Make attest engagements more profitable

By Maria L. Murphy, CPA

It’s possible for enterprising auditors, accountants, and firms to make attest engagements more profitable, said Alan W. Anderson, CPA, founder of the accounting firm consultancy ACCOUNTability Plus LLC.

A willingness to change is the key for CPA firms of all sizes to achieve more profitable attest engagements, Anderson said. He said firms can bring more profit to attest engagements by gaining efficiencies in processes and procedures and being willing to plan engagements differently.

“The focus should be on right-sizing procedures and meaningful planning about where to spend the time and how much time to spend,” Anderson, who presented a session on A&A engagements on Thursday at the AICPA ENGAGE 2018 conference in Las Vegas, said during a preconference telephone interview.

Reviews, compilations, and preparations by definition require different procedures from audits and from each other. But Anderson believes that CPA firms have some reluctance about doing less work.

“Accountants have a dilemma because they are very good at and like detail, but they feel less comfortable that it is enough to perform only analytical review procedures and inquiry in a review,” he said. In addition, Anderson said clients think CPAs are their “auditor” regardless of the level of service and assurance being provided.

Workflow includes all phases of a typical engagement: planning, fieldwork, wrap-up, and delivery. Smart planning includes getting jobs organized, determining the level of effort, and determining what procedures are required.

“Workflow in most engagements is like a bee flying over a field of flowers. They go from one flower to the next, back to the first, all over the place. Workflow looks at how to improve the process, to accomplish ‘one and done,’” Anderson said.

A focus on workflow enables firms of all sizes to align their level of effort and tailor the engagement specifically to each client. “There is often a correlation between how firms assess client ‘complexity’ and the level of service that outside third parties want,” Anderson said. When developing the work plan, modifications should be made for things such as risk areas, the quality of the records, and who will be using the financial statements.

To improve engagement workflow, CPA firms need to take time to understand their clients, industries, requirements of the applicable professional standards, and their own engagement process. Inefficient processes and procedures should be scrutinized. Processes may be inefficient because work is started before the client is ready, too much time is spent on easy or low-risk areas, the file is touched too many times as it moves from preparers to reviewers, or it takes too long to review and sign off. Inefficient procedures include doing too much work, over-documenting, and performing procedures only because they were done last year.

A contributing factor in workflow change is effective planning and supervision of the engagement team. This includes evaluating skill sets upfront so people are assigned the right work and their proficiencies are used most effectively, along with providing guidance and timely feedback during fieldwork.

“It is not as much who is doing the work as making sure staff are given proper direction and not letting them flounder,” Anderson said. “While skill set is important, training and review is needed so that staff become good at performing and interpreting analytics that make sense and are relevant to the engagement.”

By applying Anderson’s suggestions for better planning and management of engagement workflow, CPA firms can make changes and focus more of their time on understanding their clients and offering them valuable business insights. Firms will also benefit from enhancements to their own efficiency and effectiveness. “Clients want firms to take the time to understand their business,” Anderson said. “The client’s expectations are that the ‘commodity’ is the attest service, but the ‘value-add’ is a firm’s ability to relate to their business.”

Maria L. Murphy is a freelance writer based in Wilmington, N.C. To comment on this article or to suggest an idea for another article, contact Ken Tysiac, a JofA editorial director, at Kenneth.Tysiac@aicpa-cima.com.

SPONSORED REPORT

States look to unclaimed property for revenue

This free report outlines the escheat process, common types of AUP, how different states are handling it and how companies can plan for potential audits and liabilities.

PODCAST

Using drones to enhance audits

Hermann Sidhu, CPA, global assurance digital leader at EY, walks us through EY’s exciting new project to use drones to help audit large warehouses and outdoor inventories.