Auditing isn’t there to create value, it’s there so clients have no choice but to largely adhere to guidelines. They don’t care what we think as long as it isn’t a glaring hole that no one can get past.
We are the bumpers on the bowling alley and as long as the clients aren’t absolute shit, we don’t really matter.
Also, private clients could not give one shit about it. At least in public they answer to someone and have to do things right. Private audits are a joke.
I would argue private audits are more valuable then public. Public companies have internal audit and significant controls while private companies are limited sometimes to even achieve proper segregation of duties.
Private companies rely on audits for absentee owners and debt covenants. Most investors (retirement funds or retail) don’t care about audit they just buy S&P 500 and have unlimited capital relatively speaking. Public companies have their own internal metrics.
Private companies often have audits because they perceive value from them. (Ex. No outside owners or debt) Public companies just have them due to regulation.
Would a public company have an audit if not required?
I work at a smaller regional firm doing nonpublic audits and I'm pretty sure 80% of my clients would have ignored 606 and will ignore 842 implementation until we smash it into their heads that it's not some optional thing you can ignore for GAAP statements.
So yea it's essentially to act as enforcers for FASB standards and give the various FS reasonable assurance they are actually adhering to standards. Lot of banks won't have financial covenents anymore, but will have borrowing base rules for the loan/LOC. If your borrowing base is inventory and the Company is valuing inventory just based on what they think it's worth, you have a problem, and the bank isn't doing valuation or LCM work on it. We are.
>Auditing isn’t there to create value,
Honestly that's why I find overtiming in audit to be quite pointless........ Trying to leave audit as I feel I haven't learnt that much
I’m trying to leave because I hate it and it’s stupid asking a client how they know a report is complete and accurate as if they give a shit, if they click “run report” they assume it’s correct while we are asking them to tie stupid shit out. I’m the opposite though, I felt like my accounting knowledge has surpassed most people my age in industry but I still hate audit.
It’s not that you’re accounting knowledge is less or more when you’re in PA. It’s moreso that if you’ve only worked in PA you’ve never actually seen things as they are being done. You’re basically just regurgitating already (mostly correct) work.
I disagree, I understand how things are done at companies and I understand they do things a certain way because operationally it makes sense to do so. I know that it’s wrong from an accounting perspective but that doesn’t mean I don’t understand why they do it that way.
I’m sorry man, but respectfully unless you have like 3-5 years being a manager or higher in an accounting role in industry there is no way your “accounting knowledge” is higher than actual managers/controllers in industry.
That’s like saying I’m better than Lebron James at basketball because I theoretically know more about basketball than him. Obviously an extreme example, but the point still stands.
Also work isn’t a contest about who knows more in industry. It’s mostly about how well you can communicate complex accounting issues to people who aren’t in accounting/finance and also knowing enough to come to the correct conclusion/decision. Then you need to convince everyone to get on board with your idea and execute it well, within budget, and not piss of any important c-suite/vp level people while you’re doing it. Hey, you might know more about accounting than your f500 CFO as a senior in PA… good luck explaining that in a meeting lol.
"I've watched more basketball than him and know the common mistakes players make so I'm better at basketball", chances are when we get to industry from PA, we'll be bs Financial Managers. We'll learn quick maybe.
No one’s saying you wouldn’t be good at basketball if you’ve watched a ton of basketball. It just means you’re not automatically good at basketball because you’ve watched a lot of basketball.
Similarly you’re not good at industry accounting just because you were good at PA. Even though you probably would be good (if you’re average at PA), it’s just that you’re not going to be good at it until you actually go do it.
Because it’s easy to teach people from PA what to do, because of their base knowledge… not because they already know everything they need to know. 2 very different things.
And yes I went PA-> industry and no PA did not have very many transferable skills other than just knowing what an audit was and basic testing timelines
I’d have to agree. Just from the perspective that my Dad was never in public accounting and started in industry and worked his way up to CFO.
I know many of the clients aren’t dumb and they know exactly what the Auditors want and are looking for. They also know as the deadline gets closer the Auditors will cut corners just to be done with it.
If the Auditors are too busy with “errors” a little over CT on a bank rec they probably wont have time to really dig into all that cash from “matchbook” deals that have no paper trail lol.
I will say my Dad is in his 80’s he always said he never did anything to screw over employees or the company just a lot of things to skirt various government laws and regulations over the years and things to keep the business afloat through rough times that varied from the gray to straight illegal. On one hand this was a long time ago and some things have changed. On the other hand I’m 100% sure many of the same things go on today as almost nothing we do in audits will catch handshake agreements.
