Capturing Time-Especially When You Are Busy

Time marches on, so Tracy Lawrence says. The question–at least for a CPA–is: Can I bill for it? Not if you don’t know where it went.

iStock_000002150418SmallDo you ever work all day and think “I need to log my time.” But as you try to recall what you did, you can’t–at least not well anyway. You’ve worked all day (all 10 to 14 hours of it), and now, you can’t remember what you did. So you start the drill. Scanning emails and tax software, you construct a summary. You’re able to create a list of projects, but you’re not quite sure how much time you actually worked on each. So you guess.

Or maybe you’re one of those people who uses yellow-stickies. At the end of the day, yellow stickies are everywhere–on the computer screen, your desktop, your scanner, maybe even in your pants pockets. This is better than nothing, but still not an efficient or accurate method.

So how should we track our time?

1. Capture time as you work.

I can promise you if you don’t, you will spend more time–time you don’t have–summarizing your time at a later hour.

Turn your timer on–most time and billing software has this feature–as you start a project. But what if I get a phone call or someone walks in and interrupts the timed project?

Two suggestions here:

  • Close your door as you start a new project and
  • Don’t answer your phone for a period of time, say one hour

By not closing the door and answering the phone every time it rings, you are inviting interruptions.

Focusing on one project saves time. Moving back and forth between projects does not.

What if your boss will not allow you to close your door and requires you to answer phone calls as they come in? I can’t help you. One thing I do know: Sustained concentration creates efficiency and a better work product.

2. One last word on capturing time: Key in your time daily.

If you are using your time and billing software as you work, you’ve solved this issue. But if not, at a minimum jot down the projects you work on and then key those in at the end of each day. Keying in time for a whole week or two weeks at one time can be done, but if your daily sheet doesn’t add up (you know you worked 12 hours but your sheet reflects 8 hours), you will not be able to recall–days later–where that time went. I know. I have done this too many times in the past.

Main Points

  1. Track your time as you work.
  2. Key in your time daily.

You already know these things. I’m just writing this post as a reminder; I know I need the same from time to time.

Other Thoughts

Do you have other tips you can share about tracking time? If yes, please do.

Variable Interest Entity Alternative Accounting for Private Companies

You will recall that in 2012 the Financial Accounting Foundation, the parent of the Financial Accounting Standards Board,  created the Private Company Council (PCC) to suggest exceptions or modifications to FASB standards; the FASB then endorses the recommended change. I am glad to report that the FASB has issued an alternative to accounting for variable interest entities (commonly referred to as VIEs). Prior standards required the consolidation of certain entities due to leasing arrangements.

FASB Accounting Standards Update No. 2014-07Applying Variable Interest Entities Guidance to Common Control Leasing Arrangements provides an exemption when a private company lessee elects not to apply VIE guidance to a lessor; all of the following must exist (to use the exemption):

  • The private company lessee and lessor are under common control.
  • The private company lessee has a leasing arrangement with the lessor.
  • Substantially all activity between the entities is related to the leasing activity between them.
  • If the private company lessee explicitly guarantees or provides collateral for any obligation of the lessor related to the asset leased by the private company, then the principal amount of the obligation at inception does not exceed the value of the asset leased by the private company from the lessor.

Effective Dates

The standard should be applied for annual periods beginning after December 15, 2014, and for interim periods within annual periods beginning after December 15, 2015. Early application is permissible for all financial statements that have not been issued. The alternative should be applied retrospectively for all periods presented.

Retaining Superseded Audit Documents (for Next Year)

Should an auditor retain superseded copies of draft financial statements or review notes once an audit is complete?

Through the years I’ve had the opportunity to work with several CPA firms in various capacities. Sometimes while visiting those firms, I open an audit file, and see draft copies of financial statements or review notes.

Buried in papers

I always cringe.

Reason Auditors Retain Superseded Documents

I ask firm members, “why do you keep these?” Here are the more common answers I receive:

  1. Staff and managers: “So next year I’ll remember what the reviewer focused on.”
  2. Partners and managers (and I have to pry to get this answer): “So I can see who made mistakes.”
  3. With regard to draft financial statements: “So I can see how I arrived at the final product.”

So what’s the problem with retaining superseded financial statements or review notes?

