Deloitte Dumped for 43 Percent Discount

A micro-cap company decides its Big Four auditor is too expensive.
Sarah JohnsonJanuary 8, 2008

When Catapult Communications Corp. made the uncommon decision to drop a Big Four accounting firm in favor of a local, smaller auditor, it also took the unusual step of announcing its reason for the switch: Deloitte & Touche, Catapult’s auditor of the past two years, was simply not offering the right price.

By hiring Los Angeles-based Stonefield Josephson, Catapult estimates it will save 43 to 49 percent in accounting expenses this year, off the $985,000 the Mountain View, California-based company would have paid Deloitte for fiscal 2008.

Catapult claims the change in audit firms will create “significant savings … without negatively affecting the quality of the audit and related services.” Considering its relatively small size — $102 million in market capitalization — saving nearly half a million dollars was significant, Catapult’s investor relations representative, Leigh Salvo, told

Drive Business Strategy and Growth

Drive Business Strategy and Growth

Learn how NetSuite Financial Management allows you to quickly and easily model what-if scenarios and generate reports.

Catapult, which supplies telecom test systems to service providers like Alcatel-Lucent and Motorola, also was attracted by Stonefield’s team, service offerings, and background, Salvo said.

Practical Accountant ranked Stonefield 67th among accounting firms in revenue last year, with $40 million. The firm has four California offices, one Hong Kong location, and more than 100 employees.

It’s not a surprise Catapult was looking for ways to cut expenses. The $39.3 million company reported a 17 percent drop in its revenue for fiscal-year 2007, which it blamed on the consolidation of its customers and increased global competition.

To be sure, Jeff Garrison, Stonefield’s president, says cost savings isn’t his firm’s main selling point. Like most auditors, Stonefield touts its high-quality work. However, he told the firm was able to offer a lower rate than Deloitte in part because its partners don’t have to deal with as much bureaucracy and can make decisions sooner without having to check in with headquarters.

At the same time, Garrison acknowledges that a regional firm like his does not fit every company’s needs. In general, large-cap companies prefer using a Big Four firm, and Stonefield may not have the technical, industry-specific expertise to handle the review of some companies’ financials without relying heavily on affiliated firms.

In announcing the change in auditors, Catapult said it has had no unresolved disagreements with Deloitte during its two-year partnership — a fact the accounting firm agreed with in a letter accompanying Catapult’s latest 8-K filing. Deloitte did not respond to’s request for comment by press time.

However, the relationship ended soon after Catapult addressed a material weakness in its internal controls. In its financials for the quarter ended September 30, 2007, Catapult announced it had resolved the outstanding weakness, which resulted in properly classifying variable rate demand notes during the previous year.

4 Powerful Communication Strategies for Your Next Board Meeting