Fieldwork Complete……Is the Audit Complete? By Alan W. Anderson, CPA

President, ACCOUNT-ability Plus

© Copyright 2011 Alan W. Anderson, used with permission.

It’s It’s Friday afternoon, and you are off to another client on Monday morning. You have exhausted your allotment of fieldwork time at this client. There is one “small” problem; however, the audit is not done. You will have to complete the audit in “wrap-up” mode, even though wrap-up isn’t scheduled. You ask yourself, “How will I get it done?” Does this sound familiar?

When I talk about the above scenario to auditors, they all recognize the inefficiencies in the “wrap-up” mode and hope that audit quality won’t be negatively impacted. They acknowledge that addressing the situation is an opportunity for reducing audit time yet confirm that beyond talking about the issue, they seldom do much to change. If we see the issue and know the issue, why then don’t we do something to deal with this issue?

Peter Senge is quoted as saying, “People don’t resist change. They resist being changed.” In many respects, Mr. Senge’s quote fits this situation. The auditor sees and knows the issue but resists being changed. Resistant to change or not, most audit firms do not effectively deal with this audit issue and just hope it will get better.

Change based on hope, without action, is doomed to fail. Many firms take this situation for granted and audit staff are simply “told” either directly or indirectly to “just deal with it.” This article is designed to help you make appropriate, positive steps toward change in the audit process.

Imagine again, it’s Friday afternoon and you are off to another client on Monday and this audit is complete! This doesn’t need to be a dream; it can happen.

Completing in the Field Requires Planning

Several years ago, there was an oil filter commercial which used the slogan, “Pay me now or Pay me later.” Of course, the context of the commercial was to get viewers to take better care of their cars by changing the oil and oil filter on a regular basis. The downside of not doing so would result in serious damage to the engine, suggesting that the “later” cost would be far in excess of the cost of oil and oil filters “now”. I believe that slogan fits reasonably well in the audit world, with a slight modification. I suggest that the auditor reflect on the concept of “Plan Now or Plan to Pay Later.” Paying “later” in terms of the added time resulting from not completing the audit in the field and the potential for an unsatisfied client is a far greater cost than taking the time to plan “now”.

In the article, “Audit Planning is a 2-way street – Both the Auditor and the Company need to be Involved,” I identified 10 basic steps to carrying out a successful audit plan. The fifth step offered the concept that the overall audit plan should include a specific plan to complete all of the work in the field. This concept is easy to state but very difficult to execute, if the auditor doesn’t have specific action steps identified in advance.

What is Your Action Plan?

An audit team that typically does not complete the audit in the field may not know how to set the audit in motion for successful completion. Specific action steps need to be identified that help to ensure successful completion of the audit during fieldwork.

The first thing the staff should do is to determine the bottlenecks that prevented the prior year audit from being completed in the field. The following table contains a partial list of typical audit bottlenecks and actions that can eliminate those bottlenecks:

Bottleneck Action(s) Client not totally ready Place due dates on required client schedules

Call client a week before field work to ensure readiness

Be prepared to reschedule fieldwork start date Not enough time scheduled for fieldwork Prepare a detailed time budget and match it to

the scheduled staff time in the field New accounting standard(s) not addressed timely Design audit approach to address the new

standard(s) during planning Discuss the new standard(s) with the client

early Draft the proposed new footnote(s) for the

client to read early Reviews not completed timely Perform real-time reviews and don’t wait until

all areas are complete Perform reviews in the field

Critical confirmations not received timely Mail confirmations as soon as possible after year end

Perform Attorney procedures first day of fieldwork or at interim and mail attorney letter no later than the first day of fieldwork

Request any covenant waiver letters as early as possible

Client prepared schedules not complete Have the client send the schedules in advance so the In-charge can review them

Return incomplete schedules to the client rather than fixing them yourself

If you must fix the incomplete schedule, gain client agreement to additional billing and then track that time separately

Develop a Fieldwork Plan

Eliminating the bottlenecks listed in the table alone can go a long way toward successfully completing the audit in the field. However, most audit teams go out to the field and dive into working on whatever is ready without a plan. One way to help ensure fieldwork success is to develop a fieldwork plan. The purpose of the fieldwork plan is to specifically lay out a detailed “who”, “what”, and “by when” plan for all audit staff assigned to the engagement. Know the “Who” First, the in-charge needs to know “who” is assigned to the audit and the amount of time each staff is assigned to the audit. The in-charge should determine the experience and skill level of the assigned staff. With this information, s/he can now perform a high level analysis of the audit team that considers the overall adequacy of staffing compared to skills needed and amount of time assigned. If either or both are not adequate, the chance of completing the audit in the field is remote. The in-charge should take action to attempt to rectify the situation. Know the “What” Second part of the plan is dealing with the “what”. The in-charge should assign audit responsibilities to match audit complexity with the skill set of the audit staff. Typically, the assignment of audit work is one staff to one audit section. In other words, Joe or Mary will audit the cash section and Tom or Jane will audit the accounts payable section. Making assignments in this manner will generally leave most difficult audit section(s) to the in-charge. The fieldwork plan should challenge the norm of what section is audited first, as well as the audit section approach to job assignment. Since the easiest areas are generally audited first, if the team doesn’t complete the audit in the field, the more difficult areas are left to be completed in “wrap-up” mode. The audit team, therefore, should plan to audit the most significant and difficult audit areas first. The fieldwork plan should then consider making certain work assignments based upon the steps within the section that need to be performed rather than the assignment of the entire section to one staff person. This approach holds especially true for the most significant and difficult audit sections.

