Audit
What to evaluate
Independence, industry expertise, leverage ratio, data-analytics-driven approach
Watch for
Engagement partner experience; technical accounting capacity for emerging standards
Document: RFP-ACC-007Vertical: Accounting / Audit / Tax
Industry Template / Accounting
The Accounting Services RFP Template Built Around AICPA Independence and Audit Scope Discipline
Accounting services RFPs cover three distinct workstreams (audit, tax, advisory) with different evaluation criteria and different independence rules. This template addresses each separately, gets fee transparency into the proposal stage, and requires the firm to commit to specifics (engagement partner, leverage ratio, technology stack) that drive engagement quality.
Audit vs Tax vs Advisory and Why They Need Separate Scoring
Accounting firms structure their service offering across audit, tax, and advisory practices that operate semi independently. The RFP should treat them as separate evaluation domains because the criteria that matter differ across each. A firm with excellent tax practice may have a middling audit team and vice versa. Generic firm size and brand reputation correlate weakly with quality at the engagement level.
Tax
What to evaluate
Federal / state / international expertise relevant to your operations, M&A tax experience if relevant, transfer pricing depth if multinational
Watch for
Aggressive vs conservative tax positions; willingness to issue opinions; representation in IRS / tax authority audits
Advisory
What to evaluate
Specific practice depth (M&A diligence, valuation, technology consulting, internal audit, dispute / forensic)
Watch for
Cross-sell pressure from audit / tax; ensure advisory engagements do not impair audit independence
Audit Scope With Enough Detail for Comparable Quotes
The audit scope description determines whether the proposals you receive are comparable. Insufficient detail produces a 2x spread on audit fees because each firm has assumed different scope. The mandatory inputs into the audit scope section:
- Entity structure. Consolidated entity plus subsidiaries by jurisdiction. Joint ventures, equity investees, variable interest entities. Operating segments.
- Revenue and size profile. Most recent year revenue, total assets, employee count by location. Industry classification.
- Financial reporting framework. US GAAP, IFRS, or other framework. PCAOB or AICPA standards for the audit itself. Filing requirements (SEC, state, lender, regulator).
- Internal controls. SOX 404 in scope or not. ICFR maturity (managed via formal framework or evolving). Recent material weakness or significant deficiency history.
- System landscape. ERP and material business systems. Cloud vs on-premise. Recent system implementations or migrations.
- Estimated audit hours. Prior year audit hours and fee if available, split by phase (planning, fieldwork, review, reporting). Firms can sanity check their proposal against this.
- Anticipated complexities. Acquisitions or divestitures during the period. New accounting standard adoption. Material judgments (revenue cutoff, impairment, contingencies).
- Internal audit reliance. Whether the external auditor is expected to rely on internal audit work, the maturity of that function, and the scope of reliance.
Useful reference framework: PCAOB Auditing Standards for public-company audits; AICPA Statements on Auditing Standards for private-company audits; IFAC standards for international.
Independence Disclosure and the Non-Audit Services Question
Independence is the foundation of audit value. A firm that loses independence loses its ability to issue an opinion. The RFP requirement is to confirm independence and disclose any relationships that could threaten it.
- Confirmation of independence under AICPA Code of Professional Conduct (and SEC rules for public companies)
- Disclosure of all current and recent professional services to the entity (last 3 years)
- Engagement partner rotation status (5-year mandatory rotation under SEC rules; AICPA recommends similar cadence for non-issuers)
- Any business relationships (vendor / customer / joint marketing) between the firm and the entity
- Personal relationships between firm partners or senior staff and the entity's officers / directors
- Investment holdings policy applied to engagement team members
Reference framework: AICPA Code of Professional Conduct and SEC Rule 2-01 of Regulation S-X.
Engagement Letter Terms That Reduce Year-on-Year Friction
Standard accounting engagement letters have variable strength on protecting the client side. RFP requirements to bake in before signature:
Fee structure with explicit out-of-scope rates
Fixed fee for defined scope plus hourly rates by level for out-of-scope work. Examples of out-of-scope: acquisition due diligence, restatement, new accounting standard adoption, control deficiency remediation work.
Fee growth cap
Year-on-year cap (typically CPI + 1 to 2 percent) for ongoing engagements. Increases above cap tied to documented scope change.
Staffing continuity
Engagement partner committed for the engagement period subject to mandatory rotation rules. Material team changes require notification. Continuity of senior manager from year to year supports audit efficiency.
Audit timing commitment
Specific fieldwork dates and deliverable dates committed in the engagement letter, not just in the planning document.
Knowledge handover at rotation
When engagement partner or senior manager rotates, formal handover process to incoming team to preserve institutional knowledge.
Working paper access
Client right to review working papers under standard professional standards. Cooperation with successor auditor if firm is replaced.
Frequently Asked Questions
Q.How often should we issue an RFP for our audit firm?+
A.Every 5 to 10 years is the standard cadence for private companies. Public companies generally rotate audit firms less frequently but rotate the lead engagement partner every 5 years per PCAOB Rule 3211. Some EU jurisdictions require mandatory audit firm rotation every 10 years for public-interest entities under Regulation 537/2014. Board audit committees increasingly use the RFP process even when not strictly rotating, as a benchmark exercise every 7 to 10 years.
Q.Can the same firm provide audit and tax services?+
A.Yes, with strict separation. AICPA independence rules (and SEC rules for public companies) permit a firm to provide both audit and certain non-audit services to the same client, with restrictions. Prohibited non-audit services for audit clients include bookkeeping, IT consulting on the systems used to produce financial statements, valuation services with material impact on the financials, and certain advocacy services. The RFP should disclose any non-audit services you also expect to procure and the firm should confirm independence is maintained.
Q.How should audit fees be structured?+
A.Fixed fee with explicit out-of-scope hourly rates is the dominant model. The fixed fee covers a defined audit scope (your standard year, complexity, locations, subsidiaries). Out-of-scope work (acquisitions, restatements, accounting standard adoption like a new revenue or lease standard, significant control issues) is hourly at agreed rates. Pure hourly billing is rare and creates incentive misalignment. Pure fixed without out-of-scope clauses creates scope disputes.
Q.What partner ratio should an audit engagement have?+
A.Standard audit team for a mid-market entity: 1 partner, 1 senior manager, 1 to 2 managers, 2 to 4 seniors, 3 to 6 staff. Leverage varies by industry complexity and revenue size. The RFP should ask the firm to disclose hours by level for both the engagement and any subsidiary audits. Highly leveraged teams (heavy on staff) are cheaper but raise concerns about review depth; lightly leveraged teams (heavy on partner / senior manager) cost more but typically catch more issues.
Q.How do I evaluate firms with similar AICPA / IFAC credentials?+
A.Three meaningful differentiators: industry depth (auditor familiarity with your industry's typical control environment and accounting policy elections matters more than firm size), engagement partner experience (years auditing comparable entities, not just years at the firm), and technology stack (data-analytics-driven audit vs traditional sampling, integration with your ERP for direct data access). The PCAOB inspection reports for publicly available firms are useful objective data points.
Q.What is reasonable for fee growth year-over-year?+
A.3 to 5 percent for stable engagements, higher in years where the firm absorbs new accounting standard adoption or where regulatory scope changes (e.g., adoption of ASC 842 leases, ASC 606 revenue). The RFP and engagement letter should cap year-on-year increases, typically at CPI plus 1 to 2 percent. Increases above the cap require client consent and are tied to documented scope changes.