IDT Sheds E&Y Costs, Picks Thornton

The second-tier auditing firm offers "the best combination of cost and quality," the company says.
Stephen TaubMarch 28, 2008

Grant Thornton is in as IDT Corp.’s independent auditor for the rest of its current fiscal year. Big Four firm Ernst & Young is out, a victim of IDT’s mission to cut costs.

“It was not the result of any disagreement between the company and Ernst & Young on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedures,” says IDT.

Company CFO Steve Brown says IDT is evaluating all significant corporate expenses: “Grant Thornton offers our shareholders the best combination of cost and quality.”

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In January reported that Catapult Communications Corp., which supplies telecom test systems to such service providers as Alcatel-Lucent and Motorola, dropped Deloitte & Touche, replacing it with local auditor Stonefield Josephson. Catapult estimated the change would save 43 percent to 49 percent in accounting expenses this year, off the $985,000 the company would have paid Deloitte for fiscal 2008.

In general, however, the movement from Big Four auditing firms to smaller ones has been slowing significantly in recent years. A recent analysis of data from Audit Analytics shows that in 2007, 101 public companies moved from a Big Four firm to a midtier or regional firm, down from 163 in 2006 and 275 in 2005.

Donald Whalen, director of research at Audit Analytics, says it’s part of a general decrease in auditor switches. “It looks like things have settled down,” he adds, “with more people seeming to be happy where they are.”