OT ratobranco - Response to your Auditor post.
Ratobranco, I read your post detailing Chads conversation with his sister-in-law who is an accountant. Although some of the points she makes hold merrit it is my opinion (auditor at aa for 5 years) and that of my wife's (she is a partner at a big 4 audit firm) that most of the commnets are inaccurate and misleading.
For instance
- Partners are greatly involved in the day to day tasks assciated with the audit at big 4 firms. While it is accurate that staff accountants perform alot of the work (testing, documenting and ticking and tieing) it is senior managers and partners making all decisions with regard to applying the principals of Gaap and determining audit process and methodology.
- the PCAOB does not have the resources to scrutinized the larger firms. I do not believe this is true. There are many in the industry that feel the PCAOB is more focused on the larger firms. I have experience with two PCAOB audits performed on a big 4 firm and i can assure you the PCAOB did not cut any corners or leave any stone unturned.
I think the question you are trying to get answered is why would someone not use a large accounting firm and the answer in my opinion boils down to... Cost - like wall street law firms, Large audit firms charge a premium. it is up to the client to determine if the additional cost is worth it.
A few reasons the premium is worth it
1)Many private investors, pention funds and hedge funds require that any investment they make is to an entity audited by a big 4 accounting firm as this adds a level of credibility.
2) Global presence - offices worldwide allow for seamless audits for mutinational corporations
3) the large firms are on the cutting edge of changes to GAAP and other accounting rules.
4) They have resources to handle complex issues. Some of the brightest minds in the industry
5) Credibility
6) many clients view there auditor as a member of their team and look to them for industry best practices.
Those are just a short list of reasons to hire a large accounting firm. I am of the opinion that Chinese companies view an auditor and audit as a painful process that needs to happen to comply with regulators, they do not use the process as one to improve thier internal processes. As such, they are looking for the least costly way of stay in complience. They must feel the additional creditbility brought to the company by a large audit firm is not worth the additional cost (it can be signifigant.
SIAF is complex and getting more complex (international, several lines of business, many jv's, traded on a foreign exchange, emerging high growth company)and I would think that if they continue to grow at the rate they are it will not be long until they move upstream with regard to their auditor. If Management does not do it on their own the investment community will force their hand.
Sorry for the long post but I wanted to tell the other side of the story. There are many people that do not share Chads sister in laws veiw of large accounting firms. Many people feel they are worth every dime.
AI
