Increasing Audit Profits Series No. 12--Creating Proprietary Audit Documentation

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During most of my live seminars over the past four years, several participants complained about the ever-increasing volume of audit practice aids provided by major publishers. One CPA said concerning the 2007 updates to the risk assessment standards, “I received the voluminous annual updates for my purchased audit guides, opened them and couldn’t determine where to begin.” Many practitioners lamented that the increased volume of practice aids was significantly greater than other engagement documentation containing audit evidence!

The practice aids provided by major publishers are an important part of every CPA firm’s reference library and quality control system.  Because these practice aids are designed in a one-size-fits-all format, however, they contain guidance and documentation that may not be necessary on all engagements.  Some of the forms, checklist and programs, for example, don’t meet the needs of smaller audit engagements. In fact, using standard, unmodified practice aids on smaller audits will almost always result in over-auditing!

To increase audit profits many firms are modifying purchased practice aids for use on smaller audits or are creating their own proprietary documentation. Here are some excerpts from an article discussing these issues published in the December, 2009 issue of the Journal of Accountancy.  It is written by Michael Ramos, CPA and is entitled Risk Based Audits Best Practices.

Regarding proprietary methodologies and practice aids:
“Most firms build their audit methodologies around a set of standardized practice aids. These forms and checklists help auditors comply with the requirements of the standards, but they should not be confused with the standards themselves. An auditor can comply with the standards and prepare audit documentation in many ways.
‘Forms and guidance only cover a percentage (hopefully high) of the requirements,’ says Lyn Graham, chair of the AICPA task force that drafted the risk assessment audit guide. ‘They should not be a substitute for training or understanding or consulting the literature for unusual situations. From what I have seen, one needs to deviate (probably more often than auditors would like to) from the forms to comply with GAAS.’
Once thought to be the purview of only the largest firms, growing numbers of audit firms are developing a more customized, firm-specific set of audit practice aids by creating their own forms or checklists for highly judgmental areas such as the documentation of internal controls.”

Regarding benefits of the process of creating methodologies and practice aids:
“It’s not just about the forms—there is tremendous value in the process itself. To create practice aids, firm personnel must obtain an in-depth understanding of the requirements of the standards and how they should be applied. This technical expertise becomes invaluable not only for performing audits but also for other critical activities such as training. Firms that make the commitment to “own” their audit methodology do so with the expectation that ultimately it will lead to more effective and efficient audits.”

The Ramos article contains this and other practical guidance that can result in increased profits on audit engagements.  The article can be downloaded under the Publications tab at and is a must read for every auditor.

My live and on-demand webcast entitled Using Only Key Forms and the Most Efficient Documentation provides illustrative guidance on how to modify practice aids purchased from major publishers for use on smaller audits.  You can download a syllabus and register by clicking the applicable box on the left side of our website, .


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