Choosing the right audit firm is a pivotal decision for any organisation, and one that should not be taken lightly. In my experience as a Partner at Sayer Vincent, I’ve seen that organisations starting this process early, setting clear expectations, and engaging the right stakeholders are key steps to ensuring a smooth and effective selection process. The right auditor will not only meet your compliance requirements but can also play a vital role in supporting your long-term strategy and governance.

By taking the time to carefully consider these elements, your organisation will be positioned to make a well-informed decision that not only addresses your immediate needs but also aligns with your future goals. As you embark on this process, here is a step-by-step guide to support you along the way:

1. Establish Your Audit Requirements

• Regulations: This is usually quite straightforward, you’ll often know from experience, or you can simply check the current regulatory thresholds for audits and independent examinations.
• Governing document: Always check your organisation’s governing documents (e.g. constitution, articles of association). If an audit is required by these documents, it must be carried out even if you fall below the statutory threshold.
• Funders: Consider your funders’ requirements. Some may explicitly require an audit in their funding terms, or expect one as best practice, even if you’re below the regulatory threshold.
• Reporting requirements: Make sure the audit meets all statutory and regulatory reporting obligations, including compliance with relevant accounting standards (e.g. UK GAAP, IFRS).

2. Create a Tender Document

• Invitation to tender: Clearly outline your objectives for the audit, going beyond the statutory requirements. Include areas of particular focus, timelines, and any specific deliverables you expect. Also set out what information you’d like to receive about each firm. Avoid a rigid application form format, even if required by your procurement policy. Remember, you’re selecting a partner for an audit relationship, not purchasing a product.
• Just an audit or more?: Be clear about whether you’ll need the auditor to format your final numbers into statutory accounts, or if your internal team will handle that. Also indicate whether you’ll need assistance with your corporation tax return.
• Background information on your organisation: Include a short description of your organisation in the tender document. You can link to key documents hosted on your website. Prospective firms often ask for items like management accounts and risk registers, decide in advance whether you’ll provide these, and ideally do so from the outset.
• Selection criteria: Set out how you’ll choose your audit firm. Consider experience, qualifications, sector knowledge, and overall approach.
• Expected outcomes: Be explicit about what you’re looking for beyond the audit report, such as a collaborative working relationship, shared values, and any additional services required.
• Timing considerations: Begin the tender process at least six months before your financial year end. Allow enough time for firms to respond, hold interviews, and finalise your decision. Plan around your governance structure, particularly the meeting of your finance committee and/or board where the auditor appointment will be approved. Start with those key meeting dates, along with your financial year end, and work backwards to create your timetable.

3. Identify Potential Audit Firms

• Research firms: Shortlist audit firms based on sector experience and organisational size. Consider recommendations from similar organisations to yours.
• Recommendations: Seek insights from other organisations or trustees.
• Previous experience: Review their past performance, references, and ability to support your organisation over the next 5 to 10 years.
• Number of Firms: Be selective. If you have decided to replace your current auditor, decide whether they need to be included in the tender process as preparing a pitch takes a lot of time and investment.

4. Issue the Tender

• Send invitations: Distribute the tender document to shortlisted firms, ensuring they have all the necessary details.
• Set a submission deadline: Clearly outline the deadline and process for submitting proposals and asking questions. Audit firms will want to speak with you, so allow time for conversations. Avoid limiting questions to email only, as this doesn’t offer the same opportunity to explore what you’re looking for in an audit relationship as a proper discussion does.

5.  Evaluate and Select the Auditor

• Review proposals and shortlist: Assess each submission against the tender criteria, focusing on the firm’s fit, added value, experience, and timing.
• Interview firms: Clearly communicate expectations, for example, whether the tender involves a presentation or a Q&A. Use a standard set of questions to ensure consistency and fairness.
• Decision making: Consider the long-term fit. Audit relationships often last at least five years, if not longer, so assess whether the firm can support your organisation’s evolving needs. Audit costs should reflect the complexity of your organisation, not just its income or balance sheet size.
• Approval process: The chosen firm should be approved at governance level. Ensure the interview panel includes representatives from both the trustee board and the finance team, so you can properly assess cultural fit and working relationships.

6. Transition Phase for the First Year of Audit

• Professional clearance and engagement letter: The selected firm will handle professional clearance procedures.
• Clarify reporting: Ensure clarity on audit reporting timelines, deliverables, and trustee discussions.

Top Tips

By following this guide, your organisation can ensure a transparent and well-structured audit tender process, selecting an auditor who not only meets your organisation’s immediate requirements but also aligns with your long-term values and goals. To help you navigate this process effectively, here are 5 top tips to keep in mind:

1. Start early: Begin at least six months before your financial year-end.
2. Be clear on expectations: Define what you need beyond the audit report.
3. Engage Trustees and finance staff: Include both in the decision-making process.
4. Think long-term: Choose a firm that can support your organisation’s future needs.
5. Communicate timeline clearly: Set clear deadlines for each stage.

We have written this guide with the external audit in mind, but it can be used for any service selection process by just tweaking step one to define the service you need. For example, Sayer Vincent offers other assurance services, tax and governance advice that are often relevant to prospective clients.

At Sayer Vincent, we’ve seen the difference that a trusted, collaborative relationship with an auditor can make for charities and not-for-profits. If you’re looking for an audit firm that understands your unique needs and can support your organisation’s ongoing success, we’d be happy to help guide you through the process