ASSURANCE SERVICES

The key to growth is to match the service to the client.

First:Know Your Market

B Y R O B E R T K . E L L I O T T A N D D O N M . P A L L A I S

f you haven^t learned how to identify customers' information needs,you re not ready to provide new assurance services. Why? Because those

assurance services that meet customers' needs will sell; those that do not willfail. Traditional audit services cannot be expected to expand your practice;they are no longer growthareas. Therefore, the pro-fession has no alternativebut to fashion new ser-vices that bridge cus-tomers' needs and Cl'As'competencies. However,no bridging can takeplace without understand-ing customen' needs.

WHO ARE THECUSTOMERS?The potential customersare people who use infor-mation to make decisions.They could be seniormanagers or other em-ployees, members of cor-porate or not-for-profitboards, institutional in-vestors, fmancial analysts,individual investors, creditors, charitable donors and indi-viduals who make decisions about matters such as select-ing personal medical care or arranging care for elderlyfamily members.

Assiinuice services are defined as independent professionalservices that improve the quality of intormation, or itscontext, for decision makers. If the assurer does not im-prove the decision-making information, the service doesnot qualify as an assurance engagement. So the key criteri-on identifying the customer for an assurance service is thathe or she is the party who can benefit from improved de-cision-making information.

Special Committee's Web Sites in This Article

Questionnaire:www.aicpa.org/assurance/scas/comstud/icn/index.htm

Interview findings:www.aicpa.org/assurance/scas/comstud/analy/index.htm

Trend analysis:www,aicpa.org/assurance/scas/comstud/mega/index.htm

Decision-making process:www,aicpa.org/assurance/scas/comstud/relevnce/index.htm

Survey results:www.aicpa.org/assurance/scas/newsvs/addiposs/index.htm

The committee's general sitemap address:www.aicpa.org/assurance/sitemap/index.htm

However, the cus-tomer is not necessarilythe party who pays for theassurance service. For ex-ample, in a financial state-ment audit, the decisionmaker is the investor orcreditor who uses the fi-nancial statements or, inthe case of not-for-profitsor governmental units,the decision maker is thedonor or taxpayer. But itis the client who preparesthe fmancial statements,deals with the auditor andpays the fee.

Focusing on the cus-tomer is a fundamentalbusiness concern. Thedecision-making users ofinformation create de-

mand for assurance services; their needs dictate engage-ment possibilities.

HOW TO IDENTIFY CUSTOMERS' ASSURANCE NEEDSThe first requisite for CPAs is a customer-focused mindset.This includes not only undersUnding who the customer isbut also making a commitment to learn the customers in-formation needs, being alert to all kinds of informationthat could illuminate those needs and constandy striving tolearn more about them.

Existing clients—because of the estabhshed service rela-tionship—offer the hest opportunity to learn more about

5 6 J O U R N A L <)/ A C C O U N T A N C Y J u l y

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The CPA has to uncover client needs by understanding the decision makers'problems and how they are influenced by major trends.

their information needs in order to create a new service. Inaddition, because clients trust them, CPAs have a market-ing advantage with their clients.

CPAs can use three basic techniques to identify clients"information needs. They can ask them individually, takesurveys and hold discussion groups.

1. Asking clients what they need can be a regular pro-cedure. Good communications are always a plus, and

clients appreciate learning how their accounting firms canhelp them.

2. A questionnaire delivered to a sample of clients withthe objective of learning about them provides data helpfulin making decisions about potential services.

3. A formal focus group, with a two-way mirror, a fa-cilitator and videotapes, can be costly, hut gathering someclients together to discuss service needs allows interaction

Implications for Industry CPAs

The same forces that should leadCPAs in public practice to reorder

their priorities alTect CPAs in busi-ness and industry. Management ac-countants already have demonstratedtheir flexibility- with their intellectualferment on performance measure-ment, which lias paid otf by increas-ing the value of information theyprovide to managers in all sorts of or-ganizations, liut that is not enough.

