عرض العناصر حسب علامة : التدقيق والمراجعة
الأربعاء, 18 أغسطس 2021 11:06
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يمكن أن يكون اختبار كشوف المرتبات أثناء التدقيق عملية يدوية مملة، وهو نوع من العمل الشاق الذي لطالما كان يُنظر إليه على أنه "مستحقات" يدفعها المدققون الشباب قبل أن يتقدموا في حياتهم المهنية
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المحتوى بالإنجليزية
A new eye on audit quality
By Daniel Hood
March 29, 2021, 9:00 a.m. EDT
18 Min Read
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Testing payroll during an audit can be a tedious manual process, the kind of grunt work that has long been viewed as the “dues” paid by young auditors before they advance in their careers. Recently, however, one computer-savvy associate at PwC decided not to pay those dues.
Instead, the associate — “someone at the most junior levels of an audit team,” according to vice chair and assurance leader Wes Bricker — built their own computer model to quickly evaluate the reasonableness and appropriateness of any given payroll expense. And rather than hand out a stern warning against deviating from long-established audit processes, PwC sent the associate’s data workflow and visualization tool to its Digital Lab for vetting, and then rolled it out for use by all of its audit teams. To date, the Digital Lab has shared approximately 7,500 of these “citizen-led” digital assets across the firm.
Welcome to the new world of auditing, where people and technology are inextricably intertwined, leading to audits that are faster and more efficient and, perhaps most important, creating the opportunity for major improvements in audit quality.
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Faster first, then better?
The last decade has seen a significant increase in the audit profession’s adoption of a range of software and hardware solutions that have reduced or eliminated a great many manual tasks, streamlined data collection and other audit processes, and given auditors a new level of flexibility. Whether intentional or not, the primary result of this increased adoption has been efficiency gains, with firms able to conduct audits more quickly and with fewer people.
“Firms have been investing heavily over the past several years in several different advanced technologies to enable both remote work and automation of basic tasks, much of which goes to efficiency,” said Julie Bell Lindsay, the executive director of the Center for Audit Quality.
Besides producing general efficiency gains, the investment also paid off in allowing auditors to switch to working remotely during the COVID-19 pandemic, and spurred even further adoption of new technologies. “The rapid acceleration to remote work in the past year due to the pandemic has also led to increasing creativity by firms, such as using cameras and livestream technology to test inventory without a site visit,” said Erik Asgeirsson, the president and CEO of CPA.com.
Using drones or smart glasses to check inventory without visiting a client’s warehouse, or using APIs to gather their financial data more quickly, or building a bespoke tool to automate payroll testing are all great examples of using technology to streamline an audit, and they’re certainly valuable.
But do they make an audit better?
Experts in the field are quick to point out that they create the possibility of making the audit better. “The more we can make mundane processes automated,” explained Tim Landry, an assurance services partner in the national quality control group and assurance applications technology leader at Top 100 Firm Marcum, “the more we’ll free our teams up to use their brainpower and knowledge.”
Time, energy and expertise once spent on rote tasks can be redirected toward higher-value work on the audit — and many people assume that it will — but it can also simply allow firms to take on more audits, or to get by with fewer staff.
There are some ways, though, that efficiency gains do contribute directly to audit quality. “The increasing automation of inputs enabled by the cloud and intelligent workflows reduces redundant, manual data entry, which can introduce error,” noted Asgeirsson. Fewer fat-finger errors is a clear plus, as is the consistency of calculation, tabulation and so on that comes with taking tasks like that out of human hands.
And at their best, efficiency technologies empower audit staff and augment their capabilities, which can only have positive results for quality. As Bricker puts it, “Automation is how technology can harness points in the audit process to achieve synergy between our people and the machines that they use, so that the sum is greater than those individual parts.”
While the boost to audit quality from technologies that are primarily efficiency-related is — or can be — real, it’s not where the biggest potential gains lie.
“I think there’s no single area in the audit that can’t be improved by technology,” said Christian Peo, national managing partner of audit quality and professional practice at Big Four firm KPMG. “The field is ripe; it is ready for further incremental improvements.”
For the present, the biggest potential seems to lie in four areas, where audit firms have already begun applying technology to good effect: consistency and standardization, initial risk assessment, better and deeper use of data analytics capabilities, and the use of artificial intelligence.
Really SALY
“Same As Last Year” has become something of a euphemism for the thoughtless repetition in audit processes, but standardization and consistency in repetition can actually contribute to audit quality.
“Robotic process automation software is often associated with driving efficiencies, but is also used to drive consistency and ensure a higher volume of work is done accurately, from the perspective that repetitive tasks that were previously done by humans can be automated, thereby eliminating the potential for human error,” said Tammy Mooney, senior director of audit innovation at the American Institute of CPAs.
At an even higher level, establishing high-quality procedures and then ensuring their regular application through audit systems can make sure that all audit work is done at the highest level.
“Standardization is about taking a look at where we can work at scale on a centralized basis,” explained PwC’s Bricker. “It’s not a cost decision — it’s about consistency of execution, which contributes to quality.”
A prime example of this kind of higher-level standardization pushing audit work to a higher level is KPMG’s centralized audit platform, KPMG Clara (based on the Latin “clarus” for “bright” or “clear”). “Clara is probably our most important technology, and that’s because it not only is the workflow and drives the auditor to apply the methodology that is consistent with the standards, but it also is the platform to allow for other technologies to be embedded in and incorporated into our audit methodology,” said Peo. “You can create all kinds of technology, but if they’re not really embedded in your audit methodology and they’re just sitting on a shelf waiting for an audit team to pull them off the shelf and use them, then it won’t be consistently used, and it actually might not be used quite correctly if it’s not incorporated into your audit methodology.”
In a similar vein, the professionwide Dynamic Audit Solution project led by the American Institute of CPAs, CPA.com and CaseWare International aims to embed a brand-new audit methodology into a software application that will, among other things, make sure the methodology is consistently applied from one audit to another, while not succumbing to the mindless repetition of SALY. The project aims to release its first iteration this year; the three partners have already released a number of attest tools that offer the same type of consistency of approach in their OnPoint A&A Suite.
