I’m pretty much a creature of habit. My thinking, like most accountants, is “If it ain’t broke, don’t fix it!” Change isn’t easy for any of us, particularly when it appears to cost money!
In my training seminars and webcasts we talk a lot about change. I always encourage participants to identify opportunities to change their approaches to audits to get the work done faster, even on small audits. Effective planning on every job is the way to do this.
When we apply our common sense to audit planning, there are basically four decisions that must take place. Effective planning outlined in SAS No. 108 must include, among other things, the development of an audit strategy. These four decisions comprise an audit strategy:
1. Determine the level of risk of material misstatement at the financial statement and assertion levels and the impact of these risks on tolerable misstatement by financial statement classification.
2. Design the most cost-beneficial audit strategy which should include the types of tests necessary to reduce detection risk to an acceptably low level.
3. Plan the nature, extent and timing of analytical procedures and tests of balances procedures to be consistent with the types of tests and evidence collected from the risk assessment procedures.
4. Decide on sampling or non-sampling procedures to collect evidence in the most efficient way.
Planning outside the box is making these four decisions on every audit. Taking time to plan our audit strategies will save time because our audit plan will include only procedures and documentation that is necessary to accomplish audit objectives in each engagement’s circumstances. Considering every engagement as unique is change that pays!