Alan Anderson, Author at CPA Trendlines

Put the Ethics Code to Work for Your Clients and Your Firm

Future audits will yield far more information much faster.

By Alan Anderson, CPA
Transforming Audit for the Future

Some CPAs say that auditors can’t provide any kind of advice without harming our independence and violating our professional ethics. But remember, the pillars of our ethics as CPAs are objectivity and integrity. Independence is the measure chosen by our profession to measure our objectivity.

MORE: Is Audit in Crisis Because of Definitions? | Stop Sending the Wrong Message to Audit Teams | The Big Issues in Audit: Frustration, Inconsistency and Technology | Talent Retention: Five Tips for an Audit Adjustment | 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 we remind ourselves of those pillars and make our decisions from that viewpoint, we’ll be fine. You can offer advice and options for a client, but they must be the ones who make the management decisions. The decision-makers at the client must be the ones who choose an option and who implement that option. We can’t choose and we can’t implement.

AUDIT & ASSURANCE

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 Teams | The Big Issues in Audit: Frustration, Inconsistency and Technology | Talent Retention: Five Tips for an Audit Adjustment | 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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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.

AUDIT & ASSURANCE

WANTED: Great Audit Mentors

Professional audit mentors are scarce.

By Alan Anderson
Transforming Audit for the Future

Instant download:
“The New Manifesto for Accountants.“

I was lucky in the entirety of my career to have been empowered to try doing things differently. I had mentors who encouraged me to keep learning. But today, this forms-filling exercise that audit has become discourages people like me from staying. The ones who stay in audit are the ones who like filling out those forms.

MORE: Is Audit in Crisis Because of Definitions? | Stop Sending the Wrong Message to Audit Teams | The Big Issues in Audit: Frustration, Inconsistency and Technology | Talent Retention: Five Tips for an Audit Adjustment | 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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New audit staff rarely have a mentor who gives them the big picture of what audit is supposed to be. Instead, they learn how to fill out the forms better and more accurately. They don’t get review notes that ask them to think about what they’re doing. They get review notes about the way they reference their supporting documentation.

This lack of mentorship means that the best and brightest, the ones who like to keep learning, eventually leave. We are making the problem worse for future generations.

AUDIT & ASSURANCE

Is Audit in Crisis Because of Definitions?

Auditors, accountants and businesses need to agree on expectations and deliverables in audits.

By Alan Anderson
Transforming Audit for the Future

Instant download:
“The New Manifesto for Accountants.“

Do the banks and investors get useful information from historical audited financials? In their book, “The End of Accounting and the Path Forward for Investors and Managers,” Baruch Lev and Feng Gu researched the relationship between changes in stock prices and the dates that corporate financial reports were released.

MORE: Three Fundamental Questions to Ask in Audit | How Auditors Can Beat AI | The Big Issues in Audit: Frustration, Inconsistency and Technology | Five Ways to Increase Audit Efficiency | Early Adopters Gain an Edge in Audit | Talent Retention: Five Tips for an Audit Adjustment | Six 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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In the 1950s and 1960s, roughly 90 percent of the market value of public companies could be directly attributed to the earnings and book value reported in their financials. By 2013, that percentage had dropped to just 50 percent. Personally, I’m surprised it’s even that high. The historical financial statement does not serve the needs of the users of those statements.
READ MORE →

AUDIT & ASSURANCE

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 Technology | Five Ways to Increase Audit Efficiency | Early Adopters Gain an Edge in Audit | Talent Retention: Five Tips for an Audit Adjustment | Six 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.

AUDIT & ASSURANCE

Closing the Audit Expectations Gap

Regulator expectations versus client expectations: Is there a middle ground?

By Alan Anderson
Transforming Audit for the Future

Instant download:
“The New Manifesto for Accountants.“

The overarching goal of the audit is to issue the correct audit opinion. But what else do we expect from an audit?

MORE: Three Fundamental Questions to Ask in Audit | How Auditors Can Beat AI | The Big Issues in Audit: Frustration, Inconsistency and Technology | Five Ways to Increase Audit Efficiency | Early Adopters Gain an Edge in Audit | Talent Retention: Five Tips for an Audit Adjustment | Six 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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The word “audit” comes from a Latin word that means “to hear.” Originally, the official examination of accounts – what we would call an audit – was an oral procedure. And, for many centuries, listening was a primary way of gathering information in an audit. The Merriam-Webster dictionary defines audit as “a formal examination of an organization’s or individual’s accounts or financial situation” or as “a methodical examination and review.” READ MORE →

AUDIT & ASSURANCE

Three Fundamental Questions to Ask in Audit

Are you teaching your team the real work or just the compliance work?

By Alan Anderson, CPA
Transforming Audit for the Future

Instant download:
“The New Manifesto for Accountants.“

When I started in accounting, we wrote audit programs out by hand, and we thought about what it was we needed to do to carry out our audit procedures.

And then, the firm got a copy machine. That started the arts and crafts period of public accounting.

MORE: The Big Issues in Audit: Frustration, Inconsistency and Technology | Five Ways to Increase Audit Efficiency | Early Adopters Gain an Edge in Audit | Talent Retention: Five Tips for an Audit Adjustment | Six 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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Because we were going to do the same as last year, every year we would make a copy of last year’s hand-written audit program, cut out the sign-offs, tape that on a new page, make sure to draw the lines for the sign-offs, and then we’d make a copy of that. Then we had our audit program for the new year.

ADVISORY & CONSULTING

How Auditors Can Beat AI

Ignore the coming tsunami of change at your own peril.

By Alan Anderson, CPA
Transforming Audit for the Future

Instant download:
“The New Manifesto for Accountants.“

The other day, I picked up a college textbook on auditing from 2001.

MORE: The Disruptors: Re-Inventing Accounting with Tyler Anderson | The Big Issues in Audit: Frustration, Inconsistency and Technology | Five Ways to Increase Audit Efficiency | Early Adopters Gain an Edge in Audit | Talent Retention: Five Tips for an Audit Adjustment | Six 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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Even back then, that book listed these as “critical forces on the profession:”

Increasing market saturation with relatively little opportunity for growth
Perceptions that financial statement audits have become a commodity
Price competition and continual pressure to reduce fees
Cost pressures that have resulted in the reduction of time devoted to engagements
Perceptions that the incidence and severity of alleged audit failures have increased

In the 20-plus years since that book was published, not much has changed. Today many of the college students who learned auditing from that textbook are in leadership positions at audit firms. They were warned about what we were up against.

That we are still facing those same “critical forces,” which have only exacerbated since then, is an indicator of the ossified state of leadership in the audit profession.

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