‘Big 4 only’ audit clauses outlawed: what’s the impact on your agency contracts?

In April 2014 legislation was approved by the EU Parliament and adopted by the Council of the European Union to make the audit market in the EU more competitive. Key measures are that Public Interest Entities (PIEs) will have to change the audit firms that review their year end accounts at prescribed intervals and the market is to be opened up to firms other than the ‘Big 4’ (PricewaterhouseCoopers, Deloitte, KPMG and Ernst & Young). As a result ‘Big 4 only’ audit clauses in commercial contracts (often loan agreements) that force companies to use one of the Big 4 firms for their year end statutory audit are now “null and void” i.e. completely unenforceable.

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Why we don’t work on a contingent fee basis

Given the fact that we have managed to find money that our clients are owed in 95% of the audit assignments undertaken on their behalf, you may be puzzled to know why we don’t work on a contingent fee basis, and even more so when it isn’t uncommon for us to find that our clients are owed in excess of £100k…

There are many reasons why we have taken this stance. In this article, I explain in a little more depth why we have taken this seemingly uncommercial position.

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There’s more to this contract compliance audit lark than just money…

When done in the right way, contract compliance audits of marketing services agencies deliver far more value to both client and agency than simply identifying accounting errors.

That was the message delivered by Philipp Schuster of adidas Group at the ProcureCon Marketing Conference held in London in June.

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You can play with my train set…but not the engines

Cast your mind back to your toughest ever panel-based job interview? Now make it even tougher and it will pretty similar to the grilling I received a few months ago from the European FD of a global agency network and his UK counterpart. This was before we had even started the audits of their agencies!

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4 sensible questions to ask when working with small or young agencies

During the past year we have had the opportunity to audit some small, independent and relatively young agencies in a number of different countries across Europe and in the USA. This has been a learning experience for both us and our clients. Here’s why: standard brand/agency contracts are often based upon a standard contract available to members from ISBA, the ANA or their equivalents in other countries. That is, on the whole, very positive. Standard contracts, however, tend to be more suited to mid-large sized, established agencies that have the systems and processes in place to comply with all the terms within the contract, particularly the ones related to record keeping.

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You say potato, I say potahto

As the line goes in “Let’s Call The Whole Thing Off” sung by Fred Astaire and Ginger Rogers in their 1937 movie “Shall We Dance”:

“You say “either” and I say “either”

You say “neither” I say “neither”

“Either” “either”, “neither” “neither”

Let’s call the whole thing off

You say “potato,” I say “potahto”

You say “tomato”, I say “tomahto”

Oh, let’s call the whole thing off”

You say “mark-up” and I say “margin”… and does it really matter?

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Adrian Jenkins FCA, Director, Financial Progression Limited.

‘Half the money I spend on advertising is wasted. Trouble is, I don’t know which half.’

Adrian Jenkins knows where it goes.
John Wanamaker, pioneer of modern advertising and marketing techniques, famously hated budgetary black holes. Here at Financial Progression we’re not huge fans of unproductive marketing spend either. Adrian Jenkins and his expert team of finance professionals work with global brands like yours to ensure exemplary budgetary behaviour and contractual compliance from your marketing agencies. Find out more →

What does ‘independent’ really mean when it comes to contract compliance auditors?

As I read through the agency’s feedback on our draft audit report, I was somewhat surprised. Apparently, “We [the agency] provided all necessary documentation during the audit. There was only one exception, the [words deleted].” The reason why they hadn’t complied with this one (as it happens rather important) clause, was they had a group wide policy that they would only disclose this information to the Big 4 audit firms.

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How different are financial practices in agencies around the world?

While accountancy may not qualify as being the oldest profession, it can date its history back to before the Roman times and the ancient civilisation of Babylon. ‘Modern accounting’, i.e. double entry book-keeping, really started in Venice in 1494 when Luca Pacioli published his “Summa de Arithmetica, Geometria, Proportioni et Proportionalita” which contained 27 pages on book-keeping. I’m sure it was as thrilling a read to scholars then as accounting textbooks are now to modern day students of accountancy!

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Are your professional relationships worth more to you than your reputation?

Let’s be honest, a presentation on marketing agency compliance audits is not, on the face of it, the most eye catching agenda item at a gathering of seasoned Marketing Directors. You may however be interested to learn that we were in precisely this situation in the slot after lunch on a sunny Friday afternoon in spring (not ideal!). The ensuing conversation was surprisingly lively and there was a great deal of discussion. What were the main themes? Reputation and peace of mind…

Not many weeks beforehand we were talking to our friends at The Orange Partnership, who do a similar type of work to us, just with big construction contracts rather than consumer brands and their advertising and media agencies. After the first warm beverage, our thoughts turned to putting our respective worlds to rights. Interestingly, they are finding that the natural desire to trust is one of the biggest risks from a financial perspective to the smooth running of a construction contract. We agreed that yes, the natural desire to trust is a risk factor we face as well, and, in our world, it often manifests itself in the length of the relationship between the senior management of the brand and the agency.

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