CPAs in companies face cost pres-sures, new .sources of competition foraccounting work and a decline indemand for their traditional func-tion: accounting information supply.Financial reports prepared undergenerally accepted accounting prin-ciples are losing decision-informa-tion "market sliare" {both inside andoutside the enterprise), and softwareincreasingly is taking over routine ac-counting flinctions. The cost squeezewill continue, making insourcing-or-outsourcing decisions routine.Competition from non-CT'As in or-ganizations will grow. Informationtechnology gives nonaccounting de-partments additional power to collectand report their own information. Ifinternal users are dissatisfied with theinformation supplied by the financialreporting system, they may look toother departments to supply tlie in-formation decision makers need.

These are symptoms of interrelat-ed megatrends that will play a moreprominent rote in the future. Tech-nology is transforming all aspects ofinformation collection, storage, re-

porting and analysis. It is transform-ing commerce by creating a newmedium for selling and conductingtransactions. It is transforming rela-tionships among producers and con-sumers by enabling consumers toexert more influence on producersand enabling producers to go furtherin meeting consumers' needs. Mean-while, stakeholders of all types aredemanding more accountability in-formation from responsible parties.The kinds of assets that enable prof-itable growth are increasingly off-hal-ance-sheet intangibles (such as theasset value of data used to run thebusiness, marketing capabilities, thedemand pull of brands, knowledgetranslatable into new products or ser-vices or improved processes and or-ganizational learning capacity).

CPAs in industry are not satisfy-ing their customers' (that is, compa-ny executives, managers andsupervisors) needs for information ifthey provide only financial state-ments (including tliose intended forexternal use and those designed forinternal use), but the opportunitiesfor additional valuable activities areenormous. Boards of directors andsenior managements, for example,are requesting information on risks,monitoring business processes andbenchmarking and industry com-parisons. Industry CPAs must beinvolved with delivering such infor-mation or else their customers willseek it elsewhere.

CFAs in business and industry' can

expand their expertise and range ofactivities by themselves or in con-junction with CPAs in public pnu-tice, based on the opportunitiesdeveloped by the special committeeon assurance services and pursued bythe assurance services committee.The new services will not be man-dated by standards or regtilations.Entities will purchase them voluntar-ily to enhance their performance.

Corporate CPAs, like CPAs inpublic practice, must adopt a cus-tomer focus, identifying customers'decision-making needs for informa-tion. They should take a broad viewof their potential activities, at least asbroad as what is given in the specialcommittee's definition o(asstinjiiccscri'ict's (services that improve thequality of information, or its context,for decision makers). Industry Cl'Asshould not limit themselves to im-proving financial information or toany other specific types of informa-tion. Nor should they he bound to asingle type of improvement. Theyshould be open to improving accura-cy, relevance, timeliness, format orany other quality that better servesdeci.sion makers.

Opportunities for new contribu-tions by industry CPAs are growingeven as the changing environmentthreatens their traditional contribu-tions. The greater the role informa-tion plnys in our economy, the moreneed for improved information, andthe greater the opportunities forCPAs in business and industry'.

July 19^7 JOURNAL «/ ACCOUNTANCY 57

ASSURANCE SERVICES

Companies need to know how well they are fuifilling their strategies in order toevaluate the strategies and the processes used to achieve them.

and delivers more information than can be gained from aquestionnaire. It also creates goodwill.

The American Institute of CPAs special committee onassurance services created a questionnaire to learn chents'information needs, which was published in the July 1996journal of Accountancy (page 10) and is available atwww.aicpa.org/assurance/scas/comstud/icn/index.htm.The special committee also interviewed a spectrum ofdecision makers to learn their needs for decision-makinginformation. The interviewees included members of cor-porate boards, investors, creditors, managers, regulators,members of government and university administrators.

Despite their diversity, they generally wanted the samething: more information on the risks they faced, informa-tion on entity performance to see whether goals were be-ing achieved and information on the quahty of the systemsthey used. Three of the services developed by the specialcommittee address these needs (risk assessment, perfor-mance measures and systems reliability). The interviewfindings are presented in full on the special committee'sWeb site (www.aicpa.org/assurance/scas/comstud/analy/index.htm).

