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Audit mistakes
Feb 09

Audit Mistakes: Seven Deadly Sins

By Charles Hall | Auditing

Seven deadly audit sins can destroy you. These audit mistakes kill your profits and effectiveness.

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, and it’s driving you insane.

Insanity: doing the same thing year after year but expecting different results.

Are you ready for better results?

Audit Mistakes

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

Audit mistakes

1. We don’t plan

Rolling over the prior year file does not qualify as planning. Using canned audit programs is not planning.

What do I mean? We don’t know what has changed. Why? Because we have not performed real risk assessment such as current year walkthroughs. We have not (really) thought about current year risks of material misstatement.

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 or new staff? Can you still obtain the reports you need? Are there any new audit or accounting standards?

Anticipate issues and be ready for them with a real audit plan.

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 procedure 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 high time for a Goodwill visit. After all, this audit mistake has been with you too long. So ask yourself 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 overall effort? Yes.

Sometimes the Saly issue occurs because of weak staff.

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. Maybe you have smart people, but they need training. Consider AuditSense.

Another audit mistake is weak partner involvement.

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 often results in a lost game.

As Ronald Reagan once said: Trust but verify.

Engagement partners need to lead and monitor. They also need to provide the right technology tools.

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? Do you store files securely in the cloud (e.g., Box)? Are you using data mining software such as Idea? Do you send electronic confirmations

Do your staff members fear you so much that they don’t give you the bad news?

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.

And here’s one last audit mistake: no post-engagement review.

7. No post-engagement review

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 to overcome audit mistakes

What do you do to keep your audits within budget?

Audit Lessons from a Brain Tumor
May 20

Audit Lessons from a Brain Tumor

By Charles Hall | Auditing

Did you know you can learn audit lessons from a brain tumor? Here’s my story.

One day while driving, I said to my wife, “Am I weaving?” I did not feel in control, and I was hearing clicking noises in my ears. My conditions worsened and the mystery grew over the next two years as I visited three doctors. They stuck, prodded, and probed me, but no solution.

Frustrating.

Audit Lessons from a Brain Tumor

As time passed, 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 and read, having never heard of an acoustic neuroma. While reading about the symptoms, it was as though I was staring at my diary. My next thought was “it can’t be a brain tumor.” I turned to my wife behind me and said, “this is what I have.”

The next day I handed the acoustic neuroma information to my doctor, asking, “Would you please order a brain scan?”

Two days after the MRI, I received my doctor’s call while on a golf course. He said, “Mr. Hall, you were right. You have a 2.3-centimeter brain tumor.” (I sent him a bill for my diagnosis, but was 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. We had two children at the time, ages two and four. Having just started my own CPA business six years before, I was forty-one years old. So, as you can imagine, I was concerned about my family and business, but strangely, I was completely at peace.

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 like yours every day.” He was a pioneer in fractionated stereotactic radiation, one of the few physicians in the world (at that time) using this procedure.

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 your brain). Fun, you should try it. Four more times I visited the table, and I kept noticing 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 in Him. And my wife sat outside, lifting me up in prayer.

Three weeks later I returned to work. Twenty-two years later, I have had two sick days.

I’ve watched my children grow up. They are twenty-six and twenty-eight now–both finished college at the University of Georgia (Go Dawgs!). And a year and a half ago, my daughter had our first grandchild. My wife is still by my side, and I’m thankful for each day. Here’s a recent picture of my family at one of our favorite places: Cades Cove, Tennessee.

So what does a brain tumor story tell us about audits? (You may, at this point, be thinking, “they did cook his brain.”)

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 contact the Center for Plain English AccountingI 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 be 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 CCH Prosystem Engagement), data mining (we use TeamMate Analytics), 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. 

Using Project Management in Audits
Nov 08

Project Management in Audits: Key to Profit

By Charles Hall | Auditing

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.

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. If you want to start with a free application, try Trello or Asana. Another option is Smartsheet (an Excel-spreadsheet-based product). Larger firms may desire to take a look at XCMWorkflow.

I was recently exposed to SuraLink in an engagement where I assisted a city government with its preparation for an audit. The external auditors used SuraLink to request and receive information from the client. I was very impressed with this product. Though I have used Basecamp historically (as you’ll see in a moment), I plan to give SuraLink a hard look. Basecamp is wonderful in terms of use-of-use, but I’m not confident in the security. So I’ve used Basecamp in conjunction with other products such as ShareFile and Box. SuraLink appears to provide you with one product to manage and house documents. 

Regardless of the project management software you use, always think about security since you are uploading and downloading client files. 
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Hire and Retain Great CPA Firm Employees
Jul 31

How to Hire and Retain Great CPA Firm Employees

By Charles Hall | Accounting and Auditing

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.

Ten Technology Tips for Accountants
Mar 02

Top 10 Technology Tips for Accountants

By Charles Hall | Technology

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

Ten 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 Notability to take notes.
  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?

Also, here are Eight Ways to Increase Your Efficiency and Productivity as a CPA.

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