The spring is always a difficult time to schedule an audit as companies prepare their calendar year-end financials but this year the time crunch will be magnified by talent shortages, an audit specialist says.
“Let’s say you were doing a fundraise and you wanted to get that audit done by March 31 or April 30,” Stacy Dow, partner at accounting firm RSM, told CFO Dive. “That would be very difficult. Most of the firms would probably say that’s something that would have to wait until after April, and if it needed to be done sooner, likely that would mean you would have to pay more for it. Firms would have to reevaluate how they’re deploying their resources.” RSM provides audit, tax and consulting services.
As in other parts of the economy, the auditing field is dealing with a war for talent, driven in part by the rise of remote work, which has opened doors to sought-after accountants looking for opportunities elsewhere. And technology changes have led to accountants getting offers to do new types of work that fit well with their skill sets.
“Data analytics and other areas are exciting for a lot of talent where financial people are being used,” she said.
The widespread availability of capital, which has fueled fundraising and acquisitions, has also played into the problem.
“When you look at venture funds and the amounts of money they’ve raised, private equity groups, and the stock market, a lot of private companies have to take another look and say, ‘Well, while I didn’t see myself as an acquisition candidate in the past, now I have a lot of liquidity options,’” she said.
Special purpose acquisition company (SPAC) mergers, although their popularity is leveling off, have been a driver of demand, too, because they put companies under the gun to get public-ready in half the time they normally would.
“Most companies struggle with the transition to go from private to public over a two-year time period, sometimes longer,” said Dow. “SPACs let you go public in half that time, six to nine months. If the company didn’t have any of that infrastructure to begin with, that takes up a lot of resources.”
This environment makes it important for CFOs, working with their audit committees, to take a tactical approach to scheduling an audit even if they don’t have immediate plans for a financial raise or other liquidity event in which an audit would customarily be done.
“You may not need an audit today,” she said, but that can change quickly.
For a target company, not having an audit can put it at a disadvantage if the buyer wants to move quickly, because it means getting an audit becomes a tactical problem.
And for companies that find a good acquisition target, even if they weren’t looking for one, the audit becomes key to their moving quickly.
“If you need financing, [the absence of an audit] would impact your ability to do a deal,” she said.
For companies, either in a target or acquiring situation or otherwise wanting to be ready to raise capital or secure debt, Dow recommends getting the audit done off-cycle, such as in June or later. Audit season is over by then and firms will more likely have resources to move without as much delay.
“If I were a company that didn’t have a need today, maybe it would make sense to have an audit that’s not in the busiest time of the year,” she said. “That gives you a little bit more flexibility, and much better pricing.”