Checklists are great tools to help get audits done. They can be superb reminders of something you forgot or hadn’t thought about. They can also be a constraint on actual thinking, leading us into cookie-cutter audits.
My friend Charles Hall, writing at CPA-Scribo, suggests How to Overcome Cookie-Cutter Audits.
The idea is to start with a blank sheet of paper and ask some questions about the audit. Ponder what has changed in the economy, the accounting & audit rules, what problems might be encountered, and what work from the prior audit isn’t needed anymore.
This might get you out of the mental rut of doing things the same as every other audit and avoid the inefficiencies of hanging out with SALY all the time.
Here are his ideas for questions to ponder:
Where’s the risk?
Are there any complex estimates?
How has the client’s accounting system/staff changed?
Are there any new accounting or audit standards relevant to this audit?
Does the client desire any new services (in addition to the audit)?
What problems might delay the completion of the engagement, and what can I do about them?
Has the client incurred any significant new debt?
Has the client constructed any significant capital assets?
Does the client anticipate the discontinuance of significant operations?
What is the most likely area someone would steal? How?
Were there any procedures performed in the prior year that are no longer needed?
I’m going to implement this, starting with two audits that are in planning stage. Here are the first few questions that come to mind which I’ll be adding:
- How soon will long-term debt be due?
- What is most important to readers of the financial statements?
- How important is the functional allocation to readers? (for NPOs)
- Without looking at the trial balance, where are the numbers likely to be incorrect?
What focused questions could you add for your firm which would stimulate some fresh thinking and get you out of your mental rut?
The post linked above also discusses a bit of the downside from the checklist mentality. Also suggests outside inspections as another way to improve a firm’s audit approach.