Using Project Management in Audits: The How and the Why

It's not enough to be effective, we must be efficient

On the first day of your audit, you’re confident you’ll deliver your report on time. You have visions of a happy client and happy firm partners. But, somewhere along the way, things break down. Your best auditor transfers to another job. You learn–as the audit progresses–that your junior staff member lacks sufficient training. Your client is not providing information as requested. And, additionally, your audit team has unearthed a fraud.

How can you lessen or respond to these problems? Project management. In this post, I’ll tell you what it is and how you can start using project management in audits, including software selection and practical implementation steps.

Using Project Management in Audits

 

Using Project Management in Audits

Auditors need to be effective (by complying with professional standards), but we also need to be efficient (if we want to make money). And project management creates efficiency.

Managing resources, identifying impediments to audit processes, responding to scope creep–these are just a few of the issues that we encounter. And these challenges can increase engagement time and decrease profits. Worse yet, that promise regarding timely completion can go unmet. 

Either we will manage our audits, or they will manage us. 

So, what are the keys to using project management in audits?

  • Audit team members
  • Project management software
  • Create a project management plan
  • Be aware
  • Be vigilant

Audit Team Members

The number one ingredient to a successful audit is your team members. Even more important is the person managing the engagement.

Have you noticed that some people–regardless of the obstacles–just get things done? If possible, get and keep people like this on your audit teams. You may be thinking–at this moment–“but our firm has a difficult time hiring and retaining great employees.” Then revisit your hiring and retention practices.

Having great team members is essential, but they need to work together. So, how do we get them to play their roles at the right time? A project management plan defined in project management software.

Project Management Software

There are plenty of useful project management software packages. They include:

Pricing varies. Some are free while others are expensive. So, you’ll need to do your research to determine which solution is best for you. Personally, I use Basecamp at $50 per month. If you want to start with a free application, try Trello or Asana. Another option is Smartsheet (an Excel-spreadsheet-based product) at $25 per month. Larger firms may desire to take a look at XCMWorkflow.

Regardless, get your feet wet. If you’ve never used a project management package, it’s hard to understand the beauty of doing so.

Basecamp

Here’s how I got my own feet wet.

Four years ago I started using Basecamp. And why did I pick this software? Mainly, because of ease of use. I can create cloud-based to-do lists for my audit teams and my clients. Also, Basecamp allows me to hide my audit team’s to-do list from my client. So, my audit team can see the client’s to-do list, but the client can’t see my audit team’s list.

Additionally, I can assign each to-do item to an audit team member or client personnel. And even better, I can assign a due date. When the to-do item is due, the designated person receives a reminder email. (As you can see, I no longer need to send a client assistance checklist to my clients. Those tasks that once resided in a Word doc now live in Basecamp.)

Basecamp provides iPad and iPhone apps so that I can see my projects on those devices. Additionally, I access my projects on my Windows desktop using the Internet. So, Basecamp is accessible from anywhere.

Here’s a video overview of Basecamp:

Once you’ve picked your project management software, you need to create a project management plan.

Create a Project Management Plan

What is a project management plan? It’s deciding what, when, and who. These three factors are dependent upon the deliverables, and in our case, the deliverable is the audit report.

Who

First, let’s start with who will perform the actions.

A partner, an in-charge, and one or two staff members often comprise an audit team. Regardless of the team size, your first decision is “who is going to work on the engagement?” and as we said above, this is the most crucial element in getting your audit done. But notice that an audit involves not only your team members but client personnel. You can’t audit unless they provide information, answer questions, and allow you to inspect documents. You might also work with specialists or attorneys

Add all persons to your project management software, including audit team members, client staff, and others. (In Basecamp, I add persons to the project by sending an invitation email from within the software.) But how do we know who we will work with? That depends on what we plan to do.

What

Second, determine what needs to be done. But how do we do this? The development of our audit plan.

The audit plan is our response to risk assessment which is performed early in the engagement. Once we perform walkthroughs, make inquiries, inspect documents, and make observations, we become aware of risks. And in response, we create an audit plan to address those risks. Now we know what needs to be done. The audit plan feeds the project management plan.

Notice the risk assessment process and audit plan informs the project management plan. Notice also that the project management plan is not the same as the audit plan; they are distinctly different. One addresses risk and the other addresses the how, when, and who of getting things done. For me, my audit plan lives in the audit programs (inside my audit software), and my project management plan lives in Basecamp in the cloud. 

Here’s an example of how the risk assessment process feeds my project management plan. As I perform my risk assessment procedures, I see that one person makes disbursements, records the payment, and reconciles the bank statement. Now I know the client lacks segregation of duties in the payables area and has a fraud risk. I will respond to those risks by performing procedures such testing disbursements. Now I know what I am to do. In my project management plan, I need to marry this audit procedure (the testing of disbursements) to a team member. So, I add the task to my project management plan and assign it to one of my people. I also specify a performance date.

Some audit tasks are performed in every audit, regardless of the audit risks, such as obtaining a signed representation letter.  These tasks can be set up in a project management template which can be used to create your initial project management plan. Then you can add the client-specific tasks as needed.

When

Thirdly, we need to specify a date for each action.

Project management software allows you to specify when an action is to occur. Once I know who is on the audit team and what is to be done, my remaining duty is to specify a date for the action. You may wonder, “how do I know when each action will occur?” You may not know precisely, but you have an idea. So, go ahead and specify a date. If later you need to change that date, you can. There is no sin in amending the plan. 

