Changing auditor is usually manageable when the organisation starts before the next audit becomes urgent. The safest approach is to separate the commercial decision from the formal change, allow the proposed auditor to complete acceptance and independence work, and agree a first-year plan before promising a completion date.
The mistake is not changing firms. It is assuming that signing a proposal immediately transfers the audit, the knowledge and the timetable.
Start with the problem you need the change to solve
A finance director may be considering a change because senior involvement has reduced, queries remain unanswered, the timetable repeatedly slips or the fee no longer feels proportionate to the service. Those are different problems.
Write down the two or three improvements that would make the next audit materially better. For example:
- a named senior contact who remains involved through completion;
- an information request issued before fieldwork, with clear owners and dates;
- earlier discussion of significant judgements;
- a clearer distinction between information received, reviewed and cleared;
- an agreed process for additional work and fees; or
- better coordination with a parent company, group auditor or external accounts preparer.
This gives shortlisted firms something specific to respond to. A promise of “better service” is difficult to test. A proposed timetable, team structure and escalation process can be examined before appointment.
Changing auditor will not remove the need for challenge, evidence requests or management judgements. The objective is a better-controlled audit, not an audit with less scrutiny.
When should the process begin?
As a practical planning rule, begin the review several months before the intended fieldwork date. More time may be needed for a group, a first statutory audit, overseas reporting, complex opening balances or a tight parent-company deadline.
Work backwards from the date on which the signed accounts or group reporting output is genuinely needed. Then allow time for:
- agreeing the scope and obtaining comparable proposals;
- the incoming firm's client acceptance, independence and conflict checks;
- communication with the outgoing auditor, with the company's authority;
- the legal appointment or cessation steps appropriate to the circumstances;
- access to prior-year information and opening-balance planning;
- agreeing responsibilities for the draft accounts, tax work and supporting schedules; and
- preparing current-year information before fieldwork.
Do not treat the statutory filing deadline as the working audit deadline. Boards, lenders, shareholders and overseas parents may need approved information earlier. The timetable should show those separate dates.
What happens before the incoming auditor can accept?
A credible proposal is not the same as formal acceptance. The incoming firm will need enough information to decide whether it can act. This normally includes the group structure, ownership and management, the reason for the proposed change, the latest accounts, the expected reporting framework, significant accounting or audit issues and the proposed timetable.
The firm must also consider independence, conflicts, resources and whether the engagement can be performed competently. If the proposed auditor also provides other services, those services and the relevant group relationships need a separate independence assessment. Management continues to own its records, judgements and decisions.
Professional communication with the predecessor is part of this process. It should not be viewed as a request for the outgoing firm to endorse the appointment. The incoming firm is looking for information relevant to acceptance and professional matters. The company will usually need to authorise the communication.
The current ACCA Rulebook and the FRC Ethical Standard for Auditors provide the professional and independence context. The exact requirements depend on the firm, entity and services involved.
Do not confuse commercial agreement with legal appointment
The formal route depends on why and when the existing appointment ends.
For a private company, section 485 of the Companies Act 2006 deals with appointment of auditors. Removal before the end of an auditor's term is a different process: sections 510 and 511 require an ordinary resolution at a meeting and special notice. An auditor's resignation is addressed separately in section 516 and related provisions.
This means the board should establish the correct route rather than using a generic “change of auditor” checklist. The company's articles, group arrangements and the circumstances of the outgoing auditor may also matter. Obtain company secretarial or legal advice where the position is not straightforward.
Relevant legislation is available in Part 16 of the Companies Act 2006.
What information will the new auditor need?
The incoming auditor needs enough information to understand the business, plan the current audit and address opening balances. A practical first-year handover pack commonly includes:
- the latest signed statutory accounts and audit report;
- current management accounts and trial balance;
- a group structure and ownership chart;
- the current-year reporting timetable and required outputs;
- details of systems, locations and key finance contacts;
- significant contracts, financing and post-year-end developments;
- an analysis of changes since the previous audit;
- the status of prior-year audit findings and unadjusted differences;
- the accounting policies and areas involving significant judgement;
- the draft accounts preparation responsibility; and
- any group-auditor instructions or parent reporting requirements.
