Imagine, for a moment, that you are sick and require a major operation. Among the many thoughts that would immediately cross your mind would be the need to find “the best” doctor available. What criteria would you use when selecting the best doctor? I bet that the following attributes would weigh heavily in your decision:
- Experience – You want someone that has been around the block with your disease. You can’t afford to be the training ground for a new doctor that has never actually performed this type of operation.
- Expertise – A general practitioner could technically perform the operation, but you demand someone that has the specialized credentials for your illness.
- Cost – Not as important as the other decision points, but clearly you do not want to be wasteful in obtaining your treatment.
You see, when it comes to virtually any professional services, it logically boils down to experience, expertise and cost. Selecting a builder for your dream home? First time builders probably won’t be on your short list. Interviewing an attorney to represent you in a major legal dispute? A recent college graduate charging $1,000 would be unacceptable.
What if you were choosing a CPA firm to perform your SAS 70 audit? You would want a project team comprised of certified experts with significant audit experience and deep references, right? Well, that depends on your company. Unfortunately, many companies use “Big 4” firms for such services simply because they are “Big 4” firms. While these same decision makers would not allow a doctor to perform their brain surgery simply because they work at a well-known hospital, they make decisions about their audit firm based primarily on the size of the entity. In other words, certain companies make the Big Four firms their default “short list” of vendors. Such an approach short fuses the importance of experience, expertise and cost that would normally be associated with such decisions.
This “Big Four Bias”, as Jeremy Newman, chief executive of BDO, describes it is causing growing concern around the world. In October, the New York Times published an article highlighting increasing concern within the European Union over the market dominance of the “Big Four” global accounting firms. It reported that 70% percent of all European audits are performed by these firms, with 99 percent of Britain’s FTSE 100 companies using them. A European Commission even studied this problem and concluded, in short, that Europe needs more diversity and competition and that legislation compelling the use of other accounting firms may be prudent.
Personally, I am not an advocate for using legislation to influence the selection of professional services providers. However, I am a relentless supporter of using common sense when selecting a vendor, no matter what the service. As it relates to the accounting industry, requiring firms to provide the following basic information about each of their proposed project team members would go a long way to removing much of the puffery that can pervade the proposal process:
- Years of professional experience – Does the vendor intend to assigned seasoned professionals or inexperienced personnel to your project?
- Years employed by the vendor – How familiar are the project team members with the vendor and its methodology?
- Professional certifications – Do the team members have the credentials to support claims about their expertise (e.g., CPA, CISSP, CISA, and CIA certifications, among others)?
- Previously Completed Projects – Does the vendor intend to assign personnel with significant experience, or more junior staff with little or no relevant experience?
- References – Can the vendor produce relevant references for each proposed project team member?
- Level of involvement – How much time do the vendor’s personnel intend to spend working on your project, especially performing on-site procedures?
- Hourly rate – Is the cost for the person reasonable given their experience and expertise?
I hope that you pick the best provider for your needs, whether it’s a Big Four global provider or a local CPA firm. For some companies, that will mean reevaluating a bias for the Big Four firms. Many Fortune 1000 and publicly traded companies that previously had such a bias used the approach above and selected SAS 70 Solutions. These companies put the focus on the project team rather than the size of the entity, and for them, it made all the difference.
For those that are considering such a decision, check out this tool. Consider sending it to all of your potential vendors and requesting that the data be provided in this standard format. In my opinion, there is no better way to get comparable about the team of people that will actually provide the professional services.