Now that I have a project management plan, I need to be aware and vigilant to keep the plan on track.

Be Aware

The purpose of project management is to enable you to control your audit. But many times the original scope and particulars of our audits change. And if our project management plan doesn’t change concurrently, we lose control.

using project management in audits

For example, if your audit team discovers a fictitious vendor fraud, then your time budget may need to expand. Let’s say we believe the audit will now take an additional 80 hours, and that we need to bring in a fraud specialist. At this point, if we don’t amend the engagement letter, we’ll eat this additional cost. So, it’s time to ask the client for an additional fee. The fraud was not anticipated in the original contract. Now, you need to amend the contract to cover the additional work. (Construction contractors do this all the time with change orders. But auditors are often hesitant to do so.)

As you perform your audit, be aware of scope creep. If your client asks you to perform additional services, then amend your contract. Otherwise, your profit realization will diminish quickly. This is especially true for bid audits such as governmental engagements.

More times than not, changes will occur during the engagement. And regardless of the cause, we must amend our plan. For me, I’m going back into Basecamp and adding additional steps.

In addition to being aware of potential changes, we need to be vigilant.

Be Vigilant

We know from experience that it is natural for the audit process to fall apart. It’s like most things in our universe. Entropy happens.

When it does, you must fight to restore order. Why is this so hard to do? Because you have so much going on. You aren’t working on one audit. You’re working on two–or three. You have office meetings, client meetings, tax deadlines. You are busy! Therefore, if you don’t have a way to maintain control, you will feel desperate.

But that’s the beauty of project management. With it, you can maintain control.

Think of your project management plans as dashboards that flash green or red lights. And those indicators allow you to see how things are progressing–or not. Moreover, this knowledge allows you to react in real time–and to stay vigilant. As you monitor your audits, you can take corrective actions to keep your projects on track.

Summary of Using Project Management in Audits

Project management is simple in concept. You plan tasks, you assign them, and you specify due dates. Then you need project management software to track the actions, assignments and due dates. Once the system is in place, you can monitor your projects and manage change.

So why do most auditors not use project management? Because many think they can do so in their heads–and I know many who feel this way. Sorry, but I have to disagree. If you’re like me (and I bet you are), you have a million things going on. So without project management, you’ll do your work by the seat of your pants. The result? Missed deadlines. Frustrated clients and disappointed partners. Not what you desire.

So, give it try. You will find yourself delivering audits on time and on budget.

Auditing Blog Series

This post is a part of my auditing series. In it, I take you from the start to the end of the audit process. Click here if you’ve missed my prior posts.

Wrapping Up Audits: The How and The Why

Why is it so hard to finish audits? They seem to go on for ever and ever.

Sometimes we think we are almost done with an audit, but then–days later–we realize we were nowhere near the finish line. Very frustrating! For our clients and us. Why does this happen? That’s the question I’ll answer in this post. Wrapping up audits is not always easy, but–in this article–you’ll learn how to finish them efficiently and effectively.

wrapping up audits

Wrapping Up Audits: An Overview

In the final stages of an audit, we are (among other things):

  • Reviewing the file
  • Updating subsequent events
  • Obtaining a management representation letter
  • Summarizing passed journal entries
  • Considering going concern
  • Creating final analytics
  • Creating management letters
  • Communicating control deficiencies

Reviewing the File

If we review our audit work as we perform the engagement, then the review process (at the end) will not be difficult. The thorns and snares come when we allow a junior staff person to work without supervision and without a timely review process. Then, when the manager or partner begins to review the file (at the end of the engagement), it’s a disaster.

The review problem starts at the beginning of the audit, namely in the scheduling of the engagement. Too many times, audit firms send an untrained person out–just to get a warm body on the job. Sure, someone is onsite with the client, but does he know what he’s doing? I said this “warm body” effort could be the result of scheduling, but look even deeper. The root problems could be poor hiring or retention practices or insufficient training. If audit firms are to properly schedule work, they must first hire, retain, and train. Only then will sufficient staff be available.

Once a firm has sufficient personnel, then it needs discipline. Review files daily (or at least weekly)–not at the end of the engagement. Why are timely reviews more efficient and effective? Because the work is still fresh in the staff member’s mind. As he receives review comments, he is better able to respond. Also, timely reviews enable junior staff members to learn as they go, and the reviews provide them with confidence as they work. But in terms of wrap-up, you are much closer to your goal of completing the engagement.

In short, review work and provide feedback as soon as possible, at least weekly.

Updating Subsequent Events

The financial statements should disclose material subsequent events such as legal settlements, the issuance of new debt, the adoption of a new benefit plan, or the sale of stock. And while disclosure is important, subsequent events–such as legal settlements–can have a bearing upon the recognition of amounts in the financial statements.

Here are common subsequent event procedures:

  • Inquire of management about subsequent events
  • Review subsequent receipts and payments
  • Consider attorneys’ responses to request for litigation information
  • Read subsequent minutes
  • Review subsequent interim financial statements
  • Obtain an understanding of management’s methods for accumulating subsequent event information

Perform these procedures so that audit evidence is obtained through the audit report date. Auditors often need to update attorney’s response to coincide with the audit report date. You want the attorney’s letter to be as close as to the audit report date as possible. How close? Usually within two weeks of the audit report date. If there are significant issues, you may want to bring the written response even closer.

