This is a guest post by Harry Hall. He is a Project Management Professional (PMP) and a Risk Management Professional (PMI-RMP). See his blog at ProjectRiskCoach.com.
Some auditors perform the same procedures year after year. These individuals know the drill. Their thought is: been there; done that. But, before we start the engagement, we need to identify the audit stakeholders.
Imagine a partner or an in-charge (i.e., project manager) with this attitude. He does little analysis and makes some costly stakeholder mistakes. As the audit team starts the audit, they encounter surprises:
Changes in the client stakeholders – accounting personnel and management
Changes in accounting systems and reporting
Changes in business processes
Changes in third-party vendors
Changes in the client’s external stakeholders
Furthermore, imagine the team returning to your office after the initial work is done. The team has every intention of continuing the audit; however, some members are being pulled for urgent work on a different audit.
These changes create audit risks–both the risk that the team will issue an unmodified opinion when it’s not merited and the risk that engagement profit will diminish. Given these unanticipated factors, the audit will likely take longer and cost more than planned. And here’s another potential wrinkle: Powerful, influential stakeholders may insist on new deliverables late in the project.
So how can you mitigate these risks early in your audit?
Perform a stakeholder analysis.
“Prior Proper Planning Prevents Poor Performance.” – Brian Tracy
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.
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
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.
Regardless of the project management software you use, always think about security since you are uploading and downloading client files. Continue reading
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?
Here are seven deadly (audit) sins that cause our engagements to fail.
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.
Do you ever find yourself digging through hundreds of emails to find one message? You know it’s there somewhere, but you can’t put your electronic finger on it. Use Slack to communicate by project–that way, you’ll have all messages (by project, e.g., individual audit engagement) in one place.
What is Slack?
Slack is software designed to allow project teams–e.g., audit team–to send and store messages. Why use Slack rather than traditional email? Messages are stored by channel (by project), making itmuch easier to see project conversations.
The Slack website says the following:
Most conversations in Slack are organized into public channels which anyone on your team can join. You can also send messages privately, but the true power of Slack comes from having conversations everyone on the team can see. This transparency means it’s quick to find out what’s going on all across the team, and when someone new joins, all the information they need is laid out, ready for them to read up on.
How CPAs Use Slack
How can you as a CPA or auditor use Slack?
Create a channel for each project, and ask all team members to communicate using Slack (rather than email).
In CPA firms, some activities are year-round such as quality control reviews (we perform several hundred a year). Other activities are a true project, such as an audit engagement. Either way, you can use a separate (Slack) channel to communicate and store all related messages.
Using Slack for Quality Control Reviews — An Example
Below you see an example of how Heather, my associate, and I use Slack to communicate about file reviews in our quality control department. By doing so, we can see who is doing what and when. Also, all of the messages are searchable by channel. So, suppose I’m wondering when we reviewed the ABC Bank engagement. I can search the CPR (cold partner review) channel to see who performed the review and when. Notice, in this channel, Heather and Iare posting status comments. We do so for the following reasons:
To create a history of each review
To notify each other that the review has commenced (Slack automatically sends a notification message to those included in a channel)
To select our quality control channel, I click the CPR channel on the left (where all the channels appear). Once I click CPR, I see the most recent messages for this channel.
Made with Stitcher
Audits – Another Example
Think about a typical audit. You have three to five team members, with some individuals coming and going. To maintain continuity, you need a message board that allows all audit team members to see what is going on. That’s what Slack does when you create a channel for a particular audit. Think of it as a message board in the cloud since the designated personnel can see the audit communications with their PC, iPad, or cell phone.
Other Advantages of Slack
Advantages of Slack include the following:
Accessibility from all devices, including cell phones and tablets
Shareability of documents such as PDFs and spreadsheets