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Substitute Services<br />

Negotiation Power<br />

1. None<br />

An <strong>audit</strong> is a legal requirement in many<br />

instances. Federal and state law<br />

requires that nonprofit organizations abide<br />

by certain financial reporting<br />

requirements.<br />

High Supplier<br />

High Supplier<br />

High Buyer<br />

2. Financial Review<br />

A financial review by an independent<br />

<strong>audit</strong>or examines the nonprofit's or nonfor-profit's<br />

financial statements to<br />

determine whether they are consistent with<br />

Generally Accepted Accounting<br />

Principle(GAAP). A review has the same<br />

objectives of an <strong>audit</strong>, but, it it not<br />

conducted with the same level of<br />

investigation or analysis as an<br />

independent <strong>audit</strong>.<br />

Supplier Power<br />

Low Supplier<br />

Low Buyer<br />

High Buyer<br />

3. Compilation<br />

Buyer Power<br />

A compilation differs significantly from a<br />

review or an independent <strong>audit</strong> of<br />

financial statements in that it is literally a<br />

compilation of financial records into a<br />

format required by Generally Accepted<br />

Accounting Principles (ex GAAP). If this<br />

work is performed by an <strong>audit</strong>or then it is<br />

referred to as a compilation and<br />

accounting standards require the <strong>audit</strong>or<br />

to assess whether the records contain<br />

obvious errors.<br />

High Buyer Power<br />

High Supplier Power<br />

Competitors rivalry<br />

Switching costs low<br />

Local suppliers an option<br />

Market share concentration<br />

Economies of scale<br />

Brand Recognition<br />

Target Price Savings Example<br />

Year-End<br />

19%<br />

Processing<br />

$4.50<br />

Reduction<br />

per W2<br />

200000 $175,000<br />

$141,750<br />

100000<br />

$33,250<br />

Total annual <strong>audit</strong><br />

<strong>services</strong> savings<br />

0<br />

Benchmark<br />

Target<br />

Savings Goal of 15%<br />

Savings at 19%

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