Can procurement help CFOs navigate the statutory audit market?
Feb 17, 2015 5:01:00 AM
It is perhaps unsurprising that more and more FTSE350 companies will start to shake up their auditing process with the new regulations now in place by the Competition and Markets Authority. However, the tender market is still at a teenage stage. While experience is bringing greater sophistication of approach, both in how the auditors are bidding and how they are being hired; companies still have some work to do in recognising what true value looks like and how to drive maximum value from their auditors.
The new process is inspiring auditors to introduce new levels of sophistication, both in how they are bidding and how they are being hired. Harriet Agnew at the Financial Times and I discussed in a recent interview that “behind the scenes we’re seeing a profound shift in the way firms are forced to work. As an entire generation of audit partners who did not have to be commercial or change their product offerings are having to learn to sell their services.”
It’s great that at Proxima we have been given the chance to speak to lots of journalists who are covering the subject. In an AccountingWEB article, critics say auditors are sometimes scared to tell clients about big problems in their accounts because they are too close to the company and fear losing a big contract.
But this shake-up presents an opportunity for forward thinking procurement leaders to align themselves with a highly topical, largely untouched area of business spend. Look at how second tier accountancy firms, such as BDO and Grant Thornton are making steady progress in winning non-audit work – consulting and advising.
Harriet also wrote about BDO’s announcement of a rise in revenue – connected to the ‘audit shake up’ – reporting that they currently work with 107 members of the FTSE350, including 40 non-audit clients in the FTSE100.
It is clear that there is still some work to do. Long-standing relationships might have become too ‘comfy’, but with new auditors, companies can take a fresh approach to the marketplace.
My colleague, Richard James, Proxima’s Category Director for Professional Services spoke with Spend Matters about how the key to a successful modern audit solution is to demonstrate understanding of the client’s marketplace and business climate. After all, if procurement teams can engage with their CFO and the Chair of their Audit Committee by speaking about the concepts of value drivers, and can themselves challenge these senior executives to think about how they will assess firms’ proposals, then they have a fighting chance of being considered seriously.
Richard also spoke with Procurement Leaders in regards to how “the best audit teams will not be around forever, and so it is imperative to start the tender process sooner rather than later to secure the ‘A-team’ ahead of the competition. Auditing has much to offer if you know what you’re looking for, and how to buy it. And, when conducted properly, a tender process will ensure that the right firm is selected for the job.”
Speaking to Accountancy Live I reinforced the fact that pricing audit can be very complicated. “Costs are set by the supplier, price is set by the buyer. This shows that audit tendering is still an immature process, and that it is going through an awkward teenage period. But in time, auditor and company expectations will mature.”
As more companies go to tender, some for the first time in years, and begin to learn the process over again; perhaps then the secondary tiers will have a fighting chance of ‘getting into bed’ with the larger companies that they may never have stood a chance with in the past.
So what does all this mean for procurement? How can procurement help the wider business navigate this complex ‘teenage’ market? We’ve pulled together a best practices guide here - but get in touch with your own views.
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