The following post is republished from AccountingWEB, a source of accounting news, information, tips, tools, resources and insight–everything you need to help you prosper and enjoy the accounting profession.
Most small firm practitioners can offer lots of answers as to why it is difficult to profit from small audits. Ever-changing professional standards, increasing quality control requirements, using standard “one-size-fits-all” audit documentation and increasing legal liability are a few of the common answers. The problem is that knowing the answer doesn’t solve the problem!
Maybe we need to change the question to solve the problem. A better question may be, “What changes do we need to make in our audit practices to profit from small audits?” Answer this question correctly and we solve a major problem!
Here are changes in audit practices some smaller CPA firms are considering:
• Developing the technical and leadership abilities of engagement leaders is at the top of the list. Recognizing this takes time and money, small firms are making increasing investments in training and consultations to expand the knowledge resource base of their leaders and the firm. Making sure leaders are technically current in all professional standards affecting auditing engagements is a first step. Teaching leaders to pass their knowledge on to all assistants is the second.
• Designing firm policies and procedures within existing professional standards that provide reasonable assurance audited financial statements are not misstated. While we’d like to achieve absolute assurance the financial statements are not misstated, we have to assume some risk they may contain misstatements. In short, we have to give up some of our traditional approaches to audits in exchange for uniquely tailored audit strategies designed to gather the minimum amount of evidence necessary to verify relevant financial statement assertions. Gathering the minimum required evidence in the most efficient ways results in maximum profits!
• Creating proprietary audit documentation packages by eliminating or modifying documentation purchased from major publishers. Extensive audit documentation is not a substitute for the knowledge of staff personnel! We cannot afford to complete practice aids and other documentation containing everything we need to know on every engagement, particularly on small audits. Many small firms are realizing they can modify their quality control documents to permit engagement leaders to tailor documentation on every audit. Using major publisher’s practice aids for reference is the most any firm should do on small audits. When we know the requirements of professional standards, it isn’t difficult to tailor or create basic practice aids to guide small audit performance.
These are just a few of the small audit changes CPA firms must consider to increase profits. I’ve designed my Small Audit Series of live and on-demand webcasts to provide holistic solutions that will enable practitioners to make more money on small audits. You can obtain over 300 pages of instructional text materials and illustrative practice aids designed for CPE credit on the left sidebar of our website, www.cpafirmsupport.com. Don’t be left behind! Small audits can generate BIG profits!