The Annual Audit Dilemma | AccountingWEB

The Annual Audit Dilemma

By Chris Wood, CPA - My outside auditors were in all last week performing the various tasks associated with issuing the “audited” financial statements. I’ve been through these endless times, but it’s still unnerving. I dread audit time. What did I miss? What question will they ask that I can’t answer? About the hardest thing they came up with this year was “How do you explain the variance in inventory turns between the years?” I was taken aback. I don’t know. Why have my turns changed so drastically? I’m sure I sit around at the end of everyday agonizing over my inventory turns and why they are different. I know, I’ll ask the plant manager. He’s got his finger on the pulse. Surely he’ll know why my inventory turns have changed.

“Hey Jeff, What’s up? By the way the auditors were asking about inventory turns. Do you know they changed so drastically?” I politely asked.

“Get out of my office bean counter. I’m too busy to be bothered with such trivial matters,” he rudely responded.

“OK Jeff, I’m sorry. Oh yeah, I approved your expense report. I’m going to get that paid” I responded, and then under my breath I muttered “in 2015”. He’ll never learn.
Still I need to know why my inventory turns have changed. I know, I’ll ask the IT manager. He’s always creating reports about this and that with the manufacturing software.

“Hey Nick, How ya doin’? The auditors want to know why our inventory turns changed so drastically. I told them you’d know for sure. You probably already have a report that explains it all. Don’t you?”

“No, I don’t.” Nick dryly retorted. “Would you like to see the bookings for the next three months?”

“Yeah go ahead and email that to me.” Still, I need to tell the auditors something. If I can’t answer that, they’ll think something else is wrong. They’ll expand their testing. They’ll be here forever. I’ve got to come up with something.

My auditors’ names are Josh and Courtney. Whatever happened to Bill and Tom or Karen and Debbie. I must be getting too old when I speculate over the names of my auditors. “Hey Josh, I noticed that you used the labor and overhead content in my inventory to calculate the theoretical inventory turns. Be advised that we reduced our labor by about 2,000 hours when we moved our stamping operation to Tennessee. We now purchase that material that we used to make. Also that new automated cell we put in this year reduced labor by another 1,500 hours. That’s probably why you’re calculating that variance”.

“OK, Thanks.” He said as he documented his work papers. That’s it? I can’t wait until next year’s audit.

Next time – Pivot tables. Accountants that know how to use pivot tables use them often.

This blog

by Chris Wood, CPA - Chris Wood is a CPA with experience in Big Four, large regional and local public accounting firms. Write to the good Captain on everything under the sun concerning the captivating world of Excel!



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.


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.


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.


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.

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.

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".


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.


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


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


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

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:
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.

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.

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.
Michael Alter's blog specializes in providing practical advice to those who seek greater profitability and practice management tactics that enhance deeper client relationships.

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.


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.


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.


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


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.

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

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


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 share their ideas, insights, and perspectives from across the pond.