I thought I had arrived. I transitioned from an audit manager at a now “Big 4” accounting firm to the Chief Financial Officer of a small ($35 million in revenue) company. I was an executive at 27 and confident (read cocky) that “my future’s so bright, I gotta wear shades (hat tip to Timbuk3).

And I was ignorant.

I knew how to audit financial statements, assess the internal control environment, research accounting and reporting issues, write technical footnotes and draft inane management comment letters (“checks older than 180 days outstanding should be voided and reissued or escheated” was always a reliable go to…).

I didn’t know business. I was technically proficient but, sadly, unlearned about why or how a business existed. I did the “going concern” analysis with every client I audited but the time horizon was limited to a year from the date of the audit report.

The first year as a CFO was brutal. I discovered “financial irregularities” by the previous owner, the company lost one-third of it’s customers because they feared we weren’t going to make it, we were embroiled in multiple lawsuits and we desperately needed to find a credit facility as a lifeline.

None of my technical training could help me. It was baptism by fire and the absolute best training/experience possible.

So imagine my reaction when I received the management comment letter from the auditor that suggested I maintain detailed fixed asset depreciation schedules. Huh? I was embarrassed for myself because that was me less than a year earlier. And I thought I was one of the better auditors…

My rude awakening was the realization of the chasm between sterile compliance and creative business. Between “did you follow the regulatory rules” and “how do we change the market rules to our advantage”. Two entirely different purposes and perspectives which require entirely different skill sets and tools.

CPA firms can nurture an appreciation for and understanding of their client’s business by asking their staff (and themselves) to answer some simple questions:

  1. How does the client make money?

  2. What is their value proposition?

  3. Why do customers choose them over their competition?

The answers require reflection and exploration. Have engagement teams discuss and compare their ideas and thoughts. Do it as part of the audit planning process. Make your client’s ability to continue as a going concern your concern and you’ll have a pleasant awakening to new opportunities to serve them.

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