Search Results for: livescribe

Livescribe
Jun 26

Livescribe: Note Taking Magic (for CPAs)

By Charles Hall | Accounting and Auditing , Technology

Livescribe: Note taking magic. Here’s an overview of how auditors are making their lives easier using the Livescribe pen.

Have you ever interviewed a client, feverishly taking notes, and straight away forgot critical facts? You wish you had a recording of the conversation. Better yet, you wish you could touch a particular word in your notes and hear the words that were being spoken at that moment. What if I told you, “you can”?

Livescribe: Note taking magic

How? Livescribe.

Think about what you could record with such a tool:

  • CPE class lectures
  • Walkthroughs of transaction cycles
  • Board or committee or partnership meetings
  • Fraud interviews

Livescribe: Note Taking Magic

What is Livescribe? It’s an electronic pen/recorder. As you write on special coded paper, you simultaneously record the conversation (the recorder is built into the pen). Once done, you touch a particular letter in a word (with the tip of your pen) and you hear–from the pen–the words spoken at that moment. No more forgetting and not being able to retrieve what was said. And it’s efficient since you can go to any particular part of the conversation using your notes as signposts.

To start a recording, you press the tip of the pen to the “record” icon at the bottom of the page.

IMG_0002

To stop the recording you press the “stop” icon above.

Once the recording is complete, you simply touch the tip of the pen to any letter and the audio recording will start playing–from the pen–at that point.

IMG_0004

You can upload the pen notes and the audio to your computer desktop Livescribe software using a USB cord that connects to the pen. (See below.)

IMG_0003

You can also play back notes from your uploaded desktop copy just as you can with your pen. Click a letter with your mouse and the recording will play.

I was surprised by the clarity of the sound from the pen and the audio capacity200 hours (for the Echo version that you see below).

There are different versions of the pen. I bought the Echo version due to the lower price. You can review the available pens on Amazon. I also bought additional Livescribe notebooks (they come in packs of four) and a portfolio (binder) to hold the notebook and pen.

My Experience with Livescribe

I have used a Livescribe pen for four years. After using to it to record hundreds of hours of audio, I consider my Livescribe pen to be one of my best audit tools. I recommend it.

What if you don’t desire to shell out the $155 for the pen? Consider using the Notability app. 

Another Option 

If you have an iPad, you can buy the Notability app for $9.99 and record conversations with your notes (with play-back similar to Livescribe). You will need a stylus (I use an Apple pen) to take notes since you write on your iPad screen. See my article about using Notability.

One More Thought

If you are performing a walkthrough of a complex transaction cycle, consider using your phone to take pictures of what you are seeing (e.g., computer screens, documents). I use the Scanbot app. Between your notes (with audio) and your pictures, you will have a good understanding of what you have seen and heard.

You might also be interested in my article Four Keys to Better Client Interviews.

audit walkthrough
Oct 25

Audit Walkthroughs: The What, Why, How, and When

By Charles Hall | Accounting and Auditing , Risk Assessment

What is the purpose of audit walkthroughs? How do you document walkthroughs? Is it better to use checklists, flowcharts or summarize narratively? How often should walkthroughs be performed? Are they required? Will a walkthrough allow me to assess control risk at less than high?

In this post, I answer these questions about one of the most important risk assessment procedures: walkthroughs. I share techniques I’ve used for over five years. They work for me, and they will work for you.

Let’s dive right in.

audit walkthrough

What are Audit Walkthroughs?

Walkthroughs are cradle-to-grave reviews of transaction cycles. You start at the beginning of a transaction cycle (usually a source document) and walk the transaction to the end (usually posting to the general ledger). The auditor is gaining an understanding of how a transaction makes its way through the accounting system and about related internal controls.

As we perform a walkthrough, we:

  • Make inquiries
  • Inspect documents
  • Make observations

By asking questions, inspecting documents, and making observations, we are evaluating internal controls to see if there are weaknesses that would allow errors or fraud to occur. Audit standards do not permit the use of inquiries alone. Observations and inspections must also occur.