Obtaining a Management Representation Letter

Another part of wrapping up in obtaining a written representation letter. The letter should address issues such as:

  • Management’s responsibility for the financial statements
  • Management’s responsibility for internal controls
  • Assurances that all transactions have been recorded
  • Whether known fraud has occurred
  • Whether known non-compliance with laws or regulations
  • The effects of uncorrected misstatements
  • Litigation
  • The assumptions used in computing estimates
  • Related party transactions
  • Subsequent events
  • Supplementary information
  • Responsibility for nonattest services

The date of the representation letter should be the same as the date of the audit report. Also, the representation letter should be for all financial statements and periods referred to in the auditor’s report. If management refuses to provide the management letter, then consider the effect upon the audit report. Such a refusal constitutes a limitation on the scope of the audit and will usually preclude the issuance of an unmodified opinion.

If your audit firm creates the financial statements, then provide them to management in a timely manner. Management needs to review the financial statements prior to signing the representation letter.

Summarizing Passed Journal Entries

Prior to creating the representation letter, the auditor needs to summarize passed journal entries. Why? You need to attach the passed entries to the representation letter. Audit standards require management to provide a written assertion regarding whether the uncorrected misstatements are material. That wording could, for example, read “the effects of uncorrected misstatements are immaterial.”

Once you summarize the uncorrected misstatements, you as the auditor should consider whether they are material. Review your audit materiality and performance materiality documentation and consider if the passed adjustments are acceptable. If the uncorrected misstatements are material, then an unmodified opinion is not appropriate.

Considering Going Concern

Even in the planning stage, auditors need to think about going concern, especially if financial weaknesses are present. But as you approach the end of the audit, the going concern evaluation should crystallize. Now you have your audit evidence, and it’s time to determine if a going concern opinion is in play. Also, consider whether the going concern disclosures are sufficient. If substantial doubt is present, then the entity should include going concern disclosures (whether doubt is alleviated by management’s plans or not).

Substantial Doubt

And what is substantial doubt? The Financial Accounting Standards Board defines it this way:

Substantial doubt about the entity’s ability to continue as a going concern is considered to exist when aggregate conditions and events indicate that it is probable that the entity will be unable to meet obligations when due within one year of the date that the financial statements are issued or are available to be issued.

So for nongovernmental entities, ask “Is it probable that the company will meet its obligations for one year from the opinion date?” If it is likely that the entity will meet its obligations, then substantial doubt does not exist. If it is not probable that the entity will meet its obligations, then substantial doubt exists.

Evaluation Period

And what is the period to be considered when assessing going concern? One year from the audit report date unless the entity is a government. If the entity is a government, then the evaluation period is one year from the financial statement date (though this period can be lengthened in certain circumstances).

Who Makes the Evaluations?

The going concern evaluation is one that management makes as it considers whether disclosures are necessary.

Then the auditor considers going concern from an audit perspective. Based on the audit evidence, the auditor could possibly issue a going concern opinion or qualify the opinion if required going concern disclosures are not included in the financial statements.

Creating Final Analytics

Another part of wrapping up is the creation and review of final analytics.

Auditors create planning analytics as a risk assessment procedure. Why? We are looking for risk. So, what is the purpose of final analytics? We are performing analytical procedures, near the end of the audit, to assist in forming an overall conclusion about whether the financial statements are consistent with our understanding of the entity.

What type of analytics should be used? Audit standards don’t specify the particular analytics. Those standards say that a wide variety of procedures can be used, including reading the financial statements. An auditor can also use analytics similar to those used in the planning stage of the engagement. Regardless of the procedures used, they should be documented. So, if you read the financial statements as an analytical procedure, you should say so in a work paper.

I commonly use the same analytics in the close of the audit that I used in the beginning. I want to know that the questions raised in the beginning have been answered by the end of the engagement.

Creating Management Letters

At the conclusion of an audit, you can provide a written management letter.

wrappping up audits

What should be included in such a letter? It’s up to the auditor, but here are some examples:

  • Communication of control weaknesses that are not significant or material
  • Recommendations concerning the implementation of new accounting standards
  • Efficiency recommendations such as how to process cash receipts
  • Warnings regarding cyber attacks and suggestions for preventing them
  • Suggestions that may expedite next year’s audit
  • Recommendations regarding procurement
  • Suggestion for the creation of a code of conduct
  • Recommendation that an accounting manual be created
  • Suggestion to use excess cash to pay off high-interest rate leases
  • Suggestion to create a more robust IT change management process

Significant internal control deficiencies and material weaknesses must be reported in writing. Other control weaknesses (those not significant or material) can be communicated in writing or orally. If such weaknesses are orally communicated, then they must be documented in some manner such as in a work paper. Alternatively, the control weaknesses can be included in a management letter.

If a management letter is provided, consider providing a draft to the client prior to issuance. Doing so will allow you to avoid the embarrassment of making inaccurate or inappropriate suggestions. Also, the auditor, if desired, can include client responses (e.g., the status of implementation) in the management letter.

Communicating Control Deficiencies

Audit standards require that significant control deficiencies and material weaknesses be reported in writing to management and to those charged with governance. As we saw in the previous section, control weaknesses that are not significant or material are normally communicated in the management letter. Significant deficiencies and material weaknesses are defined as follows:

  1. Significant deficiency. A deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness yet important enough to merit attention by those charged with governance.
  2. Material weakness. A deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected, on a timely basis.

