Seven Deadly Audit Sins

By Charles Hall | Auditing

Feb 22

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 We use outdated technology.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?

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About the Author

Charles Hall is a practicing CPA and Certified Fraud Examiner. For the last thirty years, he has primarily audited governments, nonprofits, and small businesses. He is the author of The Little Book of Local Government Fraud Prevention and Preparation of Financial Statements & Compilation Engagements. He frequently speaks at continuing education events. Charles is the quality control partner for McNair, McLemore, Middlebrooks & Co. where he provides daily audit and accounting assistance to over 65 CPAs. In addition, he consults with other CPA firms, assisting them with auditing and accounting issues.

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(7) comments

Jim Bennett February 24, 2016

Great article – you hit the nail on the head – we somehow think that things will magically go better this year, without being tough minded about identifying the things we need to do to make it go better.

Another poor planning practice – jumping into tying out the numbers before doing the hard thinking work about planning. Tying numbers, making adjustments, it’s the “comfort food” of auditing. We know how to do it, and know when we’ve reached the right answer. This ambiguous planning stuff doesn’t always have a “right” answer, and can make us uncomfortable.

Reply
Charles Hall February 24, 2016

Jim, I love the “comfort food” comment — that made me laugh! Well put. We all like to do things we are good at, and agreeing numbers is something most CPAs love to do.

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Selena Fogg February 24, 2016

I think these steps should occur with all projects, not just with audits.

Reply
Carole Carlson November 29, 2016

I have found that weak staff and an aggressive budget are a recipe for disaster. I try to push back on the budget if the job is poorly staffed. Goes along with the comment about uncovering problems early. What is the point of making a budget that everyone knows cannot be met?

Reply
Charles Hall November 29, 2016

Good point Carole. Reasonable budgets are necessary for good audits!

Reply
Tammie November 29, 2016

Great list! This is very applicable to what we are going through right now. Can I share this with others at the firm I work at?

Reply
Charles Hall December 7, 2016

Yes, please do Tammie.

Reply
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