No matter what technique is used to inquire directly ofcustomers' needs, the CPA must bring to the task an un-derstanding of the client's business and industry, includingthe client's business objectives, markets and dependencieson suppliers. This knowledge is essential to interpret andcorroborate responses to questions and volunteered ideas.

Clients' information and assurance needs will never befully stated. The CPA has to uncover additional needs byunderstanding the decision makers' problems and how

those problems are influenced by major trends. The specialcommittee used this technique to identify several services.The need for ElderCare-Plus, which was described in lastmonth s article, was identified from analyzing such trends.

The AICPA assurance services committee will be usingtrend analysis in its work on service identification, butfirms should apply the technique when they explore thenew services as well. The special committee's analysis oftrends, including many new assurance opportunities, isavailable at www.aicpa.org/assurance/scas/comstud/mega/index.htm. It is helpful to conceive of the exercise asstrategic thinking, trying to understand where the market-place is going, what forces are influencing the serviceneeds of clients and potential clients and whether the firmcan provide the services. The three following methods,used singly or in combination, can help C PAs gather theinlbrmation to identify new assurance needs.

USING BUSINESS MODELS TO IDENTIFY NEW SERVICESA CPA may find a reliable and comprehensive businessmodel instrumental in identifying which new services cus-tomers need. A model can be used to identify importantinformation flows about which decisions have to be madeand where services are needed to improve the quality ofthe information—in other words, what assurance servicesare needed. The model shown in exhibit 1, page 59,"Business Model for an Enterprise's External InformationFlows," illustrates typical external information flows.

Companies do business in four marketplaces: those torsupplies (of goods, services and technologies), customers,capital and talent. In each instance, the enterprise conducts

E X E C U T I V E S U M M A R Y

k THE INITIAL STEP IN IDENTIFYING a new as-surance service is to focus on user needs. For CPAs inpublic practice, the best place to look is at the existingclient base. For CPAs in business and industry, it is thecompany executives, managers, supervisors and otheremployees. Other users of assurance services are mem-bers of corporate or not-for-profit boards, institutionalinvestors, analysts, individual investors, creditors, charita-ble donors and individuals.• ASSURANCE SERVICES are defined as indepen-dent professional services that improve the quality of in-formation, or its context, for decision makers. If theassurer does not improve the decision-making informa-tion, the service does not qualify as an assurance service.• GATHERING DATA ON USER NEEDS can beaccomplished in several ways through (1) face-to-face

discussions, (2) questionnaires and (3) discussion groupsthat bring together a group of users.• BUSINESS MODELS. BUSINESS strategies and de-cision models are useful to practitioners to identifywhich new services customers need. A business model isan important tool in recognizing the information flowsfor which decisions must be made and. thus, where as-surance services are needed.• ONE ASSURANCE SERVICE—business perfor-mance measures—is integral to many modern manage-ment techniques, to discharging accountability tostakeholders and to oversight by responsible parties. Per-formance measures can be used to motivate managersand employees and to monitor important activities.These elements create a demand for performance mea-surement assurance services.

ROBERT K. ELLIOTT. CPA. is a pamier of KPMG Peat Marwick LLP in New York City. He was chairman of the AICPA spe-cial coniniictee on assurance services. DON M. PALLAIS. CPA, has his own practice in l^chmond, Virginia. He was executivedirector of tlie AICPA special committee on assurance services and now is a member of the assurance services conimittce.

5 8 J O U R N A L of A C C O U N T A N C Y J u l y 1 9 V 7

ASSURANCE SERVICES

The development of appropriate measures is itself an assurance service,as is the evaluation of performance measures.

Exhibit 1: Business Model for an Enterprise'sExternal Information Flows

Capitalsuppliers

Suppliers Enterprise Customers

Communityr Talent

Adapted from C.K. Prahalad

transactions (for example, raw materials purchases, sales offloods and services, sale of capital stock and hiring). Andin each instance, the decisions about the transactions aresupported by two-way information flows. The arrows il-lustrate these flows. In addition, the company has relation-ships as a member of its community: Information flows toand from community agencies are necessary when deci-sions have to be made about accountability and regulatoryrelationships (for example, factory location and compliancewith regulations).