Control deficiencies are often noted during the risk assessment procedures, particularly when walkthroughs are performed. They may also be noted as audit journal entries are created, especially when material adjustments are made. It is best to capture control weaknesses as they are noted. Otherwise, you may forget your notice of them. Also, if control weaknesses are material, you may desire to communicate them to management as they are discovered.

As recommended for the management letter, a draft of this internal control report should be provided to management prior to final issuance to avoid potential misunderstandings. Management can better assess the correctness of a control weakness communication once they see it in black and white. If there’s a disagreement between management and the auditor, it’s best to clear the issue prior to final issuance of the internal control weaknesses letter.

Wrapping Up Audits

Now you have an overview of how to wrap up your audits. You may have thought while reading the above, “How does an auditor make all of this happen at the appropriate time?” Sound project management.

While this article covers wrapping up audits from a professional standards perspective, you’ll find additional insights into managing your engagements by reading my Basecamp post. What is Basecamp? It’s a cloud-based project management application. As you can see in the above wrap-up article, there are a lot of moving parts. So, use of sound project management software and procedures can significantly increase your efficiency.

You’ll also find my twin brother’s article How to Identify and Manage Audit Stakeholders helpful.

Continuing Audit Series

This post is a part of my continuing audit series titled The Why and How of Auditing: A Blog Series About Basics. I have covered the planning and substantive parts of audits in earlier posts. To see an overview of the blog series, click here.

Forty Mistakes Auditors Make

Here are 40 technology, planning, and execution deficiencies

Here are forty mistakes auditors make. While the list is (obviously) not comprehensive, you’ll see common technology, planning, and execution mistakes.

forty mistakes auditors make

  1. We aren’t paperless.
  2. We don’t link our trial balances to our work papers.
  3. We haven’t learned to use Adobe Acrobat.
  4. We don’t use optical character recognition (OCR), so we can’t electronically search our documents.
  5. We don’t use project management software such as Basecamp.
  6. We lose team communications (i.e., emails) because we aren’t using Slack.
  7. We use old (slow) computers.
  8. We don’t properly consider and document our independence.
  9. We don’t perform continuance procedures.
  10. We don’t assign appropriate personnel to risky engagements.
  11. We don’t appropriately price the engagement which leads to unattainable time budgets.
  12. We don’t focus our efforts on particular niches (thinking we can audit anything that comes our way).
  13. We keep doing the same thing year after year after year (and then complain we have too much time in the job).
  14. We assume we already know all the risks.
  15. We perform no (real) risk assessment.
  16. We don’t perform walkthroughs because we assume nothing has changed.
  17. We don’t perform walkthroughs because we are afraid of interacting with client personnel.
  18. We don’t consider internal control weaknesses in our risk assessment and audit program development.
  19. We create preliminary analytics in a perfunctory manner, not allowing them to inform us about risks.
  20. We ask perfunctory fraud questions without truly considering fraud risks.
  21. We don’t perform retrospective reviews of estimates.
  22. We don’t link identified risks to our audit plans.
  23. We don’t (really) have an engagement team discussion.
  24. We don’t tailor our audit programs.
  25. We don’t add purpose statements or conclusions on our work papers.
  26. We don’t define our tickmarks.
  27. We receive unnecessary documents from the client and leave them in the audit file.
  28. We leave review notes in the file.
  29. We don’t sign off on work papers, so no one knows who created the document.
  30. We don’t perform post-audit reviews to document the mistakes we made (so they won’t be repeated next year).
  31. We ask clients for certain documents without showing them the prior year example (and they provide the wrong document).
  32. We get on and off the same engagement too many times, losing momentum and wasting time.
  33. We send our audit team into the field even though the client hasn’t provided requested information.
  34. We don’t educate the client regarding the importance of timely information.
  35. We use staff that are not properly trained.
  36. We don’t plan our CPE to address upcoming audits.
  37. We don’t review staff work on a timely basis, so feedback is late (or not provided at all).
  38. We don’t report significant deficiencies or material weaknesses (because of client push-back).
  39. We fail to lock down our files.
  40. We don’t add value to our audits.

How to Hire and Retain Great CPA Firm Employees

Many CPA firms find it difficult to hire quality staff

Do you desire to hire and retain great CPA firm employees? Today we’ll discuss how you can do just that.

Last month I visited two small CPA firms, one in Georgia and one in North Carolina. Both firms are located in remote areas, so it’s difficult to attract solid talent. Also, firm fees are lower and–as a result–wages are less. Consequently, these firms are not able to provide compensation comparable to Atlanta or Charlotte.

Nevertheless, I found that both firms have great people. So, how did they do it?

Hire and Retain Great CPA Firm Employees

Mine Locally

First, they are mining the gold locally. What do I mean? Well, they are constantly looking in their own neck of the woods for talent. Is there a local college student majoring in accounting. They are inquiring. Has a new CPA moved into the community? They are putting out feelers. If there is a possible match, they are digging for it.

Give Them What They Want

Second (and I think this is key), they are giving new-hires what they want. No, they are not offering Atlanta or Charlotte wages. They can’t. But they are offering other things. Like what?

Well, first of all, flexible hours. If a young female accountant has children at home and desires to spend time with them, then these CPA firms are crafting work schedules that allow Mom to be with her children but still work. For many people–especially Millennials–being able to put family first is everything. Give them what they want. This is good for the employee and the firm. Why? Happy staff members make for productive and loyal employees.

