Monday, September 28, 2009

Training the auditors

Now that the busy audit season is coming up for most CPA firms, top of mind is likely to be-how do we manage our fieldwork time and balance that with risk for the firm.

One straightforward answer is to have audit teams understand internal controls. It's not enough just to understand the financial statements and auditing standards. Internal controls play a crucial role in business and it's time to train auditors so that they understand the implications of weak or strong internal controls.

Thursday, September 24, 2009

What are internal controls

Internal controls are defined by COSO as a process, effected by an entity’s board of directors (regents), management and other personnel, designed to provide reasonable assurance regarding the achievement of objectives in the following categories: Effectiveness and efficiency of operations; Reliability of financial reporting; and, Compliance with applicable laws and regulations.

But what is internal control in layman's terms-since my wife doesn't understand what I do, I had to think more about this. And using everyday processes, I explain internal controls as the locks on doors, passwords for computer access, and signatures on checks to pay bills.

Wednesday, September 23, 2009

Internal audit fees

Consulting fees continue to be driven down in the Big 4 and second tier firms and the partners need to cut costs to maintain profits.

The result is higher turnover of staff on client projects, and inefficiency in the firms' internal processes.

In the hay days of Sarbanes-Oxley, the firms could charge blended rates of $250 an hour and up. Now, clients are realizing that the blended rate, even from large firms-should be in the neighborhood of $130-$150. If client's are paying above that, they're likely overpaying.