Talk it over: open discourse between internal CPAs and external auditors is critical.

• Author: Regan, Greg
• Position: PROFESSIONAL ISSUES

No matter how understanding internal CPAs are, tension is created when company shareholders or other interested parties hire an external auditor to provide an opinion of the internal CPA's work.

Knowing and preparing for this tension will allow interaction with the auditor to function smoothly.

HOW FAST IS YOUR AUDITOR?

While internal CPAs are dedicated resources within an entity, auditors have many clients, each requiring separate time commitments. Consequently, auditors are not always available to discuss accounting decisions. This is understandable given that an auditor's business is generally built upon pre-determined time commitments to the client rather than on-demand assistance.

But because speed is often a vital ingredient to transaction flow, conflict can arise if auditors are unavailable.

Companies rely upon internal CPAs to provide them with the best accounting advice possible. But there always will be a gap between the internal CPA's confidence in a decision and the 100 percent assurance needed because the accounting will require an opinion from the auditor.

This external involvement for a seemingly internal decision can be difficult to swallow for internal CPAs. If the workflow is slowed because of the auditor, the pressure on the internal CPA mounts. This can lead to the awkward question to the auditor, "Why don't we have you do our accounting rather than waste time on this ourselves?"

This creates a multi-layered conflict between management and internal CPAs, and between internal CPAs and auditors.

THE KNOWLEDGE FACTOR

CPE and attention to current events may keep internal CPAs aware of accounting guidance, but they can't substitute for the resources of external auditors. The speed of accounting trends and breadth of accounting areas eligible for change make this a critical service from the auditor--and another source of conflict.

Internal CPAs may be applying accounting guidance that, to their surprise, becomes obsolete. Even more difficult for internal CPAs and auditors are those situations when executive management is frustrated by the revision of generally accepted accounting principles or when management, during business negotiations, unknowingly applies the accounting rules of a different industry.

Many software companies faced this predicament a few years back as revenue rules continuously changed. The challenge for an internal CPA was navigating the latest GAAP, while responding to customer negotiations, particularly...