Some prior-year audit information may be made available through the predecessor, subject to professional, legal and confidentiality requirements. That does not remove the incoming auditor's responsibility to obtain sufficient appropriate evidence for its own audit.
Opening balances deserve specific attention in a first-year audit. The auditor needs evidence that opening balances do not contain misstatements that materially affect the current financial statements and that accounting policies have been applied appropriately. The current requirements are set out in ISA (UK) 510, Initial Audit Engagements - Opening Balances.
Why can the first year cost more or take longer?
The incoming team does not begin with the knowledge accumulated by the predecessor. It must understand the organisation, systems, controls, accounting policies and prior-year position. That can create additional first-year work even when the underlying business has not changed.
Potential drivers include:
- complex or poorly documented opening balances;
- changes in accounting policies, systems or group structure;
- late or incomplete draft accounts;
- unresolved prior-year findings;
- a need to revisit the proposed audit scope;
- additional group reporting or component work; and
- information that is held by several advisers or overseas teams.
These are not automatic extra charges. They are matters to clarify in the proposal. Ask each firm to distinguish the recurring audit fee from identifiable first-year work, state the assumptions behind both and explain how a scope change would be agreed.
The cheapest first-year quote may still be the right choice. The useful comparison is whether each proposal covers the same entities, reports, locations and responsibilities, and whether the finance team can provide the assumed schedules.
Agree the first-year timetable before appointment
A useful timetable shows dependencies, not just fieldwork dates. It should identify:
- when the draft accounts and final trial balance will be ready;
- when key reconciliations and supporting schedules will be supplied;
- when significant judgements will be discussed;
- when opening-balance work will take place;
- when group instructions or reporting packs are due;
- when partner and senior review is planned;
- when the board or audit committee will review the accounts; and
- the target signing date, with contingency before the filing deadline.
Put a named owner beside each dependency. If the accounts preparer, tax adviser, overseas parent and audit team are different organisations, show their responsibilities separately.
An early timetable is not a guarantee. New information can change the work required. It does, however, make unrealistic commitments visible while the organisation still has choices.
Questions to ask the proposed auditor
Before appointing a new firm, ask:
- Who will lead the audit day to day, and when will the partner become involved?
- What acceptance and independence steps remain outstanding?
- What information is needed from the outgoing auditor?
- What opening-balance work is expected?
- Which first-year tasks are included in the quoted fee?
- What assumptions depend on our finance team or external accountant?
- How will requests, review status and open queries be tracked?
- When are the planned senior review points?
- How will additional scope and fees be agreed?
- What could prevent the proposed signing date from being achieved?
The final question is particularly useful. A serious answer should identify dependencies and trade-offs rather than promise a frictionless change.
A practical next step
Prepare a one-page transition brief before seeking proposals. Include the reason for change, required outputs, target dates, entities, accounts preparation responsibility, significant current issues and the improvements expected from the new relationship.
That brief helps the board compare firms on a common basis and gives the preferred auditor a more credible starting point. Once a firm is selected, map the acceptance, professional communication, appointment and first-year planning steps before giving stakeholders a completion commitment.
Changing auditors can improve accountability, communication and senior access. The benefit comes from choosing a suitable team and managing the transition properly, not from the change alone.
FAQs
Do we need to tell our current auditor before obtaining another quote?
Organisations commonly explore alternatives before making a final decision. The incoming firm will, however, need to complete its acceptance process and communicate with the predecessor at the appropriate stage, normally with the company's authority. Consider the existing engagement terms and obtain advice on the formal process.
Can we change auditors after the year end?
It may be possible, but the available time, status of the accounts, appointment route and opening-balance work all matter. A late change can put a tight deadline under additional pressure. Establish a realistic plan before ending the existing appointment.
Will the outgoing auditor transfer the whole audit file?
Not necessarily. Access to relevant prior-year information is governed by professional, legal and confidentiality requirements. The incoming auditor must still perform and document its own work.
Is professional clearance the same as appointing the new auditor?
No. Professional communication is part of the incoming firm's acceptance process. The company's legal appointment steps and the firm's engagement acceptance are separate matters.