Employment should always be win-win. Too many CPA firms think only about what is good for them, and not their employees. But this is a mistake–is it not? There are two parties. The firm and the employee. Both need to be happy.

Ask yourself, “Is the firm better off with an excellent employee for twenty hours a week or a bad one for forty?” You know the answer.

And while we are talking about giving them what they want, let’s discuss remote work.

Working From Home

Many smaller CPA firms require their employees to come to the office, but what if a potential new-hire lives two hours away? Both of the companies mentioned above allow employees to work from home. While this arrangement has its challenges, consider the option anyway. Ask yourself: “Are you better off with a great remote worker or no worker at all?” I know, getting the technology working can be challenging. But look at what you gain. A competent employee that is not available in your locale.

You may be wondering, “Charles, do you do this?” Yes. My administrative assistant lives in Colorado (I’m in Georgia), and one of my associates works in South Carolina. May I say, “They are awesome!” I don’t know what I’d do without them. Resolving technology and training issues requires effort. But I’m telling you, my employees’ distance has almost no downsides (other than I’d like to see them sometimes).

These two employees have remote access to our paperless files (we use Caseware). And Basecamp (project management software) enables us to stay on the same page. Additionally, we use Zoom for conferencing purposes. So, I can share my computer screen and talk with them about anything. It’s almost better than being in the same room.

One other ingredient to hiring and retaining wonderful employees is having a positive work environment.

All in the Family

One thing I noticed in the two CPA firms is a sense of family. You could tell everyone enjoyed being there. 

If you want your employees to feel like family, treat them that way. Say thank you — a lot. Give unexpected gifts. Celebrate achievements. Have a Thanksgiving and Christmas dinner together. Go to an Atlanta Braves game (and do the tomahawk chop). Give them a day off for their child’s sporting event. Culture matters.

And this may sound silly but love matters. (Yes, I used the L word–going out on a limb.) We might be accountants but we are still humans, people that desire approval and genuine concern.

Great or Mediocre Employees — It’s Your Choice

If you’ve had no success in attracting talent to your small- to medium-sized CPA firm, think about the above. Too many firms can’t hire quality personnel because they refuse to change their hiring practices or work environments. But we live in a different world today. Millenials don’t think like the Baby Boomers. So maybe the Boomers need to think like Millenials. Then those great employees might magically appear on your doorsteps.

Audit Lessons from a Brain Tumor

Life teaches us unexpected lessons

I said to my wife, “Am I driving straight?” I felt as if I was weaving, not quite in control. I felt dizzy and heard clicking noises in my ears.

The mystery only increased over the next two years as I visited three different doctors. They stuck, prodded, and probed me–but no solution.

Frustrating.

Doctor Looking at Head Xray on blue

Picture is courtesy of istockphoto.com

Meanwhile, I felt a growing numbness on the right side of my face. So one night I started Googling health websites (the thing they tell you not to do) and came upon this link: Acoustic Neuroma Association. I clicked it. It was like reading my diary. It couldn’t be. A brain tumor.

The next day I handed my doctor the acoustic neuroma information and said, “I think this is what I have. I want a brain scan.”

Two days after the scan, while on the golf course, I received the doctor’s call: “Mr. Hall, you were right. You have a 2.3-centimeter brain tumor.” (I sent him a bill for my diagnosis but he never paid–just kidding.) My golfing buddies gathered around and prayed for me on the 17th green, and I went home to break the news to my wife. I had two children, two and four at the time. I was concerned.

Shortly after that, I was in a surgeon’s office in Atlanta. The doctor said they’d do a ten-hour operation; there was a 40% chance of paralysis and a 5% chance of death. The tumor was too large for radiation–or so I was told.

I didn’t like the odds, so I prayed more and went back to the Internet. There I located Dr. Jeffrey Williams at Johns Hopkins Hospital in Baltimore. I emailed the good doctor, telling him of the tumor’s size. His response: “I radiate tumors this size every day.” He was a pioneer in fractionated stereotactic radiation, one of the few physicians in the world using this procedure (at the time).

A few days later, I’m lying on an operating table in Baltimore with my head bolted down, ready for radiation. They bolt you down to ensure the cooking of the tumor (and not the brain). Fun, you should try it. Four more times I visited the table. Each time everyone left the room–a sure sign you should not try this at home.

Each day I laid there silently, talking to God and trusting Him.

Three weeks later I returned to work. Eighteen years later, I have had one sick day.

I’ve watched my children grow up. They are twenty-one and twenty-three now–both finished college. My daughter is engaged to be married. My wife is still by my side, and I’m thankful for each day.

Cades Cove, Tennessee with my wife

So what does a brain tumor story tell us about audits? (You may, at this point, be thinking: they did cook the wrong part.)

Audit Lessons Learned from a Brain Tumor

1. Pay Attention to Signs

It’s easy to overlook the obvious. Maybe we don’t want to see a red flag (I didn’t want to believe I had a tumor). It might slow us down. But an audit is not purely about finishing and billing. It’s about gathering proper evidential matter to support the opinion. To do less is delinquent and dangerous.

2. Seek Alternatives

If you can’t gain appropriate audit evidence one way, seek another. Don’t simply push forward, using the same procedures year after year. The doctor in Atlanta was a surgeon, so his solution was surgery. His answer was based on his tools, his normal procedures. If you’ve always used a hammer, try a wrench.

