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It’s good to talk…
Back in the ’90s, One2One—a now defunct British mobile phone company—ran a successful advertising campaign about who celebrities would most like a phone call with. Unsurprisingly, nobody suggested their auditor. However, our research suggests that if the same question was put today to senior finance executives, some people might actually really want a one-to-one with their external auditor. Honest!
The audit market is on the cusp of profound change. Clients, investors, regulators, and the general public are becoming increasingly unhappy with the apparent cosy relationship between auditors and their clients and the potential conflicts of interest that can arise. At the same time, digitisation, blockchain, automation, and other technologies that are pervading the wider economy are starting to impact audits, and may change the way auditing is done in the future. Against this backdrop, we asked clients to rate different audit firms across a range of attributes, and then to tell us what attributes are the most important for that firm to improve.
It turns out that far from wanting their auditors to hide in some dusty dark room full of files and servers, clients want to talk to them! Clients of Big Four firms tell us that communication is the most important attribute for firms to improve, while it was the second most important with clients of mid-tier firms.
While communication is clearly important to all clients, there is a marked difference in how different firms perform. Communication is only the twelfth-best attribute of the Big Four, out of the nineteen attributes we look at, but is the third-best attribute of mid-tier firms. It’s also one of the few areas where mid-tier firms outperform the Big Four.
We think this is because smaller firms are able to provide a more personal service. The Big Four may well have the world-leading experts in audit and assurance, but they have a reputation for stretching partners across multiple projects, leaving them reliant on ranks of juniors fresh out of top universities. Partners at smaller firms, on the other hand, may be able to make their clients feel special and important by giving more of their time to them. Indeed, given the relative differences in market share, any individual client is much more important for a mid-tier firm compared to a Big Four firm.
This could be a differentiator that mid-tier firms can turn into a competitive advantage. Changes in the structure of the market may give them the opportunity to prove their strengths to otherwise sceptical prospective clients. If the Big Four continue to underwhelm with the quality of their communication, this could be a powerful strength for mid-tier firms—one that could allow them to steal clients from under the noses of the Big Four.