Tender touches for better audits - five recommendations
Nov 19, 2014 11:05:00 AM
Following new regulations and a deep desire to restore lost public faith in business, audit is making a conceptual comeback. The European Commission’s new rules on mandatory tendering for audit every ten years (along with increased scrutiny; demands for transparency in the audit process; and controls on what other work your auditor can do) make the process of choosing and contracting and auditor incredibly important.
Lots of companies are also embracing the idea of a high-value audit. Rolls-Royce, for example, commissioning KPMG to go way beyond the boilerplate audit report and describe for shareholders everything it found during its investigations. “Differentiation” is the name of the game.
The problem is that many audit committees will have never conducted an audit tender (the average tenure for FTSE 100 audit firm is around 50 years) – or done so merely to decide which firm’s logo appears on a boilerplate “opinion” in the annual report.
Proxima has worked on quite a few audit tenders recently. And by applying our expertise in thinking laterally and strategically about procurement, we have come up with:
Five key recommendations for getting the most from your audit tender processBuying statutory audit is not like buying stationery, engineered products or cleaning services. There isn’t a fixed specification of requirements against which you can objectively assess the quality of the output and reverse engineer the price.
So what needs to go on your blank sheet of paper?
- Describe what you really want. It’s unlikely to be the lowest cost. So what about relationship management? Approach to applying technology? Cultural alignment (which could cover anything from sector specialism or appreciation of how intangible assets are valued to knowledge of complex securities)? And while you’re at it, consider how you’re going to judge the providers’ responses and presentations
- What’s your big picture here? Which firms are you already using for consulting or outsourcing work? Which firms outside the Big Four are hungry for your audit – and are they capable of handling your needs?
- What’s your pitch? It’s not just about producing a factual annual report: you’ll want the best team for your business, deploying the right level of resources and providing practical support as well as counting the beans. You want folks who are excited (in audit!) to be working with you
- Take your time. Preparing well in advance for a tender – both with internal stakeholders and bidders – will pay dividends. But don’t waste time. Securing the audit firm’s “A team” and maximising the benefits of a differentiated audit are easier if you steal a march on the crowd and make yourself easy to work with
- Remember that this firm will see everything once appointed. So the tender process might as well be transparent. If there are issues, air them (under non-disclosure agreements, of course). The days of auditors turning a blind eye are over. The relationship is going to get richer. And that demands a better and more considered tender process.
These five recommendations for purchasing audit services are taken from our latest UK Audit Services whitepaper - which can be downloaded by clicking here.
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