September 23, 2020

“Same As Last Year” and Inept Senior Auditors Are Failures of the Audit Industry

The following was written by a second year staff auditor who wishes to remain nameless. Clearly pounded out in the heat of frustration and perhaps a tad profanity-laden, it exposes a very serious problem that infects all corners of auditing from so-called "expert" auditors on down to brand new staff. Fresh-faced youngsters are often tasked with procedures that should be left to their allegedly more skilled seniors and even then, just because you've done a decade or more in the industry does not necessarily mean you have any idea what you are doing. This, my friends, is a huge problem. No one wants to talk about it but everyone knows it happens every single day. The outside world falsely believes audits exist to "catch" fraud but cases like the one below are why even if that were the case (it certainly isn't), they'd fail miserably at that task. We could have a thousand Senate hearings on the failure of the financial industry and a million new regulations but until we attack this core infection of the audit industry and make it right, we'll continue to experience massive failures in capital markets. Same as last year.

Why is it that engagement executives so frequently come across as knowing so little about their supposed area of expertise, like, you know, auditing?  I mean honestly, aren’t the majority of review notes written by managers, senior managers and partners tacit admissions that they have no clue what’s going on?   How it is that those who have spent their entire professional careers in auditing – five, ten, 13 years – can display such extraordinary incompetence on the subject?   Shouldn’t we expect more from our engagement leaders, those distinguished mentors, those stalwarts of the capital markets?

I’ve listed a couple of review notes I recently received from a senior manager.  This professional has been auditing her entire professional career.  By any standard, she should be an expert in her field of work.  Using the 10,000 hour standard popularized by Malcolm Gladwell in his best selling book Outliers  for example, this woman should know her shit backwards and forward.  (For those doing the math, at 47 weeks per year – auditors love them some vacation – 5 days a week, 8 hours a day, she’s clocked over 24,000 hours of auditing).  So it’s astonishing really that she is writing comments like the ones I’ve included below.   For your comic benefit, I’ve also included the response I was thinking in my head as I writing some diplomatic nonsense just so I could close the note and be done with her.

–          Not sure why the completeness assertion is associated?

o   You tell me, big guy.  You’re the apparent expert, no?  Why the f*** should I know why the completeness assertion is associated?  I just rolled the damn thing forward from prior year.  You think I actually think about this shit?

–          Do we need to add more significant processes to this assertion?

o   How the f*** do I know?  I’m a second year staff auditor.  I don’t know the difference between the measurement assertion and the f*** this assertion.  If you wanna add more significant processes to the assertion, be my guest.  No one’s stopping you.  Add those processes to your heart’s content.

–          Why would this impact the completeness and disclosure assertion?

o   I’m all ears.  You’re the one who’s been doing this for 13 years, a little help here?  This is your rasion d’être, your pièce de résistance. Oh, what’s that?  You don’t know shit?  You actually haven’t done any real work the last 13 years?   

Imagine for a moment a surgeon turning to his first-year resident during the middle of a knee replacement operation and asking something like “do we need to add another screw to this side of the implant?”  Or a lawyer, during a cross-examination of a witness, stopping his questioning to confer with the tag-along-associate whether or not he is permitted to introduce Exhibit A into the record.  How absurd would these scenarios be?  Spectacularly.  Why?  Because surgeons and lawyers and bankers and engineers and doctors and other professionals generally know a thing or two about their professional work.  But for some reason, we give a pass to auditors and we tolerate their remarkably stupid questions.  Enough, please.  

Have something to add to this story? Give us a shout by email, Twitter, or text/call the tipline at 202-505-8885. As always, all tips are anonymous.

Comments are closed.

Related articles

Three Former KPMG Partners Charged by SEC For Being Dirty, Dirty Cheaters

Just when KPMG thought maybe everyone had forgotten about that whole cheating scandal debacle, the SEC announced Monday it settled charges with three more dirty cheaters who once called the firm home. The Securities and Exchange Commission today announced settled charges against three former KPMG LLP audit partners for improperly sharing answers to internal training exams […]