A focus on risk
The risk assessment phase that helps kick off every audit needs all the improvement it can get, according to Cathy Rowe, vice president of product management at Wolters Kluwer Tax & Accounting US, thanks in part to changes three years ago in the peer review process for audit firms that place it under heavy scrutiny.
“What firms did before is no longer going to be good enough,” she warned. “Firms had to adopt the right methodology to drive assessing risk and doing that linkage, and assessing risk at the assertion level, and making sure that every audit had a specific risk. Now we’re nearing the end of that three-year period this fall, and I think the real call to action for firm is, are they following the risk assessment standards, and if they’re not, they need to, because it will have a direct impact on their audit quality and on the success of their future peer review.”
Top 100 Firm Baker Newman Noyes has implemented technology in part to help it systematize and deepen its approach to risk, according to Patrick Morin, principal of information systems and risk assurance. “We rolled out a new methodology that we subscribe to, and what the solution does is require the auditor to more formally document all of the risks for the engagement, based on the nature of the client and the industry they’re in and the type of accounting activities, and integrate that risk assessment with the all of the underlying software applications and their databases as well as their operating systems. Then you need to brainstorm what the risks are, enumerate the controls, and then, based on all that, test it.”
“Basically, it forces the auditor to make sure that they’ve looked at everything from the controls side, from the business process as well as the IT process, and where those intersect,” he explained. “The tool allows us to ensure that we’ve been thorough and by default have a much more effective audit, and it makes us prioritize where we put the most effort on our jobs.”
A risk-based audit methodology backed by technology is critical for improving the quality of risk assessments, according to Rowe, “so that you have a higher emphasis in the planning process and having that understanding of your client to identify the risks that are unique for that client based on the data that you’re getting in, and being able to then tailor your engagement for that client for the risks that you have identified, being able to have that linkage between the steps that you do and the risk — really having a purpose for what you’re doing and why.”
Cloud storage, better data pipelines and related technologies are enabling earlier and more complete data acquisition for audit teams, contributing significantly to better risk assessment. “This capability, along with expanded data analysis capabilities, can significantly improve the auditor’s understanding of the entity and provide for an enhanced risk assessment process,” said the AICPA’s Mooney. “In other words, the tools can assist the auditor in gaining a deeper understanding of the entity, better identify risks (or transactions that occurred due to the risk) and focus on what matters most in the audit.”
But risk assessment isn’t the only area where improvements to auditors’ ability to acquire and manipulate data can make a difference to quality.
Big on data
At Marcum, data analytics are so important that the firm has set up a standalone group, the Data Solutions Center, which specializes in data analysis tools and testing.
“We’ve built this team and bolted it on as a service to the audit group,” explained partner and chief information and digital officer Peter Scavuzzo. “The audit group sends over data, and the team is doing hundreds and hundreds of analytics for all these audits, with pure data analytic competency – and they give it back to the auditors, consistently at the same level of quality.”
The DSC has a library of test templates, and if an auditor on an engagement wants a new test run, it gets sent to the firm’s audit transformation team for review before getting added as a template for all audit teams to use. “As someone comes up with a new test, 900 other people may have an interest in it, and they can look at the list and say, ‘I love that test,’” said Scavuzzo.
Its sole focus on data analytics gives the DSC a level of expertise that the average auditor can’t hope to match; it has been so successful that Marcum has made its capabilities available to its advisory and tax departments, and is considering offering its services to clients. “We have even had a couple of accounting firms that have approached us about sending their audit work to our solution center,” Scavuzzo noted. “Maybe it’s not a terrible idea.”
According to Peo, KPMG is in the pilot stages of getting transaction-level detail and doing transaction-level scoring on it — “really taking a look at detailed transactions, so you’ll get all of the ledger detail of, say, revenue transactions, and instead of having an individual look at revenue at a top level and come up with, ‘Well, this is what I think from a complexity standpoint,’ and all the factors that are in the standard that tell you this is how you think about the level of risk and how you respond to it, the routines that we run that data through can spit out an answer that is then consistent across all of the audits.”
“Analytics is a clear example of what you can do now,” added Wolters Kluwer’s Rowe. “Being able to get comfortable with working your clients’ data so that you can really validate the estimates that you’re making; you can do your sampling much faster; you can have a consistent process for your entire firm in terms of running the analytics and executing the steps much faster, and being able to work with 100 percent of the data, so that you are moving away from looking for a needle in a haystack to having the data kind of tell the story for the auditor.”
Besides testing, there are opportunities in bringing together disparate sets of data. “You’ll see things you never thought you’d see from multiple data sets,” said Scavuzzo. “Auditors can take AP by itself or cash by itself, but there are aspects of relationships between all those when they are aggregated all together, and a different rule set could surface other, different insights.”
Nontraditional data sources also offer opportunities for better-quality audits. According to the CAQ’s Lindsay, auditors are now using machine learning tools to scan third-party-verified reviews of a company’s products to assess whether the company’s warranty reserve liabilities are accurate and sufficient. “In other words,” she said, “is what the company is saying they need from a warranty reserve liability accurate with how customers are perceiving the product? It’s allowing a broader review of information that only further improves the overall quality of the audit.”
Mention of machine learning naturally leads to its cousin, artificial intelligence, the fourth major area where audit quality is likely to see major gains.
Just the beginning
AI and machine learning is being applied all across the accounting profession, not just in auditing, but in many ways they are still in their early days.
“One of the future aspects that firms are going to need to start looking into — and we’ve done this to some degree — is cognitive computing, the simulation of human thought and the use of human models, like AI,” said Marcum’s Landry. “If we can train a program that is AI-based to read documents and summarize them based on parameters we establish, you can take the time away from our associates and run it through this system and have them spend more time looking at the accounting aspects of what is found through the AI technology, rather than having them sit there and read 600 pages.” He noted, though, the cognitive systems require a lot of training, and must be continuously fed new examples until they understand what they’re looking for.
KPMG actually has a tool in a pilot phase to read contracts and business agreements, looking for audit-relevant information. “A two-page contract is easier for someone to read through, but when you get to a thousand-page contract, a loan agreement, a debt agreement — those are hard to go through, and very labor-intensive,” said Peo. “Having technology read through those documents much faster than a human could and identify key terms — it’s a great tool for us.”
