Articles

Questions Around Your Choice Of Auditor

Stephen Broderick, CEO

The big media agency groups – and one in particular – are currently making aggressive, anti-competitive recommendations on compliance auditor choice. They are trying to force their advertiser clients to work with the Big Four auditors only; to stop them working with specialist, independent auditors who are experts in media agency practices and trading. Specialists like our team at FirmDecisions.

Now of course we’re not saying that every advertiser should work with FirmDecisions, but we are saying that every advertiser should have the freedom to choose who audits their media agency for contractual compliance. This is not a decision that should be dictated by anyone other than the advertisers themselves – and least of all the company whose work will be assessed during a media compliance audit.

Advertisers should also know that the Big Four accounting firms are not solely-dedicated specialists or experts in media compliance or indeed precisely how media is traded by the agencies. Specialist, dedicated media compliance auditors are able to challenge agency practices through their superior knowledge, expertise and experience.

What’s more, the Big Four are in effect the Big Three because all big media agency groups use one of the Big Four accounting practices as their financial auditors and so they are prohibited from auditing the same agency for media compliance, limiting advertiser choice still further.

We recommend strongly that all advertiser clients should ensure that their media agency contract does not stipulate who they can and cannot use to audit their work. We have seen several examples of contracts that dictate which firms advertisers are allowed to use and which are prohibited. Where these have been signed, advertisers’ hands have subsequently been tied when trying to use an independent specialist, and they have been forced to use one of the Big Four only, much to their annoyance and frustration. So when assessing the terms and conditions of agency contracts, advertisers should pay particular attention to any auditor or auditing clauses that have been included. And they should check their established contract today to see whether it includes any restrictions on who can audit the agency; if it does, these should be removed.

In the current climate, advertisers may find their media agency approaches them just to change the clause in the contract relating to who is and is not allowed to carry out a media compliance audit on their work. Advertisers should be aware why they’re trying to enforce the clause, and resist it.

We have even heard examples of media agencies offering to pay for the compliance audits, provided advertisers choose to work with one of the Big Four auditors. It goes without saying that this represents a serious conflict of interest, where the auditee is paying the auditor’s fees! If a media agency tries to dictate who should run a compliance audit, advertisers should seek legal advice from a law firm recognized by the media industry.

At the end of April 2016, ISBA issued a new set of recommendations on the model media agency contract required to deliver transparency for advertisers. The contract was 100 percent in favour of clients having the right to choose who runs their media compliance audit. Other industry associations are expected to endorse and reinforce this position in the near future.

I would also add that it is only a matter of time before the agency groups try to apply these restrictions to any compliance audits you wish to perform across your whole marketing services roster of agencies, so I would suggest you check those contracts as well as your media agency contracts and again insist that you must have the right to choose the compliance auditor you think suits your needs.

Remember: it’s your right to choose who you use to audit your agencies. It’s your spend, your contract and your choice.