Some auditors believe that audit walkthroughs (or documentation of controls for significant transaction cycles) are not necessary if the auditor is assessing control risk at high. This is not true. While the auditor can assess control risk at high, she must first gain an understanding of the cycle and the related controls. In other words, the auditor can’t default to high. Risk assessment procedures are required.

What is not an Audit Walkthrough?

Following a transaction through the accounting system–without reviewing controls–is not an audit walkthrough. We must examine controls to see if they have been implemented and to see if they are properly designed. 

Placing a copy of the operating and accounting system manual in the audit file is not a walkthrough. While manuals tell you what the client intends to do, they don’t tell you what is occurring. In other words, they don’t answer the implementation question.

Lastly, asking a client, “Is everything the same as last year?” is not a walkthrough. Auditors must do more than inquire. 

Internal Controls Documented in Prior Audits

In some situations, AU-C section 315 allows the auditor to rely on audit evidence obtained in prior periods. In those situations, the auditor is required to perform audit procedures to establish the continued relevance of the audit evidence obtained in prior periods (for example, by performing a walkthrough). 

Here’s what AU-C 315.A20 says about prior year audit information used in the current year:

Paragraph .10 requires the auditor to determine whether information obtained in prior periods remains relevant if the auditor intends to use that information for the purposes of the current audit. For example, changes in the control environment may affect the relevance of information obtained in the prior year. To determine whether changes have occurred that may affect the relevance of such information, the auditor may make inquiries and perform other appropriate audit procedures, such as walk-throughs of relevant systems.

Why Audit Walkthroughs?

Accountants are often more comfortable with numbers than processes. We like things that “tie,” “foot,” or “balance.” We may not enjoy probing accounting systems for risk. It’s too touchy-feely. Even so, passing this responsibility off to lower staff is not a good choice. It’s too complicated–and too important. So there’s no getting around it. The walkthrough—or something like it—must be done. Why? We’re gaining an understanding of risks and responding to them. We’re developing our audit plan. Screw up the plan, and we screw up the audit.

What is the purpose of the walkthrough? Identification of risk—specifically, the risk of material misstatement. Once we know the risks, we know where to audit.

Walkthroughs and Lower Control Risk Assessment

Usually, audit walkthroughs are not sufficient to support lower control risk assessments (those less than high). If the auditor assesses control risk at less than high, she is required to test the effectiveness of the control. Since audit walkthroughs are usually a test of one transaction, they typically don’t prove operating effectiveness.

Regarding computer controls, a walkthrough of one transaction might be sufficient to prove effectiveness if general computer controls are working—namely, change control. Why? Computer controls are usually consistent. 

An auditor can determine whether a control has been implemented with a test of one transaction. Effectiveness, on the other hand, normally requires a test of transactions. For example, a test of 40 transactions for appropriate purchase orders.

audit walkthrough

Audit Walkthrough Documentation

While you can use checklists, flowcharts, narratives, or any other method that enables you to gain your understanding of controls, my favorite is a narrative mixed with screenshots.

So how do I do this?

I interview personnel. Usually, one or two people can explain a particular transaction flow (e.g., disbursement cycle), but some complicated processes may require several interviews. 

Early on, I may not know how each person’s work fits into the whole. It’s like gathering puzzle pieces. The interviews and information may feel random, even confusing. But, later, when you put the parts together, the picture speaks more clearly. Then, you’ll understand the accounting system and control environment.

My Audit Walkthrough Tools

I document the conversations using:

  • A Livescribe pen
  • My iPhone camera

Taking Notes

Using a Livescribe pen, I write notes and record the conversations.

I begin the interview by saying, “Tell me what you do and how you do it. Treat me as if I know nothing. I want to hear all the details.” (For sample transaction-level walkthrough questions, see my audit series titled The Why and How of Auditing.)

As I listen, I write notes. At the same time, my Livescribe pen records the audio. Later the conversation can be played from the pen. (For more information about Livescribe, see my article: Livescribe, Note Taking Magic (for CPAs). )

Click the pen below to see Livescribe on Amazon.

