How to Ax Your Auditor

(continued)

Switch No. 7: "Come-on" Pricing
An appealing facet of the E&Y bid for the Tymetrix account had been a low fee, one-third the rate of competing bids in the first year of a three-year deal, in fact. "I saw that they were trying to buy their way in," says Henrie. And he negotiated with E&Y to keep fees relatively low in successive years to reflect the need for a "relationship" between auditor and client.

When, in the second year, E&Y tried to reinstall the higher fees, he backed away and chose UHY as auditor, resulting in a 40-plus-percent reduction from the higher fee Ernst was proposing to charge. In addition, the UHY engagement partner who was assigned the Tymetrix client had formerly represented it for E&Y. "So I was actually getting better continuity through UHY," even at the sharply lower fee.

Switch No. 8: Preparation for a Deal
The last auditor switch was also at Tymetrix. But it was initiated, in the post-Sarbox era, by the board. "As a result of my pushing for the exit strategy, the audit committee came on-board with this, and that accelerated the move to be acquired." But that required a new auditing approach, one that seemed to dictate representation by the Netherlands-based company's own firm, KPMG. So UHY, too, was replaced, with Henrie's input.

Things have come a long way from the days when, as Henrie remembers it, a CEO might turn the auditing work over to "a golfing buddy at one of the other accounting firms." (Such unfounded auditor replacement is something that "peripherally I've seen," he says, through his years in finance.)

"I'm not a big fan of Sarbanes-Oxley; the minuses outweigh the plusses," Henrie says. But in the realm of making audit decisions more professional and more useful to corporate strategy, "this has been a big plus."

Says the veteran of so much auditor switching, "Bringing on a new accounting firm is not unlike hiring a CFO in many ways. One needs to know that they have the capabilities and the personalities to promote working with all the company teams with whom they may be expected to interact."

He adds, "That's another part of being a good strategic CFO: being able to expand the senior management team and board by bringing the best people in to provide their insights, as well as their services."