For many auditing firms or divisions, now is a critical time to reassess the value, cost and risk of continuing to provide independent audit services.
The emergence of new audit technology combined with new SMSF Audit Independence Standards have had a profound impact on the way accounting and audit firms view their services and the relationship with their clients.
If you’ve developed a reputation for high-quality service, however you find it difficult keeping up with this aspect of the business or not being able to meet the Australian Auditing Standards, you’re not alone. Audit and assurance services can be a challenge for several reasons, and it may be worth considering succession planning and seeking the support of a truly independent audit service provider.
How are you coping with these changes to the audit profession?
Clearly, any firm which provides audit services directly to clients or directs clients to a third-party for audit and assurance services must ensure the new independence rules are being followed.
In response, top tier firms like KPMG, Deloitte and BDO have already reconsidered their role as independent auditors, given potential conflict of interest with accounting and consulting services which they also provide. Every firm providing SMSF audit services should be reviewing the potential for independence threat if they have not already done so.
Failure to adopt technology aimed at increasing the efficiency of production will inevitably lead at best to reduced margins of profit. At worst, an overall reduction in the value of service will force clients to look elsewhere for auditing services. And progressive clients who want more than just pure assurance will go elsewhere.
For many auditors in public practice, the best way forward is a partial or full sale to an internal partner with the skills and capabilities for the future, or to an external practice with stronger systems and processes. This is a decision which some practitioners are making 10 years out from retirement, on the basis their ongoing involvement as a sole auditor will result in more stress and less profit.
Are you thinking about outsourcing audits or transitioning to retirement?
Are you looking to continue working for the foreseeable future or do you plan to retire within the next 3-5 years? If the decision you’re considering relates to succession, then ask yourself ‘What do I want to get out of this process?’
It’s important to have a clear understanding of your requirements before you start talking with potential equity partners or buyers. If you’re looking to sell, it makes sense to approach firms who see a strong benefit in acquisition strategies for growth. It’s likely these firms will be other, larger, audit only firms.
Some of the questions you should consider include:
- Who do you know in your professional network who you are confident working within relation to the transition of clients and workflow? Consider the cultural change which will be required to ensure a successful transition.
- Are your audit and assurance-based clients easily transferable to a new firm? Identify the actions which you should take now to ensure the transition takes place with minimum discomfort to clients.
- What is involved in the transaction process and how long is the expected time period? It’s important to understand the expectations of potential buyers.
How to begin the transition from audit services today
If you’re considering transitioning from audit services to focus on core accounting work, or if you simply want to start work on your personal succession plan, consider how National Audits Group may be able to assist.
In an auditing climate where trust and independence are the core governing principles of behaviour, the role of the company auditor has never been more important. The team at National Audits Group has more than 60 years of hands-on experience working within all areas of auditing, including operations, strategy, reporting and management. We are committed to engaging with the profession to ensure that client needs are always managed in a professional and proactive manner.
If you’d like to discuss your audit succession plan, we welcome the opportunity to invite you to a confidential meeting with our Managing Director, Steven Watson.
Contact Steven Watson on 0459 053 620 or visit our website www.audits.com.au
