Paperless or Not? A Contrarian's View

About five years ago, all my audits were nearly 100% paperless and had been for several years.  As a sole practitioner, some of my audits required 150 hours to complete.  Most averaged around 75 hours. Although my documentation was electronic, the standard forms I purchased from a major provider increased in number and content each year.  For my small audits, it reached a point where it was almost taking more time to read the forms than to do the work!  Making the problem worse, if I didn't spend hours modifying the standard documentation, my professional judgment was being overridden by the requirements of some of the forms!  I'm sometimes slow but I finallty realized that the cookie cutter approach to documentation on my small audits wasn't working.  My great awakening resulted in returning to hardcopy documentation for most of my smaller audits!  Heresy?  Please read on.

To make money on smaller audits, on any audit for that matter, the professional judgment we're required to use in designing audit procedures has to extend to our audit documentation.  The day of using one standard set of practice aids and other audit documentation is nearing it's end!  As the volume of accounting and auditing pronouncements pass the overload level, trying to include everything an auditor needs to know in standard practice aids is resulting in documentation few auditors have time to read, let alone understand!  I don't know about you, but I was taught to think about my audit strategy first and then concentrate my procedures in audit areas with the highest risks of error or fraud.  Deciding on and completing documentation was secondary to everything else!

Here is reality for our times.  Trying to develop an effective and efficient audit strategy and documentation has to begin with the strategy, not the documentation!  We must first decide on our strategy given engagement risks, then decide how to most efficiently prepare the documentation in those circumstances.  It may be for our smaller audits, designing, completing and storing our documentation electronically does NOT result in the most efficient approach!  Before we jump on the paperless bandwagon for our small audits, it's time to count the cost!  In the next few blogs, we'll discuss cost-efficient documentation alternatives for small, medium and large audits.  Post a comment and tell us how you are answering the question, "Should we go paperless or not?"

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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.

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