It’s important to remember that in many cases auditors won’t just use a technology — they may need to audit them, as well. All sorts of organizations are or will soon be using AI in business-critical functions, according to Brian Fox, the founder of Confirmation and vice president of strategic partnerships in the tax & accounting business of Thomson Reuters, and an emerging company called Monitaur aims to give auditors the ability to audit an AI-based system, he said.
Most algorithms are static, so an auditor can test them and be comfortable that they’re operating as they would have earlier in the year, but artificial intelligence changes over time, so that an AI tool at a bank might make different lending decisions in December than it did in June.
“AI decision-making changes and is updated as it learns over time,” Fox said. “Therefore, the auditor needs the ability to verify at the end of the year whether the AI made the correct decision in the middle of the year, even though it might have made a different decision now given what it has learned since the historical point in time.”
Into the future
As important as these four areas are, they are hardly the only ones where technology can improve the quality of audits. Staff and client collaboration tools, for instance, are already beginning to allow firms to better deploy their human capital, making sure that the right auditor is assigned to the right engagement.
Nor have they taken their final shape; as technologies of all kind advance, their ability to improve the quality of audits will advance as well.
In some cases, this will be a matter of combining two different developing solutions. “With data analytics powered by machine learning, we’ll eventually see the development of more precise risk assessment and benchmarking to spot anomalies that may require further confirmation or exploration,” noted CPA.com’s Asgeirsson.
“What’s coming down the line is how we can augment the auditor with artificial intelligence,” added Wolters Kluwer’s Rowe, “taking the story with our data, and layering on artificial intelligence to be predictive in terms of what risks you may want to consider or similar clients may have had similar risks in that industry, and also being more predictive in terms of what are the best steps to address those risks.”
PwC’s Bricker, meanwhile, sees potential in enhancements to the structuring and formatting of financial data at earlier stages in the process. “I think the next step change is really framed around digitization of corporate reporting and business reporting,” he said. “We’ve had digital representations of financial statements and audit reports for years, but over the last 15 years, we’ve increasingly structured that content. We’ve structured that content at the point of disclosure — that’s the XBRL and 10-K filings and so forth — there’s more and more opportunity to structure it at earlier points in the process, from point of entry in accounting systems to flow the whole way through reporting. Those innovations impact the preparation of information, which then impacts the auditing of that information.”
Looking further down the road, many experts believe that blockchain has the potential to have a major impact on auditing — just not yet. The distributed ledger technology includes features that make it practically impossible to change or falsify earlier information, or to disguise who is adding records to the system, which has obvious benefits for auditors, but it’s still far from widespread adoption in the broad corporate world.
“When distributed ledger hits mainstream, we will perhaps see a seismic shift in audit quality, and to some degree, some audit needs will go away and the emphasis of audit will change,” said Baker Newman Noyes’ Morin. “We’ll be looking more at the ethical application of the tools that leverage distributed ledger, as well as maybe audit compliance to other attributes other than just the numbers themselves.”
Marcum’s Scavuzzo similarly feels that blockchain may be a game changer, but that its impact isn’t likely to be felt in the next three to five years.
More immediate potential for improvement to audit quality, though, is seen in the ability to move closer and closer to a real-time audit, as finance and accounting systems get faster, and auditors gain access to them on a more regular basis.
“We really only audit at the end of the year, but we know the financial markets move substantially every quarter that a company releases its earning statements,” said Thomson Reuters’ Fox. “For the first time, technology is going to allow us to do full quarterly audits or semiannual audits. You could do monthly, you could go to weekly and daily; you get into the continuous audit.”
That ability to see where a company stands at any point, and what mistakes it may be making in reporting or new activities it may be undertaking, can let an auditor intervene earlier or being to prepare for new challenges; as a window into what’s going on, it also gives the auditor ever-greater opportunities for catching fraud at all levels, and adding value to an audit.
“Right now, we clearly have to tackle material misstatements due to fraud; we’re missing those in droves and we’re getting a black eye,” said Fox. “If and when we get to the point where we’re really good at finding material misstatements due to fraud, then the next layer is, let’s cut out employee theft, let’s cut out those types of fraud, and hopefully continue to get smaller and smaller and drive it out. That’s the ultimate goal.”
That goal may be far down the road, but it’s never too early to start preparing for it.
“We have to think ahead for the next 10 to 15 years,” said Marcum’s Landry. “The way we audit now is going to be completely different from how we audit in the future. Now is the time to find efficiencies and improve audit quality by implementing new techniques and new approaches.”
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الإثنين, 26 يوليو 2021 14:22
دورة: الرقابة والتدقيق على الأنظمة المحاسبية
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- البلد مصر
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- بداية الفعالية الأحد, 01 أغسطس 2021
- نهاية الفعالية الخميس, 12 أغسطس 2021
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الأحد, 04 يوليو 2021 12:34
البحث عن الثغرات في الخطة المالية للعميل
إن تقديم خدمات إدارة الثروات هو أمر يجب على جميع شركات المحاسبة القيام به لجميع العملاء الذين يحتاجون إليها.
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المحتوى بالإنجليزية
Finding the gaps in a client’s financial plan
By John P. Napolitano
June 29, 2021, 9:00 a.m. EDT
8 Min Read
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Offering wealth management services is something all accounting firms should do for all clients that need it. My premise is that everyone needs some sort of financial planning; the scope and depth of the engagement will vary based on complexity, but everyone that is a client of your firm has financial issues and needs. The harder part is getting your clients to understand that they have needs and that your firm may be the answer to pulling it all together.
The concept of a financial planning audit has been in my head for a while. In effect, it is designed to reveal and document deficiencies in a family’s financial plan. The challenges in such an offering are not in the tactics of getting the work done, they are in getting your clients to recognize that a second look or opinion may be a good thing.
Think of all the things where your clients seek out multiple opinions: home renovations, medical issues, car repairs, vacation planning, wedding planning … the list goes on and on. Yet when it comes to personal financial matters, why are they so sedentary and “satisfied” with where they stand financially? There are lots of answers that I’ve heard from clients and prospects, yet most are merely cover-ups so that they don’t look foolish. Answers that are commonly spewed include:
“I have more money than I need; how can you help me?”
