Just tell them to hire a top auditor. Recent research by Gus DeFranco and others from the Universities of Toronto and Negev reveals evidence that “enterprise values of private firms who have a Big 4 auditor are 19% to 25% higher than firms without a Big 4 auditor.”
These and additional findings—including how valuation multiples are “increasing in factors that proxy for earnings quality (e.g., Big 4 auditor) as well as a proxy for liquidity (working capital)”—are fully explored and explained in the academic’s working paper, “The Private Company Discount and Earnings Quality” available at the Social Science Research Network. Click here to view the abstract; the site offers several download options, available at the bottom of the page.
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