Consulting business in audit support

[Guest Quacka]

This is my first post & I want to start by saying this board is fantastic! It is extremely useful in getting a flavor for that elusive answer & it has helped me many times.

I have been in a large tier accounting firm for several years in compensation and benefits tax consulting. During this time I have supported the benefit plan audit practice doing tax reviews. Basically, 2-3 hours per plan reviewing plan documents, IRS d-letter, financial statements, etc. getting the auditor comfortable that the plan should retain its tax-qualified status. This often this involves helping the auditor get comfortable that any correction method proposed by the client is appropriate under IRS guidance. I have also done several deep-dive operational reviews of qualified plans for compliance with plan terms, code, regs, ERISA. I have also done a lot of tax consulting on the deferred comp and equity comp side.

In my experience the benefit plan auditors are not well versed in how to identify or deal with a tax qualification issue. Extrapolate this out to thousands of benefit plan audits each year (and the new 403(b) audits), and there should be a broader market for my skills, yes? So my idea is to do what I do now, but for local & regional CPA firms with large books of benefit plan audits. From there, I would try to do other work such as special projects, consulting on plan design, and training.

Some more tidbits:

(1) My value proposition would be increasing the quality of the audit and providing additional value (perceived at least) the client may not otherwise be getting.

(2) I expect this would be a high volume, low-hours-per-plan business. This might create a billing headache but I suppose I could outsource that.

(3) I want to be a soloist, at least intially (I suppose I have no choice the matter, at least intially!)

(4) I am a CPA not an attorney, so I need to avoid any unauthorized practice of law. If I avoid drafting plan documents and the like I expect I would be ok.

(5) Ideally I would like to work April-October and work part-time and travel the rest of the year. This has enormous appeal, particularly if I could net six figures during the busy time (am I dreaming?)

(6) I am at the point in my career when looking at spreadsheets and minutiae is not the best use of my time or skills. Tax concepts are what I do best, so doing the actual audits or recordkeeping would not be a good fit.

I welcome your thoughts and constructive criticism!

[Bill Presson]

This is my first post & I want to start by saying this board is fantastic! It is extremely useful in getting a flavor for that elusive answer & it has helped me many times.

I have been in a large tier accounting firm for several years in compensation and benefits tax consulting. During this time I have supported the benefit plan audit practice doing tax reviews. Basically, 2-3 hours per plan reviewing plan documents, IRS d-letter, financial statements, etc. getting the auditor comfortable that the plan should retain its tax-qualified status. This often this involves helping the auditor get comfortable that any correction method proposed by the client is appropriate under IRS guidance. I have also done several deep-dive operational reviews of qualified plans for compliance with plan terms, code, regs, ERISA. I have also done a lot of tax consulting on the deferred comp and equity comp side.

In my experience the benefit plan auditors are not well versed in how to identify or deal with a tax qualification issue. Extrapolate this out to thousands of benefit plan audits each year (and the new 403(b) audits), and there should be a broader market for my skills, yes? So my idea is to do what I do now, but for local & regional CPA firms with large books of benefit plan audits. From there, I would try to do other work such as special projects, consulting on plan design, and training.

Some more tidbits:

(1) My value proposition would be increasing the quality of the audit and providing additional value (perceived at least) the client may not otherwise be getting.

(2) I expect this would be a high volume, low-hours-per-plan business. This might create a billing headache but I suppose I could outsource that.

(3) I want to be a soloist, at least intially (I suppose I have no choice the matter, at least intially!)

(4) I am a CPA not an attorney, so I need to avoid any unauthorized practice of law. If I avoid drafting plan documents and the like I expect I would be ok.

(5) Ideally I would like to work April-October and work part-time and travel the rest of the year. This has enormous appeal, particularly if I could net six figures during the busy time (am I dreaming?)

(6) I am at the point in my career when looking at spreadsheets and minutiae is not the best use of my time or skills. Tax concepts are what I do best, so doing the actual audits or recordkeeping would not be a good fit.

I welcome your thoughts and constructive criticism!

I think what you are doing (have done) is usefull. I run a benefit consulting practice within a CPA firm and we do something similar on many of the benefit audits.

The problem is going to be getting someone to pay you to do it. I don't think many CPA firms are going to be willing to pay you for the work. While it can be very useful to the client, it isn't required for the audit and fees are squeezed tremendously now as it is. Adding an extra $1,000 or so to the audit, probably won't be very well received.

I don't mean to discourage you, but you'll have to be able to answer the questions from the CPA side:

1. Why should I do this?

2. How can I pass through this cost to the client?

3. How is the client going to see the benefit?

Hope this helps some. Good luck.

[GBurns]

The idea seems to have some merit, but iit has some basic problems.

Since you are now doing it internally for a firm, it means that the need exists and clients are being billed for it.

But, the clients had no choice and probably are not aware that it has been bundled into their charges. They probably would not understand the value nor see the need. So your services might mainly be sold to the auditing firms. That seems to limit you to auditing firms that are not currently doing this internally already or are currently outsourcing. Unless you can show the value to those auditors who are not using such services, your market might be limited.

Of course, there is the market of plans who have had problems to whom this service could have helped, but that should be a marketing challenge.

But you never can pre-judge whether or not offering such a service would be successful. You have to test.

It might be cheaper for these firms to outsource and you will never know unless you ask.

Some others might not have even thought that such services were available.

Some might be using a more expensive service provider.

Some might be not satisfied with their current provider.

You never know until you try.

I know a guy who made very good money for years providing return preparation, accounting revisions and back-office support to a few law firms that provided IRS representation to businesses. He was not a CPA but was excellent at bookkeeping and taxes. His forte was being able to go beyond filling in the blanks on a data entry screen. Since their clients saved more money and the lawyers got additinal approaches etc to use, they were willing to replace some internal work and share the additional profit.

This is not too dissimilar to what you are proposing. That worked, there is no reason why yours should not.

[Guest Quacka]

I am going to take a much closer look at this over the next few months. I am going to assess my overall skillset against the broader outsourcing/subcontracting opportunities in the marketplace.

I like the idea of law firm support and of having a few large clients as opposed to dozens of smaller ones. I picture myself as a solo entreprenuer (S-corp or LLC maybe?) (charging $150 per hour maybe?) We'll see how the research goes.

Any other suggestions, please reply. I am a CPA with a Masters in Tax and 10 years of compensation and benefits tax consulting and compliance,and three years of general audit and tax experience prior to that. I am thinking about getting my CEBS designation in the near future.

[K2retire]

I would think that a CEBS or ASPPA designation in addition to your CPA would be a powerful marketing tool.

[IRA]

How has this worked out for you?