“I am all set, and have my team of advisors. I’ve been working with these firms for years, and don’t feel the need to change.”
“I am personal friends with my [attorney, investment person, insurance agent or banker] and would find it too difficult to break up.”
All valid excuses in the eyes of your client, but not acceptable to the family financial unit if their personal and business financial situation is plagued with gaps and unattended items. That’s where your financial planning audit may make sense.
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A different kind of audit
The financial planning audit is a non-offensive way to dig into your clients’ personal financial lives to see that they are, in fact, in good shape. I believe that this offering is easily accepted by clients in that the service sounds like something they’ve grown to expect from a CPA firm — an audit. When communicating the value of an audit, you are not making any references to the possibility that they may need to eliminate any of the incumbent advisors.
Throughout the audit process, you are likely to uncover many deficiencies and gaps that will cause your clients to ask themselves why their incumbents hadn’t addressed these deficiencies. You and I know why — but clients are always the last ones to find out that they’ve been underserved. The reason why their existing team didn’t uncover the gaps is because they all rigorously stick to their silo and all try to spend the least amount of time possible for the dollars of revenue they are billing.
Perhaps the biggest challenge to carrying out an engagement such as a financial planning audit is the estimated time it will take to complete it. Your best clients may agree to an hourly type of engagement and understand that you really can’t give an accurate estimate of the time and costs associated with the engagement. Everything from their insurance policies through their estate documents could be voluminous.
These engagements are also easily subject to scope creep. That is, like renovating an old house, you don’t know what you are going to find until you open up the walls or, in this case, read their documents.
To document this engagement, I would create a work program to be sure that the engagement is complete and able to be reviewed by another professional in your firm. I find the guides created by the American Institute of CPAs’ PFP division particularly helpful. With the many guides that are published and kept current, you can easily create your firm’s standard of documenting these engagements.
Just like a financial plan, your financial plan audit services should be comprehensive — unless a scope limitation has been requested by the client. These areas should include a review of cash flow and their forecast for financial independence. Don’t be surprised if all they have is a brief financial independence forecast as their financial plan. Many of the big firms that we all see advertising in golf tournaments and the like consider the independence forecast the extent of their financial plan.
The financial plan audit should cover all of the major areas of a plan, including risk management, tax planning, retirement planning, investment planning, estate planning, business and family governance reviews, and any other major moving parts in the family’s financial life.
A perfect example of scope creep is when you look at their estate plan. If your client has documents that are over 10 years old, should you simply stop reviewing and tell them that the documents are outdated? I’d suggest not — continue working through the documents to see what other deficiencies exist. The common areas of deficiency lie in issues such as spendthrift protection for heirs. Just because their daughter is 35 doesn’t mean that she should have outright access to your clients’ fortune.
In older documents, it is common that adult children have full access to inheritances upon attaining a certain age. While this may have been what your client wanted when the documents were drafted, you should ask about stability of marriages, health of grandchildren, risk circumstances surrounding your children, and if they care about bloodline planning.
Your client may not realize that if their 35-year-old daughter passes prematurely with outright access to the inheritance that the assets are likely to go directly to your son-in-law, also 35. Most would agree that a remarriage is possible for a 35-year-old, and when that occurs, your grandchildren are no longer first in line for your inheritance — they may be second, even a distant second, to your son-in-law’s new spouse! I haven’t met a client yet who didn’t find this possibility unsettling, and didn’t want it changed.
Identifying threats
Risk management is another area that is often overlooked in the financial planning process. When performing your FP audit, I suggest approaching risk from a broader perspective than merely looking at policies. You want to look at risk from every angle. You want to start with an overall risk assessment, and reveal where the risks may originate.
Some are obvious, such as residential rental property and the perils of being a landlord in general. But within that same property there may be risks lurking that have been ignored and masked by the substantial insurance coverage that the client may have on the property itself.
Some of these risks may lie in the form of ownership. Ownership in one’s individual name is not advised for rental property. You may ask why an LLC or some other form of ownership was not utilized. The only thing worse is when your client owns it jointly with another individual. In this case, your client still has all of the personal exposure as if they owned the property themselves, but now compounded by the fact that there is a second owner whose liabilities and lawsuits could lead to problems for any asset they own, including the one they own with your client.
Beyond the form of ownership, you should read the policies. More likely than not, their existing financial advisory team has not done this. Simply asking for the policy is a differentiator in their eyes. This is also a good example of something that may be out of the financial planner’s area of expertise, so you may need to engage with an insurance specialist to help look at the contracts.
You may want to look at their leases. Are they using canned leases they found online, or did they have their attorney draft one that has protections built in? I’d look for protections such as the tenants’ obligation to insure their contents or replacement housing in the event of a problem with the building.
The form of ownership may be even more significant with your clients’ major business assets. Do they own their business in their individual name or is it held in an estate planning trust? Leaving it in the individual name will subject this asset to probate and public notice if not owned in trust. What about the real estate that houses the business? Is it in a separate trust or LLC, with a current and proper lease with your client’s business? Probably not!
Looking at personal insurances such as life, health, disability or long-term care is also a part of the FP audit. Some of the common findings here include a disability policy that only pays benefits to age 65 or for five years if the client is near 65. Is the cost still worthwhile or should this policy be dropped?
Life insurance may be a bit more complicated but just as important as anything else. A life review should start with reestablishing your client’s need for the coverage, then a review of what they currently have followed by a recommendation on what to do. With life insurance, many clients have agents that only want to sell them insurance and not give advice. This is very evident if you have a client with many small life policies. I hate to throw agents under the bus, but when I see a client who is sold a new whole life policy each year, it bothers the heck out of me. Even worse is when they start borrowing from the older policies to buy new ones.
The investment area is what many of your clients think financial planning is all about. In many cases, their investment advisor does literally no financial planning, yet the client may refer to that person as their financial planner. Rather than getting into a deep investment analysis here, I’d see that their risk tolerance matches their portfolio and that their expected results are in line with their investment needs. This is also a good time to tell them that asset management has become commoditized, and that they can get asset management only at a far lower cost from many other firms. When planning firms are charging full retail for asset management services, there should be a heavy financial planning component unless the investment advisor is highly specialized or consistently delivering amazing returns.
