Sameer H Shroff
New member
Hi.
do any 1 have data for Eifficeny Audit for subject Financial Management II.
Regards
Sameer H Shroff
do any 1 have data for Eifficeny Audit for subject Financial Management II.
Regards
Sameer H Shroff
Required Proj. - Efficiency Audit
- Thread starter Sameer H Shroff
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- audit efficiency proj required
ankitgokani
Ankit Gokani
The study revealed that there were four important steps to achieving audit efficiency.
1. Manage and train the client. CPAs can work much more efficiently when clients supply them with all the data they need. If a CPA’s staff has to spend time doing catch-up bookkeeping work or locating and copying needed files, the length of the audit probably will increase and the firm is much less likely to realize 100% of the value of its fees.
“You have to separate assistance from auditing,” says Deborah Lambert, a partner of Johnson Lambert & Co. in Bethesda, Maryland, and chairwoman of the AICPA auditing standards board. “Too often we get in there and the client has things that aren’t reconciled or account analysis that isn’t done. We end up rolling all our extra work into the audit and not getting paid for it.”
To prevent this problem, her firm has experimented with creating two separate groups: a traditional audit team and another, “swat” team that prepares clients for the audit. Introducing the swat team and a different engagement letter for its work “forces a conversation up front with the higher level people where we say, ‘Here’s what’s not ready, here’s what needs to happen, here’s how we can help and this is what it will cost.’”
At Weaver & Tidwell in Dallas, partner Gary Hoffman reviews the possible engagement efficiencies with clients at the planning conference. “We look at what added or saved time or money during the previous year’s engagement so we can reinforce the right client behavior. The clients see how they can provide us with better assistance and the financial impact that will have on engagement time.”
The survey revealed other strategies for ensuring clients are prepared for their audits:
*
Starting at the top. Practitioners meet with boards of directors and ask them to communicate audit value to organization staff members and urge them to cooperate in engagement preparation.
*
Making it as easy as possible. Firms provide explicit lists of what is needed with clear examples and due dates.
*
Charging for preparation work the auditors must do and mentioning the extra charge in the engagement letter.
*
Discounting the fee when proper preparation is performed. Firms found a small inducement can cost less than taking on preparation work themselves.
*
Rescheduling fieldwork if the client is not ready.
*
Developing realistic expectations. Firms know clients won’t complete all the preparation work needed at first, but once they start with basic expectations, they can add more responsibilities each year.
2. Retain clients and staff. Firms agreed that a meaningful investment in an industry niche was an important contributor to efficiency. When a firm retains clients, it means that greater familiarity with the practice area and with particular clients enables practitioners to streamline their audit approaches and to make the most of the time they spend on each engagement. It also allowed them to offer clients valuable advice on best industry practices and to charge premium fees.
Lambert always looks ahead. At the end of an audit, “when you deliver the report, also deliver your next year’s engagement letter,” she advises. “It’s not at all unusual for the client to sign it and hand it right back. It’s a great way to keep the relationship going.”
Survey participants said staff retention was very important because it enhanced both their client-specific and industry experience. Firm strategies for achieving low employee turnover included
*
Explicit and enforced antiovertime policies.
*
A growth plan that offers opportunities for recognition and advancement to partner level.
*
Flexible hours and casual dress policies.
*
Competitive compensation and benefits.
*
Keeping the work interesting, which can involve granting responsibility and including staff in the planning process.
3. Plan properly. The time survey participants spent on this part of the audit process varied greatly from firm to firm, with a range of 2% to 25%.
Planning is critical to audit efficiency, many practitioners believe. “Back in the mid- to late 1980s, we changed our audit approach,” says Tony Lynn of Davis, Lynn & Moots, in Springfield, Missouri. In the past “our philosophy was to go in, audit as much as we could and when our bags were full, come home. As a staff person, I didn’t understand why we did some procedures except that they were in the workpapers from the year before.”
Today, on any audit, Lynn’s firm spends time getting to know a client and its systems in advance. “We can understand its entire operation, as opposed to understanding a bunch of procedures that we’d done previously.” Since changing the firm’s approach, “we’ve been able to reduce hours on the engagement. We’re not just in there doing procedures; we’re doing an audit.”
