“If you fail to plan, you are planning to fail.” – Ben Franklin
“Failures don’t plan to fail; they fail to plan.” – Harvey McKay
Both Franklin and McKay were on to something with those statements. Everything becomes easier, less stressful and more successful if you plan appropriately.
In this article, we will be discussing how to be successful planning an audit. Being in the public accounting career and working with community banks (primarily), I’ve been involved with planning hundreds of engagements, both internal and external audits.
Regardless of the service your firm is providing, there are five keys to planning an audit to make it successful.
1. Request list – You cannot perform your service without obtaining quality information from your client. The request list, or “prepared by client” or “pbc” list, is your mechanism to make sure you get what you need.
2. Staffing – You can get everything you need but without the right people doing the right things, you’ll never get the job done on time.
Staffing is one of the biggest issues with any form of professional services engagement because you can’t control what people do. Someone who is a perfect fit for the engagement may resign right before the engagement begins. What do you do?
Reallocating resources is a difficult task but it has to be done. Remember, all companies suffer from a resources perspective so they understand when it happens.
3. Budget – Just like your personal expense budget, if you live outside your means, your budget is meaningless. Your time budget for an engagement should be realistic.
Realistic? Yes, but by who’s standards? That’s the tough part. Everyone working on the engagement is responsible for knowing the budget and constraining themselves to that budget.
4. Goal – Okay, so you’re working on planning an audit. What’s the end-goal? If you don’t know what you’re trying to achieve, you won’t have a successful audit.
Does the client simply need an audit opinion? Or, do you need to assist with drafting the financial statements? Or, is there an audit committee or board of directors’ meeting deadline you need to meet?
Answering these questions and then working backwards is the only way to make sure you meet everyone’s expectations.
5. Communication – You can do everything else right in an audit but if you do not communicate well, all is lost. Communication is the key to any relationship. CPA firms and their clients are in relationships. Therefore, communication is the key.
Communication cannot be a one-time event. It has to be continual. It should be year-round.
Communication in the planning stage of an engagement will help set expectations. If you fail to set the expectations early in an audit, I guarantee your expectations will differ from your client’s.
Don’t just wait for something negative to happen. Be up front about everything.
It’s mid-September and audit planning should be in full-swing. If you don’t have your hands around each of these five elements of a successful audit, start working on them now. Don’t wait.
These five elements to be successful with planning an audit are the keys. We’ll delve into much more detail in future posts. If you have specific suggestions, tips or concerns in any of these, or other, areas, please leave a comment below.