I find that most interviewees talk too fast—at least faster than I can write. As I’m writing about the last thing they’ve said, they are moving to the next, and I fall behind. So I write simple phrases in my Livescribe notebook such as:

  • Add vendor
  • Charlie opens mail
  • P.O. issued by Purchasing
  • Checks signed by the computer

Later, as I’m typing the walkthrough narrative, I touch the letter “A” in “Add vendor” with the tip of my pen (I’m doing so in my Livescribe notes). This action causes the pen to play the audio for that part of the conversation. Likewise, touching “C” with the tip of my pen–in “Checks signed by the computer”–causes the pen to play that part of the discussion. Since the audio syncs with my notes, I can hear any part of the discussion by touching a letter with my pen.  

Taking Pictures

In addition to writing notes in my Livescribe notebook, I take pictures with my iPhone. Of what? Here are examples (from a payables interview):

  • Invoice with approver’s initials  
  • Screenshot of an invoice entry  
  • If several people are processing invoices, I take a group picture of them at their desks
  • A signed check 
  • The bank reconciliation 

So my inputs into the walkthrough document are as follows:

  • Livescribe notes and audio
  • Photos of documents and persons 

 Audit Walkthrough Summary

I write my narratives in Word and embed pictures as needed. The walkthrough documentation takes this shape:

  • Narrative
  • Pictures
  • Control identification
  • Control weakness identification

Why identify control deficiencies in the walkthrough? So I can link them to my risk assessment summary. The system’s weaknesses tell me where risks exist.

Another key feature of the walkthrough documentation is the identification of who I spoke with and when. So, at the top of the transaction cycle description, I name the persons I interviewed and the date of the conversation. For example:

Charles Hall interviewed Johnny Mann, Hector Nunez, and Suzanne Milton on October 25, 2019. 

Look Beyond the Normal Client Procedures

It’s easy for clients to tell you about normal procedures, but they may not think about unusual situations such as the absence of an employee or how errors are corrected.

Always ask who performs control procedures when a key person is out. Why? If someone can—even though they don’t normallyperform key controls, you need to know. Why? Such a situation can lead to fraud. For example, if a person does not normally issue checks but can, and that person also reconciles the bank statement, he might issue fraudulent checks. He knows the theft will not be detected through normal controls–in this case, the bank reconciliation.

Always look beyond accounting policies and routine procedures to see what can happen. I often have clients say to me, “John is the only one who approves the purchase orders,” for example. But I know this is not true because purchases would cease to occur when John is out. So I ask, “Who issues purchase orders when John is on vacation?”

Additionally, ask how errors are corrected. When things go wrong (and they sometimes do), you want to know how they are made right.

Identification of Controls and Control Weaknesses

As you write your narrative of the accounting system and controls, highlight both controls and control weaknesses.

I note appropriate controls as follows: 

Control: Additions of new vendors is limited to three persons in the accounts payable department. Each time a new vendor is added, the computer system automatically sends an email to the CFO notifying her of the addition. Persons adding new vendors cannot process signed checks.

I note control weaknesses as follows:

Control Weakness: Only one signature is required on check disbursements. Johnny Mann signs checks, has possession of check stock, keys invoices into the payables system, and reconciles the related bank account. 

Response to Risk of Material Misstatement

The control weakness created by Johnny Mann’s duties increases the risk of theft. My response? I establish audit procedures in my audit program to address the risk such as:

  • Review one month’s cleared checks for appropriate payees. 

How do you know what audit procedures to perform in response to the risk? Ask, “What can go wrong?” and design a test for that potential. Johnny can write checks to himself. My response? Scan cleared checks to see if the payees are appropriate.

Communication of Internal Control Weaknesses

Though this article focuses on planning and risk assessment, the identification of control weaknesses will impact our end-of-audit communications.

The words Control Weakness (as shown above) makes it easy to locate control weaknesses. Upon completion of the walkthrough, I summarize all control deficiencies so I can track the disposition of each one. Each weakness is a:

  1. Material weakness
  2. Significant deficiency, or
  3. Other weakness 

I report material weaknesses and significant deficiencies in writing to management and those charged with governance. I communicate other deficiencies in a management letter (or verbally and document the discussion in my work papers). 

