31 March 2020

We want to proactively assist our users to become more equipped, skilled, efficient and profitable. Here are some ideas:

Have us assess your practice

We often find that firms that are struggling with their documentation and staying current benefit hugely by having us look through the kind of work they do, having a conversation around problems and challenges and having us make some recommendations about what they could be doing (which may include some or all of the following). This discussion often takes place informally in the context of training, however, we are happy to do this at a basic level as a free service on request.

Think outside your location

In the current audit environment, where many smaller part-time audit firms are opting out of auditing,  there is a great need for other firms to take up the slack, especially in the more remote regions. By embracing paperless, cloud-based technology like Audit Assistant there is no real disadvantage to auditing small entities remotely. Have you thought about following your networks and your specialisations to regions where there are few or no auditors?

Use all our online connection tools

Sharing pages to gather data, complete checklists and otherwise interact with clients is a no-brainer when it comes to efficiencies, yet many firms still don’t use these to their fullest. The ability to customise pages prior to sharing, hiding sections, and getting prompts when clients complete their work have made this even better. Plus use our requests feature to gather data directly from the client into anywhere in the audit file.

Upload your testing data and trial balance

Much efficiency is gained by using our sampling tool yet this is not used nearly as much as it could be. Once the data is loaded tests are run against the sample, scans may be attached and errors noted – all within the software. Similarly, trial balance data is now easier to upload and manipulate. Xero Trial Balances are now a one-click upload

Embrace paperless – attach and link

Having everything in the digital file means it is secure, backed up, and accessible from anywhere. Apps like Microsoft Office Lens make scanning from your device while on fieldwork far easier. Remember that in most cases attachments may be added by simply dragging and dropping onto the appropriate work item. Remember too that links to external sites and repositories may be added using the attachments tool.

Review concurrently and use our review tools

A huge advantage of cloud-based real-time audit software is the ability to review jobs in smaller, more timely chunks. A reviewer can jump into a job when they have a spare ten minutes, add review notes if required on pages in progress and head off any potential rabbit trails that staff may be on. No need to wait until the file arrives just hours before sign-off is required, and finding that there are plot holes in the story. If a firm is not using the review tools they are missing out on huge efficiencies.

Use the right templates

Follow the prompt which tells users that there is a better/newer version of a job type that they could/should be using. In some cases, this is critical where a standard has been updated. We don’t force these changes as in some cases there may be a good reason to stay on an older version (say doing a job that relates to an earlier period) but this is rare. In general, if there is a new version flagged this should be adopted as a matter of course – especially after roll-over. Most of your data will be retained (that which relates to the old job type will be dropped) and you will be assured you are using current content. In the worst case, you can always roll back the job using duplicate/restore.

List on our website

We have provided a service for some time of listing firms who wish to do so on our website and this free service will continue.

Use us to assist with your quality control

We offer a file review service whereby firms submit names of jobs for us to review and provide a written report including recommendations on how to use Audit Assistant better. This can be part of a practice assessment, lead to training in identified areas, and/or form part of your formal quality control process. Our report also contains feedback on how the file holds together and how it has addressed the auditing standards and best practices. This service is charged on an hourly basis.

Book a training session

There’s nothing like taking time to sharpen your tools. This is what training does – gives firms a chance to pause, take a breath and look at alternative ways to do better work. Bad habits can be left behind and better ways learned. We carry out training in-house if required, combined by area for new users and smaller firms, and also from time to time carry out workshops around issues of special interest. There is a fee charged for training sessions. 

Let us help with data migration or fee purchase

Sometimes firms hesitate to add all their work onto Audit Assistant because the time required for set up with many jobs can be unappealing. We can help with data migration and job setup – either just creating a bulk lot of clients with contact details, or by adding trial balance data. This is a custom service that depends on the specific need so contact us to discuss. We can also transfer jobs from another user in the case of sale and purchase of a block of fees. We can also connect firms either selling or wanting to buy a block of fees.

Tell us what you need from us

We’re here to help! Any requests, ideas, or suggestions are appreciated. If you can see an opportunity for us to develop some new content that may have wider commercial value please get in touch. Or if you want a new feature or service just ask. If we have enough requests we will find a way.

Note that most of these ideas can also apply to your compilation work as well. 

Please contact us to discuss further these ways we can partner with you to enhance your business and lifestyle

To help our users prepare for their next review – to get the proverbial ducks in a row – I requested the CAANZ NZ auditor oversight team to provide a list of the main issues encountered in their review work with audit firms. 

