We know that the engagement leader is the pinnacle of a CPA firm’s quality control system. Ultimate responsibility for the planning, performance and completion of an engagement is on the shoulders of the engagement leader. In carrying out his/her responsibilities, the leader often acts as a conduit, i.e., passing along instructions, guidance and information to facilitate the work of engagement personnel. The more effective the leader is in “passing through” knowledge, the more effective and efficient the engagement will be!
Here is a chronology of how this may occur on an audit engagement:
1) The engagement leader is responsible for delivering and discussing the engagement letter, discussing current economic events, asking questions about fraud and discussing the planned conduct of the audit with client management personnel. Information obtained should be documented in a memo and passed through to the in-charge accountant prior to planning the engagement.
2) Information about the client obtained by the leader throughout the year should be passed through to the in-charge accountant during pre-engagement planning.
3) When the in-charge accountant has completed engagement planning, the leader should lead the brainstorming meeting with engagement personnel to identify risks of material misstatements due to error and fraud, plan the audit strategy and provide training for staff personnel.
4) By frequent contact during engagement performance, and by reviewing work in stages, the leader can pass along his/her expertise when it can best prevent wasted time and mistakes.
5) Completing the engagement review process offers one of the greatest opportunities for the leader to pass-through his/her expertise to develop the capabilities of all engagement personnel.
Integrating these quality control procedures at appropriate times into the chronology of an engagement enables the leader to ensure compliance with auditing standards and, at the same time, creates the highest level of engagement profitability. The effective engagement leader is indeed a “pass through” entity!
Watch for my webcasts later this year on “How to Become an Effective Engagement Leader.” When you register for my free email newsletter on our website, www.cpafirmsupport.com, you’ll receive notification of presentation times as well as notification of new small audit tools we’ll be releasing in 2011.