See my article about classifying control weaknesses.

Audit Walkthrough Frequency

How often are walkthroughs required?

Answer: Once per year, if this is how you corroborate your understanding of the cycle. While walkthroughs are not specifically required in the audit standards, you do need to verify your understanding of the accounting system and related controls. And I know of no better way.

audit walkthrough

AICPA Guidance on Walkthrough Frequency

TIS Section 8200.12, as issued by the AICPA, states the following:

Inquiry—AU section 314 (now AU-C 315) requires the auditor to obtain an understanding of internal control. An auditor might perform walkthroughs to confirm his or her understanding of internal control. If the auditor decides to use walkthroughs to confirm his or her understanding of internal control, how often do walkthroughs need to occur?

Reply—In accordance with AU Section 314 (now AU-C 315), the auditor is required to obtain an understanding of internal control to evaluate the design of controls and to determine whether they have been implemented. To do that, performing a walkthrough would be a good practice. Accordingly, auditors might perform a walkthrough of significant accounting cycles every year [emphasis added].

If we’ve documented walkthroughs in prior years, then we need to do so again in the current year to prove the continuing relevance of the audit documentation. 

The Value of Walkthroughs

Walkthroughs tell us where risks are so we can plan our engagements to detect material misstatements.

Additionally, they allow us to add value to our audits. Clients want more than just an opinion. They desire to keep assets safe and to maintain accurate records. Well written management letters that highlight control weaknesses allow you to do just that. Time to start walking.

For additional information about risk assessment, see my article Audit Risk Assessment: The Why and How.

make your CPE incredibly useful
May 26

Make Your CPE Useful: Seven Suggestions to Improve Learning

By Charles Hall | Accounting and Auditing

In a thirty-five year career as a CPA, you will spend well over 1,400 hours taking CPE classes. Are you using this time wisely? Today I share how you can make your CPE useful.

It’s 3:32 p.m. on a Friday and you are thinking, “When will this CPE class ever end?” Your golf swing, a late tax return, your daughter’s college tuition cost–each float through your mind. Your thoughts continue, “So much to do, and I sit here wasting another day. Why can’t this be more interesting?” Tired. Bored. Numb. You want to be anywhere but where you are. You feel trapped. 

make your CPE useful

Why does this happen? Many CPAs mistakenly believe this pain is a requirement of the profession. They seem resigned to death-by-CPE, as though there is no other choice.

But then you’ve been in classes where you’re laughing, learning, and even wanting more. The day ends quickly, and you walk away satisfied.

Wouldn’t you love to increase the quality of your training and your engagement with what you are learning? Here are seven suggestions to make your CPE useful.

1. Create Three-Year CPE Learning Goals: Tie Training to Vision

Create a three-year rolling CPE plan. While you may not be able to plan each individual class, you can still sketch out your desired objectives and learning path.

Fifteen years ago, I decided to become a Certified Fraud Examiner. I thought, “Why not use my CPE hours to move me in that direction?” Over the next year, I purchased the training material from the Association of Certified Fraud Examiners and trained. In September 2004, I reached that goal. Without the goal, the idea would still be just that–an idea. 

What training goal can you set that will make your dream a reality? What vision do you have for your future?

In your career, you will spend hundreds of hours in training. Why not use those precious hours to get you to your desired destination? Continuous learning about new things is no longer an option. There are exciting (and scary) future changes in accounting.

2. Plan Your CPE Classes Annually: Avoid Cramming in December

Planning your CPE calendar will allow you to spread out the learning load (I do not recommend taking 40 hours of CPE the last week of December). The human mind is not designed to absorb large quantities of complex information in a short period. Space out your classes. The separation will allow your mind to digest and retain what you learn. 

3. Seek Out the Best CPE Trainers: They Will Elevate Your Game

Will excellent trainers cost more money? Sometimes yes, but what’s the alternative? Cheap teachers that bore you to death. Signing up for any old class for convenience’s sake or because it’s cheap is a terrible idea.

Great trainers make for excellent learning experiences. Seek them out. Pay the extra money, if need be. This will make your CPE more useful.