They were kind enough to send me notes from a recent presentation which included these very topics (for all audit firms – not just our users).So here are the main points, along with my commentary and suggestions about how to best use Audit Assistant to address these common problem areas:

1.  Audit / review report not compliant with standards

Our standard audit reports are designed for all types of jobs, and different permutations and outcomes, however they are not foolproof. Common mistakes include:

  • Using an out of date audit template which includes an out-of-date audit report: With help from Bill Heritage we updated all our reports in 2016 when the reporting standards changed. If users are using an old template our system now prompts for an update with a red flag-box at the top of the page. Updating is easy and users are then assured of the correct audit report.
  • Incomplete or incorrect reports: Using the correct report still may not produce a complete report if the wrong boxes have been ticked, or not ticked at all earlier in the job. Read the produced report carefully to make sure it makes sense and all essential parts are included. Use the Customise/Edit button to open up the detail on the page to see if something is missing or wrong and follow the hyper-links back to correct.
  • When the standard reports don’t fit: Occasionally there will be some odd situation that we haven’t covered. In these cases use the Customise/Edit button to open and create the custom changes needed. Or use Copy to Clipboard and carry out a final edit in Word.
  • Using your own out-of-date reports: To check if your reports are up to date we suggest checking your reports against ours, and use our checklists to find out where your reports are lacking.

And please if you do find an error or omission in our reports – or have a suggestion for improvements – let us know.

2. Not identifying that the financial statements do not comply with the reporting framework

At the beginning of each audit template we ask which reporting framework is being adopted and whether this is appropriate. There is also a testing tool included to make sure the framework actually fits the job. We also provide financial reporting checklists that allow the auditor check the disclosure and presentation in detail for compliance with the chosen framework. If an issue of non-compliance is found we suggest users:

  • Note the problem and flag the issue – either as a risk, an adjustment, a management letter point, for follow up, or a key issue for partner attention or combination of the above depending on the kind of non-compliance.
  • This will ensure that the point is not overlooked, and an adequate response is made, either by the client rectifying the issue or the appropriate note included and modification added to the audit report.

3.  Independence threats (self-review / long association)

Practice review seems to be requesting firms to have peer reviews carried out for jobs where there is a long association. The risk is that familiarity can bring a certain blindness that another auditor may easily spot. This is a particular issue for smaller firms where internal review or rotation of staff and partners is not possible. We suggest:

  • Find another local firm of similar size and style and create reciprocal review agreement.
  • We have acted as “matchmaker” in one case so far. We are happy to offer this as a free service to our users.
  • Use our review service – this also serves as a training exercise in the use of Audit Assistant. While we are not “qualified auditors”, we find that so far our review has fulfilled quality control requirements.

4. Lack of clarity about opinion modifications (e.g. which revenue streams are affected)

When a modification is made to an audit report, there is a prompt to make a paragraph describing the basis of the modification.

  • We do not provide any standard wording for this as every situation is likely to be unique so it is up to the auditor to provide a sufficiently precise statement.
  • In these cases it may be a good idea to involve a peer reviewer (as above) to ensure that this essential wording is clear.

5. Going concern requirements not met (audit report and financial statements)

Again this is an issue of using the correct audit report, and considering the requirements of the standards.

  • Auditors are required to ask whether a preliminary assessment of the entity’s ability to continue as a going concern has been carried out by the client, evaluate that assessment, and if not to discuss with client and record the discussion and evaluate (ISA(NZ)570,10).
  • The financial reporting checklists will assist in checking the disclosure requirements of the relevant reporting standards.

6. Staff members completing Audit Assistant with little apparent understanding / No evidence that the engagement partner has taken responsibility for the direction, supervision and performance of the audit

These were two separate items in the notes, but they seem to relate closely. Within Audit Assistant:

  • The partner is required to sign off the A1 control page which concludes the whole job. This implies that they have taken responsibility for approval and supervision of the work.
  • There are a number of other pages that the partner should either be concluding or reviewing, such as the risk assessment page, the audit summary page, and the quality control page.
  • We provide full training for users, so if this is you please contact us and book a training session.
  • Download the latest user handbook.

