As most within the accounting profession will acknowledge as a concern, the number of registered company auditors (RCAs) are dwindling. While I appreciate that not all non-SMSF audits require the RCA status, we tend to find those who perform these type of audits have had a long standing involvement in this area and are typically RCAs. Regardless, the issue manifests itself in slightly different ways depending on the size of the firm.

For smaller firms, with a senior practitioner who performs a handful of non-SMSF audits per annum and doesn’t necessarily require RCA status, your future successors, are unlikely to possess the same skill set.

If you are planning to sell down to someone internally, hopefully they have been assisting with the preparation of your audits to date.  If they haven’t, it is unlikely that they will want to carry on this work once they acquire your firm which means you are unlikely to get paid for this revenue stream. If you are planning on selling your firm to an external purchaser, again depending on the size of your firm, this party is unlikely to currently provide such services, so again won’t be interested in paying you for the revenue or clients.

For larger firms who provide more substantial non-SMSF services, a similar sort of trend is also occurring. Often those performing this service will be more senior practitioners. While staff within the firm will assist with completion of the work, generally these practitioners are not interested in making this their main career focus or becoming a RCA. So, as those who are a RCA and perform the audit services of the firm continue to age, there is fast becoming an issue as to who will continue to provide these services, post the current audit practitioners retirement. Again, this puts this form of revenue under threat.

There are a couple of possible solutions:

• For smaller firms, consider trying to ‘sell off’ this work in advance of your actual succession event where possible. Or perhaps source an external party who has an ongoing interest in performing this work. Finally, if selling externally, you can endeavour to source a purchaser who has these capabilities internally, however this is likely to narrow your potential pool of purchasers.​

• For larger firms, it’s also about deciding whether you wish to remain in this space. If you are unable to attract and retain good audit personnel that are willing to step up and become RCAs or obtain the expertise required to maintain the services, then a sale of these fees to another party could be the best alternative.  For what it is worth, there is some interest in the market place at present for these type of opportunities, however be mindful of whether this will also impact your accounting / business services revenue. Conversely, this may also signal an opportunity to merge or sell the practice as a whole to a competitor who has greater strengths in the audit area.

Irrespective of the desired outcome, it’s imperative to be aware that the provision of such services adds complexity to any proposed succession options which require some longer and more significant pre-planning than is experienced by those firms without audit services.