The arrows represent information flows. When dealingwith a specific client, the practitioner would identify thespecific information and then determine whether theclient needed services that could improve the quality of theinformation.

Exhibit 1 also shows how CPAs have channeled theirinformation improvement services in the past and how abroader view is achieved. Arrow 1 (the black arrow) showsthe information flow CPAs have been most involved withthrough the audits of fmancial statements. Obviously, manyother information flows are needed for entity decisionmaking, as the other arrows in the figure demonstrate.However, even on the black arrow there are possibilitiesfor new services beyond financial statements, for example,nonfinancial information such as operating statistics. Todaythere are many other information flows to investors andcreditors. Exhibit 2, at rigiit, illustrates the range of infor-mation flows represented by the numbered arrows in ex-hibit 1. Each of these types of information might benefit

assurance services.

USING BUSINESS STRATEGIES TO IDENTIFY NEWSERVICESA CPA's knowledge of corporate strategy is useful inidentifying information needed for decisions and, thus,new assurance services. Companies need to know how

well they are fulfilling their strategies in order to evaluatetlie strategies and the processes used to achieve them. En-terprises therefore need to employ a variety of perfor-mance measures.

Exhibit 3 on page 60, "Deriving Measures From aCompany's Vision," illustrates a generic strategic visionthat encompasses four measurement perspectives, whichcorrespond to the balanced scorecard devised by Robert S.Kaplan and David P Norton. (Also see JofA, Jan.97, page48; "A Smarter Way to Run a Business.") The four per-spectives cover the full breadth of what is needed toachieve a company's vision; financial measurements alonecannot achieve this.

The questions to the left lead to objectives and goalson the right tiiat support the vision, if the goal, for exam-ple, is to be rated number one by customers, the mea-surement of on-time delivery and responsiveness isessential. Similarly, two objectives of the internal perspec-tive are short cycle times and speed to market, and theirmeasurement would be important to decision makers.Supplier defect rates also would be of interest in evaluat-ing internal processes, as would classic scrap and reworkdata. Finally, important objectives in organizational learn-ing (the company's ability to create and exploit newknowledge) include improving core competencies andreaching a high percentage of sales from new products—

Exhibit 2: Types of Information for Exhibit 1Arrows

Arrow

1

2

34

5

6

7

8

Information

Financial statementsPress releasesAnalysts' meetingsFact books"Truth in lending"Undertakings in securities offeringsFinancial capacityProduct/service quality (For example, ISO 9000)Financial condition (creditworthiness)Customer qualificationsCredentials/competenciesEmployment historyReferencesBenefitsEmployment policiesCompensationJob-related informationTax policy/regulationsEmployment requirementsAir/water qualityEnvironmental restrictionsEnvironmental effects (For example, ISO 14000)Employment effectsTax returns

J u l y JOUKNAL 0/ ACCOUNTANCY 59

ASSURANCE SERVICES

Understanding the marketplace, focusing on the customer and identifyingnew services are the beginning, not the end, of orderly service expansion.

Exhibit 3: Deriving Measures from a Company's Vision

tThe Vision

• To be rated #1 byour customers In to-tal value delivered

If we succeed, how willwe look to stakeholders?

tTo achieve the vision, how

must we look to customers?

t

• Market leadership• High revenue growth• Profitability

• Superior lead time• Low defect levels• On-time delivery• Responsiveness

To satisfy customers, whatprocesses must we excel at?

tInternal Perspective

Cycletime

Quality Produc-tivity

To achieve the vision, how must theorganization learn and improve?

• Time to market• Manufacturing cycle time• Low process defects• High yield

I High sales from new products> Constant improvement• Build core competencies

Adapted Irom Kaplan & Norton, The Batanced Scorecard

which is a measurement of the ability to commercializenew products. Measurements of both would be importantto decision makers.