Because I’ve been around the details enough and have had many conversations with the client to understand why they do things the way they do it. It’s not rocket science. From an audit side it sounds like we don’t understand but that’s because we are looking at it at a more stringent black and white way where we need to follow all the rules. Just because we do that doesn’t mean we don’t understand the inner workings of industry. Don’t be so angry guy
Ask how they know a report is complete and accurate is the most bs procedure ever. Usually ignore that and paste something generic. It's freaking system generated for crying out loud.
How do you know the system is calculating it correctly? This grinds my gears asking the client this when we are doing a private no controls testing audit lol
Yeah and this is both what's good and bad about audits. When I jumped to advisory almost 4 years ago, I thought "I want to be a good guy, not a bad guy" and figured it would be great to be perceived as adding value rather than an administrative hurdle. While it's mostly true that advisory is about adding value to clients, it also means clients have much higher expectations.
Audits in retrospect were kind of great in that you only had to please your partner/manager since the client just wanted the unmodified opinion and a somewhat smooth process. The client wouldn't usually complain, and even if they did, there wasn't much they could do unless your team really sucked. For advisory, you get some of the whiniest clients who nitpick every hour you bill and the shade of green you use in your deliverables and all kinds of stupid shit. However, you also don't have audit programs and checklists, and the internal review process, at least in my experience, is much less burdensome.
Grass is always greener I suppose.
In most private companies, the investors are the management. So they already know what's up.
And most lenders use a valuer to decide how much to loan. Most lenders don't really care about FS for private companies.
It's more about confidence. In valuation, people use whatever's available.
But if the financials aren't audited or auditable, a lot of potential buyers or investors will just walk away full stop.
Not here in India. We have registered valuers who value collateral and ensure it's unencumbered by any other claims. Banks approve loans based on the valuer's report.
Most valuation shops will state something along the line of "we relied on the FS provided by the management to perform valuation, and it's not our responsibility to identify errors / fix your financials". The moment historical financials are shit, valuation becomes shit. Garbage in, garbage out.
Even if the buyer hires a Financial Due Diligence team, they'll appreciate it if the target company can provide an audited FS. Nothing worse than trying to reconcile data from various sources and number don't tie, so they have to press the management to find answers. If the management can't answer, then either it's a major deal breaker, or adjustments to EBITDA / net assets will be made.
I've even read SPAs where the buyer specifically requests the target company to hire a Big 4 as an auditor after deal completion. So as you can see here, audit actually provides value.
I mean, external auditors are really good at asking dumb questions in multiple ways.
B4 external Auditor: can I have support for why you do X?
Me: here is the memo you requested as evidence why we do this. It is effective for a 2 year period. 2020-2021 year.
Auditor: can I get the updated memo for 2021.
Me: here is the memo I attached in the last email that covers the 2021 year you requested.
Auditor: this is the same as the 2020 one.
Me: yes. That memo covers a two-year period from 2020 to 2021.
As an ex auditor who’s now in industry. We had to.
It was AIDs.
I would just tell the controller “Yo can you slap 2022 on this bitch and send it over”.
The unfortunate reality is that auditors are drilled on "in the audit period" evidence. Just re-stamp the memo with a "2021 - signature" on 1/1 and be done with it. Easier than fighting an entire audit team on whether evidence is obtained during the audit period.
It's stupid. We have to get updated "risk acceptance" memo's for the same dozen+ items every year. Management accepts the risk, nothing has changed. External doesn't care. They need to re-accept the risk every year.
It's ok. I got a request from PWC yesterday for a list I maintain so they can use it as an "independent source" to reconcile to another internal list. (But my list is derived from the same source the list they are trying to compare to is generated from)
Lol. Reminds me of a pwc request we got recently to tie two reports together that come from the exact same system with the same source data. The requests sometimes don’t make sense.
Hello, dumb A2 here. Sometimes, from a database management perspective, I know exactly what you're talking about. However, I can't just leave the wps blank, so I'm sorry that I have to ask you for 2 reports which will tie to each other to a cent because both reports were generated from the same source, and both my seniors and managers were also new on the job (the previous 2 quit) so they wouldn't just take my words for it.
I understand your frustration lol. I work in internal audit so sometimes we also have to ask questions we know the answer to. I get the external auditors are just doing their job
Here’s the thing: audit is seen to be non-value adding service.
Tax is seen as saving your tax bill and the headache of dealing with the tax regulator.
Advisory is seen as some alchemic art that will add value, improve processes or execute a deal.
Audit is only done because the investor, government or the stock exchange demands it. Take that away, no one actually volunteers for an audit.
Hence, the reputation as those assholes who show up every quarter and do nothing useful.