4. Revisit CPE Information: Move Learning to Long-Term Memory

For each one-day class, write a one-page summary. Do this the day after you attend the course. (Once you create the one-page outline, archive it in Evernote for future reference.) Merely writing the summary will drive the learning deeper into your mind. 

make your CPE useful

Then revisit the summary using the following intervals:

  • One week later – review for 20 minutes
  • Two weeks later – review for 10 minutes
  • Three weeks later – review for 5 minutes

There’s nothing sacred about the intervals. The method is what is essential.

Additionally, try to recall the information before reviewing the notes. Doing so facilitates retention according to the book Make It Stick. Revisiting the information and trying to recall it will move your knowledge from short-term to long-term memory–where you need it!

Another suggestion to help you remember the information is that you teach it to your firm members. You can’t explain something you don’t understand. Teaching forces you to learn.

5. Use Livescribe Pen to Take Notes: Record the Audio 

For about $180, you can own the Livescribe pen. No, it will not allow you to remember everything you hear. However, it will record the full audio as you write. Then, later, you can touch a particular word in your notes with the tip of the pen and “voilà,” you hear–from the pen–what was said at that moment. You can upload the written notes and audio to your computer. Don’t ask me how it does this, but it works. Amazing! Now you can have a full recording of your training with shortcuts (notes) to find the audio you want to hear. The pen holds up to 200 hours of audio. 

In terms of learning, writing your notes is more effective than typing (and I might add, less distracting to those around you). Science has proven that writing has a more significant effect on learning and retention than typing.

Another learning tip to make your CPE useful: Read the table of contents before the class starts.

6. Read the Table of Contents: Prepare Your Mind 

The human mind likes to anticipate, to know what’s coming. If you can access your CPE material before the class, I encourage you to scan the table of contents and highlight the areas you are most interested in. Highlighting the table of contents will prepare you for what’s coming.

7. Sit Up Front: You’ll Learn More

Finally, sit up front. The farther back you sit, the more distractions you will see (like the guy reading the latest ESPN headlines or the couple talking all day).

Take Action Now: Plan Time to Consider Your Goals

I challenge you to take action now! Go ahead. Specify a time on your calendar to think about your goals and the CPE classes that will get you there. Become an expert in cybersecurity, fraud prevention, litigation support, data mining, artificial intelligence. Pick an area and move toward your goal. 

efficient CPA
Mar 17

The Efficient CPA: 10 Super Easy Ways to Increase Your Productivity

By Charles Hall | Accounting and Auditing , Technology

Are you missing out on opportunities to be even more efficient as a CPA?

Here are ten super easy ways to increase your productivity.

super easy ways to increase productivity

1. Control f

First, I see too many CPAs hen-pecking around, trying to find information in their electronic piles. Many times the quickest route to finding information is Control f (Command f on a Mac). Hold your control key down and type f. This action will usually generate a find dialog box–-then key in your search words. Control f works in Excel, Word, PowerPoint, and Adobe Acrobat.

2. OCR Long Documents

Computers can’t read all electronic documents (that is, not all documents are electronically searchable). Sometimes you need to convert the document using OCR. OCR stands for optical character recognition. So how can you make an electronic document readable and searchable?

Scan documents into Adobe Acrobat and use the OCR feature to convert bitmap images into searchable documents. Then use Control f to locate words. When should you OCR a document? Typically when it’s several pages long. Do so when you don’t want to read the entire document to find a particular word or phrase.

For example, suppose your client gives you a one-hundred-page bond document, and you need to locate the loan covenants. Rather than reading the entire document, convert it to searchable text (using Adobe Acrobat) and use Control f to locate each instance of the word covenant

3. Dispatching Paper Quickly

A clean work surface enables you to think clearly.

So make filing decisions quickly–as soon as a paper or electronic document is received. Keep your desk (and computer desktop) clean.

If you can dispatch a document in less than two minutes, do so immediately. For documents that take more than two minutes to file, electronically scan them. Then place the document in an action folder on your computer’s desktop. (If you don’t have time to scan the document at the moment, create a To Be Scanned pile in a paper tray.)

