Advice & Best Practice

Why it pays to look beyond the Big 4 for media auditing

Marketing is the single biggest expenditure for many brands, and media space typically represents up to a third of all marketing investment. This means that media spend is the largest line in many brands’ overall budgets, and it makes media agencies their most important single supplier. Unsurprisingly, CFOs are keen to monitor and measure media and marketing agency performance and the extent to which agencies are delivering against the commitments detailed in their contracts. CFOs want to know if media and marketing agencies are keeping their promises, and if not, what they can do about it.

Doing nothing and hoping that agencies will stick to the spirit and the letter of the contract is no longer an option. The independent investigation into media agency practice by the U.S. Association of National Advertisers (ANA) in 2016 – reporting the first evidence of non-transparent practices in the U.S. media market for the first time – saw to that. Hope is no longer a strategy.

As there is increasing internal, market, and shareholder pressure for better governance of media and marketing agency relationships, CFOs are faced with two options. They can work with one of the Big 4, generalist accountancy firms – familiar partners to many of the world’s biggest companies for their work in conventional, financial auditing. Alternatively, they can work with a media and marketing contract compliance specialist that understands the nuances of the rapidly-evolving sector. Finding the right partner to fulfil this role has become an increasingly important element of the checks and balances advertisers need to put in place as a result of the growing trend for non-transparent agency working practices – in media, for sure, but also in creative, production, and below-the-line marketing activation.

Related Articles

Never backwards in coming forwards to offer an ever-more elaborate palette of services, the Big 4 have been making a big play in the marketing space for some years now. On the plus side, working with one of the Big 4 can provide CFOs with some comfort, a known brand, recognised for their chartered accounting work. Before taking the plunge, however, there are four key issues that CFOs need to bear in mind if they’re considering working with one of the Big 4 in this area.

1.Generalist vs specialist: The Big 4 are generalist accountants with a lot of generalist knowledge but usually not so much specialist knowledge of the media or marketing space. Because their auditors work across multiple sectors, they can be unfamiliar with the media trading ecosystem. The rate of change in the ecosystem is fast and increasing – as media trading becomes increasingly digitised and automated, with many more links in the largely programmatic media supply chain – so if it’s not your primary area of focus, it can be hard to keep up. We know this all too well, and it’s our bread and butter.

2. Potential conflicts of interest: Increasingly, the Big 4 are now offering complementary services to advertisers – services including media trading – and that can lead to conflicts of interest. You could say that the Big 4 – different departments of the same firm with the same P&L – are now effectively marking their own homework. By that I mean they’re recommending media and marketing strategies for their advertiser clients, and then judging how efficiently their own colleagues have invested on behalf of the very same clients. By offering media and marketing consultancy services, you could argue that the Big 4 have compromised their ability to be truly objective on media matters.

3. Time is money: The Big 4 can spend more time on media contract compliance audits than specialists. This is because they often need some time to learn agency processes and the specifics of the industry. More time typically means higher audit fees.

4. Limited audit scope: Big 4 Audit firms often limit their responses to the specific audit scope, rather than working in collaboration with a company to provide assurance that the agency has stuck rigorously the terms – and the spirit – of the contract.

These four issues should give CFOs pause for thought as to whether they want to work with one of the Big 4 as their media and marketing contract compliance auditing partners. Familiarity, size, and reputation are of course important criteria, but we’d advise that these shouldn’t the only reasons why CFOs choose their partners for media and marketing audits. They should use these factors as the priority filters for judgement, too:

  • Specialism: The best media and marketing compliance partners are those companies who know what the issues are because they are in agencies every day around the world, working on behalf of a breadth of different advertisers.  This is the key to understanding the issues that matter. In addition, working with a partner whose staff is made up of ex-agency CFO’s and practitioners adds experience that generalists just can’t match.
  • Single focus: Look for companies that do one thing only – media and marketing contract compliance auditing – to there’s ensure no conflict of interest.
  • Industry leadership: Work with one of the handful of companies in this area that agencies – both the Big Six media agency holding companies, and a wealth of independents – respect as industry leaders. This makes the whole process smoother and less contentious for all involved, and most particularly for the advertiser.
  • Speaking a common language: Working with auditors who can get to the nub of the issue faster is of great financial and practical benefit. It’s critical that your contract compliance auditors speak the same language as the marketing and media industry because they’re an established part of the industry’s independent governance, checks and balances. This expertise also makes specialists much more cost effective than generalists.

So, while it’s understandable why CFOs might be tempted to work with the Big 4, there are very good reasons why they shouldn’t do so, reinforced by the very good reasons why they should work with specialists to ensure that agencies working in their clients best interests.

One more thing you should know. Some of the leading agency holding companies are known to have recommended to some of their major advertiser clients that they should only use Big 4 auditors to run their media contract compliance audits. What’s more, some agency holding companies were attempting to specify this restriction in contracts with advertisers. In September last year, Tony Bromell, the Head of Integrity and Markets at the Institute Chartered Accountants England and Wales wrote to all media agencies specifying that including clauses in their contracts that mandated Big 4 agencies as auditors represented, in the ICAEW’s opinion, a restraint of trade.

Back to top button