One of my favorite television shows of all time is Seinfeld. My favorite Seinfeld made-up holiday is Festivus. And my favorite Festivus activity is the Airing of Grievances. In the immortal words of Frank Costanza, “I got a lot of problems with you people! And now, you’re going to hear about them.” (If you have not seen the episode, check out this YouTube video)
Under the best of circumstances, auditing an entity’s financial statements is a challenging and time-consuming venture. But there are some behaviors clients occasionally exhibit that make completing and issuing the audit a time-consuming and arduous process. What follows are three of those behaviors, along with some honorable mentions.
Let it not be said that I'm not introspective. I know there are many ways we, as auditors, can fall short of our client’s expectations. Stay tuned for part two, where I will review the top things auditors do that drive our clients up the wall.
This is easily the biggest frustration we, as auditors, can experience. There’s no sinking feeling like the one you get when the team arrives on a Monday morning, only to be told that no documentation is yet ready. As most audit teams are 2-5 people, that can be $300-$1,000/hour of lost productivity while we stare at each other across the table. It’s not the lost productivity that is our primary concern, however, it is the havoc this can cause for other clients. We typically schedule our audit seasons anywhere from three to six months in advance. This means that our personnel are typically scheduled to work with a different client the following week. If the first audit wasn’t completed, that work will spill into subsequent weeks, which means we aren’t serving other clients as well as we could and causing your audit to languish.
We understand that unexpected events pop up. As mentioned in the previous paragraph, we prepare the audit schedule far in advance and a lot can happen in that period. If you will not be entirely ready, please let us know ahead of time. Ask us what the first areas are we want to look at and focus on preparing the requested items for just those areas. It may be that the audit should be rescheduled. In that case, giving us as much lead time as possible makes the process much smoother and gives us the most options for meeting your required timeline.
I can’t stress this enough: Being well prepared when the auditor arrives for fieldwork and giving timely, thorough responses to our requests makes the audit quicker, less stressful, and cheaper.
Consider the following scenario: I am sitting down with the controller of an audit client, going over the large fluctuations in balance from the prior year. I say something like, “It looks like repairs and maintenance increased significantly from the last year.” The controller responds, somewhat eloquently, about the various costs the organization incurred for planned maintenance, the equipment that broke down and needed to be repaired, and the buildings they renovated. And then I say, “Whoops! I got my signs backward. You actually had a large decrease in your repairs in the maintenance account.”
True Story: the first time this happened to me was an accident, but ever since then I've asked these questions by design. If we, as auditors, believe a client doesn't understand its own numbers, it causes us to look at everything with additional skepticism and scrutiny. We wonder if any response can be accepted at face value. This makes the audit more challenging both on the part of the auditor and of the auditee. We recommend that management fully grasp what occurred in the organization during the year.
Now, to be fair, many times the issue isn’t one of ignorance, but rather of shooting from the hip. It’s ok to tell us that you don’t know but will investigate. A well-researched response is better than a quick response.
For several years, turnover has been a challenge in the accounting industry, both public and private. I recently reviewed my client listing and realized that, within the last two years, 43% of my nonprofit and business clients have lost either the head accountant, head executive, or both. In fact, I had one client who went through four controllers in one year. This can make an audit more challenging. But we understand this is the environment we currently live in. We are generally happy to help our clients navigate these challenges. What can be frustrating is when the new individual’s standard response is, “I don't know. I wasn't here during that part of the year.” Moreover, he or she expresses no interest in finding the answer. This can make completing the audit extremely challenging. We request that new accountants spend some up-front time learning the organization, reading board minutes, finding out what significant events occurred during the year, and speaking with those who were there during that time. We have found that this extra effort makes the week of fieldwork go much more smoothly, and the audit wraps up more quickly.
Although I haven’t written it yet, I am confident that turnover at the audit firm will show up in Part II of this article.
In addition to the grievances above, I asked our audit staff about their pain points. Here are some of their responses:
I hope you found this article helpful and entertaining and that I didn’t sound too much like a curmudgeonly old man. If you have any suggestions for Part II, “Things Auditor’s Do that Drive Us Nuts,” please send them to me at jfries@becpas.com.
Now, I have to go yell at some kids to get off my lawn. . . .