Question

Dave Czarnecki is the managing partner of Czarnecki and Hogan,
a medium-sized local CPA firm located outside of Chicago. Over lunch, he is surprised
when his friend James Foley asks him, “Doesn’t it bother you that your clients don’t look
forward to seeing their auditors each year?” Dave responds, “Well, auditing is only one of
several services we provide. Most of our work for clients does not involve financial statement
audits, and our audit clients seem to like interacting with us.”
a. Identify ways in which a financial statement audit adds value for clients.
b. List other services other than audits that Czarnecki and Hogan likely provides.
c. Assume Czarnecki and Hogan has hired you as a consultant to identify ways in which
they can expand their practice. Identify at least one additional service that you believe
the firm should provide and explain why you believe this represents a growth opportunity
for CPA firms.

Answer 1

Solution:-

a. Identify ways in which a financial statement audit adds value for clients:-

An audit of financial statements adds more value for clients because it helps to ensure the information is correct and reliable. Financial statement audits reduce information risk, which lowers borrowing costs. This is beneficial for internal and external users. Management can make better business decisions based on this information. External users such as lenders and even stockholder use this information as well to make business decisions.

An audit also provides assurances to management about information used for decision-making purposes, and may also provide recommendations to improve efficiency or effectiveness of operations.

b. List other services other than audits that Czarnecki and Hogan likely provides:-

Hogan and Czarnecki likely provide tax services, accounting services, and management advisory services. They may also provide additional assurance and attestation services other than audits of financial statements.

c. Assume Czarnecki and Hogan has hired you as a consultant to identify ways in which they can expand their practice. Identify at least one additional service that you believe the firm should provide and explain why you believe this represents a growth opportunity for CPA firms:-

They should provide consulting or management advisory services, such as assistance with the adoption of international financial reporting standards.

Since there is an increase interest in corporate responsibility and sustainability, I would suggest this CPA firm to add this type of service. This would be great service to offer to existing clients and could also open the door for new clients which would provide growth opportunity.

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