{"id":131178,"date":"2024-10-14t11:57:51","date_gmt":"2024-10-14t15:57:51","guid":{"rendered":"\/\/www.g005e.com\/?p=131178"},"modified":"2024-10-29t19:22:42","modified_gmt":"2024-10-29t23:22:42","slug":"give-your-audit-teams-tasks-that-increase-business-acumen","status":"publish","type":"post","link":"\/\/www.g005e.com\/2024\/10\/14\/give-your-audit-teams-tasks-that-increase-business-acumen\/","title":{"rendered":"give your audit teams tasks that increase business acumen"},"content":{"rendered":"
<\/strong><\/p>\n business-mindedness helps you identify risks.<\/strong><\/p>\n by alan anderson, cpa i’ve previously described a task i have teams perform at the end of an audit. after everyone shares their insights about what they learned about that client and their operations, i ask everyone to complete this phrase:<\/p>\n \u201cif i were running this business, i would\u00a0______________.\u201d<\/p>\n <\/p>\n <\/p>\n here are a few of the ideas i\u2019ve heard audit teams come up with in that exercise:<\/p>\n <\/p>\n even if you don\u2019t relay all the ideas to your clients, just discussing with your team will help them expand their thinking beyond the checklists to the businesses they\u2019re working on. it gets them to think like a business owner. it encourages them to build up an internal repository of best practices and worst practices so that when they work with a new client, they compare that client\u2019s practices to their library of best practices.<\/p>\n recently, i was coaching a gentleman to be the efficiency expert for an audit firm. we picked three engagements to go through to find areas to be more efficient. one client had a lot of cash accounts, so he thought a good tactic would be to pick the two biggest ones and focus on those. those two were an investment account for a deferred comp plan and a money market savings. over on the liability side, he wanted to look at the big numbers again. but that\u2019s not where the risk necessarily is.<\/p>\n as accountants, we tend to focus on the big numbers, but the accounts with the biggest balances aren\u2019t always the ones with the most significant volume of transactions, which is where the risk tends to be. when you fine-tune your business-mindedness by learning more about a client and an industry, the more you know which areas to focus on in an audit. it\u2019s not always the biggest balances that matter as much as what those numbers should be with other accounts and the client\u2019s overall situation. does that situation provide the client any motivation to overstate or understate?<\/p>\n the financial crisis of 2008-2009 exposed organizations’ relatively weak enterprise risk management processes. conditions were ripe to incentivize fraud. business-mindedness means being aware of the overall economic and business conditions and how that might impact your client. in difficult times, an auditor needs to apply additional skepticism and cautious scrutiny to subtle attempts to mislead.<\/p>\n for example, organizations can manipulate earnings by adjusting bad debt reserves or changing the useful lives of assets. they can also accelerate revenue recognition by shipping products at year-end for orders not needed until the following year. auditors need to be on alert for these kinds of subtle actions. upon discovery, it\u2019s critical to focus on management\u2019s intent. was management pressured to \u201cmake their numbers,\u201d and they saw the opportunity to make this adjustment?<\/p>\n determining intent can be difficult, especially with a first-time audit or an inexperienced team. be cautious and suspicious if you are ever pressured to let management get away with it \u201cjust this once.\u201d that can start you on a slippery slope, which is undoubtedly how many of the big audit failures of recent history began.<\/p>\n","protected":false},"excerpt":{"rendered":" business-mindedness helps you identify risks.<\/strong>
\ntransforming audit for the future<\/a><\/em><\/p>\nmore<\/b>:<\/strong> are you using the right business model?<\/a> | give advice while remaining independent<\/a> | the new formula for an accounting business<\/a> | don\u2019t risk losing good employees for bad clients<\/a> | four questions to make your firm more successful as a business<\/a> | say adios to audit fee pressure<\/a> | deliver more audit value by getting out of the conference room<\/a> | six essential elements in audit planning<\/a> | before the audit: more than just planning<\/a> | five crucial attributes for successful audit leadership<\/a> | put the ethics code to work for your clients and your firm<\/a> | is audit in crisis because of definitions?<\/a>
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