How to Plan an Audit during Fieldwork and Get Away with It!
First, let me say that planning during fieldwork is the least desirable approach for audits. The truth is, however, it happens! Engagement personnel get tied up on a problem job. The client doesn’t have required schedules prepared. The in-charge accountant is wrapping up another job. The result is fieldwork start dates get changed and the engagement team “hits the ground running!”
While we know starting an engagement without proper planning will cost us, sometimes we have to do it. Here is one approach to staying alive for the in-charge accountant when it happens:
• Check on status of client assistance upon arrival
• Meet with staff persons, brainstorm and assign standard stuff
o Trial balance input
o Proving bank reconciliations
o Replicating prior year audit documentation
o Support tests for fixed assets, expenses, etc.
• Perform client acceptance and continuance evaluation
• Prepare engagement letter and meet with client CEO or owner
• Review prior year’s working papers
• Read the general ledger
• Create or update internal control documentation
• Perform systems walk-through procedure
• Start fraud risk memo and planning document
• Tailor audit program as you go
While the in-charge accountant may stay alive without proper planning, the biggest problem with planning in the field will be playing “catch up” from the beginning of fieldwork to the end. The work flow will be filled with stops and starts and inefficiencies. Time will likely be wasted due to over auditing and using the “SALLY” method of performing procedures and preparing documentation. Because of little or no on-the-job training for staff personnel, the in-charge accountant’s supervision and review time will skyrocket! In addition to all this, the in-charge will probably need an anti-depressant!
When we have to plan in the field, the impression left with client personnel is often less than favorable. Clients or prospective clients often evaluate a CPA firm based on how they run their own shop. Beginning the engagement with little or no planning can speak negatively about the way a CPA firm conducts its business.
So, how can we play “catch up” and minimize the damage? Here are some suggestions for the in-charge accountant on how to “quick-start” planning with the least amount of negative impact:
1. Visit the client’s office and obtain the schedules that have been prepared by client personnel.
2. Postpone the start of the fieldwork for a day.
3. Return to the office and meet with engagement personnel to brainstorm and assign work that they can do before going to the field, e.g., replicating prior year schedules, loading trial balances and assembling standard practice aids to use in their areas of assignment.
4. Complete the engagement letter, client acceptance or continuance documentation and review prior year’s working papers.
5. Go to the field the next day, assign work to staff and perform the remainder of the planning procedures above.
The final procedure is to figure out how we prevent this approach to planning from happening again next year! To say it another way, what do we need to change to enable us to perform proper planning next year before starting fieldwork! The simple answer is for us to make planning a priority. I’ll address the longer answer and talk more about how to make planning happen before fieldwork in a future blog.
My Small Audit Series of live and on-demand self-study webcasts address ways auditors can avoid these planning and other pitfalls to maximize engagement profits. You can obtain course descriptions and register at www.cpafirmsupport.com.
by Larry Perry, CPA, CPA Firm Support Services, LLC - Larry has over 40 years experience as a CPA practitioner, author of accounting and auditing manuals, author and presenter of live staff training seminars and author of webcast and self-study CPE programs. He is co-founder of CPA Firm Support Services, LLC (www.cpafirmsupport.com), an organization providing resources, training and consulting to smaller CPA firms. Larry writes a weekly blog on AccountingWEB.com focusing on small audits, reviews and compilations. He is currently developing documentation manuals and handbooks for small audits, reviews and compilations and related electronic practice aids.