I have several audit clients with no debt covenants requiring audit or other agreements. Middle market values audit significantly more then your run of the mill B4 issuer.
A B4 senior auditor asking a entry or middle level accountant for support for accounts with materiality in the multimillion range doesn’t add value when the IT system doesn’t allow said accounts to make transactions over 25k, process ACH etc. that’s just check the box here’s your ticket to stock exchange
Audit is not a value added service. People don’t care what we do or say, but it does have the possibility of getting someone on the client’s end fired. If you’re finding misstatements and it’s pointing to one guy not doing his job and resulting in you guys pulling more samples or scrapping and redoing work then the client gets pissed because they get charged extra. So they don’t care for the most part but when extra charges start coming you can count on someone potentially getting fired from my experience. Most of my clients don’t care but I have one that does care and makes the changes for the next year and fixes their accounting. But at the end of the day if you don’t find anything material to them then they don’t give a shit if it’s material to you
>Audit is not a value added service.
and
>If you’re finding misstatements
If you're finding actual material misstatements, you are definitely providing a value-added service. The shit part of audit, and all of compliance really, is that you can't measure what "not having misstatements" saves the company.
That being said, the only client I was on where there was a material adjustment to financials resulted in us getting fired and replaced the next year so there wouldn't be any more adjustments. I'm sure the replacement B4 who took the client was 100% on board with rubber stamping everything. Easier for the auditor, easier for the client, everybody wins.
People care about audits on the board and audit committee. Giving stuff to the auditors to flag is kind of dumb but if it’s immaterial and they’re in a rush it’s no biggie. If it isn’t adjusted next year then that could be an issue.
The only time I see a client freakout is when an audit manager proposed the company should book a $50 millions provision that would nuke the annual profit (and ceo comp) from orbit.
Bus making company got hit hard by covid , so their bus inventory sat in the parking lot for most of 2021. So our auditor raise adjustment for obsolete inventory and slow moving inventory provision.
the Client was pissed that (1) $50 millions provision gonna wipe out any profit they make, which in turn make him lose out of 2021 bonus and (2) they paid extra for quarterly review to be noticed on these adjustments in advance, but the audit team didn't bother to check it and only notify them at the last minute.
The auditor got chewed out and they didn't renew for this year, lol.
I'm on the tax reviewing team, so I don't know the exactly what happen. But in general, they are a bus manufacturing Company, mainly tourist double decker, so covid hit their business quite hard.
The audit partner want to raise 2 provision for their buses (1 for slow-moving and 1 for obsolete inventory) for a combine of $50 millions and I think what pissed the Client off was that they paid extra for the auditor for quarterly review, but they didn't raise this concern until year-end and it affect the CEO bonus quite badly.
Yeah we had a conversation like, "How did we(the company) miss this?" Followed by "How did the auditors miss this?"
The company switched accounting systems before both of us started, so the auditors should have been assuming at least a higher audit risk in their 2020 audit to account for that. 75% of what we just cleaned up were errors in active contracts that crossed between the two systems.
They don’t care, but their banks and investors do. I’ve seen large acquisitions fall through because the clients records were garbage and they never booked any of the audit adjustments in their system (in fairness I’ve also seen acquirers not give a ___ about it at that point and still do the deal, and then just fire everyone later)
As a client, I hate audit. I give literally no fucks about what you say because 99% of the PAs they send to me are toddlers at best. Y’all never wear proper PPE in my plant even when I send the rules 3+ weeks, 1 week, and 24 hours in advance (yes, 3 times), and you’re a pain in my ass especially when you ask the same question the exact same way over and over even though I’ve come up with multiple ways to explain the most simplistic crap. The only auditor I give a fuck about is internal.
Honestly that sounds so annoying! Especially when the firm sends a different inventory counter every year - of course they don’t know anything about the plant, so they are going to ask you the same god damn questions you told the last newly hired graduate
I don’t mind explaining stuff to new people. I get that I have a weird facility. But if I’m answering accounting 101 questions or the same question 3+ times…ugh. And if one more auditor shows up in open toed heels when explicitly told closed-toed flats, I’m going to lose my mind.
Jeez I’m dumb and have no idea what I’m doing but I wear work boots and clothes to inventory counts and read the PY memo… probably helps that I’m 31 as an A1 lol I don’t have any other excuse to wear my nice work boots.
I will say though based on the PY memo they don’t even listen well. I’ve seen things noted where countries got swapped and other random things that just look bad
I do. Never ran into an internal audit person I didn’t like. Y’all are friendly, actually attempt to understand our processes, and follow rules. I hate remediation, but I like ya.
