Changing Independent Auditors

There are any number of reasons why a company would choose to change its auditor from one year to the next. From the point of view of a creditor doing business with the company, many of the reasons for making such a change are completely benign but when a customer changes CPA firms it is important for the credit manager to try to find out why.

One of the most common reasons given is a desire to lower auditing costs. While this motive may seem logical, prudent and benign, it may have implications on the scope or the quality of the audit. The creditor's concern is that a cut in auditing fees may result in a cut in the scope of the audit or a rush job in which quality is sacrificed for cost savings. Creditors should carefully compare the certification of the new CPA with that of the former audit firm.

Changing CPA firms may be prompted by a difference of opinion between the CPA and company management regarding the treatment of one or more items in the audit. A difference of opinion can result in a decision to change auditors - hoping that the new auditor will be more flexible about the items the company wants a different accounting interpretation for.

Source: Michael Dennis, author of "Credit and Collection Handbook" available at the NACM Bookstore.