The Sport of Auditing

How winners win and losers lose

I recently asked an auditor: “If auditing was a sport, what sport would it be?” He responded that it would be a “blood sport.”

Not an attractive analogy, but it sure feels that way. Competition is fierce. It’s driving pricing down almost to the point of pay to play. Discounting an audit has even been adopted as a market share strategy by some firms. If auditing has become a game that we’re all playing, how do the winners win and the losers lose?

Three Ways You’ll Lose the Auditing Game

1. Budgeting to the fee. Do you ask yourself: “How can I meet requirements and standards, keep the client happy and maintain profitability…all for the fee the client is paying? If this sounds familiar, stop right now. If you didn’t consider these factors when pricing the work, then chances are profitability is unattainable. Driving internal efficiencies may help, but if you’re thinking about these things when creating the budget after determining the fee, it’s too late.

You can’t satisfy a client by budgeting to the fee either. While you might produce a good work product, you’ll minimize time in the field and interaction with the client to do so. Less time equals less opportunity to expand the relationship.

2. Playing the game on paper. During planning meetings, you talk about what happened last year, what you’ll do differently this year and how the audit will unfold. It’s important to learn from mistakes, but how long did that huddle take? Two hours, perhaps? That’s a lot of time and money you invested in a plan that probably won’t unfold as hoped.

This game isn’t played on paper. It’s played in the field. If you didn’t take time to understand or control conditions in the field, your best laid plans can go to waste. For example, have you ever shown up to start a job and the client isn’t ready, but they can get you started on cash? It’s too late. You lose.

3. Focusing on defense only. There is an old sports adage that goes “the best offense is a good defense.” There is a lot of truth in that statement. However, if you’re on an audit playing defense, reacting to clients and conditions encountered in the field, it’s tough to win. If you only focus on how you audit, what is material and how much time you have in it, you ultimately won’t have much to cheer about.

Your Winning Strategy

Start with scouting. It’s a necessity for sports teams and a profitable audit. Scouting is pre-planning. This demands dialogue and interaction with the client before the planning meeting. Determine what has changed since last year. Create a customized prepared by client list with the client to document the exact items your audit team will need while in the field. Prioritize and collaborate on delivery dates they will hold themselves accountable to meeting. That way, when you take it to the field, it’s game on.

Then plan a balanced attack. Your best defense is proactive, not reactive. In an ideal scenario, your in-charges have met with your clients to prepare them. They have worked with the first partner to design how the engagement will likely unfold. They’ve run the planning meeting as a short presentation to the team with feedback, not a free-for-all meeting. And they’ve communicated with the client again right before taking the field.

While things may not unfold as anticipated, you’ve controlled every variable you can. And if it does go as planned, you’ll hand the client a draft copy of the financials when you leave the field. Score!

Be sure to actively manage the game. If you are doing the work, you can’t manage it. And it’s difficult to manage if you never go onsite. Review notes hardly constitute good coaching either – it’s like watching instant replay – after the fact.

Go on-site, in the field, at the start of the engagement. Have your team tackle the hardest sections first. That way you can coach while you’re there and eliminate the back and forth time review notes create. Doing so will also allow you (and your in-charge) to move onto the next audit engagement while your team tackles the easier sections. It will also allow you to interact with the other part of your team – the client – throughout the process.

“Show Me the Money”

Most firms struggle to address the root cause of why engagements aren’t as profitable as they should be.

They don’t know how to elevate themselves above the RFP, which might as well stand for “Request for Pro-Bono.” Progressive firms have used Lean Six Sigma as the catalyst to become more profitable and deliver a higher quality service to their clients. It helps you change the rules of the game and compete on a level that other firms cannot. If you improve yourself from within, you can become someone your clients cannot live without.

Whatever sport you want to liken an audit to, everybody knows a good team when they see one. Typically those are the ones that control the field of play and set themselves up to win. What will you do to win the auditing game you’re being forced to play?

Lean CPA
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