7. Insufficient (or non-existent) audit documentation

Obviously not talking about Audit Assistant users 🙂

8. Has not demonstrated professional scepticism

The notes point out that there may be no single way in which the auditor’s professional scepticism is documented. It is more an attitude of having a questioning mind, being alert to anything that may indicate misstatement due to error or fraud and critically assessing audit evidence. Nevertheless the audit documentation should provide evidence of the auditor’s exercise of professional scepticism in accordance with the ISAs (NZ), addressing questions such as:

  • Has the auditor responded appropriately in circumstances when inconsistent or contradictory audit evidence was obtained?
  • Does the documentation indicate alertness to anything that may indicate misstatement due to error or fraud?
  • Has the auditor sought evidence to challenge rather than just corroborate management’s assertions?
  • If information is inconsistent with the auditor’s final conclusion regarding a significant matter, have they documented how the inconsistency was addressed?

9. Inappropriate sample sizes

As part of the audit documentation, there must be a logical connection made between sample size for test of details with factors such as:

  • Assessment of risk.
  • Use of other substantive procedures directed at the same assertion.
  • Ability to stratify the population.

Thought must be applied to reducing sampling risk to an acceptable level, and the logic of the decision must be documented.

The notes point out that two types of conclusion can result if this connection is not made:

  • That a material misstatement does not exist when in fact it does.
  • That a material misstatement does exist when in fact it does not.

Within Audit Assistant we prompt for these kinds of discussions as part of our planning and tests of details areas.

We hope this tips give some direction as to where you might consider some internal training or updates to procedures. Please contact us if you have any questions or comments about any of these issues or would like any assistance.

As I’m reviewing audit files I like to feel as if I’m reading a thriller, or at least a mystery story.

The introduction sets the scene, including the characters and their world. Then we start to see the stakes – what is at risk? What do the characters want? What dangers are there that our heroes have to overcome?

Once the hero (which is you – the auditor) – identifies these things, then they set about solving the mystery. How will they approach it best to make sure that they aren’t side-tracked onto irrelevant issues that aren’t really that critical to the plot? How do they stay focussed, and lead their trusty side-kicks safely through to a satisfactory outcome so that they survive to live the (even more exciting) sequel?

The brave adventurers set out on their great quest. What do they do when the unexpected plot twists come up? Do they stay alert or are they lulled into boredom on the long journey, or tricked by some evil mastermind into missing some hidden piece of the puzzle? Are they intimidated by their fierce enemies to back down and take an easier path that leads to a dead end? Can they see through their quest to the end?

Okay so it’s not always quite that exciting doing an audit. But nevertheless all audits follow a clear story that encompasses many of standard tropes of a good story. And most importantly the reader of an audit file should be able to discern a clear story arc. I would describe this as follows:

1. What is the setting (entity and environment)?
2. What does our mission entail (scope and legislative requirements)?
3. Who are the key characters and stakeholders and how they relate to the entity and to each other (risk, related parties, fraud)?
4. Who will be reading our story – or at least the final chapter – our audit report (user needs)?
5. What details can we skim over and what do we need to include so we don’t miss anything important (materiality)?
6. What are the key points we need to focus on where things could go badly wrong (documentation specific risks including how the entity deals with it own risks)?
7. What the risks are that our mission could fail (reducing audit risk to an acceptable level)?
8. How can we meet this goal by choosing the combination of approaches that is most efficient – based on assessed risks and materiality?
9. How much we will rely on the client’s own controls, how much we will rely on analytical review, and how much we will have to cover by testing transactions by sampling (our Risk Analysis, Strategy and Plan)?
10. How do we make sure we focus on our plan and don’t get side tracked – UNLESS something pops out that we didn’t know about – the dreaded plot-twist (revisting planning)?
11. What have we found out about the big issues we identified in our planning (summarise the whole job on – Audit Summary Information page – what we identified as the big issues -medium, high and significant risks and key issues – any changes we had to make along the way, and anything else that is really important – errors we found or indications of fraud for instance)?
12. Is our work is sufficient to meet our goals?
13. Pull together a report that encompasses all the important findings above.

Many audit files contain lots of good work, but don’t necessarily hold together the story arc that makes a good audit file. Often the story is in the auditors head, but they haven’t recorded it that well. The story is either cluttered with too much detail or missing some important detail on which the whole plot hangs. 

So when you are completing your next audit file, sit back and imagine you are reading a story. Does it contain all the elements above, or are there holes in the plot? Is it as big as Lord of the Rings but not nearly so interesting? Is there a clear story running through the whole file, so that someone else could read it and feel like they were right there with you on your adventure?