A New Approach to Auditing – Accounting Today Oct 30 Webinar Summary

The seminar “A New Approach to Auditing” was held on October 30, 2015, and sponsored by Wolters Kluwer and hosted by Accounting Today. Presenter Randolph (Randy) P. Johnston, Chairman and CEO of K2 Enterprises, discusses a new approach to auditing. Considering recent changes in regulations and obvious flaws in the auditing processes, it may be time for you to reevaluate how you approach auditing.

Consider Workflow Improvements

For example, if you’re using collaborative accounting products, then you should be able to use a trial balance that can flow through ProSystem fx® Engagement to a tax return. Additionally, you may want to evaluate how your adjusting entries and tax adjusting entries are handled. Finally, can collaborative accounting software (such as Quickbooks) provide auditors with better support?

Writeup Tools: Issues

The main concern with accounting is that it often takes 20 days to make financial statements available after the end of the month, which is obviously less relevant than real-time data.

Collaborative accounting software seeks to solve this by allowing clients and accountants to work on one set of data simultaneously. This means you can be on the client’s premises or work remotely. Most companies use Cloud solutions to solve this dilemma, and this is also how eFileCabinet provides real-time document management.

Writeup Tools: SaaS Solutions

There are many SaaS (Software as a Service) solutions available to give businesses access to their financials. Many companies reconcile on a daily basis, which is made possible by different SaaS apps. Some of these apps also allow expense reporting, inventory management, bill payment, and statement gathering in real time.

As an accounting professional, you can also take advantage of software solutions that provide you with multi-client portals. This gives you access to aggregate information from multiple clients.

Writeup Tools: Hosted Solutions

Using hosted solutions, such as third-party hosts and traditional on-premises software, can help your company get access to the real-time information. You can also integrate your software with support products like Results CRM, Smart Vault, and eFileCabinet.

Audit Technology

In order to evaluate how your firm is using technology, it’s important to ask yourself this question: does your firm’s technology help or hinder your growth efforts?

Audit technology exists to increase audit efficiencies in risk assessment and planning, substantive testing, and engagement management. Audit technology can also equip auditors in the field with the tools necessary to access viable information and help them collaborate.

Risk Assessment and Planning

The audit team can use the audit tool such as ProSystem fx® Knowledge Coach to review information according to risk assessment standards. Specific audit procedures can also be linked back to documented risk. This ensures that all risks are addressed and unwarranted work is eliminated.

Substantive Testing

There have been many publications on audit standards recommending additional substantive tests. Tools like ActiveData for Excel can reduce the time spent on substantive tests. These tests include the following:

  • Duplicate item testing
  • Aging
  • Stratifications
  • Gap testing
  • Statistical sampling
  • Benford’s Law

Use of Appropriate Technology in the Field

Equipping auditors with adequate technology in the field is important. It’s not enough to hand your auditors a laptop, but they may also need access to the following technologies:

  • Internet access (cellular data, Wi-Fi)
  • Mobile scanning (camera or scanner)
  • Multiple monitors
  • Access to important files from the office (through Cloud-based storage like eFileCabinet offers)

Trends in Audit

It’s important to focus on the right amount of auditing. Audit firms shouldn’t over- or under-audit. Therefore, the trend for integrated workflows is to improve efficiency as well as quality.

However, the most recent initiatives to improve audit quality also bring up some concerns. For example, SSARS 21 permits management to use only compilations where no compilation letter is required. This leads to “preparing” financial statements without a report. Presenter Randy Johnston recommends that audit partners should check with a peer review expert on how to handle this change.

Quality of Audits

AICPA’s recent release proposes “real-time” monitoring versus the current 3-year peer review cycle. In fact, leading firms are already increasing their focus on audit quality in anticipation of upcoming changes. To support these 2 trends of quality and efficiency, tools and workflows for auditing continue to evolve.

Instead of the checklist approach, auditing is shifting to a more efficient dynamic approach in which data flows automatically between linked work papers. Consequently, diagnostics are available in real-time. As an added benefit, this linkage of work papers reduces the frequency of errors because it decreases the number of manual entries.

6 Steps to Improve Audit Quality

Last but not least, Randy Johnston talks about the 6 steps that need to be taken to improve audit quality, including:

  • Pre-Licensure (Accounting Education, CPA Exam)
  • Standards and Ethics (Auditing and QC Standards, Ethics Code)
  • CPA Learning and Support (Education and Resources, Training Requirements)
  • Peer Review (Enhancing Quality of Peer Reviewers, Improving Engagement and Firm Tracking)
  • Practice Monitoring of the Future (Real-Time Practice Monitoring)
  • Ethics Enforcement and NASBA Collaborations
By | 2016-12-15T11:59:21+00:00 November 23rd, 2015|
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