|
Is it fair to say a small-cap company is out of its league when it dares to use a Big Four accounting firm? Last week, Catapult Communications said it was able to find huge savings by going with a regional auditor ranked 67th among accounting firms by revenue size — the company expects to save as much as 49 percent in accounting expenses this year by making the switch from Deloitte & Touche to Stonefield Josephson.
CFO.com reader Kunal Ganguly wrote us to say a company of Catapult's size, with its $102 million market cap, shouldn't have been using a giant like Deloitte anyway. A local firm would be a better fit because it likely has more experience handling companies of a smaller size, he thinks. Adds accounting professor Zafar Iqbal: "[Smaller] public accounting firms have more experience with, and better knowledge of, the needs of smaller clients. Thus they are in a position to add more value."
It's an interesting point considering the Big Four began shedding some of their smaller clients after Sarbanes-Oxley was put in place because of the higher risk of working on the small caps' financials and the firms' expanding workloads. Of the 37 SEC-registered clients let go by the four largest auditors in 2007, more than half were smaller businesses, according to data provided by Audit Analytics to CFO.com. Maybe the accounting biggies were doing the little guys a favor.
Of course, as in Catapult's case, the relationship goes both ways: 62 companies with a market cap of $110 million or less dismissed their Big Four auditor in favor of a smaller tier firm last year (compare that finding with the 143 smaller companies that did so in 2005).
|
Video
