How to save 43% on audit fees: dump Deloitte
Last week, CFO.com wrote about how a company in the US dumped Deloitte and anticipates saving 43% on it professional fees in the process. How much are we talking about?
By hiring Los Angeles-based Stonefield Josephson, Catapult estimates it will save 43 to 49 percent in accounting expenses this year, off the $985,000 the Mountain View, California-based company would have paid Deloitte for fiscal 2008.
That’s around £240K at the highest savings estimate. Given what Richard Murphy recently said about KPMG charging the government £334 per hour, I’m not surprised it’s possible to make significant savings.
But then comes the lie in the CFO piece – no doubt spun to them by someone at Deloitte or because they’ve been listening to the Big Four for too long:
In general, large-cap companies prefer using a Big Four firm, and Stonefield may not have the technical, industry-specific expertise to handle the review of some companies’ financials without relying heavily on affiliated firms.
Ahem – let’s get this straight. How many times in the last year have I written about audit failures? Francine McKenna can provide a LOT more detail: This post neatly summarizes some of the more egregious activities of the Big Four.
And yet the next tier down have a devils own job trying to break through the oligopoly. Why is this? Apart from the corrosive effect of the ‘old boys network’ ably assisted by the equally closed shop financial PR companies, my sense is that company executives don’t believe they have the power to say no. That’s not true. It’s also untrue that the Big Four are necessarily better placed than the next tier down to deliver a quality service. While I agree there are special circumstances among certain of the Global 2000 that make it more difficult for tier 2 players, it’s not impossible.
Unfortunately, I believe the marketing among the next tier is little short of abysmal. Even Jeremy Newman at BDO places what I think is an unhealthy faith on boring advertisements. On the upside, BDO is doing great work in encouraging its staff to be better at delivering a world class client experience. What they should really be doing is socializing that experience so that clients can see for themselves just how good the firm can be. Alas, that doesn’t seem to be on the cards.
UPDATE: After I wrote this, I noticed that Damien Wild has a good post on the topic, opening up the transparency debate.
About This Post
Thanks for referencing one of CFO.com’s stories. Just to clarify, Deloitte did not “spin” anything for us. In fact, Deloitte wouldn’t talk to us for this piece. The numbers show that the Fortune 1000 stick with the Big Four (hence the “in general”). Stonefield itself and other small auditors I’ve spoken with admit they don’t always have the technical expertise that a Big Four has — but often that’s OK for smaller clients.
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Thanks for the clarification – it would have helped to have said that re: Deloitte. The piece is really unclear on what tier 2 can and cannot handle. It seems to me, and this is a myth perpetuated in the UK as well, that if you’re not Big Four then in some way you’re not qualified. Without adequate qualification, that’s nonsense and a convenient perpetuation of the status quo.
Of course there will be circumstances where a non-Big Four will not have the bandwidth or technical capability. But then we’ve seen enough failure among the Big Four to seriously question just how ’superior’ they really are.
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