Covering Business Credit Logo Home   About Us   Services   Credit Articles   Q&A   Contact  

  Business Credit Articles  

Credit Management Articles
All Articles •  Home

More About Monthly Statements
By Michael C. Dennis, MBA, CBF
and Steven Kozack

When a company changes its outside [independent] auditors, this is a red flag to trade creditors. It is important for the credit manager to try to find out why this happened. The credit manager will often be told that cost savings was the motive. Even this benign reason is not without a certain amount of risk. What risk? The risk that changing auditors to save money might lead to lower quality work or a less comprehensive

Changing CPA firms can be [and often is] prompted by disagreements between the previous CPA firm and company management regarding certain disputed accounting issues. As a creditor, you should carefully compare the opinion letter issued by the new CPA firm to be sure that it is issued without qualifications. Also, read the notes carefully to determine what if any accounting changes have been made in preparing the new financial statements.

One final thought: A decision to change auditors does not necessarily mean that there is a problem between the CPA firm and its client. There are a variety of legitimate reasons for a company to change CPA firms unrelated to disputes or cost savings. For example, the company may want to hire the consulting division of the CPA firm and having one auditing firm analyzing financial reports and another making recommendations might be counterproductive. Another example would be the CPA firm of Arthur Anderson. Many of their clients feels that the issues surrounding the Enron Corporation bankruptcy including allegations of shredding documents is enough reason to change CPA firms.

Share |

Business Credit Articles
Send to a Friend
Ask A Credit Question
Questions & Answers
Business Credit News
Your Privacy
Site Map