We are at the point now where we are 99% sure that the powers that be have made auditing for small companies so expensive that we simply have no alternative but to resign from them all and make redundancies.
Has anyone else gone down this route? Clients don't want to pay and the rules and programmes are so vast that we can't see how to make it sustainable in the short term.
Any ideas of how we can make it at least break even without spending about 6 weeks just on 1 simple audit?
Thanks in advance.
Replies (14)
Please login or register to join the discussion.
But small companies are generally audit exempt aren't they? Or are you perhaps using "small" in a non-technical sense.
The other way of looking at it is that you are under-charging. Why not double all your audit fees? If (is this a big "if") you are as efficient as your competitors your clients will not be able to get the job done significantly more cheaply elsewhere and will stay with you. They have no option but to pay someone to do their audit after all - it being a legal requirement. If you just sack them you will be handing all your audit fees to your competitors without putting up a fight.
How many?
How many audits do you have ? How many employees' jobs at stake ?
I have to say, I haven't missed auditing - in a financial sense. I can do much more useful work for my clients within the same budget.
Missed auditing
I have to say, I haven't missed auditing - in a financial sense. I can do much more useful work for my clients within the same budget.
You must be talking about clients who have become audit exempt. But the question relates to clients who are not audit exempt whom the OP is considering sacking. So the fees will go to other firms.
Difficult to increase fees
My experience mirrors your own that clients will not pay increased fees at a level to make the audit viable - from their end, they see absolutely nothing to justify the hike. Some other firm will then low ball the first years fee for them to buy the work.
Offer the clients to another
"None of the academies will accept a fee increase"
Offer the clients to another firm possibly your alternate. Failing that dump them all, sack the staff, shed a tear and make a bigger profit. Why anyone wants to do audits is beyond me with the attendant regulatory crap that goes with them
Audits are not for everyone, but the simple answer to your question as to why anyone wants to do them is that there are on any analysis hundreds of millions (if not billions) of pounds of fees to be earned from doing them and there will always be someone there to pick up the fees if you don't want them.
I don't do audits (any more) in case you are wondering.
Is there non scope to utilise your skills on VFM/ Internal Audit
If statutory audit work does not make financial sense, and before you embrace the redundancy route, have you considered offering your services covering the internal audit/ VFM audit function of charities/statutory bodies etc.
When I was with my previous employers in the mid 1990's we somehow (we tendered and were accepted) landed an internal audit contract for three years ,which back then brought in about£20,000 per annum. We attended each month for 2-3 days, reviewed all sorts of areas (Expense claims, Benefits etc plus core systems of sales/purchases/contracts/treasury/payroll)
We had limited public sector experience ( I had a little public sector audit experience from during my apprenticeship) but a general audit background and some additional studying enabled us to perform the function. This type of work can often be very satisfying.
It may be there is nothing available in your neck of the wood but there may well be a niche services you can offer to under cut the Big Four.
Two points ....
... what audit program do you use? I would suggest looking at PCP, and attend a workshop on surviving an audit control visit. Their approach is all about picking the important aspects of the firm and planning an efficient audit. They also do an example audit file to help.
The second point is aside from your profitability, you effectively have a limitation of scope as auditor by the fee restriction and should resign the appointment as your independence is unduly threatened.
What would happen if you said this is your fee quote, feel free to tender! As there are getting less and less auditors it is not so easy to get a cheaper quote these days. Bear in mind a large percentage of registered auditors will not take on audits, they like the kudos but don't want the hassle!
Whats the word on the street regarding the Audit limits??
The bringing in of the 50 or fewer employes rule so its now 2 out 3 rule for exemption has knocked a couple of audits out for us and most of the others are very close.
Small rise might make us audit free,
Fees
Out of interest how much would you charge on average for these medium sized companies.
I ask because we do a few such audits, about the same number as you, and using the IRIS openaudit we can make them cover there charge out rates, they aren't brilliant earners, but ok.
I wondered if we are brilliantly efficient or just lucky with the clients!
I'd hang on for a while - at least until the FRC decide whether or not they will be increasing the audit thresholds (up to turnover £10.2m, total assets £5.1m) in line with the proposed small company limits. My bet is that they will, if not immediately, then within a year of the small company limits rising. Mind you, 6 weeks for a simple audit does seem quite a long time - you sure you're over-auditing low risk or immaterial areas?