3. Seek Counsel

If one answer doesn’t ring true, see what someone else thinks, maybe even someone outside your firm. Obviously, you need to make sure your engagement partner agrees (about seeking outside guidance), but if he or she does, go for it. I often call the AICPA hotline. I find them helpful and knowledgeable. I also have relationships with other professionals, so I call friends and ask their opinions–and they call me. Check your pride at the door. I’d rather look dumb and be right than to look smart and wrong.

4. Embrace Change

Fractionated stereotactic radiation was new. Dr. Williams was a pioneer in the technique. The only way your audit processes will get better is to try new techniques: paperless software (we use Caseware), data mining (we use IDEA), real fraud inquiries (I use ACFE techniques), electronic bank confirmations (I use Confirmation.com), project management software (I use Basecamp). If you are still pushing a Pentel on a four-column, it’s time to change.

Postscript

Finally, remember that work is important, but life itself is the best gift. Be thankful for each moment, each hour, each day.

Top 10 Technology Tips for Accountants

Here are tips to make your accounting life more productive

Are you looking for technology tips for accountants? Here are ten tips that will make you more productive.

Technology tips for accountants

Ten Technology Tips for Accountants

Here are my top ten technology tips in no certain order (with links to prior blog posts).

  1. Use Skitch to create annotated screenshots.
  2. Use Office 365 to jointly create Word or Excel documents with others.
  3. Use Basecamp to manage projects (such as audits).
  4. Use Scanbot as your phone scanner.
  5. Use a Livescribe pen to take notes with audio.
  6. Use Evernote as your personal digital library.
  7. Travel light as a minimalist auditor.
  8. Use your cell phone in creative ways as an accountant.
  9. Use technology to save your life.
  10. Use technology to make your office work life more efficient.

Those are my ideas. What are yours?

25 Products I Use as an Accountant

Accounting Office

Picture from AdobeStock.com

Here’s a list of accounting products that I use as an accountant and auditor:

  1. Governmental Accounting, Auditing, and Financial Reporting GFOA Blue Book
  2. Evernote (as my digital cloud library)
  3. Sharefile (as my secure means to transfer information)
  4. Caseware (electronic trial balance and working papers)
  5. Excel
  6. Word
  7. Adobe Acrobat Pro DC (PDF maker)
  8. Apple iPhone
  9. Apple iPad
  10. Dell laptop
  11. Three extra monitors
  12. Standup desk
  13. Zoom (conferencing software)
  14. Checkpoint (Thomson Reuter’s electronic guides)
  15. CheckpointLearning (Thomson Reuter’s online CPE)
  16. WordPress (blogging software)
  17. LinkedIn (to participate in accounting groups)
  18. Fujitsu i500 scanner
  19. Keynote (an alternative to PowerPoint)
  20. Outlook (for email)
  21. Fantastical (iPad calendar app)
  22. Basecamp (cloud project management software)
  23. Livescribe 3 Smartpen
  24. 1Password (to store and retrieve passwords)
  25. Amazon Tap (for music)

I use all of the above products with the exception of the stand-up desk. The desk I use is from Levenger; it appears they’ve discontinued that model.

What products do you recommend for accountants?

Note: I do receive affiliate commissions on Amazon products.

Seven Deadly Audit Sins

Sometimes we sink our own ships

Seven deadly audit sins can destroy you.

You just completed an audit project, and you have another significant write-down. Last year’s audit hours came in well over budget, and at the time you thought, “This will not happen again.” But here it is–again.

Here are seven deadly (audit) sins that cause our engagements to fail.

Seven Deadly Audit Sins

Picture is courtesy of DollarPhotoClub.com

1. We don’t plan.

Rolling over the prior year file does not qualify as planning. Including PPC programs–though I use them myself–is not planning.

What do I mean? The engagement has not been properly scoped. We don’t know what has changed and what is required. Each year, audits have new wrinkles.

Are there any fraud rumors? Has the CFO left without explanation? Have cash balances decreased while profits increased? Does the client have a new accounting program? Can you still obtain the reports you need? Are there any new audit or accounting standards?

Anticipate issues and be ready for them.

2. SALY lives.

Elvis may not be in the house, but SALY is.

Performing the same audit steps is wasteful. Just because we needed the action ten years ago does not mean we need it today. Kill SALY. (No, I don’t mean your staff member; SALY stands for Same As Last Year).

I find that audit files are like closets; we allow old thoughts (clothes) to accumulate without purging. It’s time for a Goodwill visit. Are all of the prior audit procedures relevant to this year’s engagement?

Will better planning require us to think more in the early phases of the engagement? Yes. Is this hard work? Yes. Will it result in less thinking and effort (for the overall project)? Yes.

3. We use weak staff.

Staffing your engagement is the primary key to project success. Excellent staff makes a challenging engagement pan out well. Poor staff causes your engagement time to balloon–lots of motion, but few results.

4. We don’t monitor.

Partners must keep an eye on the project. And I don’t mean just asking, “how’s it going?” Look in the audit file. See what is going on. In-charges will usually tell you what you want to hear. They hope to save the job on the final play, but a Hail Mary pass often results in a lost game.

Charles’ maxim: Monitor that which you desire to improve.

Or as Ronald Reagan once said: Trust but verify.

5. We use outdated technology.

Are you paperless? Using portable scanners and monitors? Are your auditors well versed in Adobe Acrobat? Are you electronically linking your trial balances to Excel documents? Do you use project management software (e.g., Basecamp)? How about conferencing software (e.g., Zoom)? Do you have secure remote access to audit files?

