Are Auditors and CFOs Growing Apart?

''Part of it is that they want to stay independent,'' says one finance chief, ''but part of it is that everyone's a little bit gun-shy.''
Kate O'SullivanOctober 8, 2004

As the amount of communication between auditors and top executives has increased, the content of these conversations has become much more restricted, maintain many CFOs. “The whole relationship is more at arm’s length,” explains David Bronson, finance chief of PSS World Medical, a $1.3 billion medical-supplies distributor in Jacksonville, Florida. Bronson has found that his auditors hesitate to provide their interpretation of accounting issues or take a stand on new accounting pronouncements, a service they provided routinely in the past.

“Part of it is that they want to stay independent,” he says, “but part of it is that everyone’s a little bit gun-shy.” Many CFOs report that their auditors frequently check back with the national office on issues that in easier times would have been settled in a conversation with the on-site partner. “They appear to be much more careful to arrive at a consensus opinion,” says Raymond Silcock, finance chief of Toronto-based soft-drink maker Cott Corp., of his auditors at PricewaterhouseCoopers.

In addition, auditors are documenting each step of the audit process, from engagement letters to fee estimates to final opinions, much more thoroughly. Bronson says the length of the quarterly and annual representation letters from PSS’s auditors has grown “exponentially,” from about 2 pages to 12. “It seems as though we’re representing every single line item in the financial statements,” he says. “It’s turned into something I almost want my lawyer to review before I sign it.”

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While frustration like Bronson’s is shared by many CFOs who feel the new auditor relationship is less efficient, some maintain that little has truly changed. Don Barger, finance chief at the $6.7 billion transportation company Yellow Roadway, headquartered in Overland Park, Kansas, says that “even though it’s not popular today,” he still considers his auditors “business partners,” and involves them in the company’s day-to-day business.

For example, he includes them in regular meetings with his finance staff. “I try to set the tone that communication with the auditors should be continuous,” he says. “That has been my philosophy for 20 years.” But even Barger acknowledges “a mind-set shift” on the auditors’ part, noting that they have become much more watchful of their independence. (For more, read CFO magazine’s October 2004 article “Can We Talk?“)