Early last year, I received a call from a long-term ally and SYMPAQ evangelist who told me that our business relationship was over. The issue had nothing to do with the quality of our products, services, or even a client relationship gone bad, but rather was due to a decision by the CPA firm that employed this individual to become an accounting software reseller. Hence, we suddenly were seen as a competitor even though we've never in our long history performed any of the traditional services offered by professional accounting practices. No tax returns, no audits, no reviews or compilations. Therefore, since we're in the accounting software business and now so are they, we're done working together per their decree.
Independence is the hallmark of the public accounting profession; a necessary part of the statutory corporate reporting process, and the cornerstone for creating value from an audit standpoint. Simply put, without independence and objectivity, accounting practices quickly slip into an ethical gray area where independence and objectivity are overcome by a profit motive and a desire for billable hours.
Therefore, it is exceedingly important to make sure your CPA firm is operating at a high level of independence. Ensuring independence is not as simple as you might think; in fact, the issue of independence has evolved over the years in response to accounting scandals and as influenced by legislation such as the Sarbanes-Oxley Act.
The Value-Added CPA
Besides tax returns and audits, many CPA firms offer consulting services or guidance on complex issues, such as DCAA compliance. Since your auditors are already familiar with your company, they can assist in other financial services such as wealth management, or serve to advise you when it comes to the products to fit your government contract cost accounting needs. A good accountant can assist you not only with tax returns, but also with longer-term tax planning, business planning, and referrals to bankers, lawyers, and software providers.
The problem comes when companies blindly take their CPA's recommendations without first understanding their underlying motivation (i.e., money). How can your company be sure that your CPA firm is providing you with independent, objective advice? After all, the close working relationship between you and your auditors uniquely positions them as trusted advisers as it relates to selecting products and services. Often, this relationship proves to be a double-edged sword.
Proceed With Caution
Since independence is such a complex issue, it is beneficial to have some warning signs when evaluating potential CPAs. The biggest red flag to watch out for is the one trying to steer you towards a particular cost accounting product. Many CPAs are involved with reselling or referring software products as a "value-add" to their traditional accounting services. These firms or individuals may not have your company's best interest at heart when making a recommendation but are in it for the money. I've seen accounting firms get hired to conduct an accounting software needs analysis with a solution - the one that they resell - already in mind.
Some product affiliations are obvious, but others may require some digging to uncover. Sometimes the firm's product affiliations are disguised, perhaps as a separate entity associated with the firm. While your accountant is in the position to recommend relevant products and services for your business, you must be sure they are not taking advantage of you when they steer you from one product and away from another. Unfortunately, the trend of advising clients on products and services they know (or have some stake in), versus stepping back and determining what is best for the client is all too common. Your goal should be to hire a firm that will identify the services and products that fit your particular needs, and not those solutions the firm is intimately familiar with and have an economic interest in recommending as the "best" fit for your needs.
The Best Choice is Yours
So, how do you choose the best CPA firm for your company? The key element to look for is independence and that includes being software agnostic. What works for your competitor may not be the best course of action for you. Your CPA firm should take this approach as well, and you should determine this upfront. A question to ask is "Are you accounting software agnostic, or do you already have a solution in mind for my business?"
This decision is critical because hiring a CPA means trusting that person, or firm, with the financial intricacies of your business. Your decision should reflect your needs, meaning that the CPA is well-versed in what services to provide and is not predisposed to offer an accounting software solution to pad their fees.