Presentation delivered at CCH Singapore in April 2011

1. Differentiating Your Audit Services
and Achieving Premium Pricing
Robert Sawhney
Managing Director, SRC Associates Ltd
CCH Singapore
20th April 2011
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2. Objectives for Today
• Understand the key factors that drive the
differentiation of audit services
• Understand the key elements of client value
• Learn about SERVQUAL and how it can be
applied to audit services
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3. From some of you!
• ‘Our audit approach, at the leading edge of best practices, is tailored to
suit the size and nature of your organisation and draws upon our extensive
industry knowledge. Our deep understanding of regulation and legislation
means we assist with complex reporting issues. ‘
• ‘Our services reflect our overall vision in serving as professional advisers -
we seek a personal relationship with you, so that we can provide the
services you need, in the manner most effective for your situation.’
• ‘To help our clients be the best that they can be by bringing out the best
that we can give.’
• ‘Our audit approach, which is at the leading edge of best practice and
draws upon our extensive industry knowledge, is tailored to suit the size
and nature of your organisation. Our deep understanding of regulations
and legislation means we can also help you with your complex reporting.’
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4. Try this
• What goes here?
Performance
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5. What research shows
Clients’ Perspectives Toward Audit Service Quality of the Big 4 in Thailand,
University essay from Karlstads, Pitchaya Sonsa-ardjit; Ramon Vejaratpimol;
[2010]
• Assurance, reliability, and responsiveness were significantly
below client expectations
• 8 key factors (order of importance):
• Factor 1: Trust & Confidence, Factor 2: Responsiveness &
Accuracy, Factor 3: Knowledge and skills in clients’ industry,
Caring and Independence, Factor 4: Understanding of
Clients, Factor 5: Timing/Scheduling & Right Service, Factor
6: Physical Facilities, Factor 7: Professional appearance &
Professional Procedures, and Factor 8: Information &
Communication Channels and Materials.
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6. Cont’d
• Ishak Ismail, Hasnah Haron, Daing Nasir Ibrahim, Salmi Mohd
Isa, (2006) "Service quality, client satisfaction and loyalty
towards audit firms: Perceptions of Malaysian public listed
companies", Managerial Auditing Journal, Vol. 21 Iss: 7,
pp.738 – 756
• Dissatisfaction with reliability, responsiveness,
empathy, and assurance
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7. Auditor switching
• Prior research has investigated the relationship between audit fees
and client-initiated auditor switching in two areas. Several studies
indicate that relatively high levels of audit fees prompt clients to
switch auditors [Ettredge et al., 2007; Kallunki et al., 2007; Woo and
Kob, 2001; Garsombke and Armitage, 1993; Haskins and Williams,
1990; Johnson and Lys, 1990]. Thus, the client's incentive to control
costs appears to motivate some instances of auditor switching.
• The literature suggests that factors such as client dissatisfaction
with the auditor's responsiveness to client needs, technical
competence, industry expertise, the extent of partner involvement,
and the interpersonal relationship between audit and client
personnel all lead to auditor switching [Garsombke and Armitage,
1993; Eichenseher and Shields, 1983
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8. The Importance of Industry Knowledge
• Much research in the professional services sector
points to the importance of industry knowledge
for clients and accounting firm
• For example, Moroney and Simnett (Behavioral
Research in Accounting, 2009) found that
auditors working in a complex industry (pension
funds) have a greater comparative ability to
identify business risks, information sources, and
evidence-gathering processes in their industry
than auditors working in a generic industry
(manufacturing)
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9. So, can you differentiate audit
services? Contemporary Accounting Research, Client satisfaction and big 6 audit fees
Bruce K Behn, Joseph V Carcello, Dana R Hermanson, Roger H Hermanson. Contemporary Accounting Research.
Toronto: Winter 1999. Vol. 16, Iss. 4; pg. 587,
• Both the CPA firm and the audit team as a
group (at the senior level and above) had the
necessary industry expertise to effectively
audit your company
• The CPA firm was responsive to your
company's needs
• The audit team members as a group always
exercised due care throughout the
engagement
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10. Cont’d
• The CPA firm has a strong commitment to
quality.
• The executives (partner/manager) from the
CPA firm were actively involved in the
engagement
• The audit team members interacted
effectively with the audit committee before,
during, and after the audit engagement
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11. Cont’d
• Recent research from Oxford Brookes University shows that
for every one point on a scale a firm can increase its
empathy score, it delivers a ROCE of over 16 percent.
• Responsiveness and empathy can become key
differentiators then since most clients complain about lack
of responsiveness from their PSFs and cite
industry/business knowledge as one of the key factors in
choosing a provider.
• Since many PSFs structure around practice groups and train
their people in technical skills almost to the exclusion of
client skills (such as EQ, communication, business acumen),
there is a massive gap here for firms to become more client
focused and hence create meaningful differentiation
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12. Using SERVQUAL for the 3 customer
groups
• Valerie Zeithaml and Mary Jo Bitner have come up with the
most widely used and accepted model of service quality for
services. According to these authors, service quality has 5
dimensions:
• Reliability – ability to provide the promised service
dependably and accurately
• Responsiveness – willingness to help customers and
provide prompt service
• Assurance – employees knowledge and courtesy, and their
ability to inspire trust and confidence
• Empathy – caring individualized attention given to clients
• Tangibles – appearance of physical facilities, personnel, and
written materials
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13. The Framework
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14. Thank You
• If you want copies of the any of the reports or research cited here, please
don’t hesitate to contact me:
• bob@srchk.com, www.srchk.com
• Blog: www.marketingasia.typepad.com
• Twitter: http://twitter.com/robertsawhney
• My books: Available from Lexis Nexis in Hong Kong and other Asian offices,
Ark Group, or www.amazon.com
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