As part of the planning process, the firms surveyed reviewed the prior year’s workpapers to familiarize themselves with client issues and to seek out possible past inefficiencies in their own work and possible improvements.
Other steps included
*
Meeting with clients to discuss the process and identify client responsibilities.
*
Downloading the client’s trial balance to the firm’s software.
*
Sending confirmations.
*
Preparing lead schedules.
*
Reviewing planning decisions with the firm’s audit staff and considering the staff suggestions for improvement that were turned in at the end of the last year’s work.
However, not all successful firms have lengthy efficiency planning processes, the survey found. Some simply reviewed last year’s audit and considered what the firm could have done differently. Some created a final plan after the audit had begun, when current issues and problems were clear. These approaches generally applied in smaller firms with a high percentage of experienced staff.
4. Assess risk. Correlating audit efforts to the levels of risk and materiality has inherently a more efficient approach, the survey found.
“If you assess risk, it should affect your procedures,” says Lambert. Firms should strive actively to cut out procedures in the low-risk areas and focus instead on the problem spots.
When considering risk, Lambert recommends bringing the whole audit team together. “The senior people can talk about industry risks, while the middle-level people tend to know more about control issues and the competency of the client. The youngest people may not understand it all, but they can learn a lot. By putting the whole engagement team together, we help all of them understand the different types of risk.”
Analytical procedures (reasonable and predictive tests) were considered the most efficient by those surveyed. One firm’s audit team begins each step of the process by asking, Can we audit this analytically? Every participant is trying to use more analytical procedures and do less transaction testing because it
*
Saves time.
*
Uncovers what isn’t there instead of focusing on what is.
*
Is more interesting to perform, leading to a deeper understanding of the client’s business.
Areas in which predictive and reasonableness tests have replaced transaction testing and saved time include
*
Rent payable or paid and rent receivable or received.
*
Interest income.
*
Depreciation.
*
Payroll and payroll taxes.
*
Revenue from direct mail fundraising.
*
Postage expenses in direct mail fundraising.
*
Supplies.
*
Prepaid expenses (rent, insurance).
*
Professional fees.
*
Revenue from annual meeting.
refer this site for more deatils
Best Practices for Audit Efficiency
1. Manage and train the client. CPAs can work much more efficiently when clients supply them with all the data they need. If a CPA’s staff has to spend time doing catch-up bookkeeping work or locating and copying needed files, the length of the audit probably will increase and the firm is much less likely to realize 100% of the value of its fees.
“You have to separate assistance from auditing,” says Deborah Lambert, a partner of Johnson Lambert & Co. in Bethesda, Maryland, and chairwoman of the AICPA auditing standards board. “Too often we get in there and the client has things that aren’t reconciled or account analysis that isn’t done. We end up rolling all our extra work into the audit and not getting paid for it.”
To prevent this problem, her firm has experimented with creating two separate groups: a traditional audit team and another, “swat” team that prepares clients for the audit. Introducing the swat team and a different engagement letter for its work “forces a conversation up front with the higher level people where we say, ‘Here’s what’s not ready, here’s what needs to happen, here’s how we can help and this is what it will cost.’”
At Weaver & Tidwell in Dallas, partner Gary Hoffman reviews the possible engagement efficiencies with clients at the planning conference. “We look at what added or saved time or money during the previous year’s engagement so we can reinforce the right client behavior. The clients see how they can provide us with better assistance and the financial impact that will have on engagement time.”
The survey revealed other strategies for ensuring clients are prepared for their audits:
*
Starting at the top. Practitioners meet with boards of directors and ask them to communicate audit value to organization staff members and urge them to cooperate in engagement preparation.
*
Making it as easy as possible. Firms provide explicit lists of what is needed with clear examples and due dates.
*
Charging for preparation work the auditors must do and mentioning the extra charge in the engagement letter.
*
Discounting the fee when proper preparation is performed. Firms found a small inducement can cost less than taking on preparation work themselves.
*
Rescheduling fieldwork if the client is not ready.
*
Developing realistic expectations. Firms know clients won’t complete all the preparation work needed at first, but once they start with basic expectations, they can add more responsibilities each year.