You’re thinking, “But I’ll forget about the document if it’s not physically on my desk.” Allay this fear by adding a task in Outlook to remind you of the scanned document (you can even add the document to a task). I create tasks with reminders. So, for example, the reminder pops up at 10:00 a.m. on Tuesday; attached is the relevant document. That way I don’t forget.

For more information about scanning, see my post How to Build an Accountant’s Scanning System. I also recommend David Allen’s book Getting Things Done which provides a complete system for making filing decisions.

4. Close Your Door

An open door says what? Come in.

A cracked door says what? Knock and come in.

A closed door says what? Don’t enter, especially without knocking.

I close my door for about an hour at a time. Additionally, I turn off all electronic devices and notifications. Doing so allows me to focus on the task at hand. 

5. Use a Livescribe Pen

Do you remember everything someone says in a meeting? I sure don’t. Livescribe allows me to take notes and simultaneously record the conversation. Then I can hear any part of the discussion. For example, if–in a meeting–I write the words “intangible amortization,” I can (later) touch the tip of my pen to that phrase (in my Livescribe notebook) and hear what was said at that moment. The recording plays back through my Livescribe pen. That way, I don’t have to call and ask, “What did you say about intangible amortization?”

If you have an iPad, a cheaper alternative to Livescribe is Notability

6. Take Breaks and Naps

Another idea is to take breaks and naps.

Counterintuitive? Yes, but it works.

Breaks

I come from the old school of “don’t lift your head or someone will see how lazy you are.” I’m not sure where this thinking comes from, but you will be more efficient–not less–when you take periodic breaks. I recommend a break at least once every two hours.

Naps

Naps? You may be thinking, “Are you kidding?”

Research shows you will be more productive if you take a nap during the day. It doesn’t have to be long, maybe ten or fifteen minutes after lunch. You’ll feel fresher and think more clearly. According to Dr. Sandra Mednick, author of Take a Nap, Change Your Life, napping can restore the sensitivity of sight, hearing, and taste. Napping also improves creativity.

Michael Hyatt recently listed several famous nappers:

  • Leonardo da Vinci took multiple naps a day and slept less at night.
  • The French Emperor Napoleon was not shy about taking naps. He indulged daily.
  • Though Thomas Edison was embarrassed about his napping habit, he also practiced his ritual daily.
  • Eleanor Roosevelt, the wife of President Franklin D. Roosevelt, used to boost her energy by napping before speaking engagements.
  • Gene Autry, “the Singing Cowboy,” routinely took naps in his dressing room between performances.
  • President John F. Kennedy ate his lunch in bed and then settled in for a nap—every day!
  • Oil industrialist and philanthropist John D. Rockefeller napped every afternoon in his office.
  • Winston Churchill’s afternoon nap was non-negotiable. He believed it helped him get twice as much done each day.
  • President Lyndon B. Johnson took a nap every afternoon at 3:30 p.m. to break his day up into “two shifts.”
  • Though criticized for it, President Ronald Reagan famously took naps as well.

For empirical evidence that naps help, check out the book Rest, Why You Get More Done When You Work Less.

Also, here are more ideas to create energy in your day.

7. Answer Emails and Phone Calls in Chunks

If you pause every time you get an email or a phone call, you will lose your concentration. Therefore, try not to move back and forth between activities. Do one thing at a time since multitasking is a lie.

Pick certain times of the day (e.g., once every three hours) to answer your accumulated emails or calls. 

See my article Text, Email or Call: Which is Best?

8. Exercise

I run (by myself) or walk (with my wife) six days a week–usually in the morning before work. Exercising helps my attitude and clears my mind. Also, I feel stronger late in the day.

9. Lunch at 11:30 a.m. or 1:00 p.m.

Another idea: Go to lunch at 11:30 a.m. or 1:00 p.m. Why stand in line? 

10. Take One Day Off a Week

Finally, I usually don’t work on Sundays (even in busy season). For me, it’s a day to worship, relax, see friends, and revive. I find the break gives me strength for the coming week.

Muddled minds destroy productivity.

Your Ideas?

These are my thoughts. Please share yours.

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.

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.

>