Increasing Audit Profits Series No. 3--Know Your Stuff!

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Years ago, I remember meeting auditors that reasoned this way:  “To complete an audit, all I have to do is support balance sheet classifications 100% at the beginning and the end of a year.  Everything else will drop out on the income statement.”  Some of these auditors are still around! This approach may have worked decades ago but not now!  

In a live seminar in a state that didn’t have mandatory peer review, I asked the participants what practice aids they used to ensure compliance with the quality control and auditing standards.  One small-firm CPA shared her firm hired someone from an international firm that brought copies of all that firm’s documentation, which was used in her firm…for the last eight years!  Guess what happened when peer review became mandatory in that state?

A partner in a medium-size CPA firm apparently didn’t like audits.  He delegated all engagements’ supervision and review functions to a qualified manager. The partner did, however, read the financial statements and sign the audit reports.  A few months back, this partner topped the list of disciplinary proceedings on the Professional Ethics Executive Committee page of the AICPA website!

Most of us recognize that knowing what we are doing is required by the AICPA’s Professional Code of Conduct.  We also recognize that quality engagements can only be achieved by complying with all current, applicable auditing and accounting standards.  Unfortunately, we have a few demands on our daily time that often puts learning time near the last item on our “to do” list!  That’s when we attempt to achieve quality by using all the forms, checklists and programs purchased from a major publisher…on every audit!  Quality?  Maybe.  Efficiency? Unlikely!

At a time in our profession when new standards are being issued faster than we can open our email, how can we achieve both quality and efficiency on audits?  To that question I answer: Build an Audit Dream Team!  Be the first in your community to do this and I’m certain offers for television series will flow in faster than the new professional standards!

To build an Audit Dream Team is simple.  All team members just have to know their stuff!  Thorough formal and on-the-job training for all team members, including engagement leaders, is the STUFF of which engagement quality and efficiency are made!  Acquiring knowledge and learning how to apply it to engagements must be a CPA firm’s first priority to build an Audit Dream Team.

A great opportunity is before us right now!  You may know the Auditing Standards Board is in the process of clarifying and redrafting ALL existing auditing standards.  Although they will not be effective until periods ending after December 15, 2012, they ALL will be effective at that time.  Approximately 20 of such new standards are already published in the Clarity Project section of the AICPA’s website and can be downloaded for training purposes.  The good news is that the changes are mostly insignificant.  The bad news is that there are over 30 new standards!  Waiting until near the end of 2012 to train staff personnel could turn a Dream Team into a Nightmare!  It will take most of us at least two years to learn the organization and content of all the new standards, so the time to start is right now!

The ASB has prepared a “map” of the Clarified SASs to the existing AU Sections of the AICPA Professional Standards.  I’ve expanded that “map” to link back to the SASs that are currently effective.  This “map” can be used as a guide to facilitate individual and group study in your firm to ensure your Dream Team knows their stuff before these standards become effective at the end of 2012.

You can download the AICPA’s Map from the Clarity Project section of their website or you can request my modified version on my website, www.cpafirmsupport.com, by sending an email under the “Contact Us” tab.  Write “Email Map” or “Please Help!” in the subject line.  You may also wish to sign up for our free email newsletter to receive my new blog later this year that will dissect each of the new audit standards.

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