Selling to Audit Committees: To Develop Opportunities CPAs Need to Find out Exactly What Services a Committee Needs

Before the Sarbanes-Oxley Act of 2002, an audit committee was essentially an extension of a company's board of directors, often rubberstamping the CFO or CEO's choice of auditor. The chosen auditor usually also performed many or all of the other CPA-related services the company required. Since the act, corporate boards and audit committees have taken on much of the decision making over which audit firms to hire for which services within the confines of the law. In this environment of heightened ethical and legal constraints, CPA rainmakers and business development professionals are not always sure how to approach audit committees to pursue engagement opportunities--and building an alliance with a committee is not an easy task. However, CPA firms can take heart. Here are suggestions to help practitioners approach and win over boards in each of three target markets for auditing services: publicly held companies; large private and public-interest entities (such as banks, nonprofits); and smaller private and public-interest entities that believe voluntary compliance may bring an increased measure of fiduciary responsibility to their operations. NEW ENVIRONMENT The new Sarbanes-Oxley regulations prohibit auditors from performing tax provision or goodwill impairment calculations, bookkeeping, designing information systems or providing internal audit services. Many audit committees take things a step further, "conflicting out" the auditor for services not on the list. Technically the committee is not required to choose a provider in such cases, though it has latitude to do so. The key to obtaining engagements in the new environment is for CPAs "to develop stronger relationships with members of the audit committee and board of directors," says Trent Gazzaway, CPA, national director of corporate governance for Chicago-based Grant Thornton. "Selling is all about relationships." Before building a relationship a CPA has to learn which service opportunities involve a committee and which don't, so firms need to communicate with the audit committee. The new restrictions have led to unanticipated consequences and impediments, however. For example: * Different decision makers are involved in the selection of providers of different CPA services--tax services vs. internal audit, for instance. The audit committee must choose the auditor--and the internal auditor--but not all decisions will involve the audit committee.  Audit committee members, CEOs and CFOs still aren't sure what role the committee should play in selecting a CPA services provider.  Because audit committee members may work in different cities and for different companies, it's more difficult for CPAs to develop relationships with them than if they were down the hall from the CEO and CFO. THREE BASIC MARKETS For auditors, there are three market segments: publicly held companies, large private and public-interest entities, and smaller private and public-interest entities. Regulatory compliance dictates the audit committee role for public companies, but at large private and public-interest entities, audit committees are optional--useful not for compliance but to seek a higher standard. The third market, smaller private and public-interest entities, may lack resources to determine where its compliance duties lie but perceive potential benefit from an increased and documented level of integrity. Publicly held companies. One of the prime tasks for CPAs developing opportunities has always been to figure out which executive holds decision-making power. Often you could gaze at an organization chart--a road map to boss/subordinate/peer relationships--and identify likely key people and who you needed to get to know. Alas, audit committees don't post road maps. One of your first tasks, then, is to ask each potential decision maker how active a given audit committee will be in the engagement in question and which committee members have the most influence. …

Field of study: Business