Increasing Audit Profits Series No. 30—Maximizing Time Savings when Reviewing Prior Year’s Working Papers
Reviewing the prior year’s working papers, considering findings and conclusions, adjusting journal entries, uncorrected audit differences and assessing their impact on the current year’s risk assessment offers an auditor many opportunities to increase audit profits. Here are some important questions that should be asked during this review.
1. What objectives does each working paper accomplish? Is there faster way to accomplish the objectives such as a highly effective analytical procedure instead of a more costly test of balances procedure? Will the audit strategy change this year?
2. Are any of the working papers unnecessary? Are any prepared because of preference or tradition? Can the scope of the work be described in the audit program and only exceptions and their disposition documented in the working papers or memos.
3. Can computer-prepared documentation replace handwritten schedules and memos? Are there other “paper-less” auditing techniques, such as the use of data extraction software, that could be used to save time?
4. Does the firm’s template library contain templates that could be used in place of handwritten schedules?
5. Is there an opportunity to design new spreadsheet templates to eliminate handwritten schedules or to improve documentation prepared by the client?
6. Will sampling or non-sampling methods be used this year? What is the most efficient method to use? Can we plan a strategy not to sample for any financial statement classifications?
7. Are there new accounting or auditing pronouncements that will affect working paper preparation this year?
8. Do we need to engage specialists for any part of the engagement?
9. Will any of the prior year’s adjustments to the financial statements be recurring this year? Will any additional information be necessary to make the recurring adjustments?
10. What work can be done prior to the client’s fiscal year end? What work must be done as of the client’s fiscal year end?
11. What due dates need to be scheduled for this year?
12. Considering the risks of material misstatement in account classifications, what is the staff level and special experience of engagement personnel that should be considered when scheduling staff? Can we use a temporary or paraprofessional person to more economically do lower-level work?
13. Has the nature of the engagement changed this year? Has the client made any special requests for additional information?
As you can see, this review is not something we can do in the back seat of the car on the way to the first day at the client’s office! This function is the catalyst for increasing profits on every engagement we undertake. If we fail to ask these questions during this review, we’ll likely not ask some of them at all!
These and other small audit subjects are included in my live webcast and self-study Small Audit Series. You can download syllabuses and register for any of the stand-alone courses or for the entire series by clicking on the applicable box on the left side of my home page, www.cpafirmsupport.com.