Fresh eyes, firm foundations: the real value of changing your auditor

By Servaas Kranhold, Head of Natural Resources, BDO

For a board, changing auditors is rarely a comfortable proposition. It places additional demands on the finance team, introduces unfamiliar processes and requires a new firm to develop an understanding of a business that its predecessor may have audited for years. The disruption is immediate and tangible; the potential benefits are less readily quantified.

Yet those benefits warrant greater consideration. A well-managed auditor transition creates an opportunity for the audit committee to revisit the assumptions underpinning the financial statements, scrutinise how controls operate in practice and reinforce confidence in the integrity and reliability of the company’s financial reporting. 

Having led the audit transition of a JSE Top 40 company, I believe the central question is what the business gains from the change. Keeping the reporting timetable on track matters, but it should be the starting point for judging success.

A new auditor brings a valuable disadvantage: it has not inherited the company’s institutional memory. It must establish why an accounting treatment is appropriate, how an estimate was reached and whether the evidence still supports a judgement accepted in previous years. That process can be demanding. It can also be useful.

Consider a resource company’s impairment assessment. Commodity-price assumptions, production forecasts and discount rates can have substantial consequences for reported asset values. Rehabilitation provisions depend on estimates of future obligations and costs. A fresh examination can help an audit committee understand which assumptions are most sensitive and where uncertainty needs clearer disclosure.

A different conclusion is not automatically a better one. Nor does a new question imply that the previous auditor missed something. The benefit lies in testing whether the position remains defensible as the business and its operating environment change.

The same applies to controls. A first-time walkthrough may reveal a manual workaround or a dependence on one employee that has become routine. Management may understand the arrangement perfectly; the incoming auditor still needs evidence that it works reliably. That scrutiny can expose opportunities to improve controls and the quality of information reaching the board.

Different firms also bring different specialist capabilities and ways of analysing data. For multinational groups, access to relevant expertise across jurisdictions can help the audit team assess complex issues consistently. The committee should examine how those capabilities will be deployed on its engagement, rather than rely on the breadth of a firm’s credentials.

The benefits come with a cost. Institutional knowledge takes time to build, and the first audit requires additional effort from both the incoming firm and the company. Boards that expect the first year to resemble a recurring engagement risk undermining the value they sought.

The danger begins with selection. Fees are a legitimate consideration, but a low price offers little reassurance if the team lacks sector experience, specialist support or sufficient senior attention. Audit committees should ask who will do the work, how difficult judgements will be reviewed and whether the proposed resources match the group’s complexity.

Management capacity matters just as much. A finance team already managing a transaction, restructuring or system change may struggle to accommodate a new auditor’s requests. An early appointment gives the incoming team time to understand the business and allows management to prepare evidence before reporting deadlines narrow the options.

Stakeholder interactions and relationships from day one is vital to a successful transition. Success depends on understanding stakeholder needs, maintaining strong relationships and fostering open communication throughout the journey. Regular engagement, transparent dialogue and structured touchpoints between the incoming auditor, management and the audit committee build trust, ensure alignment, address concerns early and enable the transition approach to adapt as priorities and needs evolve.

Knowledge transfer is equally important. Appropriate engagement with the outgoing auditor can help the successor understand significant prior-year matters. That understanding informs the new firm’s work; it does not replace its responsibility to obtain sufficient evidence and reach its own conclusions.

A clear transitioning governance structure transforms a complex transition into a controlled and predictable process. It creates the structure and transparency needed to coordinate activities, align stakeholders and maintain focus on key milestones. By promoting accountability, informed decision-making and proactive risk management, it helps avoid surprises, reduce disruption and support audit readiness from day one.

For the Audit Committee, the first year is a test of oversight. Members need early visibility of significant judgements, unresolved matters, information gaps and pressures on the timetable. A status update that says the audit is on schedule is useful, but incomplete. Visible and timely communication around emerging issues and remaining uncertainties enables informed challenge, timely decision-making and confidence that risks are being proactively managed throughout the transition.

Success should not be measured by an absence of disagreement. A high-quality audit may identify adjustments, challenge an estimate or require a difficult conversation. An unmodified opinion, on its own, does not establish that the transition was well managed. More revealing is whether material issues were identified early, examined thoroughly and communicated clearly.

After the first audit, the committee should assess what the change delivered. Has it gained a clearer understanding of reporting risks? Have control weaknesses been addressed? Are complex accounting positions better supported? Has the finance team improved the evidence available for future audits?

Those questions connect the initial investment to lasting value. As the new team builds its understanding, it can direct effort more precisely towards the areas that matter. Management can strengthen reporting processes, while the audit committee gains a firmer basis for challenging the accounts.

The result is not simply a successful transition, but a stronger platform for the future. A well-executed first year enhances understanding of the business, improves audit quality and creates greater confidence in the integrity of future financial reporting.

Changing firms does not itself guarantee independence, better reporting or investor confidence. Those outcomes depend on the quality of the work and the willingness of management and the board to respond to it.

The strongest case for a new auditor is therefore the opportunity to improve the scrutiny on which reliable reporting depends. For investors and lenders, the value is in financial statements they can assess with greater confidence. For boards, it is in knowing that familiar assumptions have survived a fresh examination.