Comments on: Hate To Say I Told You So… http://retheauditors.com/2008/05/01/hate-to-say-i-told-you-so/ The Business of the Big 4 Audit Firms Wed, 08 Feb 2012 21:24:11 +0000 http://wordpress.org/?v=2.9.1 hourly 1 By: Francine McKenna http://retheauditors.com/2008/05/01/hate-to-say-i-told-you-so/comment-page-1/#comment-547 Francine McKenna Sun, 04 May 2008 20:04:00 +0000 http://76.12.174.187/?p=679#comment-547 Well, companies don't like the extra costs in any form. Whether they have to beef up internal audit, beef up accounting and GAAP expertise internally or via consultants, or whether they have to still pay outside resources to do the documentation, testing and maintenance for SOx attestation, they see it as additional, unnecessary cost. Their auditors were not holding them to this higher standard pre-SOx. God forbid a company spends this money to try to get more work done inside and reduce the external audit fees and the external firm disregards and ignores it anyway. Double whammy. Then there's the fact that Big 4 firms are often all over the largest public companies. Except for the cheapo ones and the already good ones, many companies have at least three if not four firms in there providing services. There is one and sometimes two as external auditors, another as internal audit co-sourcers and/or SOx co-sourcers and another for tax and or accounting policy and standards consulting, or maybe M&A , investigation or restatement related activities. They're paying Big 4 fees all the way around. How do the Big 4 firms get blamed for this? As external auditors, they will often not accept or allow work by any other than Big 4 to be depended on for the external audit/SOx attestation. That's where the duplicate effort and rework come s in and therefore higher fees form external auditors. Since the external auditor passes final judgement on any other service provider doing work in support of financial statement assertions, clients have little choice, if they are not super savvy, but to accept the extra fees. Well, companies don’t like the extra costs in any form. Whether they have to beef up internal audit, beef up accounting and GAAP expertise internally or via consultants, or whether they have to still pay outside resources to do the documentation, testing and maintenance for SOx attestation, they see it as additional, unnecessary cost. Their auditors were not holding them to this higher standard pre-SOx. God forbid a company spends this money to try to get more work done inside and reduce the external audit fees and the external firm disregards and ignores it anyway. Double whammy. Then there’s the fact that Big 4 firms are often all over the largest public companies. Except for the cheapo ones and the already good ones, many companies have at least three if not four firms in there providing services. There is one and sometimes two as external auditors, another as internal audit co-sourcers and/or SOx co-sourcers and another for tax and or accounting policy and standards consulting, or maybe M&A , investigation or restatement related activities. They’re paying Big 4 fees all the way around. How do the Big 4 firms get blamed for this? As external auditors, they will often not accept or allow work by any other than Big 4 to be depended on for the external audit/SOx attestation. That’s where the duplicate effort and rework come s in and therefore higher fees form external auditors. Since the external auditor passes final judgement on any other service provider doing work in support of financial statement assertions, clients have little choice, if they are not super savvy, but to accept the extra fees.

]]> By: Anonymous http://retheauditors.com/2008/05/01/hate-to-say-i-told-you-so/comment-page-1/#comment-546 Anonymous Sun, 04 May 2008 19:43:00 +0000 http://76.12.174.187/?p=679#comment-546 "The sucker punch? Total audit expenses for these companies—<b>including internal and external costs</b>—averaged $3.6 million in fiscal year 2007. That’s a 1.8% increase over the prior year, an increase driven by fees related to the audit of the financial statement."<br/><br/>The article does not distinguish between whether the higher costs are due to more external costs, more internal costs, or from both. You can't assume that the audit firms are making the lost SOX fees back in audit services when the article clearly states that it is due to both internal AND external costs.<br/><br/>If a company hires more qualified people to better prepare for the SOX attestation, for SOX remediation, etc, therefore reducing the fees charged by auditors, how is that the audit firm's fault?<br/><br/>What am I missing? “The sucker punch? Total audit expenses for these companies—including internal and external costs—averaged $3.6 million in fiscal year 2007. That’s a 1.8% increase over the prior year, an increase driven by fees related to the audit of the financial statement.”

The article does not distinguish between whether the higher costs are due to more external costs, more internal costs, or from both. You can’t assume that the audit firms are making the lost SOX fees back in audit services when the article clearly states that it is due to both internal AND external costs.

If a company hires more qualified people to better prepare for the SOX attestation, for SOX remediation, etc, therefore reducing the fees charged by auditors, how is that the audit firm’s fault?

What am I missing?

]]> By: Oversight for the Better http://retheauditors.com/2008/05/01/hate-to-say-i-told-you-so/comment-page-1/#comment-542 Oversight for the Better Thu, 01 May 2008 18:59:00 +0000 http://76.12.174.187/?p=679#comment-542 While we're thinking about single-payer health insurance, how about single-payer auditing? In other words, the public takes bids and hires the auditors it chooses. The auditors then really are closer to being independent of the auditees and answer to the people. While we’re thinking about single-payer health insurance, how about single-payer auditing? In other words, the public takes bids and hires the auditors it chooses. The auditors then really are closer to being independent of the auditees and answer to the people.

]]> By: daniel http://retheauditors.com/2008/05/01/hate-to-say-i-told-you-so/comment-page-1/#comment-541 daniel Thu, 01 May 2008 13:30:00 +0000 http://76.12.174.187/?p=679#comment-541 $$$...lining the pockets of partners. It really is a shame that the power to dictate and to charge lies where it does... $$$…lining the pockets of partners. It really is a shame that the power to dictate and to charge lies where it does…

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