6. Staff (intentionally) hide problems.

Remind your staff that bad news communicated early is always welcome.

Early communication of bad news should be encouraged and rewarded (yes, rewarded, assuming the employee did not cause the problem).

Sometimes leaders unwittingly cause their staff to hide problems; in the past, we may have gone ballistic on them–now they fear the same.

7. No post-reviews.

Once our audit is complete, we should honestly assess the project. Then make a list of inefficiencies or failures for future reference.

If you are a partner, consider a fifteen-minute meeting with staff to go over the list.

Your Ideas

What do you do to keep your audits within budget?

Zen and the Art of Audit-Cycle Maintenance

Keys to efficient audits

As a teenager, I played golf, lots of golf. Some summer days, I walked unhindered with no one in front of me. Just me and the clubs. I would hit the ball and walk. Hit and walk. Hit and walk. It was a thing of beauty. On those magic days, golf was effortless. Pure joy. I had a goal. I had my clubs. No one was in the way.

Do auditors ever feel this way?

Yes, when audits process smoothly.

Some refer to this elusive state as flow. While I’m not sure what you call it, I know it when I see it — and when I feel it. And it does happen — even in accounting firms.

In some jobs, things move along at a steady pace. The constituent parts come together at the right time. There is cooperation between the audit team and the client. We understand each other. We hit our shots. We finish the round.

What is Flow?

It is the accomplishment of a goal without friction. It is the coming together all necessary ingredients. It is simple. If flow made sounds, it would be music.

Picture is courtesy of DollarPhotoClub.com

Picture is courtesy of DollarPhotoClub.com

As accountants, we all want this. So why is it so hard to come by?

The main impediments include:

  • A lack of planning
  • A lack of proper resources
  • A lack of cooperation
  • A lack of timely information from the client
  • A lack of uninterrupted time
  • A lack of skill

The following will allow us to overcome these obstacles:

  • Goal: To finish the job within budget
  • Tools: The people and resources are in place
  • Cooperation: Everyone is pulling together
  • Information: The client provides needed information
  • Uninterrupted time: You have dedicated time periods
  • Skilled team members: Your team is adequately staffed

Goal

We start with the “end in mind,” as Steven Covey used to say. If we’re planning an audit, then our goal is an opinion.

With the goal in mind, we work backward. What are the necessary actions to get there?

Then we list those tasks and place them on a timeline.

How?

Tools

For three years, I have used the cloud-based project management software Basecamp. It has a friendly, intuitive feel that allows me to create tasks within categories. For example, I create a Planning category and—then within this category—I create a task such as Perform pre-audit planning analytics.

After creating tasks, I assign them, along with deadlines, to team members. The fluidity of a project depends on the timely completion of each element. That’s why cooperation is important.

Cooperation

How many times have you been pulled from an audit when you’re not done? You know that the more you “pick it up and put it down,” the longer it takes, but a partner is demanding that you work on another audit, so off you go. Meanwhile, the first engagement grows cold in your mind, so when you return, you have to gear back up. It’s the equivalent of building a fire and letting it die. It takes lots of energy to get a project up and going, and when you leave, it grows cold. Then more time and energy is required to return to where you were. So what does cooperation have to do with this?

Well, let me ask why you left the audit? Most of the time, it’s one of two things:

  • Either your client was not ready (client assistance list is not complete), or
  • The engagement was not appropriately scheduled

Like any project, an audit is a process. For example, the CPA performs the following:

  • Acceptance and continuance
  • Risk assessment
  • Create a plan
  • Execute the plan
  • Audit file is reviewed
  • Financial statements and related opinion are created
  • Financial statements are examined by the client (who assumes responsibility for the statements)
  • Audit report is issued

While these steps don’t necessarily occur in sequential order, structure creates rhythm. There are dependencies. That’s why it’s so important that all the disparate parts come together at the right time. So how do we do this? Usually by sending a client assistance list. Sounds like a good idea? Well, maybe.

One mistake that I see auditors make is we send this list to the client and then we don’t track the status of the requested information. We don’t know what they’ve done, and the client doesn’t know what we need at a given time. The pump and dump client assistance list is not the most useful communication. We—the audit team and the client—need to be on the same page.

That brings me back to Basecamp (or any cloud-based project management system). With Basecamp, I create a client assistance list that we (the audit team and the client) see. The cloud-based project management system shows the information requested (tasks) along with assignments and completion dates. Obviously, the auditor needs to make sure the client agrees with this level of transparency. Also, the auditor must see that in using such a system, we are implying a promise: if you (the client) do your part, I (the auditor) will do my mine. You provide timely information, and I will produce a timely audit report. It’s a team effort.

Note – I use Basecamp to track my audit procedures and client assistance requests; however, I can specify what the client sees (and what they can’t). Obviously, the client should not see the audit procedures. So they only see the audit information requests. The client’s personnel can see each other’s data requests, so the client’s supervisor sees the status of their tasks.

Information

In 1984, I obtained my masters degree in accounting and thought the world was my oyster. I quickly learned I didn’t know much. While training helps, nothing replaces experience.

Warm bodies are no guarantee of productivity.

Audit team schedules should be posted months ahead of time so the engagement partner can assess her team members’ knowledge, and, if necessary, send them to appropriate continuing education. If a team member spends half of the job reading the industry audit guide, you won’t finish on time.

