How different can an audit be?

 A few weeks ago, a girlfriend of mine accepted a job as an auditor at a local CPA firm. Previously, she was an internal auditor at a state agency and she is worried about adjusting to the new environment and expectations.

Since, in my line of work, I experience both types of auditing – internal and external – I offered to help her transition. We met at her new office and spent most of the workday pouring over a set of working papers and cross-walking them to audit standards. It was an eye-opener for her.

In the first few minutes of our meeting, it became clear that, in her new job, she will need to produce results much faster. The CPAs in her new firm finish most of their not-for-profit audits in one week. As an internal auditor, my girlfriend had a very generous amount of time to evaluate her subject matter. Her last project as an internal auditor took her six months to complete.

What causes that huge gap in the amount of time spent on audit projects?

1. Profit is very motivating. CPA firms are profit-driven. The faster they finish an audit, the quicker they can begin another project. Performing audits speedily allows them to take more jobs and thus make more money. When they move too slowly, they put their jobs at risk.

2. Repetition breeds efficiency. CPA firms perform essentially the same audit over and over. Once the CPAs learn the format and content of working papers, they use that knowledge again and again as they move from not-for-profit financial statement audit to not-for-profit financial statement audit. Contrast this with internal auditors who seldom repeat the same audit; each project involves a new subject matter and scope.

3. Finite subjects are the rule instead of the exception. CPAs must commit in writing, at the start of the project, to a specific subject matter and criteria. CPAs cannot start an audit until the client agrees to their audit objective and scope. Period. End of story. And CPAs religiously stick to that agreement. Scope creep is not permissible (reference point #1). Conversely, internal audits often start with a vague objective, and nothing in the auditing standards mandates (but it is suggested) that internal auditors get the clients’ approval before proceeding. Some internal audits start with one objective and end somewhere entirely different. In their quest to create value for their customers, some internal auditors hop down bunny trails, inspecting every possible avenue of interest while they are onsite.

4. Tools are standardized. CPA firms purchase from an audit service tools and forms that allow them to repeat the same tasks and produce similar-looking results for each audit. Unless the internal audit team has worked together for years or includes many members, it usually doesn’t standardize forms and tools. This means that, on every audit, each auditor devises his or her own forms, memos, and tools afresh.

5. Documentation standards are looser. CPA firms use the same tools and look at fundamentally the same working papers every time. CPA firms have a standard working paper index, standard tick mark legend, standard schedules – the whole bit. This means that everyone in the office – the reviewers, the partners – knows where the evidence lives in the working papers and from whence it comes. As an outsider reviewing the CPA firm’s working papers, I couldn’t find the source of a few numbers. When my girlfriend and I asked the CPA firm manager where the information was, she quickly replied, “That is on B-1. That is always on B-1.” Ah, the joys of repetition. In internal audit environments, auditors are encouraged, and sometimes required, to put a description of the source, purpose, procedure, results, and conclusion on every working paper and to make sure that all significant info is cross-referenced. Internal auditors can, and often do, spend much more time perfecting working papers and sending them through multiple levels of review.

6. Reports are significantly easier to create. The bulk of a CPA firm’s audit report is a form letter, created by the AICPA, full of all sorts of legalistic mumbo jumbo. Filling in “name of the entity here” doesn’t involve much creativity. And CPA firmsare not known for creating detailed audit findings involving a lot of backup and craftsmanship. Unless they are doing a Yellow Book audit, CPAs hesitate to be specific about issues because their clients don’t appreciate the detail and the resulting enhanced transparency and accountability. Internal auditors, on the other hand, often create dozens of pages of text entirely from scratch. They have to balance the truth with politics and the demands of their customers. They draft and edit and draft and edit, often taking months to finish the report. Sometimes, in the middle of what should be the reporting phase of an audit, they decide they need more evidence and return to fieldwork. And redraft and edit and redraft… You get the picture.

This is a huge change for my friend. She will have to step on the accelerator. A CPA firm cannot afford to employ someone who doesn’t produce. And the organization will assume she already knows how to perform audits and won’t need much guidance. I anticipate and welcome quite a few emails from her – as do I from you.

This blog

Governmental auditors unite! Leita Hart-Fanta, CPA, CGFM, and CGAP is the author of “The Yellow Book Interpreted” and owner of Yellowbook-CPE.com a website devoted to training for governmental auditors. Whether you are an internal auditor or monitor for a government entity or a CPA doing grant audits, you will enjoy Leita’s humorous take on the complexity of auditing in the government environment.

More from this blog

Bloggers crew

Steve Knowles has spent 25 years in business and practice in the UK, but he also worked in the states and the years haven't dulled his way of seeing an alternative view to everyone else, and every day is a new adventure.

48271

Joel M. Ungar, CPA is a lifelong resident of the Detroit area and a graduate of The University of Michigan. He is a principal with Silberstein Ungar, PLLC, a Top 15 auditor of SEC public reporting companies.