As you may expect, a good FP audit process will expose the incumbents. Some clients will appreciate the fact that you are helping to clean up the messes that their team has created, and others will ask you to help replace the team. In my experience, the latter happens 95% of the time!
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الأربعاء, 30 يونيو 2021 15:56
الأركان الأربعة للعمل عن بُعد لفرق التدقيق
يحتاج قادة التدقيق الداخلي إلى استراتيجية فعالة لدعم الانتقال إلى ترتيبات مرنة والعمل من المنزل.
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المحتوى بالإنجليزية
The 4 Pillars of Remote Work for Audit Teams
Internal audit leaders need an effective strategy to support the move to flexible and work-from-home arrangements.
W. Ken HarmonJune 24, 2021Comments
Flexible work options are common in the internal audit profession, but the COVID-19 pandemic has ushered in a new time when more and more auditors are working from home. Some audit departments were ready and adapted easily, while others scrambled to install appropriate infrastructure, security, and processes to support remote work. As the threat of the pandemic begins to ebb, some teams will return to traditional work environments while others may consider permanent changes to their office-centric arrangements.
This unique episode in business has demonstrated the viability of flexible, distributed work arrangements, as well as their pitfalls. Allowing internal audit teams to work from home can have significant benefits, but any distributed work strategy must carefully consider all potential security, managerial, and behavioral issues.
BEYOND THE OFFICE
Today’s office environment was born during the Industrial Revolution when workers needed access to paper documents and to be close to other employees to execute most processes. This traditional office spawned management techniques in which employees reported to work at a designated time, had controlled environments, and could be seen conducting their work.
The digital revolution has overturned the need for a central workplace by creating new opportunities for data to be accessible virtually anywhere. For example, internal auditors now can conduct routine reviews without being in the same location as the audit client. Many audit team leaders have embraced such efficiencies, including remote work, but others have been reluctant to let go of an office-centric culture. This reluctance may be due to audit leadership’s management philosophy, but it also may reflect an organizational philosophy over which audit has little control.
While remote work and other flexible arrangements have novel challenges and can have negative results, audit leaders should take an objective view of the trade-offs involved with them. A well-executed telecommuting strategy can yield tremendous benefits for internal auditors.
Enhanced Employee Morale and Retention Employees often cite “lack of respect for their time” as a leading contributor to work dissatisfaction and a primary reason for leaving a job. They desire, and increasingly expect, a flexible work environment. Job flexibility directly improves employee morale and reduces turnover because employees receive tangible benefits such as:
Trust. Allowing employees this type of flexibility sends the message they are trusted to manage their time.
Respect. Flexible work arrangements demonstrate respect for the various pressures and demands employees face from all facets of their lives. This is key for employee retention.
Reduced commutes. Long commutes to and from work can be a primary contributor to unhappiness with one’s job. Eliminating commutes, even for a few days a week, can reduce frustration, give team members a greater sense of control, and provide them extra time on those days when their only commute is to another room in their home.
Belonging. Although it may seem counterintuitive, when employees have flexibility, they tend to be more loyal to the organization. Providing a work-from-home option decreases employee turnover by 50%, according to a Stanford University study published in The Quarterly Journal of Economics.
Increased Productivity Employees who are more satisfied with their jobs tend to be more productive. The Stanford study finds that employees who work at home experience a 13% boost in productivity versus those who work in a traditional office. Employees who telecommute work the equivalent of 1.4 more days per month than do their office-based counterparts, according to a 2020 study by online employment company Airtasker.
Cost Savings When executed as part of a larger infrastructure strategy, allowing team members to work from home can result in significant savings. The increase in employee retention and improved performance can directly influence the bottom line. For many audit groups, though, the greatest savings can be from dramatically reducing the office space required. Even in hybrid operations where team members work at home and at the office, a carefully executed strategy that staggers office-based days can create tremendous savings.
To realize the full benefits of flexible work arrangements, internal audit functions need a carefully executed strategy. This strategy should be built upon four pillars: 1) infrastructure and security, 2) expectations management, 3) communication requirements, and 4) management adaptation.
Pillar 1: Infrastructure and Security
The need to adjust work structures arose quickly with the pandemic. Audit teams were sent home to work and, in many cases, discovered team members had inadequate computers, slow internet connections, and lacked the means to maintain data and access security.
To have an effective long-term strategy, the internal audit function must anticipate these needs and be willing to make the necessary investment. Leaders cannot view such expenses as additive, and instead should see them as substitutions for other investments that would come in the long run.
Ideally, the audit team should prepare a budget that identifies additional expenses for a remote work strategy. This budget should start with a full inventory of all software, hardware, and infrastructure required. For example, audit teams may need to invest in cloud-based software rather than machine dependent software, virtual private network lines for audit team members to protect the data in transmission, encryption software for data storage, reliable high-speed internet service, standardized laptop computers, and mobile phones.
These expenses can appear daunting, but management should be aggressive in identifying cost savings to offset them. Internal audit could easily reduce the hardware and software licenses required in the office. Reducing the amount of office space could provide the greatest cost savings.
Pillar 2: Expectations Management
With a change in workplace structure comes a related change in expectations. For example, an audit manager may expect a team member to be available during certain hours, yet the team member may have different views of the specific hours in which work is to be done. Also, there could be expectations about response time to team members or clients, availability for meetings, and possibly even dress codes for virtual meetings.
Audit teams face a unique challenge because they often have large projects involving multiple team members where each step depends on the completion of a task by someone else. This problem is especially exacerbated when work-from-home arrangements can result in some audit team members working from different time zones.
Too often, the greatest friction arises because there are different expectations that have simply not been articulated. Accordingly, audit teams must develop formal policies that delineate expectations. These policies should be developed collaboratively so team members fully understand the reasoning and necessity for such policies. Because the policies may not anticipate all issues that may arise, managers must revisit and revise them regularly.