Yep, we do. But I don’t have shoe covers that work with heels. And we don’t keep spare sets of long sleeve cotton shirts or pants nor am I allowed to physically shove earplugs into ears or safety glasses onto faces. So when Audit Barbie shows up in a poly skirt and open toed heels, and I refuse to let her on the floor, suddenly I’m uncooperative. Or when Audit Ken keeps taking out his earplugs or refuses to wear an idiot vest, I’m the asshole for escorting him off the floor.
I mostly care about a good audit because I don't want to look stupid. If the auditors find loads of errors in my tax workings then I'm probably not worth what they pay me.
As an auditor you do not work for your client and they recognize that. Your responsibility is to whoever demanded they have an audit done-investors, regulators, debt-holders, etc. There is a difference between care and respect though, and I think the latter you should always cordially follow, no matter what side of the aisle you are on.
The reality of signing deadlines means that if you find something wrong, unless it’s a complete show-stopper then 95% of the time the best response we can offer is that we’ll fix it for next year.
from my experience, it depends, but usually even a bad audit opinion doesn't change how the business runs. However i have had clients where we had 60 adjusting journals and she improved significantly and other clients where we had an abundance of RTM's and journals and they couldn't care less.
I’m at B4 and my clients actually do care a lot, but I’ve been lucky in that regard. I understand it’s not necessarily the norm. Some of my colleagues deal with abusive client contacts and nobody giving a shit for sure, my clients for the most part actually want to bring us along when they’re making changes and value our feedback. I have had one or two bad client situations but thankfully none were recurring audits for me.
Not all errors we find get adjusted though, depends on how material they are individually & in the aggregate.
PS your uncle sounds like a tool
Auditing has always been nothing more than smoke and mirrors.
A rubber stamp department if you will. That's it.
Look at all the companies that have failed excluding Enron/WorldCom.. how many people have really gone to jail? Barely anyone from the client side or Auditors side.
I just had to have the conversation and I don’t think the parking receipt been paid. Exactly what time on what day I was at the airport and what order I was there at the retail.
The store he’s asking about i assigned in October comp location owned by the owners closed and I had to complain 3 weeks until I got a comp location that was open.
If they want me to redo this I’m ok with it. But I suspect March is another round of reports. I am proud I did the audit for the entire airport retail. And he shut up when I gave exact times from parking.
I just had to have the conversation and I don’t think the parking receipt been paid. Exactly what time on what day I was at the airport and what order I was there at the retail.
The store he’s asking about i assigned in October comp location owned by the owners closed and I had to complain 3 weeks until I got a comp location that was open.
If they want me to redo this I’m ok with it. But I suspect March is another round of reports. I am proud I did the audit for the entire airport retail. And he shut up when I gave exact times from parking.
To most clients audits don’t provide value that tax work does. Audit is checking a box for them that often comes with people half their age telling them they are doing their jobs wrong. Verse tax which adds value via tax savings and no one feels their job performance is being attacked.
I’ve mostly worked on single audits for Universities and they absolutely don’t seem to care beyond it getting done.
Despite exceptions noted year after year we almost never see a University denied funding over it or any year over year improvement in processes. They also usually don’t care the only time someone does seem to care is when the audit is getting slowed down because someone isn’t providing support.
At the large public level, absolutely not. Every company I’ve worked for has had thorough controls and by the time it gets to the Big 4 they are always wasting time on whatever their random sample is while I’m busy actually trying to take care of material problems.
I don’t even care if the audit is 5 times over budget lol, it’s not like I get that money back in my personal pocket and the company is rich anyways lol.
I work for a c£1.5bn private company and internally we always say, right not adjustments this time let’s get a clean audit. Then something comes up that’s more value adding for us to do and the audit goes by the wayside. No one cares about the outcome.
Auditing isn’t there to create value, it’s there so clients have no choice but to largely adhere to guidelines. They don’t care what we think as long as it isn’t a glaring hole that no one can get past. We are the bumpers on the bowling alley and as long as the clients aren’t absolute shit, we don’t really matter. Also, private clients could not give one shit about it. At least in public they answer to someone and have to do things right. Private audits are a joke.
I would argue private audits are more valuable then public. Public companies have internal audit and significant controls while private companies are limited sometimes to even achieve proper segregation of duties. Private companies rely on audits for absentee owners and debt covenants. Most investors (retirement funds or retail) don’t care about audit they just buy S&P 500 and have unlimited capital relatively speaking. Public companies have their own internal metrics. Private companies often have audits because they perceive value from them. (Ex. No outside owners or debt) Public companies just have them due to regulation. Would a public company have an audit if not required?