Each company is unique in its vision, objectives, cus-tomer base and internal processes. A business modelanalysis therefore requires a deep understanding ot thecompany, the business and the industry. The developmentof appropriate measures is itself an assurance service, as isthe evaluation of performance measures. (See the sidebaron page 61, "New Assurance Service: Business Perfor-mance Measures.")

USING DECISION MODELS TO IDENTIFY SERVICESA focus on customers—that is, decision makers—centersattention on their decision-making processes. Decisionmaking often seems to follow a deceptively simple pat-tern of input information/output decision. However, theroutineness of decision making has hidden the numberand complexity of the processes. Closer analysis showsthere are several components to the process, and eachpresents an opportunity for developing new services thatserve decision makers. The better assurers understand de-cision-making processes, the easier it will he for them to

identity additional assurance services. Exhibit 4, page 61,"Users' Decision-Making Processes," shows an eight-stepmodel. It is described in detail at www.aicpa.org/assur-ance/scas/comstud/relevnce/index.htm.

Sometimes familiar business problems have beenaround so long the definition of the problem (the firststep in the illustrated model) is not considered a part ofmanagement's decision making. For example, a companysells widgets in its retail showrooms. It has always hiredlow-wage "order takers" to pick widgets off the shelf andring up purchases. The company has not rethought theproblem of how best to sell its widgets for many years. Inthe meantime, widgets have become more complex andcustomers need increasing help to understand their fea-tures and the advantages of the company's widgets. Thecompany might defme the problem as how to upgradethe capabilities of its sales personnel, or it might defmethe problem as how to install the most cost-effectivecomputerized demo kiosks in its stores, or it might definethe problem more generally. These alternatives wouldlead to new information requirements (for example,salaries for technical personnel and costs of developingand maintaining computerized demo stations). Working

60 J O U K N A L . . / A C C O U N T A N C Y J u i y 1997

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Firms also must determine whether potential services suit their competencies,risk tolerance and desired image in the community.

through the entire problem—including all the steps in ex-hibit 4—offers the CPA many opportunities to assist theclient in refining its decision-making processes and infor-mation requirements.

RELEVANCE-ENHANCEMENT SERVICES-SUPPORT FOR GOALSImproving the quality of information needed for deci-sion making will take the assurer more directly into "rel-evance-enhancement assurance services." These are

services to help clients determine the right types of in-formation to achieve their business objectives and thendevelop systems and processes to continuously providethe information. If the assurer helped defme the prob-lem, construct the decision model and name its informa-tion requirements for any given decision, each of thesethree steps would be a relevance-enhancement service.The information needed to define the problem would bebased on the decision maker's objectives and relevant inthat sense. contimu-d on puge 62

New Assurance Service:Business Performance Measures

Organizations and their stakehold-ers want to know whether

strategic goals and objectives are be-ing achieved. To find out, decisionmakers must use performance mea-sures tailored to those goals and ob-jectives. The measures might betraditional financial measures or cus-tomer satisfaction, reject rates, edu-cational attainment, absenteeism,cycle times or whatever other mea-sures or sets of measures fit an enti-ty's goals and objectives.

Performance measurement is in-tegral to many modern managementtechniques, to discharging account-ability to stakeholders and to over-sight by responsible parties. Aperformance measure can be used tomotivate managers and employees, tomonitor important activities and tohelp evaluate whether those activitiesneed revision to achieve organiza-tional strategies. But organizationsvary greatly in their performance-measurement capabilities. Theseconditions create market demand forperformance measurement services.

The servicesPerformance measurement is a fami-ly of reKited services. The CPA canassess the reliability of information(that is, is the information right?) be-ing reported from the organization'sperformance measurement system orthe relemtice of the performance mea-

sures (that is, is it the right informa-tion to achieve the organization'sperformance objectives?). If the or-ganization does not have a perfor-mance measurement system, theCPA can identify relevant perfor-mance measures and help design andimplement such a system. Finally, theCPA can provide advice on how toimprove systems and results.