Think about this scenario:

Someone appears in your lobby with a subpoena requesting all documentation with regard to a particular audit. A $3 million fraud recently occurred, and your firm audited the company. And now the attorney is looking for a way to recover the loss. The attorney inspects the file contents. She sees damning evidence in the review notes, and she thinks, “Thank you very kindly.” At a minimum, the attorney will know where the audit team struggled. The courtroom scene will not be flattering as the attorney holds up several pages of review notes and says, “It’s obvious the firm does not know how to audit. Look at all these review notes from its own personnel.” Or the attorney may hold up the eight copies of the financial statements–each one different. The suggestion: This firm can’t put financial statements together.

Audit Standards About Retaining Superseded Drafts

Do audit standards require firms to remove superseded draft copies of financial statements or work papers? AU section 339, paragraph .07 states:

The auditor need not retain in audit documentation superseded drafts of working papers or financial statements, notes that reflect incomplete or preliminary thinking, previous copies of documents corrected for typographical or other errors, and duplicates of documents.

I see no requirement to remove superseded documents, nevertheless, it does appear the standard implies the auditor should consider removing them.

Responses to Reasons for Retaining Drafts

Reason 1: I retain the draft documents to remember what the reviewer focused on in the prior year.

Response: If corrections have been made, then the work papers themselves should model appropriate steps for the next year, assuming no significant client changes have occurred.

Reason 2: So I can see who made mistakes.

Response: Retaining superseded financial statements in order to point out someone’s error is, in my opinion, a waste of space. Once I sign off on the financial statements or a work paper, I am assuming responsibility for the work product, regardless of what someone prior to that review did or did not do.

Reason 3: So I can see how I arrived at the final work product (financial statements).

Response: Having several copies of financial statements with different stages of development would only be confusing–especially a year later. The prior year issued audit report should provide all someone needs to start building the current year financial statements.

Your Thoughts?

These are my thoughts, but, hey, I can be wrong (it happens more than I care to think about). What do you think? Should auditors retain superseded documents?

A Ruler for Your Computer Screen

Notice – This morning, March 13, 2014, I realized that CNET took the ruler download off its site on the 12th. I don’t know why. Sorry. You can Google “Windows ruler” to find it on other sites, but I am not comfortable recommending sites I’m not familiar with; an alternate download site (which I cannot vouch for since I am not familiar with it) is: http://www.arulerforwindows.com/ (Warning – I have been told through a LinkedIn participant that using this link will also download additional software.)

My original post was as follows:

Ever need a ruler for your computer screen? I know I do. In the old days, we would lay a ruler down on a physical ledger to help us stay focused on a particular area. But with a computer, how do you do this?

I use three computer screens, and often I’ll look at a number on a screen and then try to compare it to a number on another. When I return my eyes to the first screen, I sometimes can’t find the original number. I need an electronic ruler. Is there one? Yes.

I have been using an electronic ruler for several months and have found it helpful. It’s available as a free download ($1 optional donation) from cnet.com.

After downloading the ruler, I placed it in my Windows toolbar so I can access it at any time.

Here’s a picture of the ruler in use.

skitch

The more you use the ruler, the more you’ll understand how to expand it, shorten it, and move it. You can also open several rulers at a time; so if you need to place a ruler on three different screens, you can.

Hope you find this trick helpful.

Is It Best for a CPA to Text, Email or Call?

A sprint, run or walk

A CPA called me today and left a message with a question. My first thought was to call him. If I phone him, one of the following happens:

  1. No answer and I play phone tag.
  2. He answers and wants to talk about other things.
  3. He answers, and I provide him with a response.

The first two possibilities are not good (if you are busy like I am–and I know you are).

Young and successful businessman

My next thought: I will text him. I did, and it took about 30 seconds.

With the options to text, email, or call, which is best? Let’s see.

I like to think of these choices as: a sprint, a run, or a walk.

Texting – A Sprint

If a client or firm member texts me, I will text back–as long as:

  • The response is short and
  • The response does not contain sensitive information

Why not just call or email the client or firm member?

In the middle of busy season, I’m looking for every moment I can save. Many times a text answers my client’s or firm member’s question–and I can do so in a timely manner (this is better than not responding at all because I’m too busy).

Emailing – A Run

When is email a better option?

Mainly when you need to send attachments. Emails take longer than texts but seem to work better–at least for me–when more than one or two short answers are necessary.