Pillar 3: Communications Requirements
Managers should articulate their expectations for team member communication, but they should be accountable for enhanced communication, themselves. Remote work cultures generate a much greater need for communication, because team members no longer have the interpersonal cues available in an office environment.
For example, team members may have difficulty getting information from clients, face roadblocks on projects, get pulled into other projects, or even face personal struggles. Such difficulties need to be communicated to managers so they can adapt accordingly. However, while such communication might come naturally during meetings in an office setting, in remote settings, managers and team members must initiate the necessary communication proactively.
Managers should be deliberate about communicating frequently and, at times, they should even place check-in calls that don’t have a specific work agenda. These connections are critical; otherwise, employees can feel disconnected and not part of a cohesive team. Managers cannot communicate enough.
Pillar 4: Management Adaptation
Changing management’s attitude is the most important and most difficult part of implementing a work-from-home strategy. Audit leaders often cite concerns about a “looser” work environment that would remove elements of accountability and result in reduced productivity, higher costs, poorer client service, and lower quality. They imagine scenarios where team members are easily distracted by their home environment and don’t prioritize work.
At the center of this discomfort is a feeling of loss of control and a major break from traditional methods when remote work becomes the norm. One reason for this feeling is many managers are accustomed to measuring input rather than output. If they can see a team member, then they assume that individual is working.
Simply stated, internal audit managers must adapt and start measuring results. For example, rather than measuring time in the office or hours billed to a job, managers could assess audit project effectiveness by measuring project throughput, trends in audit hours, hour variance from budget, or significance of analysis. Even in office environments, moving to a results-based focus that extends trust to team members can be effective and result in a better workplace culture.
REALIZING THE BENEFITS
The pandemic has provided an evolutionary break from the traditional office-centric paradigm. The work environment was already drifting toward more flexible arrangements that included remote work, but the pandemic hastened this trend and provided a realistic peek inside the new reality. The evidence is clear that flexible work environments enhance productivity, boost employee morale, and reduce expenses.
However, such benefits cannot be realized unless there is a careful approach that delineates expectations and provides clear parameters for audit leaders and their staffs. Each strategy could vary based on the size and nature of the audit department and organization, but any remote work strategy should include the four pillars to provide clarity to the team and generate optimal results.
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موضوعات متنوعة
موسومة تحت
الأربعاء, 21 سبتمبر 2022 13:51
السمعة هي كل شيء
تقييم وإدارة مخاطر السمعة أمر ضروري لرفاهية المنظمة.
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المحتوى بالإنجليزية
Reputation Is Everything
Assessing and managing reputational risk is essential to organizational well-being.
Logan WamsleyJune 22, 2021Comments
Reputation can make or break an organization. As famed investor Warren Buffett once said, "It takes 20 years to build a reputation and five minutes to ruin it." Indeed, an organization's reputation can deteriorate rapidly— and it can be difficult to restore.
Beyond its potential impact on organizational success, reputational risk is also unique in nature. Unlike a risk that can exist in isolation — such as any given operational, financial, or compliance risk — reputational risk only exists in relation to other risks. And managing it depends on the organization's ability to address those risks.
"I view reputation risk as a consequence of another tier-one risk occurring," said Arya Yarpezeshkan, chief risk officer for U.S. insurance company Navigators Group in a recent Deloitte global survey on reputational risk. "For example, if we have a compliance or fraud risk event, that could lead to reputation damage and have a stock market impact. An event occurs which poses a risk to reputation. Therefore, I look at [reputational risk] as a result of other events."
No matter how obvious it may seem, reputational risk can be extremely difficult to measure and quantify — and that can make reporting on it to the board and audit committee a challenge. But addressing reputational risk is essential to the health of the organization, and often a necessary challenge for practitioners to undertake. With an understanding of potential types and sources of reputational risk, internal auditors can better assess the organization's exposure and develop an audit plan that helps keep its reputation intact.
Scope and Impact
Reputation is a driving basis for revenue in today's economy, and organizations cannot afford to underestimate it. "Firms with strong positive reputations attract better people," wrote Robert Eccles, Scott Newquist, and Roland Schatz in a Harvard Business Review article. "They are perceived as providing more value, which often allows them to charge a premium. … Moreover, in an economy where 70% to 80% of market value comes from hard-to-assess intangible assets such as brand equity, intellectual capital, and goodwill, organizations are especially vulnerable to anything that damages their reputations." In a 2019 survey of 2,000 executives by global communications and marketing solutions firm Weber Shandwick, researchers found that reputation accounts for approximately 63% of a company's market value.
In financial services, much of that reputation is built on trust — and due to the sensitive nature of the assets financial institutions are responsible for, it does not take much for that trust to be breached. "Reputation can be affected by a news story or something on social media, but I think reputational risk in financial services — or any organization — really stems from the idea of whether the product produced is ethically created," says Dana Lawrence, senior director of Compliance and Internal Control at Azlo, a San Francisco-based online bank for small businesses. "For example, encouraging your sales staff to meet sales objectives that are not necessarily in line with the customer's best interest, or not properly handling more complex processes for something such as defaults on mortgage foreclosure collections — these are typically the root cause of reputational deterioration."
With regard to these issues, financial institutions already stand on somewhat perilous ground. In a 2019 study from J.D. Power, customer perceptions of retail banks having a good reputation and being customer driven are lower than they were 10 years ago. "Customers have long memories and their brand image ratings for bank reputation decline dramatically when they experience problems," the study says. "Reputation declines further when customers perceive that problems are unresolved or resolved in a manner [that puts] the bank's interests ahead of theirs."
Lawrence also cites the impact of who interacts with the institution's products as a significant source of risk. "Financial institutions must be aware of the impact of offering services to certain types of companies," she says. "Even if it is legal, how would such a relationship look in the paper? This doesn't mean not to initiate the relationship, but it does mean being aware of the risks of being associated with different customer types." One such example might be an investment firm's relationship with an oil and gas company — an industry that has come under recent scrutiny as environmental, social, and governance topics have come to the forefront of the global conversation.