Performance measurement ser-vices can be applied at any level in anorganization, and the measures canbe the basis for comparisons withinan industry. Each service could beperformed as a separate engagementor several could be combined intoone engagement.

Maritetplace positioningThe public's perceptions of CPAswill greatly help them as they expandinto new assurance service markets.CPAs are known for their experi-ence in financial reporting—a formof performance measurement—andas auditors, which requires generalbusiness knowledge. This image willfacilitate CPAs' progress as theymove in the financial measurementsegment of the market. CPAs mighthave a harder time, however, con-vincing customers they are as naturala choice in providing nonfinancialperformance measurement services,but, by building on their reputationsand marketing their skill sets, it

should not be difficult for CPAs togain acceptance as respected per-formers of these services.

CompetenciesMany CPAs will need additionaltraining to assess the relevance ofperformance measures. They willneed to know more about establish-ing corporate strategies and eicvelop-ing business activities to accomplishstrategic objectives. Industry exper-tise will be particularly valuable inperforming these services and assess-ing the relevance of organization-wide performance measures.

The AICPA professional devel-opment staff has developed a self-study course, Assurattcc Sert^ices:Performance Measures ($49; productno. 732023JA; 2 hours recommend-ed CPE; to order, call 800-862-4272). The course focuses on howthe service fits into the concept ofassurance services, the skills and re-sources needed to provide the ser-vice, identifying client needs anddelivering the service.

Practitioners Publishing Co. hasdeveloped relevant practice aids,some of which can be downloadedfrom www.ppcinfo.coin/scas/scas.htm. The aids include material ongoals and action plans, performancemeasurement progress Reports, sourcesof industry information and perfor-mance measurement identification.

J u l y JOURNAL (./ACCOUNTANCY 61

ASSURANCE SERVICES

Performance measurement services, as described in thesidebar on page 61, illustrate relevance-enhancement ser-vices. One such service is assessing the relevance of an en-tity's performance measures and informing nianagementabout hovi' well the performance measures supportachievement of the company's goals. Another such serviceis identifying new peribrmance measures to help the entitymeet its performance goals.

RELATING SERVICES TO CLIENTELENot every newly identified service will suit every firm'sclientele, and some will not be suitable at all. For exam-ple, ElderCare-Plus shows greater promise when a firm

has direct service relationships with individuals (for exam-ple, tax or personal financial planning clients). Electronic-commerce assurance services best suit a clientele that isengaged in electronic commerce or likely to be in thenear future. The assurance services committee will beidentifying services in the near future. Over 2()(} serviceswere identified by the special committee's survey of 21firms (see box on page 63, "A Sample of Assurance Ser-vice Possibilities").

To successfully match service characteristics to clientelecharacteristics requires a clear understanding of both theservice and the clientele. The C! PA should understandwhat party will use the information that is the subject of

CASE STUDYBenchmarking at Moss Adams

N eal West's firm. MossAdams LLP, began doingbenchmarking engagements

some 10 years ago, with a pick up infirequency over the last few. West, thefirm's director of business assurance,is a member of the performancemeasurement task force of theAICPA assurance services commit-tee, and he's ready to help otherfirms understand what these engage-ments are about and how to performthem. He told the Journal aboutsome of his fimi's experiences.

The original and still popularservice starts with a cost of doingbusiness survey for a trade associa-tion (for example, an association ofmarinas or fencing contractors).The association is the chent, and itsmembers, the subject of the survey,are the users of the information.The survey allows Moss Adams tocreate a set of "common size finan-cial statements" based on financialdata firom all the surveyed members.Association members can comparetheir performances to the industry-wide performance. The engagementsometimes calls for stratifying thecollective data by size of the sur-veyed entities into three or so sets offinancial statements. Associationmembers can compare their perfor-mances to the average for the indus-try or to the group they are closestto within the industry.

Sometimes the survey is used togather nonfinancial performance

data^—typically, market, process orworkforce data. But the purpose,again, is benchmarking. Anothervariation is to measure the perfor-mance of the top-performing seg-ment of the industry. The data set astandard for association members:they know what is possible and canset targets. Associations can distributethe performance measures to mem-bers or provide them for a fee.

