Alan Anderson

Don’t Take on Audits in an Industry You Don’t Understand

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Don’t try to wear too many hats. Pick your specialty area and become a guru.

By Alan Anderson, CPA
Transforming Audit for the Future

Industry expertise is essential for businessmindedness. For me, the primary ingredient for building a successful audit practice is to avoid taking on work that you don’t understand. Too many firms say they can audit any balance sheet, but that’s when they can get into trouble. Many firms get sued because they made a bad business decision. They thought they could take on this unique industry and get it right. If you dabble in any industry, you will put your firm and yourself at tremendous risk.

MORE: Four Questions to Make Your Firm More Successful as a Business | Move to Advisory and Assurance with Relevance | How ‘Business Expert CPAs’ Get Their Own Business Wrong | Say Adios to Audit Fee Pressure | Eight Items to Cover in the Audit Exit to Deepen Client Relationships and Prove Value | Know Your Three Audit W’s | Planning Lays the Foundation of Audit Relevance | How Do We Drive Relevance in Audit? | Before the Audit: More Than Just Planning | Are You Correctly Identifying the Relevance Intersection? | Lack of Relevance Drives Audit Commoditization
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When the U.S. Department of Labor looked at the quality of employee benefit plan (EBP) audits, they found plenty of problems. That 2014 study found “a clear link between the number of employee benefit plan audits performed by a CPA and the quality of the audit work performed.” Almost half of the firms the DOL looked at performed only one or two EBP audits per year, and 75 percent of those had deficiencies. Over half of those (56%) had five or more deficiencies.

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Four Questions to Make Your Firm More Successful as a Business

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Where on the spectrum of accounting firms do you want to operate?

By Alan Anderson, CPA
Transforming Audit for the Future

Many firms limit their consideration of businessmindedness to the narrow focus of growing their top line. However, generating sufficient revenue to cover costs and generate profit is only a baseline measure for businessmindedness.

MORE: Move to Advisory and Assurance with Relevance | How ‘Business Expert CPAs’ Get Their Own Business Wrong | Exceptional Audit Client Service Demands Effective Communication | Five Ways to Prevent Audit Bottlenecks | How Do We Drive Relevance in Audit? | Lack of Relevance Drives Audit Commoditization | Four Basic Understandings Every Auditor Must Master | WANTED: Great Audit Mentors
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The inward component of businessmindedness concerns how the firm operates. This includes the kinds of projects and clients the firm takes on. To provide relevance, you need to consider whether your firm can deliver on relevance for a particular engagement or client and whether that work makes sense for your firm.

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Move to Advisory and Assurance with Relevance

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Relevance protects you from technological obsolescence.

By Alan Anderson, CPA
Transforming Audit for the Future

The days of delivering an audit report months after year-end are numbered. How relevant is an audit report when it’s months after the fact? Even when we move to continuous audit – which will happen sooner than you think – it will still be historical information. But what will make it more relevant is that it will be delivered more timely, even if we don’t change much about how we perform the audit.

MORE: How ‘Business Expert CPAs’ Get Their Own Business Wrong | Say Adios to Audit Fee Pressure | Eight Items to Cover in the Audit Exit to Deepen Client Relationships and Prove Value | Know Your Three Audit W’s | Planning Lays the Foundation of Audit Relevance | How Do We Drive Relevance in Audit? | Before the Audit: More Than Just Planning | Are You Correctly Identifying the Relevance Intersection? | Lack of Relevance Drives Audit Commoditization | Five Crucial Attributes for Successful Audit Leadership | Traditional Audits Don’t Deserve Premium Billing | Four Basic Understandings Every Auditor Must Master
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If you’re taking the time to understand the workings of the business, how that business works in relation to the industry, and how it serves its customers, you’re on the path to providing true relevance. That’s how you move into advisory and assurance. If you provide that baseline level of relevance and then build more real-time techniques and tools, you can expand on that knowledge base of the industry and the operating environment. Then you can give your clients even more advice and suggestions for what they do.

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How ‘Business Expert CPAs’ Get Their Own Business Wrong

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Only a small percentage of audit leaders understand businessmindedness’s inward and outward components.

By Alan Anderson, CPA
Transforming Audit for the Future

I talk to leaders of firms all around the country who think that if they get their fee realization right, that’s a sign that they’ve got great business minds. They ask me what the market fee realization is, so I tell them that’s a miserable measure.

MORE: Say Adios to Audit Fee Pressure | Eight Items to Cover in the Audit Exit to Deepen Client Relationships and Prove Value | Know Your Three Audit W’s | Planning Lays the Foundation of Audit Relevance | How Do We Drive Relevance in Audit? | Before the Audit: More Than Just Planning | Are You Correctly Identifying the Relevance Intersection? | Lack of Relevance Drives Audit Commoditization | Five Crucial Attributes for Successful Audit Leadership | Traditional Audits Don’t Deserve Premium Billing | Four Basic Understandings Every Auditor Must Master
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There is no perfect fee realization. As extreme examples, I’ve worked with firms with 10 percent and 200 percent fee realizations. Which is better? Neither. The firm with a 10 percent fee realization bills at $5,000 per hour, while the other bills at $20 an hour.

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Say Adios to Audit Fee Pressure

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What client goes out for an audit proposal when their auditor provides relevant advice and useful suggestions?  

By Alan Anderson, CPA
Transforming Audit for the Future

Your client likely engaged your firm for an audit because they need an audit. But what is it that they want? They don’t want a stack of paper delivered months after year-end. Like anyone else, they focus on “What’s In It For Me?” or WIIFM.

MORE: Use Eight Audit Exit Items to Deepen Client Relationships | Exceptional Audit Client Service Demands Effective Communication | Deliver More Audit Value by Getting Out of the Conference Room | Know Your Three Audit W’s | Planning Lays the Foundation of Audit Relevance | How Do We Drive Relevance in Audit? | Before the Audit: More Than Just Planning | Are You Correctly Identifying the Relevance Intersection? | Lack of Relevance Drives Audit Commoditization | Five Crucial Attributes for Successful Audit Leadership | Traditional Audits Don’t Deserve Premium Billing
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They want relevant ideas that will help them improve their businesses. They want to learn from you about your experience with others in their industry or in a similar situation. They want a relationship with you to talk about their business in plain English. They want someone who can explain the accounting standards and how they impact how they report their results.

Remember our definition of relevance:

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