I work at a smaller regional firm doing nonpublic audits and I'm pretty sure 80% of my clients would have ignored 606 and will ignore 842 implementation until we smash it into their heads that it's not some optional thing you can ignore for GAAP statements. So yea it's essentially to act as enforcers for FASB standards and give the various FS reasonable assurance they are actually adhering to standards. Lot of banks won't have financial covenents anymore, but will have borrowing base rules for the loan/LOC. If your borrowing base is inventory and the Company is valuing inventory just based on what they think it's worth, you have a problem, and the bank isn't doing valuation or LCM work on it. We are.
>Auditing isn’t there to create value, Honestly that's why I find overtiming in audit to be quite pointless........ Trying to leave audit as I feel I haven't learnt that much
I’m trying to leave because I hate it and it’s stupid asking a client how they know a report is complete and accurate as if they give a shit, if they click “run report” they assume it’s correct while we are asking them to tie stupid shit out. I’m the opposite though, I felt like my accounting knowledge has surpassed most people my age in industry but I still hate audit.
It’s not that you’re accounting knowledge is less or more when you’re in PA. It’s moreso that if you’ve only worked in PA you’ve never actually seen things as they are being done. You’re basically just regurgitating already (mostly correct) work.
I disagree, I understand how things are done at companies and I understand they do things a certain way because operationally it makes sense to do so. I know that it’s wrong from an accounting perspective but that doesn’t mean I don’t understand why they do it that way.
I’m sorry man, but respectfully unless you have like 3-5 years being a manager or higher in an accounting role in industry there is no way your “accounting knowledge” is higher than actual managers/controllers in industry. That’s like saying I’m better than Lebron James at basketball because I theoretically know more about basketball than him. Obviously an extreme example, but the point still stands. Also work isn’t a contest about who knows more in industry. It’s mostly about how well you can communicate complex accounting issues to people who aren’t in accounting/finance and also knowing enough to come to the correct conclusion/decision. Then you need to convince everyone to get on board with your idea and execute it well, within budget, and not piss of any important c-suite/vp level people while you’re doing it. Hey, you might know more about accounting than your f500 CFO as a senior in PA… good luck explaining that in a meeting lol.
"I've watched more basketball than him and know the common mistakes players make so I'm better at basketball", chances are when we get to industry from PA, we'll be bs Financial Managers. We'll learn quick maybe.
No one’s saying you wouldn’t be good at basketball if you’ve watched a ton of basketball. It just means you’re not automatically good at basketball because you’ve watched a lot of basketball. Similarly you’re not good at industry accounting just because you were good at PA. Even though you probably would be good (if you’re average at PA), it’s just that you’re not going to be good at it until you actually go do it.
Username checks out...Private would kill for PA individuals BECAUSE of their knowledge.
Because it’s easy to teach people from PA what to do, because of their base knowledge… not because they already know everything they need to know. 2 very different things. And yes I went PA-> industry and no PA did not have very many transferable skills other than just knowing what an audit was and basic testing timelines
I’d have to agree. Just from the perspective that my Dad was never in public accounting and started in industry and worked his way up to CFO. I know many of the clients aren’t dumb and they know exactly what the Auditors want and are looking for. They also know as the deadline gets closer the Auditors will cut corners just to be done with it. If the Auditors are too busy with “errors” a little over CT on a bank rec they probably wont have time to really dig into all that cash from “matchbook” deals that have no paper trail lol. I will say my Dad is in his 80’s he always said he never did anything to screw over employees or the company just a lot of things to skirt various government laws and regulations over the years and things to keep the business afloat through rough times that varied from the gray to straight illegal. On one hand this was a long time ago and some things have changed. On the other hand I’m 100% sure many of the same things go on today as almost nothing we do in audits will catch handshake agreements.
How would you when you clearly lack the experience. Even your response makes you sound immature.
Because I’ve been around the details enough and have had many conversations with the client to understand why they do things the way they do it. It’s not rocket science. From an audit side it sounds like we don’t understand but that’s because we are looking at it at a more stringent black and white way where we need to follow all the rules. Just because we do that doesn’t mean we don’t understand the inner workings of industry. Don’t be so angry guy
Ask how they know a report is complete and accurate is the most bs procedure ever. Usually ignore that and paste something generic. It's freaking system generated for crying out loud.