The intended use of the data bythe associations is always clear whenthe engagement terms are settled.Many clients know what they want.but Moss Adams always considerswhat is best for the client's membersand will work with clients duringengagement negotiations to arrive atwhat will be of most help. In thosecases. Moss Adams is designing theengagements with clients by explor-ing their needs with them.

Moss Adams is doing a growingpercentage of its benchmarking forindividual firms. Why? Because notall firms fit neatly in an industry cat-egory. They may be uncommon insize or have unique geographiccharacteristics, for example. MossAdams's Xemplar process, now un-der development, is designed to set astandard that individual firms or a.sso-ciations can use in such circum-stances. Xemplar does not producean average or an ideal, but an excep-tional example, created in part fromexperts' views, against which a com-pany can mieasure its operations.

West believes CPAs have the ba-sic competencies to do this kind ofwork. They are skilled in financialanalysis and use these techniquesregularly on audits. What they needto do is use those analytical skills tocreate measurements clients canunderstand and to follow this upwith assistance in helping clientsimprove their operations. Follow-on consulting services of this sortare a very important part of the as-surance package, both in terms ofbenefits to the client and in termsof fees.

West give this example: Supposebenchmarking shows that personnelturnover is adversely affecting salesand customer retention. Moss Adamswould analyze the causes and helpthe client improve. As West puts it:"We're asking, 'Where are they?Where should they be? And whyaren't they there?' Then we helpthein get there."

CPAs need to have a rich under-standing of their clients' businessesand industries in order to do thiswork, but that is not a new type ofdemand on them. Basic analyticaltools are taught in staff training atMoss Adams, and a synergy existsbetween analytical reviews thatstrengthen the audit and the analyt-ical work needed to deliver bench-marking.

"It's a service that meets clients'needs and fits well with our skillsbase," West concludes.

6 2 J O U R N A L o / A C C O U N T A N C Y J u l y

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Exhibit 4: Users' Decision-Making Processes

the potential engagement, the service'svalue to the user and, if the payer isdifferent, the service's value to thepayer. Understanding the clientelemeans knowing the business and in-dustry of each client. Many firms spe-cialize in certain niche industries orclients of a particular size. Data aboutclients are readily available. Firms mustdecide how much they should collectand what forms of analysis they need.

Understanding the marketplace,focusing on the customer and identi-fying potential services are the begin-ning, but not the end, of orderlyservice expansion. Firms also mustdetermine whether potential servicessuit their competencies, risk toleranceand desired image in the community.The committees findings and sugges-tions on this subject will be taken upin the next article in this series. •

A Sample of Assurance Service PossibilitiesThis list of services is taken fix)m the special committee on assurance

services survey of 21 large CPA firms (The fiall survey results, with over200 entries, are available at www.aicpa.org/assurance/scas/newsvs/

addlposs/index.htm.) The goal of the survey was to establishthe breadth of assurance services already offered in practice.

• Assessment of ethics-related risksand vulnerabilities

• Controls over and risk related toinvestments

• Adequacy of controls and policiesfor derivatives

• Information systems security re-views

• Assessment of risk of accumula-tion, distribution and storage ofdigital information

• Fraud and i l l e^ acts risk assess-ment

• Management/board salary bench-marking

• Internal audit qualityassurance

• Adequacy of billing system com-pared to competitors

• Advertising rates to be paid vs.those chatted

• Customer satisfaction surveys—reports/validations

• Review of compliance with in-vestment policy

• Compliance with trading policiesand procedures

• Compliance with royalty agree-ments (entertainment)

• Identification of critical items tomonitor

• Examination of software specifica-tions

• ISO 9000 certification• Examination of hardware bench-

mark test results• Newspaper circulation audits• Annual environmental report• Audit of milestones in long-term

incentive plans• Compliance with industry stan-

dards for additives test labs• Verification of contributions un-

der incentive plan• Verification of construction costs

for incentive grant

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