Catapult Communications Corp. in Los Angeles quit their auditors, Deloitte & Touche. And they made public the reason.

Deloitte’s fee for 2008 audit = $985,000

Local firm fee for 2008 audit = $561,000 or less (a 43%+ savings)

The local firm is Stonefield Josephson, a 100 employee firm with 2007 revenues around $40 million. That fee level gets the firm ranked 67th nationally. The claim their fees are lower because they don’t have the same bureaucracy of Deloitte.

Am I surprised? Of course not. Audits are commodities. Auditors sell a clean audit opinion. Businesses, the buyers required to buy those opinions, know that auditors provide little actual value to the company. So why pay higher fees??? Especially when the difference is so big?

The biggest reason why many companies stick with the Big Four accounting firms is for the name. Do the clients really think a big name firm gives them something better? Probably not. But they know that when they’re presenting financial statements to investors and banks, the name lends credibility.

Catapult announced its decision and the huge savings, saying that they don’t believe that the quality of their audit will be affected. See? Commodity. Useful? Not really.

One Comment

  1. John 04/06/2010 at 3:56 pm - Reply

    Tracy,
    I think you may be overlooking one additional factor. The biggest accounting firms probably have the biggest E&O limits. If something goes wrong, the investors are going to want to look for some deep pockets.

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