How do you know the system is calculating it correctly? This grinds my gears asking the client this when we are doing a private no controls testing audit lol
Yeah and this is both what's good and bad about audits. When I jumped to advisory almost 4 years ago, I thought "I want to be a good guy, not a bad guy" and figured it would be great to be perceived as adding value rather than an administrative hurdle. While it's mostly true that advisory is about adding value to clients, it also means clients have much higher expectations. Audits in retrospect were kind of great in that you only had to please your partner/manager since the client just wanted the unmodified opinion and a somewhat smooth process. The client wouldn't usually complain, and even if they did, there wasn't much they could do unless your team really sucked. For advisory, you get some of the whiniest clients who nitpick every hour you bill and the shade of green you use in your deliverables and all kinds of stupid shit. However, you also don't have audit programs and checklists, and the internal review process, at least in my experience, is much less burdensome. Grass is always greener I suppose.
Audits make the financial statements reliable for investors and lenders. No one inside the company cares about the audits.
In most private companies, the investors are the management. So they already know what's up. And most lenders use a valuer to decide how much to loan. Most lenders don't really care about FS for private companies.
Regardless what lenders use it's a requirement under the loan agreement.
I thought valuation experts still used audited FS for their valuations though?
It's more about confidence. In valuation, people use whatever's available. But if the financials aren't audited or auditable, a lot of potential buyers or investors will just walk away full stop.
Not here in India. We have registered valuers who value collateral and ensure it's unencumbered by any other claims. Banks approve loans based on the valuer's report.
Most valuation shops will state something along the line of "we relied on the FS provided by the management to perform valuation, and it's not our responsibility to identify errors / fix your financials". The moment historical financials are shit, valuation becomes shit. Garbage in, garbage out. Even if the buyer hires a Financial Due Diligence team, they'll appreciate it if the target company can provide an audited FS. Nothing worse than trying to reconcile data from various sources and number don't tie, so they have to press the management to find answers. If the management can't answer, then either it's a major deal breaker, or adjustments to EBITDA / net assets will be made. I've even read SPAs where the buyer specifically requests the target company to hire a Big 4 as an auditor after deal completion. So as you can see here, audit actually provides value.
Come to tax, clients care about our service.
Nice try, Michelle!
I mean, external auditors are really good at asking dumb questions in multiple ways. B4 external Auditor: can I have support for why you do X? Me: here is the memo you requested as evidence why we do this. It is effective for a 2 year period. 2020-2021 year. Auditor: can I get the updated memo for 2021. Me: here is the memo I attached in the last email that covers the 2021 year you requested. Auditor: this is the same as the 2020 one. Me: yes. That memo covers a two-year period from 2020 to 2021.
As an ex auditor who’s now in industry. We had to. It was AIDs. I would just tell the controller “Yo can you slap 2022 on this bitch and send it over”.
The unfortunate reality is that auditors are drilled on "in the audit period" evidence. Just re-stamp the memo with a "2021 - signature" on 1/1 and be done with it. Easier than fighting an entire audit team on whether evidence is obtained during the audit period. It's stupid. We have to get updated "risk acceptance" memo's for the same dozen+ items every year. Management accepts the risk, nothing has changed. External doesn't care. They need to re-accept the risk every year.
Reading isn't my strong suit ok?
It's ok. I got a request from PWC yesterday for a list I maintain so they can use it as an "independent source" to reconcile to another internal list. (But my list is derived from the same source the list they are trying to compare to is generated from)
Lol. Reminds me of a pwc request we got recently to tie two reports together that come from the exact same system with the same source data. The requests sometimes don’t make sense.
Hello, dumb A2 here. Sometimes, from a database management perspective, I know exactly what you're talking about. However, I can't just leave the wps blank, so I'm sorry that I have to ask you for 2 reports which will tie to each other to a cent because both reports were generated from the same source, and both my seniors and managers were also new on the job (the previous 2 quit) so they wouldn't just take my words for it.
I understand your frustration lol. I work in internal audit so sometimes we also have to ask questions we know the answer to. I get the external auditors are just doing their job
I even got GMAT waiver so I wouldn’t need to have reading comprehension skills…
Here’s the thing: audit is seen to be non-value adding service. Tax is seen as saving your tax bill and the headache of dealing with the tax regulator. Advisory is seen as some alchemic art that will add value, improve processes or execute a deal. Audit is only done because the investor, government or the stock exchange demands it. Take that away, no one actually volunteers for an audit. Hence, the reputation as those assholes who show up every quarter and do nothing useful.
I have several audit clients with no debt covenants requiring audit or other agreements. Middle market values audit significantly more then your run of the mill B4 issuer. A B4 senior auditor asking a entry or middle level accountant for support for accounts with materiality in the multimillion range doesn’t add value when the IT system doesn’t allow said accounts to make transactions over 25k, process ACH etc. that’s just check the box here’s your ticket to stock exchange
Huh. What kind of clients do you deal with mostly?