One requisite of flow is we see things short-term and long-term (at the same time). The short-term allows us to execute; the long-term enables us to plan (for things such as inexperienced staff). Both are critical. Another element of flow is a lack of distractions and a lack of interruptions.

Uninterrupted Time

Above, we spoke briefly about the causes of interruptions and the harm that they bring. Staying on the audit until completion is critical to efficiency. Some audit trainers refer to this as a lights-out approach. This term is used in reference to auditors staying in the field until the job is complete. As you already know, there is a direct correlation between productivity and being in the field. We all want to get home, so we work extra hard and with increased focus while we are away from the office. So naturally, efficiency goes up.

Returning to the office kills flow every time. You know what happens. We go to the laundry. We get our hair cut. We talk in the hallway.

Am I saying we should stay in the field until our clothes are sullied, our hair is unkempt, and we become hermits? No, frankly I like clean clothes, a nice haircut, and some chatter with my mates — and I hope my team members do as well.

Nevertheless, uninterrupted time is critical to efficiency. There’s no getting around it.

So plan to be in the field until the engagement is complete. Then allow your team members adequate time to recover. Reward them accordingly. If they’ve been away for some time, give them a day (or two) off. For extended stays, provide a bonus as soon as the job is complete.

We want those skilled team members to know they are appreciated. Speaking of skilled team members…

Skilled Team Members

A good audit starts with the hiring of your team members. I often say, “You get what you hired the day they walk into the office.” In other words, the abilities and character traits of your team members have been formed over a lifetime. You won’t change them in one or two years.

Hire for attitude, knowledge, and experience.

Of the three, attitude is key. Do your team members like auditing? The audit life is not an easy life. Rewarding, yes. Easy, no. Show me a team member that doesn’t like what they do, and I’ll show you why you can’t finish.

Hire firm members with appropriate education and experience. If they don’t possess the necessary knowledge, spend the money and train them. Develop tailored three-year continuing education plans for each staff person. In other words, don’t allow them to take random classes just to “get their CPE.”

Experience teaches your people things CPE classes never can. It is through past failures that we gain our greatest insights. So again, if you can hire personnel with experience, do so—even if you have to pay a premium.

The number one determinant of project success is your team members. A good team will pull a project out of the ditch every time.

Your Thoughts

How do you keep your audit-cycle in tune?

My Most-Used iPad Apps

Here are the apps from my main iPad screen

My iPad allows me to add plenty of apps, but only a few are on my main screen. Here is my present screen.

My main iPad screen

My main iPad screen

 

Skitch – A screen capture app. It allows me to capture whatever is on my screen and edit what I capture. I can add annotations such as arrows, boxes, and text.

Digits – A calculator with big numbers. The app allows me to maintain a running tape of the numbers I have keyed in; this tape can be emailed to others. I can also type text next to a particular number.

Checkpoint – A library of accounting and auditing publications. You must pay for the publications, but Checkpoint provides powerful search capabilities.

Keynote – A slide presentation app. I use Keynote more than Powerpoint. The Keynote background slides are the best. Presentations can be saved to iCloud.

Twitter – A social communication tool. I use it to make short (less than 140 character) posts about my day, usually related to accounting and auditing. My handle: @ChasBHall.

Pandora – Music app. I can pick a channel and listen to whatever type of music I desire. There is a free version, but I pay around $5 per month for the add-free version.

Weather – Weather app. I start my day by checking the weather, and, when I’m going out of town, I check my destination’s weather before I leave.

Gmail – Email app. I use this app for most of my email.

Slack – Group email app. I use this app to communicate with my teams. I mainly use this app to chat with my Quality Control team member. The communications are stored by category (and I can set up whatever categories I like — e.g., XYZ Audit). The basic package that I use is free.

Kindle – Amazon’s book reading app. I buy most of my books from Amazon and read them here. I can highlight phrases in my books that are accessible in my Amazon account–and the highlighted information–for all my books–is searchable and can be copied and pasted.

Holy Bible – You Version Bible app. I start each day with this app. You Version is free and provides several different translations.

Evernote – Storage app. I create “notes” inside Evernote and store whatever I desire. This is my electronic library. I have saved thousands of articles and research. Several different tags can be applied to each note, so you can quickly find the information you need.

1Password – Password storage app. I store almost all of my passwords here (presently over 150). Security experts tell us to use strong, unique passwords. This app allows me to do so.

Reminders – Reminder app. I may need this app the most (especially as I get older). I place to-do items here with time and date–a notification pops up when it’s time to act.

Basecamp – Project management app. I can see all of my current projects with all the steps necessary to complete each one. I can see what my project management teams (e.g., audit teams) have completed.

Stitcher – Podcast app. I listen to podcasts as I walk each morning, gaining valuable insights. My favorite podcast: Michael Hyatt’s This is Your Life.

Audible – Audible book app. I listen to books while I’m on the road (or when I am exercising). I have a monthly plan (about $15 per month) that allows me to get one book per month.

GetResponse – Social media contact app. GetResponse is a paid app that allows me to see who has subscribed to my blog. It also provides statistical information about responses to my weekly RSS emails that I send to my blog subscribers. Subscribe below.

Zoom – Online meeting app. I can host online meetings and share information from my screen. Those in the meeting can see me as I talk with them.

Canva – Social media creation app. I use this app to create pictures and slides for sharing in my blog or presentations. I pay about $1 for each picture download, but this is a powerful app that allows your creative side to shine.

Your Thoughts?

What apps do you find most helpful?