"Who decides what your reputation is?" asks Reto Kohler, partner at consulting firm Marakon and former managing director and head of strategy for Investment Banking at Barclays. "When you operate in a legal environment, you know what the law is, you know what your boundaries are. However, in this area of reputation risk, it's not as clearly defined, which makes it very difficult. One person's morals are different from another's, and one might object to something you do, whereas the other might not."
The concept of ethical product production encompasses internal issues, as well. Stories of harassment, workplace discrimination, information from whistleblowers, or perceived inaction addressing social injustices can be extremely damaging, especially in today's charged political environment. Fallout cannot only result in revenue loss but loss of incoming talent. According to a recent study by Deloitte, 44% of Millennials and 49% of Gen Zers "made choices over the type of work they are prepared to do or organizations they'd work for based on personal ethics."
Measuring the Risk
Facing such a broad yet intangible risk, the first task internal auditors should undertake is measuring it in a way the risk committee and the board can consider in relation to other organizational risks. Lawrence recommends starting with geography. "It's useful to think of how many people are going to be paying attention," she says. "Is the risk local or global?"
From there, auditors can also make scale estimates in relationship to variables that relate to moral or ethical topics. "Although it's difficult to score or illustrate with any metric, you can cite, for example, if there have been any lawsuits, major customer complaints, or regulatory issues on a particular area of focus in the last 12 or 24 months," Lawrence says. "This kind of evidence allows boards to have a more comprehensive conversation in the reputational risk committee."
According to Lawrence, more concrete evidence can also be uncovered with the help of external tools such as a net promotor score, which is derived from surveys that determine a percentage of organization "promoters" versus "detractors." Basic searches through Google and social media can also prove beneficial, as can internal statistics such as recent trends of employee losses or abrupt departures from key positions.
Developing an Audit Plan
Dedicated reputational risk audits are rare, but just as the risk itself is so dependent on other risks, it can be adequately addressed in conjunction with many other kinds of audits. For example, Lawrence says, auditors can assess adherence to the code the conduct. If any updates may be necessary, they can test the effectiveness of the organization's whistleblower process, examine the marketing review process to ensure considerations are being made to identify material that may be perceived as offensive or misleading, and review the organization's social media management policy. Each of these examples is a risk unto itself, but all play a role in establishing, maintaining, or deteriorating an organization's reputation.
Reputational risk can also be communicated as internal audit takes a consultative role in helping the organization hone an effective crisis management plan. According to Kohler, evidence of the scale of the risk collected by the audit team in conjunction with the experience of executive management and the C-Suite can play a significant role in identifying potential crisis scenarios and predicting a plan's probability of success. "We always thought about scenario planning in terms of reputation," he says. "Our risk framework quite explicitly demanded evidence that when we thought about a new strategy or whatever it may be, conduct and reputation risk was taken into account." When all applicable parties have a clear picture of what may be at stake from a reputational risk, he says, the importance of understanding each party's role in executing the established plan becomes that much clearer.
Rebuilding After an Oversight
Even the best-laid plans of mice and men can go awry. And when they do, internal audit should play a role in assuring that reputation is rebuilt in a way that is both organic and ethical. For example, when assessing the organization's online reputation management program, internal audit can focus on policy covering responses to negative comments or reviews.
"There are always going to be some negative reviews, and it's interesting how companies respond," Lawrence says. "To counteract two- or three-star reviews, there are some who will just have human resources write more five-star reviews. Obviously this in unethical, but it also does little to address the underlying problem, whether that is a process error or workplace culture issue." When assessing such policies, she says, internal audit can recommend responding to negative feedback positively and assuring applicable parties are aware of the issue so adjustments can be made to avoid it being replicated.
Key Principles
Like many other risks, proactively minimizing reputational risks comes down to a few simple principles: awareness, communication, and process. "I think it's really just a matter of making sure that people are following their process, like any other audit," Lawrence says. "And if processes change, people must be made of aware of the changes to avoid gaps."
No plan can eliminate reputational risk entirely, but adhering to these ideas can go a long way in assuring the organization's name is built to last.
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موضوعات متنوعة
موسومة تحت
الأربعاء, 24 مارس 2021 14:19
ممارسات تدقيق الموظفين: الاستمرارية
الاهتمام بالبيئة الحالية المتطورة ― اعتبارات المراجعة لتأثير COVID-19
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المحتوى بالإنجليزية
This publication has been prepared to highlight key areas of focus in the current environment when undertaking procedures relating to, and concluding on, the appropriateness of management’s use of the going concern basis of accounting in accordance with the International Standards on Auditing.
It does not amend or override the ISAs, the texts of which alone are authoritative. Reading this publication is not a substitute for reading the ISAs.
Preparers, those charged with governance and users of financial statements may find this publication helpful in understanding the auditor’s responsibilities in relation to going concern, as well as any modifications made to the auditor’s report in respect of any uncertainties related to going concern. - البلد مصر
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محاسبة و مراجعة
موسومة تحت
الأربعاء, 21 سبتمبر 2022 13:16
بناء خارطة طريق للنجاح
مهنة تدقيق أفضل
معلومات إضافية
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المحتوى بالإنجليزية
Step 1: Establish Your Starting Point — Know Where You Are
Explore how you feel about your current role, brand, talents, strengths, weaknesses, and competency level. Be introspective and ask yourself: Am I satisfied with my role and how others view me? What knowledge, skills, and abilities do I bring to the table?
To better understand your knowledge and abilities, assess your current competency with The IIA's Internal Audit Competency Framework. Determine your competency level within the 22 knowledge areas among four disciplines: Professionalism, Performance, Environment, and Leadership and Communications.
Step 2: Set Your Direction — Identify Where You Want to Go
Remember what it felt like in college once you determined your major and knew your end goal? Career development planning can provide you with that same sense of direction. You can pinpoint both interim stops and the ultimate destination for your career over the next five years while building your plan. Some simple actions to help you set your direction include:
Discuss career opportunities with supervisors, colleagues, and mentors.
Share interests and seek insights on their perceptions of you, your performance, and your potential.
Reflect on your current organizational environment. How is it evolving to meet stakeholder needs? How are expectations of your role and function changing, and how can you add value?
In addition, ask yourself these questions to set your direction:
Is my immediate focus on developing new skills to enrich my current job performance?