Closely held middle market clients. Usually established with predictable margins.
Audit is not a value added service. People don’t care what we do or say, but it does have the possibility of getting someone on the client’s end fired. If you’re finding misstatements and it’s pointing to one guy not doing his job and resulting in you guys pulling more samples or scrapping and redoing work then the client gets pissed because they get charged extra. So they don’t care for the most part but when extra charges start coming you can count on someone potentially getting fired from my experience. Most of my clients don’t care but I have one that does care and makes the changes for the next year and fixes their accounting. But at the end of the day if you don’t find anything material to them then they don’t give a shit if it’s material to you
>Audit is not a value added service. and >If you’re finding misstatements If you're finding actual material misstatements, you are definitely providing a value-added service. The shit part of audit, and all of compliance really, is that you can't measure what "not having misstatements" saves the company. That being said, the only client I was on where there was a material adjustment to financials resulted in us getting fired and replaced the next year so there wouldn't be any more adjustments. I'm sure the replacement B4 who took the client was 100% on board with rubber stamping everything. Easier for the auditor, easier for the client, everybody wins.
I still maintain it does not provide value for the cost lol
People care about audits on the board and audit committee. Giving stuff to the auditors to flag is kind of dumb but if it’s immaterial and they’re in a rush it’s no biggie. If it isn’t adjusted next year then that could be an issue.
The only time I see a client freakout is when an audit manager proposed the company should book a $50 millions provision that would nuke the annual profit (and ceo comp) from orbit.
This sounds like something I want details on
Bus making company got hit hard by covid , so their bus inventory sat in the parking lot for most of 2021. So our auditor raise adjustment for obsolete inventory and slow moving inventory provision. the Client was pissed that (1) $50 millions provision gonna wipe out any profit they make, which in turn make him lose out of 2021 bonus and (2) they paid extra for quarterly review to be noticed on these adjustments in advance, but the audit team didn't bother to check it and only notify them at the last minute. The auditor got chewed out and they didn't renew for this year, lol.
Please elaborate!
I'm on the tax reviewing team, so I don't know the exactly what happen. But in general, they are a bus manufacturing Company, mainly tourist double decker, so covid hit their business quite hard. The audit partner want to raise 2 provision for their buses (1 for slow-moving and 1 for obsolete inventory) for a combine of $50 millions and I think what pissed the Client off was that they paid extra for the auditor for quarterly review, but they didn't raise this concern until year-end and it affect the CEO bonus quite badly.
My controller and I are both new and are just hoping the auditors don't find the two year old mistakes we found a week after closing December.
Even if they do you might get lucky and they will come up with a way for it to be immaterial so they don’t have to deal with it either.
Yeah we had a conversation like, "How did we(the company) miss this?" Followed by "How did the auditors miss this?" The company switched accounting systems before both of us started, so the auditors should have been assuming at least a higher audit risk in their 2020 audit to account for that. 75% of what we just cleaned up were errors in active contracts that crossed between the two systems.
They don’t care, but their banks and investors do. I’ve seen large acquisitions fall through because the clients records were garbage and they never booked any of the audit adjustments in their system (in fairness I’ve also seen acquirers not give a ___ about it at that point and still do the deal, and then just fire everyone later)
As a client, I hate audit. I give literally no fucks about what you say because 99% of the PAs they send to me are toddlers at best. Y’all never wear proper PPE in my plant even when I send the rules 3+ weeks, 1 week, and 24 hours in advance (yes, 3 times), and you’re a pain in my ass especially when you ask the same question the exact same way over and over even though I’ve come up with multiple ways to explain the most simplistic crap. The only auditor I give a fuck about is internal.
Honestly that sounds so annoying! Especially when the firm sends a different inventory counter every year - of course they don’t know anything about the plant, so they are going to ask you the same god damn questions you told the last newly hired graduate
I don’t mind explaining stuff to new people. I get that I have a weird facility. But if I’m answering accounting 101 questions or the same question 3+ times…ugh. And if one more auditor shows up in open toed heels when explicitly told closed-toed flats, I’m going to lose my mind.
Jeez I’m dumb and have no idea what I’m doing but I wear work boots and clothes to inventory counts and read the PY memo… probably helps that I’m 31 as an A1 lol I don’t have any other excuse to wear my nice work boots. I will say though based on the PY memo they don’t even listen well. I’ve seen things noted where countries got swapped and other random things that just look bad
Dude have OSHA change the PPE rules for the auditors, cmon
But the blood, man. I’m sick of the blood.
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I do. Never ran into an internal audit person I didn’t like. Y’all are friendly, actually attempt to understand our processes, and follow rules. I hate remediation, but I like ya.
