Back in November 2022, in the third year of a four year contract, our auditors unexpectedly resigned. The reason for their resignation was insufficient skilled and experienced resource to cope with the additional demands of a client with listed debt. We are not alone in this regard.
This came as a complete shock and given we would normally be about to enter audit planning for the new year, it gave us some concerns about managing the end of year audit. It also meant we would need to retender the audit in a market where I see my colleagues in the sector pulling their hair out at the lack of responses to tenders.
To an extent we are reaping what we sow in terms of the attractiveness to both existing suppliers and new entrants. Over the years we have created a number of barriers to entry: audit committees insistence on previous housing experience, the constant drive for lower costs, listed debt and increased complexity of operating models, regulations that prohibit external auditors from engaging in more lucrative consultancy projects, a recruitment crisis into auditing (who’d have thought).
So we entered the tender market with a degree of trepidation.
In order to improve our chances of success we made a number of critical decisions in conjunction with our audit committee:
We engaged with over 20 firms and proactively encouraged firms to bid – resulting in 14 no bids, seven maybes and three definite. Clarity around whether our listed debt meant we qualified as a Public Interest Entity (PIE) was a critical factor for some firms – we took advice on this and published the outcome. As our debt is listed on the International Securities Market which is not regulated, rather than the London Stock Exchange which is, we do not qualify as a PIE and are therefore easier to audit. Bear that in mind when listing debt.
The tender closed 3 January with three bids. PKF Littlejohn – who are new to the sector, Buzzacott – who are relative newcomers within the sector, plus one more established player in Crowe.
All made good submissions and performed well on the day. We had a lengthy debate in the debrief and selection about the limited timeframe to plan and execute the audit, and the capacity/capability of the firms to deliver. Whilst close run, PKF Littlejohn stood out. They had a clear desire to enter the market for the long term and a proven track record of successfully entering and expanding into other sectors and were duly appointed.
The audit is well underway, and so far so good. We’ve been hugely impressed by their approach.
So go on, be bold, be brave – get a new audit relationship. Sometimes the grass really is greener!