If you are emailing sensitive information, consider using a secure method such as ShareFile to do so. ShareFile offers an Outlook add-in that makes the transfer seamless.

Calling – A Walk

I call when the message is important or long.

We lose something in electronic communications. Our tone of voice and inflections say a great deal. Phone calls will usually take longer than texts or emails, but may be warranted if the issues are of high importance.

If my communication is lengthy (say more than three medium-sized points or one complicated issue), I usually opt for a phone call. If you are providing accounting, tax, or auditing advice, consider whether you need to document the phone conversation in a memo to your client’s file. I use a form that I’ve created for this purpose and keep it handy in my Evernote cloud account.

Summary

Sprint, run, or walk. Each has its advantages and disadvantages. Regardless of your choice, it’s all about communicating clearly and timely. Oops sorry, got to go–someone is texting me.

10 Steps to Make Your Work Papers Sparkle

Ever been insulted by an audit review note?

Your tickmarks look like something my third-grader created.

Rather than providing guidance, the comment felt like an assault.

Or maybe you are the reviewer–you stare at a work paper for several minutes– and you’re thinking, “what the heck is this?” Your stomach tightens as you continue, “I really don’t have time for this right now.”

Picture Courtesy of Canva

Picture Courtesy of Canva

Here are ten steps to make your work papers sparkle.

  1. Timely review work papers. The longer the in-charge waits to review notes, the harder it is for the staff person to explain what they did and, if needed, make corrections. Also consider that the staff person may be reassigned to another job; consequently, he may not be available to clear the review notes.
  2. Communicate the work paper’s purpose.

a.  An unclear work paper is like a stone wall; it blocks communication.

b.  State the purpose of the work paper; for example:

Purpose of Work Paper – To search for unrecorded liabilities as of December 31, 2014; payments (greater than $30,000) made from January 1, 2015 through March 5, 2015 examined (by review of invoice) for potential inclusion in accounts payable detail as of the year-end.

Or:

Purpose of Work Paper – To provide a detail of accounts receivable that agrees with the trial balance; all amounts greater than $20,000 agreed to subsequent receipt.

If the person creating the work paper can’t state the purpose, then maybe none exists. It’s possible that the staff person is trying to copy a work paper from the prior year that (also) had no purpose.

Click Purpose Notation Explanation for brief audio comment.

c.  All work papers should satisfy a part of the audit program (plan). No corresponding audit program step? Then the audit program should be updated to include the step, or the work isn’t needed.

3.  Each work paper should have the originator’s sign-off (so we can know who created it).

4.  Audit program steps should be signed off as the work is performed (not at the end of the audit–just before review). The audit program should drive the audit process — not the prior year work papers.

5.  Clearly define tickmarks.

6.  Reference work papers. (If you are paperless, use electronic links.)

7.  Clearly communicate the reason for each journal entry.

The following explanation would not be appropriate:

To adjust to actual.

A better explanation:

To reverse client-prepared journal entry 63 that was made to accrue the September 10, 2015 Carter Hardware invoice for $10,233.

8.   When in doubt, leave it out.

Far too many work papers are placed in a work paper file simply because the client gave the document to the auditor. Moreover, once the work paper makes its way into the file, auditors get “remove-a-phobia“–that dreaded sense that if the auditor removes the work paper, she may later need it.

If you just place those documents in your audit file and do nothing with them, they may create potential legal issues for your firm–I can hear the attorney say, “Mr. Hall, here is an invoice from your audit file that clearly reflects fraud was occurring.”

Again, does the work paper have a purpose?

My suggestion for those in-limbo work papers: Place them in a “file 13” stack until you are completely done; then destroy them (and I mean completely). My firm is paperless, so I place these work papers in a recycle bin at the bottom of my work paper tree. Before going paperless, I would place them in a large manila envelop marked “file 13”.

9.  Forms should be filled out; blanks should not appear in completed work papers (use N/A where necessary).

10. Most importantly: Always be respectful in providing feedback to staff. It’s too easy to get frustrated and say or write things we shouldn’t. For instance, your audit team is more receptive to:

Consider providing additional detail in your tickmark definition: For instance–Agreed invoice to cleared check payee and dollar amount.

This goes over better than:

You failed to define your tickmark–again?

Last Remarks

What about your review process? Are there other points you would add to the list?

You may also be interested in a related post: 7 Steps to Effectively Review Financial Statements.