Is my next career step lateral, up, or over in another organization? What experiences do I need?
What specific role do you have your sights set on? What skills do you need to develop?
What do I want to achieve in the next one, three, and five years?
Step 3: Plan Your Journey — Explore How You Will Get There
Remember, no two career journeys are the same. While you may move through the same sequence of roles as another person, you have unique strengths and development opportunities to leverage. Map your path by exploring the requirements and competencies for the positions you aspire to over the next five years. Focus on capitalizing on your strengths and addressing opportunities to get where you want to be. Review the job descriptions that interest you the most to:
Determine the knowledge, skills, abilities, and other characteristics you need to secure those positions.
Identify the specific skills, experiences, and knowledge you need to acquire for your year one, year three, and year five stops on your career journey.
Use the Internal Audit Competency Framework to identify competency gaps.
Step 4: Map Your Route — Document Actions, Measures, and Timelines
Commit to achieving your career goals — document the specific actions you will take, timelines for completion, and how each activity supports your objectives. Determine which activities will be most beneficial to you on your career journey. These activities might include:
Staying up-to-date on practices, knowledge, and emerging trends in the profession through online content, news sources, publications, and more.
Pursuing additional education, training, or professional certification.
Engaging in mentoring programs as a mentor or mentee.
Participating in networking and volunteering activities.
Assuming additional tasks or challenging responsibilities within your current role.
Leading collaborative projects, developing reports, and presenting findings.
Step 5: Monitor Your Progress and Course-correct
Create an accountability mechanism by sharing your plan with a supervisor or mentor, and discuss your progress quarterly to stay on track with your career journey. You may encounter detours, roadblocks, or take side roads, so establishing regular check-ins with those you admire and respect can help you course-correct or adjust your plan to accommodate new destinations.
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موضوعات متنوعة
الثلاثاء, 24 مايو 2022 07:18
إنفوجرافيك..تدقيق بدون ألم!
يمكن أن تساعد عدة خطوات الممارسين على تجنب المزالق الشائعة التي تسبب ضائقة غير ضرورية لعملاء التدقيق
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إنفوجرافيك
موسومة تحت
الثلاثاء, 24 مايو 2022 07:20
إنفوجرافيك.. مستقبل التدقيق يأتي أسرع مما تعتقد
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إنفوجرافيك
موسومة تحت
الإثنين, 11 يناير 2021 13:36
كيف يمكن للتكنولوجيا المالية أن تساعد المحاسبة في تقديم بيانات استثمار موثوقة وفي الوقت المناسب؟
لا تدوم الفرص طويلاً، لا سيما في عالم المال سريع الحركة
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المحتوى بالإنجليزية
How fintech can help accounting deliver timely, trustworthy investment data
By Ted Meissner
Opportunities don’t stick around long, especially in the fast-moving financial world. When you’re managing a large, diverse portfolio, you need to respond quickly when opportunities arise, and you need up-to-the-minute data to act with any confidence. But accounting and investment pros can’t audit sources and verify data quickly enough to ensure the information is both updated and accurate. Without insight into the source and age of data and fresh analytics, they’re operating at a huge disadvantage.
There are several reasons why reliable data is so hard to come by. The need to reconcile information from multiple sources is a big part of the problem. Data is often siloed throughout the organization, and input from numerous departments is anything but consistent. When managers must sort through stale data, updates, revisions and inconsistencies, it’s difficult to trust the information. They’re not alone in their frustration. The concern extends up to the C suite, where the chief financial and operations officers (CFOs and COOs) and chief information officer (CIO) are looking for solid data to support sound decisions and satisfy investment committees.
Fortunately, fintech can help address this problem. State-of-the-art accounting solutions provide full transparency on the quality of the data, revisions, corrections and approvals. That results in trustworthy data — the foundation for smart, fast, strategic decisions.
Data is inconsistent and inaccessible
With a manual process, it’s difficult to ensure data consistency and availability. Multi-asset data comes from a number of sources, including fund managers and accountants, sometimes including outside contractors. Often, they use different formats and timetables, which can make it hard to collate data. Handling data collection manually is a slow, tedious process full of duplication and prone to human error. Once the information has been gathered, someone has to take the time to reconcile the results into something that makes sense.
That’s easier said than done. When staff members handling different functions import and rekey details into a variety of applications, data can be stuck in those apps and siloed in those departments. Many individuals and departments maintain separate spreadsheets for their own purposes and don’t share all the information across the organization.
Given these obstacles, it’s easy to understand why it’s hard to get accurate data that is up to date, consistent across the organization and ultimately reliable.
Productivity suffers
It’s not unusual for accountants to handle all non-investment functions in an investment firm, including tax and compliance functions as well as accounting. In addition, they’re often assigned responsibility for performance reporting and contribution/attribution analysis. That’s all well within their capability, but it’s hard to accomplish using substandard tools such as spreadsheets.
The situation gets even more complicated when the work isn’t handled in-house but outsourced to outside accounting firms. When debits and credits are booked externally, there can be a lack of detailed audit trails for internal accountants to follow. Additional problems can arise when third parties don’t know what form the data should take. Companies are unhappy when data isn’t ready when needed or is difficult to reconcile.
Shadow systems add to the complexity. These workarounds often require companies to redo the work they’re paying an outside vendor to deliver. That extra step may provide more confidence in data, but it’s expensive and inefficient, and it can wind up creating yet another data silo.
Faced with these realities, accountants can feel they’re unable to provide their best work despite their best efforts. Spending hours on routine tasks such as rekeying data into diverse systems rather than doing productive value-added work is a waste of their time and talent, leading to job frustration.
Technology is the answer
Automation can resolve many of these problems. Fintech software providers offer next-generation solutions that ingest data, record it once and distribute it to the appropriate systems for portfolio accounting, performance reports and analyses, and private investment tracking. Indexing provides both an audit trail and insight into data quality, and algorithms can be used to analyze key indicators and assign data a confidence rating.
The investment industry now has the tools to solve the longstanding problems it has had with data. By harnessing technology, firms can enjoy more control and enhanced efficiency and have more confidence in the integrity of their data. In the end, this will give them more time to manage portfolios and deliver even more valuable service to their clients.
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