2. Retain clients and staff. Firms agreed that a meaningful investment in an industry niche was an important contributor to efficiency. When a firm retains clients, it means that greater familiarity with the practice area and with particular clients enables practitioners to streamline their audit approaches and to make the most of the time they spend on each engagement. It also allowed them to offer clients valuable advice on best industry practices and to charge premium fees.
Lambert always looks ahead. At the end of an audit, “when you deliver the report, also deliver your next year’s engagement letter,” she advises. “It’s not at all unusual for the client to sign it and hand it right back. It’s a great way to keep the relationship going.”
Survey participants said staff retention was very important because it enhanced both their client-specific and industry experience. Firm strategies for achieving low employee turnover included
*
Explicit and enforced antiovertime policies.
*
A growth plan that offers opportunities for recognition and advancement to partner level.
*
Flexible hours and casual dress policies.
*
Competitive compensation and benefits.
*
Keeping the work interesting, which can involve granting responsibility and including staff in the planning process.
3. Plan properly. The time survey participants spent on this part of the audit process varied greatly from firm to firm, with a range of 2% to 25%.
Planning is critical to audit efficiency, many practitioners believe. “Back in the mid- to late 1980s, we changed our audit approach,” says Tony Lynn of Davis, Lynn & Moots, in Springfield, Missouri. In the past “our philosophy was to go in, audit as much as we could and when our bags were full, come home. As a staff person, I didn’t understand why we did some procedures except that they were in the workpapers from the year before.”
Today, on any audit, Lynn’s firm spends time getting to know a client and its systems in advance. “We can understand its entire operation, as opposed to understanding a bunch of procedures that we’d done previously.” Since changing the firm’s approach, “we’ve been able to reduce hours on the engagement. We’re not just in there doing procedures; we’re doing an audit.”
As part of the planning process, the firms surveyed reviewed the prior year’s workpapers to familiarize themselves with client issues and to seek out possible past inefficiencies in their own work and possible improvements.
Other steps included
*
Meeting with clients to discuss the process and identify client responsibilities.
*
Downloading the client’s trial balance to the firm’s software.
*
Sending confirmations.
*
Preparing lead schedules.
*
Reviewing planning decisions with the firm’s audit staff and considering the staff suggestions for improvement that were turned in at the end of the last year’s work.
However, not all successful firms have lengthy efficiency planning processes, the survey found. Some simply reviewed last year’s audit and considered what the firm could have done differently. Some created a final plan after the audit had begun, when current issues and problems were clear. These approaches generally applied in smaller firms with a high percentage of experienced staff.
4. Assess risk. Correlating audit efforts to the levels of risk and materiality has inherently a more efficient approach, the survey found.
“If you assess risk, it should affect your procedures,” says Lambert. Firms should strive actively to cut out procedures in the low-risk areas and focus instead on the problem spots.
When considering risk, Lambert recommends bringing the whole audit team together. “The senior people can talk about industry risks, while the middle-level people tend to know more about control issues and the competency of the client. The youngest people may not understand it all, but they can learn a lot. By putting the whole engagement team together, we help all of them understand the different types of risk.”
Analytical procedures (reasonable and predictive tests) were considered the most efficient by those surveyed. One firm’s audit team begins each step of the process by asking, Can we audit this analytically? Every participant is trying to use more analytical procedures and do less transaction testing because it
*
Saves time.
*
Uncovers what isn’t there instead of focusing on what is.
*
Is more interesting to perform, leading to a deeper understanding of the client’s business.
Areas in which predictive and reasonableness tests have replaced transaction testing and saved time include
*
Rent payable or paid and rent receivable or received.
*
Interest income.
*
Depreciation.
*
Payroll and payroll taxes.
*
Revenue from direct mail fundraising.
*
Postage expenses in direct mail fundraising.
*
Supplies.
*
Prepaid expenses (rent, insurance).
*
Professional fees.
*
Revenue from annual meeting.
refer this site for more deatils
Best Practices for Audit Efficiency
rosemarry2
Rose Marry
Hello sameer,
Here i am uploading Management Accountability for Public Financial Management, so please download and check it.