How to Choose the Right Auditing Firm for Your Organization
Annual financial statement audits are required by the Illinois Attorney General every year for non-profit Organizations that receive over $300,000 in gross receipts per year. Additionally, most governmental entities are required to have an annual or tri-annual audit of their financial statements. Your Organization’s relationship with its auditor is an important one. The selection process in choosing an auditor can be overwhelming but here are some key factors to consider when choosing an auditor.
- Experience – Your auditor should have experience in your field. They should be able to show, through references, other organizations they audit that are in similar nature and scope to your Organization. The accounting world is always changing. You should ask potential auditor about how they: stay on top of new pronouncements, what their continuing education requirements are and how they communicate those accounting changes with their clients. A good auditing firm will have a structured plan in place for accounting changes.
- Communication – Good communication is very important to a successful audit and auditee/auditor relationship. When you meet with a potential auditor you should be able communicate freely with them. Ask questions and make sure that you understand their responses. Accountants are known for being overly technical. You should choose an auditor who explains things in a way you and others in your Organization can understand.
- Reputation – The reputation of your audit firm is an important consideration during the selection process. Feel free to ask for references and call those references. Ask about community involvement. Several awards can be presented to audited financial statements. For governmental financial statements, awards issued by the Government Finance Officers Association demonstrate high reporting standards. Ask your auditor candidates if they have audited any award winning financial statements.
- Fee – Although the audit fee should not be the most important factor when selecting an auditor it is significant to the process. A few bids should be received to insure the offer is competitive. In some cases an auditor is willing to offer a multiyear engagement at a stagnant or reduced fee over a single year engagement fee. This multiyear engagement is beneficial to both parties. The auditing firm recovers any first year setup costs over the subsequent years and the Organization has budgeting figures for the future. Please note that most multiyear engagement pricing is based off of no substantial changes from the prior year. If you are in a period of growth or substantial change a multiyear engagement might not be suitable.
- Peer Review – Accounting firms that perform audits are required by the Illinois CPA society to have a tri-annual firm peer review. During this review an independent accounting firm comes in and reviews the Accounting firm’s records. The review essentially verifies that the audits are being performed according to standards. In the interview process you should ask your auditor about their latest Peer Review results.
Other items to consider: if the firm licensed in your state, or independent to your Organization, their location to your office and ability to meet any timing requirements.
For more information please email or call Cynthia Hitzemann at 847-695-2700 or Cynthia.Hitzemann@tkocpa.com.