Editor: Would you tell us about your professional experience?
McElroy: I've been working in the public accounting environment for nearly 20 years, 17 years of which were with a Big 4 firm. I have significant experience assisting companies with international operations and have primarily focused on the manufacturing, retail, and distribution industries. I have also spent considerable time working in the technology sector, including biotechs.
Editor: What attracted you to Eisner LLP?
McElroy: After leaving the Big 4 firm, I took a nine-month sabbatical, anticipating that I would go into private industry. During that time, however, I discovered that I missed client service, so I ended up backtracking to a certain degree on my original plan. I decided I wanted to find an organization that would allow me to use my public accounting background but also provide me the opportunity to work with a more flexible schedule, as I have two young children.
Eisner offered me that combination. As a premier regional accounting and business advisory services firm, Eisner offers the services of a large public accounting firm, but primarily focuses on middle market companies. The firm conducts business with both public and private companies in a wide range of industries. Our headquarters are in Manhattan, and we have an office in Florham Park, New Jersey, which is my primary office. I have the flexibility to work out of the New York office when I want to, so I have the best of both worlds.
I work with both private and public companies. For the most part, I supervise financial statement audits as well as internal audits and risk management engagements. Much of my experience has been assisting public companies or private companies interested in going public.
Editor: Are there new issues with the application of Sarbanes-Oxley to private companies?
McElroy: There has been speculation about whether there was going to be a measure like Sarbanes-Oxley for private companies. This past summer, the AICPA Auditing Standards Board adopted and issued a set of eight new Statements on Auditing Standards (SASs). These standards are effective for years beginning post December 15, 2006, so for any company that began its new fiscal year on or after January 1, 2007, this is the first year they have to apply the new standard. The standards apply to all non-SEC audits and are also applicable to not-for-profit organizations. Many of the affected companies have not been exposed to the Sarbanes-Oxley Act. What is interesting is that typically in the past, when a new auditing standard was adopted, it was viewed as the auditors' problem; a new standard did not necessarily have an impact on the companies themselves. At the end of the day, companies just wanted to make sure that their audit work was completed according to the auditing standards. Now, the auditors are required to obtain a greater understanding of the control environment and further test for controls in a private company environment. Once the controls have been documented, the auditor will evaluate the design of the controls and determine if they have been effectively implemented. Consequently, the release of the new SASs has been dubbed "Sarbanes-Oxley for private companies," but really it is simply the newest auditing standards.
Editor: What advice on compliance would you give to a growing company?
McElroy: First, companies should remember that the rules are in place to protect investors and shareholders, who must be protected as a company grows. Second, I would say that as a company grows, compliance must be embedded in all of its actions - each step must be made with an awareness of the compliance issues it may set off. Small- to mid-sized companies tend to have smaller accounting and/or compliance departments relative to their size, because the compliance requirements are fewer; typically, those companies are behind larger companies in their reporting requirements and therefore their expertise. So growing your company means growing your compliance resources, and as you know, there is a cost to getting up to speed. In order to leverage a growing company's compliance resources, it's best to have experienced professionals determine what needs to be given priority.
Editor: What particular issues confront companies today as they become increasingly global?
McElroy: Previously I was working with companies that were already global and I had the opportunity to travel all over the world. What I find now is that the companies that I am working with are about to or are exploring the idea of making their first acquisition internationally. It is exciting to be part of the process when a company is embarking on something that is so different for them.
Companies must be aware of local regulations, which will likely differ from those in the United States. Accounting requirements may be entirely different such that a company must get involved with a local auditor. Through our independent membership with Baker Tilly International, a global network of high quality, independent accountancy and business services firms, we are able to service clients worldwide. If a client is looking to do business in, say, Hong Kong, I know whom to call within Baker Tilly International. We work closely enough with our partners such that I always can give a name, a number, and a face to a client for almost any jurisdiction worldwide.
Editor: Can you tell us about your work with technology and biotech companies?
McElroy: "Technology" encompasses many different aspects of industry. For instance, the biotech industry is very prevalent here in New Jersey, and we have several telecom clients. Clients under the umbrella of technology can be very different and distinct, but what many of them like about Eisner is that we are able to provide them with highly specialized and tailored services.
Editor: What are some of the issues that you address when working with biotech companies?
McElroy: Biotech clients always want to build value: their investors tend to be anxious that they do something for them. Often the struggle they face is: how do we bring value to our investors? And this question becomes: should we go public? Should we explore acquisitions? Are there any opportunities for us to either merge or sell off one of our products? One of the things we are able to provide is a wide range of business information and services, so that if a company is interested in pursuing any of those, it can look to us as advisors in pursuing those goals.
For instance , take our dedicated technology team. We may find ourselves looking at a client situation that is complex, and the company doesn't have the expertise on hand to work through a transaction. We can help with due diligence or valuation services and/or a tax strategy. One of my clients went from having about $20 million in assets three years ago to over $250 million today. You can imagine all of the issues that a company growing that fast must be facing.
Editor: What does Eisner bring to the table in these areas?
McElroy: One of the things that sets us apart is that our professionals have many years of experience, including Big 4 experience. Our clients have the opportunity to benefit from experienced professionals who have seen a lot and been exposed to a variety of transactions. In addition, we stay very connected with our clients and put an emphasis on a personal relationship with our clients. Our business motto - one to which I can fully attest - is, "At Eisner, business is personal." We focus on developing lasting relationships with our clients. The firm had an independent survey on our client service and client satisfaction and the recurring theme throughout the survey was that clients felt that our professionals were very responsive. This is especially important for smaller companies that don't have the in-house resources to answer their questions.
Editor: Where do you see the profession heading in the next five years?
McElroy: There has been constant "noise" in the accounting world about the status of a global accounting standards format. Currently, there is U.S. Generally Accepted Accounting Principles (U.S. GAAP) and International Financial Reporting Standards (IFRS) as published by the International Accounting Standards Board (IASB). For awhile now, both regulatory bodies have been working on a road map for convergence. The status of the actual convergence at this point is vague, however, so the question on the table for U.S. and international companies is, "Is this ever going to happen, and if so, when?" Interestingly enough, the Big 4 firms believe the Securities and Exchange Commission (SEC) should develop a comprehensive plan to eventually transition all U.S. issuers to IRFS. Therefore, the challenge is for the preparers, auditors and readers/users of the financial statements to be educated and trained on IFRS.