Audit, Review & Compilation
When audits are conducted, many companies experience disappointing results because they don’t view the process as a means of revealing areas of opportunity. Rather, audits tend to be thought of as a “black box” process offering little or no value and “all CPAs are the same” translating the service to a commodity. They are left with making a selection of a firm simply based on the lowest apparent cost because they don’t know what to ask and how to differentiate the CPAs to find a firm that provides value through quality services. Needless to say, quality can vary drastically and result in a less-than-superior audit.
Signs of a potentially low-quality audit can include:
- A firm that’s inadequately staffed to handle your project.
- Lack of experience within your specific industry niche.
- An excessively low fee which can signal the firm might not take the time to thoroughly address the complexities of your business or it can signal a “change order” billing in your future.
- A history of compliance issues with regulators such as the PCAOB.
As the adage goes, “If it’s too good to be true, it probably is!”
Solidify Your Strengths, Resolve Your Weaknesses
While a poor audit will only give you surface level insight, a high-quality audit will systematically reveal whether or not your financial statements provide true and accurate assessments of your accounts, businesses, and current affairs. The results generated can then be used to determine the specific areas of your business which need attention.
Here are some questions to keep in mind when choosing a stellar audit firm:
- Does your audit team have the experience in your specific industry?
- Does the firm have relationships in your business areas of interest?
- Will there be insightful and honest two-way communication throughout the engagement without any surprises in the final reporting?
- Can you easily meet with them or schedule a conference call?
- What is the staff to partner ratio? (Hint: the higher the ratio, the less partner involvement you will see.)
- Ask your firm about their commitment to personnel training. Does their staff receive formal training or learn on-the-job at your expense?
- Does the firm have the depth of resources to meet your deadlines?
- Do you feel that you’ll remain important to them after the engagement letter is signed?
- Does the firm have a clearly stated Code of Conduct? In other words, what do they stand for?
- Which personnel are responsible for meeting professional practice, risk management, and quality control standards? (Hint: the correct answer is everyone.)
- How will the auditing team use its professional judgment to reach the conclusion that your company is in compliance with accounting standards—while presenting it objectively and not significantly misstating information?