asked. No answer.
“We also need these new items,” they said.
“We sent those to you last week,” I said. “Oh,” they replied.
“What about this big item here?” they asked.
“(Audit partner) told me last week, that you did not need that information to get the compilation done,” I retorted.
“Oh, I don’t think he would say that. I can’t believe we wouldn’t need it,” they stated.
“Well, we are very close to your number, and you can see it by matching the bank statements with the initial balance, but to reconcile those accounts the way you want is going to take at least 4 days of work. Which, if you had told us was required last week, could have been done, but now, if it is truly required, is going to cause us to lose a new construction job. Which is the revenue we need to be able to pay you. We need this compilation done yesterday. You guys don’t seem to understand the urgency or materiality, and worse, you are clearly not communicating with (audit partner),” I complained loudly.
“Oh, well, we will have to talk with (audit partner). Do you want to talk about the other 4 items?”
I was personally offended by their lack of urgency, empathy, or caring. Auditors and internal accounting staff should all be on the same team, but we are clearly in an adversarial relationship.
So, I have a call in to the audit partner (it went straight to voicemail), and I am going to have to push him hard to get this done. I am sure we will get it done (with extra cost and stress), but I wish I had done things a bit differently.
Related: How to Hire an Accountant
Here is what I have learned:
1. Never hire an auditor on an hourly basis.
They will quote you a fixed fee. Hire them on a fixed fee. That fixed fee provides them with a bit of additional motivation to get the project done efficiently, accurately, and on time (or better…early).
2. In an intense situation, work only with the individual who can make decisions.
In an urgent audit, make sure the audit partner is on every call so that you can quickly make decisions and avoid the “he said…she said” that simply wastes time and resources.
3. Define the scope with the audit partner early.
And, if passed off to more junior staff, reiterate the scope with them prior to moving forward. Organize the communication so that the entire team is on the same page before committing to doing work.
4. Don't rush into things.
I was in a hurry, and we went with the audit firm that had done the previous audit (thinking we would save time). I did not actively bid out the work. Note to self: When you need to move fast…first move slow.