Fractured Fraternity

Oh for the days when auditors were counselors and not pricey overseers.

Finance chiefs agree, but say they wouldn’t mind a little help arriving at the answer. Too many questions can spell trouble, however. What used to pass for normal give-and-take between an auditor and a client might today be construed as a sign of control deficiencies — or worse. “At a certain point, we must draw a line,” says Wayne Kolins, chairman of the board and national assurance director at Chicago-based BDO Seidman LLP. “If a client calls 12 times a day, maybe he’s not competent.”

Don’t Speak

The point is not lost on CFOs, many of whom now seem to be engaging in a form of self-censorship. “You’re kind of showing your hand by asking for advice,” acknowledges one finance chief. “The auditor may think, ‘Maybe they don’t have it together.’” He adds: “It does color things differently.”

So, too, does the tendency for engagement partners to defer client questions to higher-ups at their firms. CFOs say the deferring has become SOP in recent months. “An auditor is no longer capable of making a judgment,” insists Wall. “Any judgment nowadays involves a committee.”

Auditors defend the vetting process. “The complexity of standards leads to more consulting [within a firm],” explains Robert Kueppers, chairman of the executive committee of the Center for Public Company Audit Firms at the American Institute of Certified Public Accountants. “And the stakes for being wrong have gone up.”

Not surprisingly, so has the time it takes for clients to get an answer from their auditors. “Today, it’s a guessing game,” says Wall. “You go to them and say, ‘Here’s the issue; what’s your position?’ Then it goes into this black hole called the national office.”

The jury is still out on whether the constant conferencing will lead to more-reliable financial statements. But the backstopping by national partners isn’t helping finance executives do their jobs. Alamo Group’s Stevens recalls a recent meeting where he questioned his independent auditors about compliance-testing control procedures. “The partner and manager just looked at each other, then said, ‘Um…can we answer that?’ ” he says. “They were unsure what the national office expected them to do.”

Nice Work If You Can Get It

Such indecision galls CFOs, many of whom say they are paying first-class fees for second-rate service. As one finance manager noted in an E-mail to CFO: “Given [that] all remotely ‘material’ items go to national (whom we are not allowed to talk to), how do I explain to my audit committee why we should still pay $570 an hour for a partner?”

Auditors are no doubt familiar with the refrain. John Morrow, a vice president at the AICPA (in which capacity he represents more than 150,000 accountants working at public companies), says flat out, “Everybody’s talking about how outrageous audit fees are getting.”

A recent survey quantifies “outrageous.” According to law firm Foley & Lardner LLP, corporate audit fees shot up an average 61 percent between fiscal 2003 and 2004. While CFOs expected some uptick (due to 404 compliance), many say they were stunned by their accounting fees last year. Says Livingston: “People felt they were being gouged.”


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