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?

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4 thoughts on “Zen and the Art of Audit-Cycle Maintenance

  1. Great post, and the timely. Our project management system (Practice CS) doesn’t have a built in client assistance list (or if it does, we haven’t discovered that functionality). As a result, we use a cloud-based exchange program called Suralink. It’s relatively new, developed by some former auditors here in Utah. We’ve implemented it last year, and it has worked wonderfully so far, for both us and our clients. We create requests, put a due date on it, the client drops the file in the request, says they fulfilled it, and then we accept or reject it, and everything with a time stamp. Clients have taken much more ownership of the request list as a result.

    • John, sounds like you guys are ahead of the game. Good! I think most CPAs are not doing anything like this, but I do believe more and more will. Thanks for your comments.

    • Yes, Armando. I absolutely hate to move away from an audit that is flowing well. When I do return, it seems to take me a full day to get back into the swing of things.