Tip of the Week: Pick the Right Auditors!
By David Feldman at 15 October, 2009, 6:08 am
Whether setting up a shell company utilizing SEC Form 10 or an operating company completing a reverse merger or self-filing, a critical member of the team are the auditors representing the company. Choosing the right auditors is not always easy. Some compete almost entirely on price. Others boast expertise in the industry in question. If a non-US company is involved, multiple offices or strong affiliations are important. A few things I have learned in watching clients make these selections for public companies:
1. Do not choose an auditor entirely based on price. The old adage “you get what you pay for” really applies here. Case in point is the recent action by the SEC and PCAOB against an auditor who charged very low fees but did basically no work. This put his clients and their shareholders at great risk. That said, there are many smaller companies for whom it does not make sense to go with the largest international firms.
2. Recognize that auditors are forced into a more adversarial position than in the past thanks to the new requirements of Sarbanes-Oxley. They will insist on multi-layer internal reviews at their firm, look at much more than in the past, and basically assume there is trouble until proven otherwise. That said, some push the envelope in one direction, others go the opposite way.
3. If your industry is complex or heavily regulated, try to find a firm with experience representing companies in that industry.
4. The personal relationship between you and your principals contacts at the firm is very important. Make sure you feel comfortable with the capabilities and responsiveness of the indivdiuals with whom you will deal very closely.
5. If you are simply not sure, allow other advisors (including counsel) weigh in on their thoughts concerning the best choice for your company.
6. It is almost always advisable to talk to at least 2-3 firms before making a final selection. And make sure to insist on, and check out, at least three business references.
Good luck!
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