Lack of Relevance Drives Audit Commoditization

Premium service providers collect premium fees.

By Alan Anderson, CPA
Transforming Audit for the Future

We are all willing to pay more for something that has been custom-created just for us or when we see that the service provider has gone above and beyond to deliver additional value for us. But without relevance, there is little chance that your clients will see any additional value in the audit. For the client, the only reason to get an audit is to meet a regulatory or banking requirement.

MORE: Five Crucial Attributes for Successful Audit Leadership | Traditional Audits Don’t Deserve Premium Billing | Put the Ethics Code to Work for Your Clients and Your Firm | Turning Audit & Accounting into Assurance & Advisory | Is Audit in Crisis Because of Definitions? | Stop Sending the Wrong Message to Audit Teams | Closing the Audit Expectations Gap
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As a profession, our actions have contributed to commoditization, but every CPA firm I talk to complains about how audit is becoming commoditized. When someone complains to me about commoditization, the first thing I ask is, what do you do when you’re under a little fee pressure from your client? Oh, lower my fee. So, why are you lowering your fee? Because quite often, whether you’re thinking about it or not, you probably haven’t delivered anything more than 24 pages with an audit report on it.

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Five Crucial Attributes for Successful Audit Leadership

As CPAs, we exercise due professional care in all we do. When we perform audits, the bar is higher.

By Alan Anderson, CPA
Transforming Audit for the Future

In my work with auditors around the country, and as I’ve thought about where audit is headed, I’ve developed a framework of five key attributes of successful leadership for audit. If we focus on these five attributes, I truly believe we can transform audit from the checklist exercise that it’s becoming into a service that genuinely adds value to our clients.

MORE: Traditional Audits Don’t Deserve Premium Billing | Four Basic Understandings Every Auditor Must Master | Put the Ethics Code to Work for Your Clients and Your Firm | Turning Audit & Accounting into Assurance & Advisory | WANTED: Great Audit Mentors | Is Audit in Crisis Because of Definitions? | Stop Sending the Wrong Message to Audit Teams | Closing the Audit Expectations Gap
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Let’s look at each of these five crucial attributes of successful audit leadership:

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Traditional Audits Don’t Deserve Premium Billing

Relevance empowers staff to do their best work because an audit isn’t reduced to checklists.

By Alan Anderson, CPA
Transforming Audit for the Future

If we can’t demonstrate to our clients that our work is relevant, then the audit will go the way of the dinosaur. Relevance underpins the other attributes.

MORE: Four Basic Understandings Every Auditor Must Master | Put the Ethics Code to Work for Your Clients and Your Firm | Turning Audit & Accounting into Assurance & Advisory | WANTED: Great Audit Mentors | Is Audit in Crisis Because of Definitions? | Stop Sending the Wrong Message to Audit Teams | Closing the Audit Expectations Gap
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Relevance is not a one-time event. It’s a continuous process woven through everything your firm does. You build it one step at a time. This should be done with every audit, so this becomes core to the fabric of the firm’s culture.
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Four Basic Understandings Every Auditor Must Master

Make your audits more relevant and provide value-added insights and services to your clients.

By Alan Anderson, CPA
Transforming Audit for the Future

The question professionals should always ask is, “Are we leaving the profession better than we found it?” So, let’s ask: Are we leaving the audit profession in better shape than it was when we inherited it?

MORE: Put the Ethics Code to Work for Your Clients and Your Firm | Turning Audit & Accounting into Assurance & Advisory | WANTED: Great Audit Mentors | Is Audit in Crisis Because of Definitions? | Stop Sending the Wrong Message to Audit Teams | Closing the Audit Expectations Gap
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Right now, we’re not providing value, but I honestly believe it’s not too late. The future of audit is ours to create or a future that will happen to us, and not necessarily a future we would prefer.

It will take leadership to change the future of audits. We have to take ownership of the process.

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Turning Audit & Accounting into Assurance & Advisory

To remain relevant, we must change the meaning.

By Alan Anderson
Transforming Audit for the Future

As I see it, audit is at a crossroads. On one path, audit will keep going the way it has for the last decade or so. It will become so irrelevant and commodified it will vanish. Fees will drop so low that no one will be able to afford to be in the audit business. Plus, technologies like artificial intelligence and blockchain will be able to do what we’re doing now, only better, faster and cheaper. That might not happen for another 15 years, but that is coming.

MORE: Is Audit in Crisis Because of Definitions? | Stop Sending the Wrong Message to Audit TeamsThe Big Issues in Audit: Frustration, Inconsistency and Technology | Talent Retention: Five Tips for an Audit AdjustmentThe Ten Financial Controls That’ll Make You a Hero | Five Cash Reports You Can’t Live Without | When an Audit Is a Great Thing
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But there’s another solution — we can drive change positively for our profession. This change won’t happen overnight.  I want to encourage us to really think about driving that change because we can influence it quite dramatically.

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Stop Sending the Wrong Message to Audit Teams

Audit is becoming further commodified. 

By Alan Anderson
Transforming Audit for the Future

Instant download:
The New Manifesto for Accountants.

The value of what we provide to clients has declined until it has become a commodity. That, in turn, drives our fees down.

The lack of innovation means that our clients can’t tell the difference between the audit we do and one done by the firm down the street. None of them provide relevant information or any value to our clients.

MORE: Three Fundamental Questions to Ask in Audit | How Auditors Can Beat AI | The Big Issues in Audit: Frustration, Inconsistency and TechnologyFive Ways to Increase Audit Efficiency | Early Adopters Gain an Edge in AuditTalent Retention: Five Tips for an Audit AdjustmentSix Benefits of an Internal Audit | The Ten Financial Controls That’ll Make You a Hero | Five Cash Reports You Can’t Live Without | When an Audit Is a Great Thing
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If our clients don’t see the value, then the audit is only being done to meet a regulatory or banking requirement, and in that case, the cheapest option that meets that basic requirement is the one they choose.

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The Disruptors: Al Anderson on The New Manifesto for Accountants

Change your firm or go extinct.

Subscribe to CPA Trendlines podcasts anywhere: Apple, Google, Spotify, iHeart, Deezer, Amazon Music and Audible, Player FM, Audacy, Gaana (India), and Boomplay (Africa).

The Disruptors
With Liz Farr

Al Anderson has been trying to change audit for nearly his entire career and has always been “willing to try things differently.” While he’s always loved auditing – and thinks to this day that auditing can be fun – what he didn’t love was “auditing by doing it the same way every year.” However, he sees far too many firms performing audits the same way they have for decades. Anderson believes that “the firms that are unwilling to change eventually are going to be history.”

INSTANT DOWNLOAD: Al Anderson’s “The New Manifesto for Accountants.

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In an effort to combat the rising tide of commoditization of audit and assurance services, Anderson has been teaching a revolutionary framework for audit leadership to auditors around the world and has now written a book (to be released later this year by CPA Trendlines) that describes the five attributes of this framework.

These five attributes include:

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