12 Building a print circulations audit system

12.13. Auditors

When all the previous work is done, it is time to find the auditors.

Because the audit work implies financial verification and expertise, it is practical to have auditors who have knowledge and experience in bookkeeping and accounting – people and an organization familiar with the legal practices that are in place. At many ABCs it is daily practice to hire chartered public accountants, who have enough experience to carry out this special work.

It must be said that the circulation audit is not a 100-percent financial verification of publishers. It covers only the press production, transportation, wholesale and retail sale activity of the publishers.

At the beginning of the activity of any ABC, there is the question of which auditors to chose, because the issue of credibility is strongly related to the auditors. It is a difficult decision. Does the ABC hire international, well-established auditing firms, or a local, domestic auditor? Both have advantages and disadvantages.

• International firms have a high profile. They have well developed procedures, and will be easily accepted by the market. They will probably be able to boost the credibility of the newly established ABC, too. Yet they are much more expensive than local auditors.
• Local auditors are much cheaper, and more flexible than the big, international firms. Nevertheless, they can be manipulated by members, and often do have not enough experience. It is also probable that local auditors will give any price, juts to get the job – and this becomes an extremely risky situation.

I would strongly suggest that a new ABC hire international auditing firms. It will cost more, but it will imply less risks, and it will raise the profile of the ABC in its initial stage. An ABC can later hire local auditors, but only after the ABC develops some experience and its credibility.

I personally do not advice a recently established ABC to hire and maintain its own team of internal (staff) auditors. This inherently takes on a lot of risk (a series of extra tasks and administration for an unexperienced organization may deviate the focus of the organization; due to unexperience, there is a danger of hiring an auditor who is a friend of a publisher, etc.), which the ABC wouldn’t want to happen.

Regardless if the auditors will be the employees of the ABC, or subcontractors, it is necessary to work out in detail the relationship, job responsibilities, communications, program calendar, control between the ABC and the auditors.

Before finalizing the contract with the auditor, make sure you run a few test-audits (on voluntary publishers), in order to have a clear picture of how the theory applies in practice. Your agreement with the future auditors must state the obligation to run a few test-audits! It is almost sure that the ABC will have to change things in the audit program, or even in the audit rules.

The appointed auditors should not provide any other service to the ABC publishers. This would be a major conflict of interest. The contract with the auditors must contain this provision.

In order to have enough stability with the audit, get prepared for a long-term relationship with the appointed auditors. Make sure there are enough technical meetings with them, and that they thoroughly understand the audit rules and procedures. Have meetings to discuss any proposed rule or procedural changes, or whenever they ask you for it. It is necessary for the manager (secretariat) of the ABC to assist with the audits on a random basis, and to be up to date with what is going on in the field. The audit rules, as well as the contract with the auditors, must specify this right of the ABC management.

Regardless of your decision on what type of auditors the ABC hires for the job, it is good to get prepared for a tough series of negotiations:

• Make sure you have a thorough understanding of the audit job to be done.
• Maximize – again and again – the potential number of publications to be audited. You will get a better price. I cannot repeat enough times how important this issue is as an effect on the prices of audits.
• Be well prepared on what your members can, and expect to pay for the audits.
• Invite for the bidding stage a large number auditing firms to ensure a large enough pool and high enough level of expertise.
• Write a short job description of the audits, and send it to each prospective auditing firm.
• State your commitment that if the auditor does a good job, the ABC will bring them more work. As an aside, this long term pledge will give the ABC leverage in negotiating discounted fees for future audits.
• Make sure you can easily exit the contract with them, if the auditing firm is not at the level of your expectation, and ensure that it cannot easily exit the contract.
• Make the auditing firm guarantee to provide enough people (resources) to do the audits in time, to all publications you have on the ABC list now, as well as in the future. Make them demonstrate man-hours required for conducting an audit.
• Tell them how many other competitors you are negotiating with. You may get a better price.
• Do everything you can to avoid a time (hourly) based audit fee. It would be much better to get a fixed fee per audited publication (type) because the time spent on work by the auditors is hard to control, and in many cases it is at the discretion of the auditors. Overall, make sure they do not price items you cannot control, and make sure the control has adequate resources.
• The “normal” financial audit is seasonal. There are periods of the year when the auditing firms have a lot of work, and periods when they do (almost) nothing. Make sure to identify these seasonal trends, and tell the auditors that the ABC will give them work in the dead season (as well). Ask for more discounts because of this higher frequency.
• Send to the negotiation table your best prepared and toughest members from the initiative group, and make sure your party out numbers the auditing firm representatives.
• You set the negotiations scene, not them.
• Never take a quick decision, but be ready to accept a good offer.

One last note – always be prepared with an alternative solution regarding your actual auditors. Be aware that an ABC must have a stabile audit service, and that your actual auditors could cease their contract at any time.

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