I previously wrote about my general aggravation with auditing standards and found the flurry of comments to be very enlightening.
But I'm still aggravated, and here is why: I think I alluded to a small audit client I have that is a small but hopeful franchisor. The Company is so small she tracks all of her activity in an Excel worksheet. Yes, I have written a comment on that in the internal control communications letter, but she doesn't view the expense as worthwhile.
For 2009, her Excel spreadsheet has 150 lines of transactions. That's it. That is both deposits and disbursements. I am able to test close to 100% of the disbursements in under 45 minutes. Testing the revenue (primarily royalty payments from franchisees) is effectively done through analytical procedures. Essentially, I get all of the detail testing done in under 90 minutes.
How long does it take me to do all of the checklists? Well in excess of 8 hours. A lot of that is spent filling our forms and saying Not Applicable. Like that there isn't any internal control structure to speak of. That there really aren't controls over financial reporting. There is an Excel spreadsheet! That's it. The CPA who does her tax return creates an income tax basis trial balance to which I post an audit adjustment to convert to GAAP. It's a material weakness in internal control. The client doesn't really care.
So yes I'm aggravated that in providing a service the client needs I have to do what feels like a lot of busy work. I don't get as aggravated spending in excess of 8 hours doing checklists on operating companies because it helps to bring everything together. I've assessed the risks like I'm supposed to for this franchisor, but am I going to get through peer review without all of these checklists? I'm not willing to take the risk on that.