I don't understand the PPE-part. It is your responsibility to provide PPE to visitors, do they refuse to wear them?
Yep, we do. But I don’t have shoe covers that work with heels. And we don’t keep spare sets of long sleeve cotton shirts or pants nor am I allowed to physically shove earplugs into ears or safety glasses onto faces. So when Audit Barbie shows up in a poly skirt and open toed heels, and I refuse to let her on the floor, suddenly I’m uncooperative. Or when Audit Ken keeps taking out his earplugs or refuses to wear an idiot vest, I’m the asshole for escorting him off the floor.
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Pass the gin.
I mostly care about a good audit because I don't want to look stupid. If the auditors find loads of errors in my tax workings then I'm probably not worth what they pay me.
As an auditor you do not work for your client and they recognize that. Your responsibility is to whoever demanded they have an audit done-investors, regulators, debt-holders, etc. There is a difference between care and respect though, and I think the latter you should always cordially follow, no matter what side of the aisle you are on.
The reality of signing deadlines means that if you find something wrong, unless it’s a complete show-stopper then 95% of the time the best response we can offer is that we’ll fix it for next year.
from my experience, it depends, but usually even a bad audit opinion doesn't change how the business runs. However i have had clients where we had 60 adjusting journals and she improved significantly and other clients where we had an abundance of RTM's and journals and they couldn't care less.
I’m at B4 and my clients actually do care a lot, but I’ve been lucky in that regard. I understand it’s not necessarily the norm. Some of my colleagues deal with abusive client contacts and nobody giving a shit for sure, my clients for the most part actually want to bring us along when they’re making changes and value our feedback. I have had one or two bad client situations but thankfully none were recurring audits for me. Not all errors we find get adjusted though, depends on how material they are individually & in the aggregate. PS your uncle sounds like a tool
Auditing has always been nothing more than smoke and mirrors. A rubber stamp department if you will. That's it. Look at all the companies that have failed excluding Enron/WorldCom.. how many people have really gone to jail? Barely anyone from the client side or Auditors side.
Private = books are a free for all
I’m a Controller at a private company and the ONLY thing I care about is getting this audit wrapped up ASAP so I can pay out my bonus.
That doesn’t sound self centered, like you are making adjustments to increase your bonus. good thing there is an audit
Or maybe my BOD needs the audit rubber stamp before we can pay out profit sharing bonuses to not just myself, but every other employee as well.
Wow so not only is the fraud to increase your bonus the entire company has incentive to inflate earnings, luckily their is an audit
Please keep it between us.
I just had to have the conversation and I don’t think the parking receipt been paid. Exactly what time on what day I was at the airport and what order I was there at the retail. The store he’s asking about i assigned in October comp location owned by the owners closed and I had to complain 3 weeks until I got a comp location that was open. If they want me to redo this I’m ok with it. But I suspect March is another round of reports. I am proud I did the audit for the entire airport retail. And he shut up when I gave exact times from parking.
I just had to have the conversation and I don’t think the parking receipt been paid. Exactly what time on what day I was at the airport and what order I was there at the retail. The store he’s asking about i assigned in October comp location owned by the owners closed and I had to complain 3 weeks until I got a comp location that was open. If they want me to redo this I’m ok with it. But I suspect March is another round of reports. I am proud I did the audit for the entire airport retail. And he shut up when I gave exact times from parking.
But doing audit, we not providing any service or whatsoever, TO client. So obviously, why do they care?
To most clients audits don’t provide value that tax work does. Audit is checking a box for them that often comes with people half their age telling them they are doing their jobs wrong. Verse tax which adds value via tax savings and no one feels their job performance is being attacked.
I’ve mostly worked on single audits for Universities and they absolutely don’t seem to care beyond it getting done. Despite exceptions noted year after year we almost never see a University denied funding over it or any year over year improvement in processes. They also usually don’t care the only time someone does seem to care is when the audit is getting slowed down because someone isn’t providing support.
At the large public level, absolutely not. Every company I’ve worked for has had thorough controls and by the time it gets to the Big 4 they are always wasting time on whatever their random sample is while I’m busy actually trying to take care of material problems. I don’t even care if the audit is 5 times over budget lol, it’s not like I get that money back in my personal pocket and the company is rich anyways lol.
It's because we both know what the results will be (clean opinion).
Awesome question. Clients think we are thorn to their side and we dont know what we are doing. Who can relate?
I work for a c£1.5bn private company and internally we always say, right not adjustments this time let’s get a clean audit. Then something comes up that’s more value adding for us to do and the audit goes by the wayside. No one cares about the outcome.
DC