In previous blogs, I've discussed many ways to save time on small audits. Most auditors realize that maximum time savings can be achieved on audits only by planning, performing and documenting audit procedures in the most efficient ways. In summary format, here are 10 steps that can simplify our approach to small audits, comply with applicable auditing standards and create huge time savings:
- Plan engagements before the fieldwork begins. Given engagement risks, plan to perform only the minimum amount of work necessary. Plan to use the most efficient audit documentation.
- Involve engagement executives frequently throughout the engagement to maximize quality and efficiency.
- Tailor audit strategies and modify standard documentation for each engagement's circumstances.
- Use flowchart documentation of clients' internal control and accounting systems. Replicate and update the flowcharts each year.
- Perform systems' walk-through procedures to corroborate the control risk evaluation from the prior period, to identify risks of material misstatement and to generate substantive evidence which may lower the level of control risk for the current year.
- Read the general ledger to identify and follow up on other potential risks of material misstatements, to analyze unusual transactions and amounts and to select transactions for performing further inquiry, inspection and observation procedures. Whenever possible, reduce the year-end detailed testing as a result of these substantive procedures.
- Use analytical procedures to verfiy financial statement assertions whenever they require less time than detailed tests.
- Calculate tolerable misstatement and the lower limit for individually significant items at both the financial statement and assertion levels based on applicable risks of material misstatement.
- Plan strategies not to sample whenever possible.
- Modify detailed tests of balances procedures to reflect the quality of the substantive evidence obtained from procedures above.
One of my objectives is to help CPA firms put fun and profits back into small audit engagements! I have prepared text materials and PowerPoint slides covering the subjects above for use as in-firm training materials. New, on-demand webcasts for self-study CPE credits on these subjects are becoming available monthly. During the summer and fall months, I'll release a Small Audit Handbook detailing the simplified small audit approach outlined above and a complete, stand-alone Small Audit Documentation Manual with electronic applications. You can read more about these products, and sign up for email notification of their release, at www.cpafirmsupport.com.
Post a comment below and let our readers know how you are planning to make more money on audits!