your reviewer should be adding value.
by ed mendlowitz
101 questions and answers: managing an accounting practice, the complete 2-volume set
q. i want to improve my firm’s review and quality control. do you have any suggestions?
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a: this is a recurring issue for most firms. every cpa practice needs quality control. the issue is whether a dedicated quality control (“qc”) person is needed, and if not, how the qc can be done without one.
a practice is a business and every business must be run efficiently and profitably. qc is an area that i have found many firms getting tied up in and spending either nothing or much more than they should.
a firm needs a dedicated qc person when the workload volume warrants it, especially where there are bottlenecks and backlogs because the supervisor or partner who would review the work is not readily or easily available; the scheduling becomes exceedingly difficult; and the expertise and training becomes more specialized and wider in scope.
almost every larger size firm has dedicated audit, attestation and financial statement report qc people; some even maintain firewalls between the qc and the audit staff. virtually every tax return, no matter how small, is reviewed by someone – whether it is a reviewer, another preparer, their supervisor or a partner.
this question is not whether it is being done, but whom and should it be a separate qc person.
there are different ways of establishing qc methods and procedures. depending on the underlying quality of the original work, measures have to be established to assure the best quality at the least cost. the lowest cost always comes where the person first performing the service does it correctly. the qc person, who is usually at a higher level and billing rate, would spend a minimal amount of time and the product gets delivered quickly and profitably. if the first-level work is done carelessly and without interest, then the reviewer will practically have to redo the work – either through extensive notes, comments and discussion, or simply making the corrections to get the work done.
qc starts with the processes and determination of the firm to assure the best job possible gets done at the lower levels. part of this is the right procedures and checklists and a resolve that they are adhered to. another part is the ego and pride of the staff to do the best job possible, complete as much of their work as they can, and not leave open items for their boss or the qc people to clean up. a “doing it right the first time” culture has to permeate the firm.
with that, the qc person can spot check the work and focus in on the major issues, using the saved time to add value to the assignment and train and further develop the staff. otherwise, the qc time is spent redoing and correcting errors, carelessness and just plain apathetic work, which wears out the reviewer and forecloses any meaningful training and development.
the person performing the qc needs to have the authority to enforce fully the processes and procedures, and should not be expected to correct the work. having the person making the errors correct them establishes a pattern of quality always, training and continuous learning, and of not settling.
in most businesses, error rates of more than 8 percent to 10 percent are totally unacceptable, while in an accounting firm, error rates of as “low” as those percentages are unheard of and considered great. a qc person is necessary, but not as an added person on the project.
qc starts with the first person touching a file. they need to be taught to follow the procedures without shortcuts, and to self-check their work before it is handed in for review. there is very little that a person does in audit and attestation and financial statement work, or tax compliance that cannot be self-checked and proved. another self-checking mechanism is to have them learn (your job is not to teach, but for them to learn!) to apply a reasonableness test. the completed work should be looked at to see if the purposes requiring the work and procedures were met; if the results make sense; what the client would look at; and whether the user would spot anything out of order. a mindset is needed to apply a critical analysis of the completed product.
finding a qc person is not that easy. besides technical expertise, the reviewer needs the ability to focus in on major issues; recognition they shouldn’t get bogged down with details; value of their time; and training skills, patience and the ability to communicate the errors they find in a way that trains and elicits buy-in, growth and the elimination of future errors of the same type.