For example, consider an audit section such as inventory at a manufacturer. That section requires a significant amount of vouching to source documents for certain audit assertions and audit judgment for other audit assertions. The newer staff could be assigned to carry out the detailed vouching steps and the assertions requiring experienced professional judgment could be carried out by the in-charge. Assigning job responsibilities in this manner will free up the in-charge to supervise and review to keep the audit moving smoothly and to remove bottlenecks as they arise. Know the “When” The third part of the fieldwork plan is to address “by when”. This part should address hours by audit area and procedure within an audit area and the date during fieldwork when the in-charge wants the procedures performed. This step can be set up as a days and hours in a day timeline. A timeline of this nature will help the entire audit team understand what is expected of them and by when. A successful audit process depends heavily on the project management skills of the audit in-charge. A fieldwork plan can be core a project management tool used to assist the audit in-charge in keeping the audit on track. Following the plan and managing against the plan will allow the in-charge to know the engagement status at any point in time during the audit to facilitate completing the audit in the field.

In Summary To institute concrete actions steps to be able to complete the audit in the field requires a change in attitude and culture in most firms. For the changes to have impact (improved staff morale, satisfied clients, and a stronger bottom line for the firm), the changes should be implemented across all of the audits in the firm. It will take some time to lay out a fieldwork plan and the results will likely not be known for months. As Mr. Senge stated, many will resist being changed. However, one thing is certain, if the firm doesn’t “plan now” the firm can “plan to pay later.” It’s late on a Friday afternoon and your fieldwork time has expired……is your audit complete?

Alan W. Anderson - Bio Al has over 25 years of experience in the accounting profession. After working primarily as a partner and National Director of Audit in the firm of McGladrey and Pullen, LLP and with the American Institute of CPAs as Senior Vice President of Member and Public Interest, Al founded ACCOUNT-ability Plus headquartered in Minneapolis. Prior to starting his new company, Al led the firm of LarsonAllen, LLP in coordinating accounting and assurance services across industry groups as the Managing Principal of Accounting & Assurance Services.

As President of ACCOUNT-ability Plus, Al is building a company to address the educational needs of auditors and to help push the vision of those he teaches to exceed client expectations by providing relevant services and meaningful information using real-time methodology.

Al’s experience in the world of auditing reaches far and wide. This includes helping to standardize the global audit approach of McGladrey and Pullen, overseeing the AICPA’s technical audit and accounting standards, including self-regulation and the CPA examination and implementing paperless solutions.

Al served as Chair of the AICPA Assurance Services Executive Committee for 6 years and continues to lead task forces of the Committee.

The 7th in a Series of “ANDERSON’S AUDIT EXPRESS”

The KSCPA is excited to that Al Anderson is committed to helping the Society enhance the quality of the Accounting & Auditing (A&A) professional development and, therefore, the quality of our members’ A&A services. This article is the seventh of a series of 13 articles to be published over the next year.

We asked Al to create articles that will stand the test of time and at the same time create a vision for how

CPAs can stay relevant by adding value to their clients and organizations they serve.

You can look forward to the following topics:

“Evolving Risk Landscape and Its Impact on the Audit Opinion:

“Total Client Service: Did you deliver all of Your Services, or Just the Audit?”

“De-commoditizing the Audit—A Pipe Dream?”

“What Brings Value to the Audit? Value-Based Audits?”

“The Characteristics of an Auditor”

“The Goal of the Audit”

Register for “ANDERSON’S AUDIT EXPRESS” Today!

Each article is supplemented with a video webcast or podcast produced and delivered by the KSCPA.

Go to www.kscpa.org for the complete list of live webinars.

Register on the KSCPA website, or call 785.272.4366 for more information. Webcasts that provide 2 hours of A&A CPE are $79 each.

Al will also be providing A&A courses in our PD catalog, speaking at conferences, and is available for in-firm training, including a new offering “Reality Based Learning.”

Our member’s appetite for information continues to increase and the methods by which this information is delivered are changing.

The KSCPA is embracing this adaptation by establishing professional development programs that address the education demands with a variety of delivery mechanisms.

Contact Mary MacBain at mary@kscpa.org for further information.