81368

Allan Boress, CPA, with over 25 years as a practitioner and consultant to the accounting profession. Mr. Boress is the author of 12 published books in 6 different languages, including a best-seller, The "I-Hate-Selling" Book.

53426

Larry Perry, CPA, CPA Firm Support Services, LLC, is the author of accounting and auditing manuals, author and presenter of live staff training seminars, and author of webcast and self-study CPE programs. He blogs about small audits, reviews, and compilations.

96340
Sandra Wiley, COO and Shareholder, is ranked by Accounting Today as one of the 100 Most Influential People in Accounting as a result of her prominent role as an industry expert on HR and training as well as influence as a management and planning consultant. She is also a founding member of The CPA Consultant's Alliance. Sandra is a certified Kolbe™ trainer who advises firms on building balanced teams, managing employee conflict and hiring staff.
24458

Maria Calabrese, CIR, Human Resources manager for Fazio, Mannuzza, Roche, Tankel, LaPilusa, LLC in Cranford, New Jersey, Maria's topics revolve around the world of: Mentoring, Performance management, and The "Y Generation," a.k.a. "The whY generation".

60737

William Brighenti is a CPA, Certified QuickBooks ProAdvisor, and Certified [Business] Valuation Analyst, operating an accounting, tax, and QuickBooks consulting firm in Hartford, Connecticut, Accountants CPA Hartford.

86375

Ken Garen, CPA, is the co-founder and President of Universal Business Computing Company (www.ubcc.com), a software development firm of high-volume, high-productivity accounting and payroll technology.

28402

Eva Rosenberg, MBA, EA, is the publisher of TaxMama.com, and author of the weekly syndicated Ask TaxMama column. She provides answers to tax questions from taxpayers and tax professionals worldwide.

69451

Amy Vetter, CPA, CITP is the CPA Programs Leader for Intacct Corporation responsible for leading the CPA/BPO Partners nationally.

38026
Brian Strahle is the owner of LEVERAGE SALT, LLC where he provides state and local tax technical services to accounting firms, law firms and tax research organizations across the United States. He also writes a weekly column in Tax Analysts State tax Notes entitled, "The SALT Effect." For more info, visit his website: www.leveragestateandlocaltax.com
109209
Scott H. Cytron, ABC, is president of Cytron and Company, known for helping companies and organizations improve their bottom line through a hybrid of strategic public relations, communications, marketing programs and top-notch client service. An accredited consultant, Scott works with companies, organizations and individuals in professional services (accounting, finance, medical, legal, engineering), high-tech and B2B/B2C product/service sales.
29839

Rita Keller is a nationally known CPA firm management consultant, speaker, author, mentor and blogger. She has over 30 years hands-on experience in CPA firm management, marketing, technology and administrative operations.

57699
Stacy Kildal is the mom of two fantastic kids, an Advanced Certified QuickBooks ProAdvisor, Certified Enterprise Solutions ProAdvisor, Sleeter Group Certified Consultant, a nationally recognized member of the Intuit Trainer and Writer Network, and co-host of RadioFree QuickBooks.
31852
Michael Alter's blog specializes in providing practical advice to those who seek greater profitability and practice management tactics that enhance deeper client relationships.
36391

Sally Glick, CMO, Principal, Marketer of the Year in 2003 and AAM Hall of Famer in 2007, leads a lively discussion of the constantly expanding roles of marketing and the professional marketers that drive this initiative in accounting firms of all sizes.

107760

The IMA Young Professionals Blog features the insights of IMA’s Young Professionals Committee. Committee members share advice and experiences on careers, continuing education, work/life balance, and other issues affecting young accounting and finance professionals.

37694

FEI Financial Reporting Blog provides highlights from SEC, PCAOB, FASB, IASB, and other regulatory news, including reporting under Sarbanes-Oxley Sect 404. It is written by Edith Orenstein, Director of Technical Policy Analysis at FEI.

118990

Sue Anderson has 30 years of experience in continuing education for accountants. Currently she is the program director for online CPE provider CPE Link.

66719

Jim Fahey is COO of Apple Growth Partners, a regional CPA firm in Ohio. His focus is on the effective and efficient use of technology within the firm by all team members.

43490
Caleb Newquist is the Editor-in-Chief of Sift Media US, overseeing content for both AccountingWEB and Going Concern.
71102

Leita Hart-Fanta, CPA, CGFM, and CGAP is the author of "The Yellow Book Interpreted" and owner of Yellowbook-CPE.com a website devoted to training for governmental auditors.

97839

AccountingWEB is more than just a U.S. team of journalists and financial and technology experts - we have an international side, too! Members of our British team who publish AccountingWEB.co.uk share their ideas, insights, and perspectives from across the pond.

58489