New York, Aug 11: After years of watching high profile deals fall through and financial scandals erupt, corporate America is relying more on its audit firms for guidance before they commit themselves to a transaction. Audit firms like PriceWaterhouseCoopers, Deloitte & Touche and Ernst & Young have always been a part of merger and takeover transactions. But until recently they were treated more like backroom boys, with most of the spotlight on Wall Street bankers and lawyers.
Times have changed. The role of audit firms has not only been expanded but company boards are seeking their skills in areas ranging from unpaid taxes of a target company and quality of inventory management to the integrity of managers. “Company boards today are asking tough questions. Mergers do not have a great track record of succeeding, but today they are looking to do better transactions,” said Robert Filek, partner at PriceWaterhouseCoopers’ transactions services.

Traditionally, accounting firms would do legal and financial diligence that involved checking for potential liabilities and making sure accounting methods fell within accepted guidelines. But companies are now paying audit firms for an extra job — integrity and controls due diligence. “There is much greater concern than there has been in the past about the integrity of the people in which they are investing (while buying a company),” said Johnny Frank, a former federal prosecutor and currently a partner in PWC’s transactions team. Bureau Report