Recent accounting audit company upheaval worrying

EDITOR: A merger is defined as “a combination of two things, especially companies, into one.” It is also “a deal to unite two existing companies into one new company.”

The recent upheaval in the accounting audit company landscape has left many clients in a quandary. Lately, the word merger has been used loosely to describe the movement of partners from one firm to another and the rationale to have auditing clients follow said partners.

Some partners of accounting firms are maintaining that clients are contractually tied to the engagement partners of the accounting firms, not the firms themselves and hence must follow them into which new firm they to choose to reside. 

An engagement partner is defined as “the partner or other person in the firm who is responsible for the audit engagement and its performance, and for the auditor’s report that is issued on behalf of the firm, and who, where required, has the appropriate authority from a professional, legal or regulatory body.”

Michael Barton, formerly of Grant Thornton, said in a 2015 interview that auditing companies are often structured as partnerships. A partnership has a governing document, a partnership agreement that you sign when you are promoted to or join the firm as a partner. Every partner in the firm is an owner of the company. They get shares, or what’s called units, in the firm (CFO.com).

I am not an expert on company law, but my layman’s view is that clients have contracts with firms or companies, not partners. If a partner leaves that accounting firm, the natural expectation is that the firm should be able to execute the audit contractual obligations until such time that the client decides to change its auditors.

Instead, instances have occurred where engagement partners of firms prior to the upheaval, are attempting to conduct the audits previously underway as engagement partners in other firms. In my mind, this can only happen if the client, whether at the board, management or shareholders levels, decides to terminate their existing contracts and enter into new contracts with the new firms from where those partners now operate.

Sadly, the process has not been managed well by some of the auditing firms. Persons have shown up to shareholders meetings representing new audit firms; invoices on new letterheads have been issued. If I were to have audited this recent process, I would have had no choice but to issue a qualified opinion. 

Dissatisfied Client