Stop Over-Auditing with a Knowledge-Based Audit Approach

A YKSM, Ltd. Case Study

YKSM, Ltd. leverages the power of a knowledge-based audit approach within Wolters Kluwer’s Integrated Audit Approach. It streamlines their processes, improves effectiveness and efficiencies, and delivers higher quality audits. This firm’s vitals include:

  • Founded in 1952
  • Headquartered in Providence, RI
  • 30 full time staff members
  • Affiliate of BDO Alliance USA
  • Conducts approximately 40 audits per year, averaging 125 hours per audit

They identified an over-auditing problem and sought to fix it. Here is their story.

Quick Changing Standards Require Action

Like other accounting firms nationwide, YKSM quickly complied with AICPA’s Risk-Based Audit Standards when they came out in 2007. After starting with the traditional checklist-based approach, though, the firm realized it was consistently over-auditing its engagements. Moreover, they knew that they could do better. That is why, in 2011, the firm set out to find a streamlined automated solution. After evaluating a variety of options, they selected CCH ProSystem fx Knowledge Coach and its knowledge-based audit approach.

Out with the Old – In with the New

“Our previous practice aid had us preparing and reviewing checklists that sometimes had nothing to do with the audit at hand,” explained Leo R. Moretti, Quality Control, and Accounting and Audit Partner at YKSM. “We knew that there had to be a more efficient solution. Our practice has long trusted Wolters Kluwer. When we heard about Knowledge Coach, we were drawn to the knowledge-based audit flow and the elimination of questions if something did not apply to a specific audit.”

Knowledge-Based Audit Approach Drives Quality and Efficiency

With the Knowledge-Based Audit (KBA) Methodology, YKSM saw an opportunity to restructure its audit process from beginning to end, eliminating the over-auditing that had plagued them in the past. The KBA Methodology starts each new audit with a clean slate. It then adds required auditing steps as risks are identified. When a staff member adds a new risk, the solution automatically prompts the user with diagnostics to make sure that each risk is addressed completely. All new information automatically flows through relevant workpapers, saving time and eliminating manual updates. Unlike the checklist approach, the knowledge-based audit approach easily enables practitioners to see the connection between the identified risks and the audit steps.

Additionally, the fact that Knowledge Coach fully integrates with their other Wolters Kluwer solutions was another key point for YKSM. The firm already used CCH® ProSystem fx® Engagement, CCH® ProSystem fx® Tax, CCH® Accounting Research Manager® (ARM) and CCH® ProSystem fx® PDFlyer. The addition of Knowledge Coach further created a seamless audit workflow experience for YKSM staff. For example, when a staff member is in Knowledge Coach and has a research question, he or she simply launches ARM from within the program, finds the answer, and provides the appropriate citation — all without interrupting the workflow.

Improved Planning and Communication

One of the biggest benefits Knowledge Coach and its knowledge-based audit approach delivers to YKSM is improved-planning before an audit even begins.

“In the past, we would go through the checklists for each audit and gather information along the way, resulting in an inefficient process,” explained Moretti. “Knowledge Coach pushes us to be fully prepared for each audit so that partners and staff know where we need to go and, almost more importantly, where we do NOT need to go during an audit. Our staff collects the right information from the client up front. There is more collaboration and interaction between staff as we move through the workflow. Also, with the use of available industry templates, we are more efficient and have grown more consistent in the way we approach each audit.”

By improving the flow of information, the Knowledge-Based Audit Methodology improves communication between audit team members. Team members can easily view summaries, risks, and findings. As a result, YKSM Partners now find it easier to monitor progress – and new staff is quickly up to speed on firm engagements.

Ability to Roll-Over Audits Saves Time and Money

One of the biggest benefits is the ability to roll-over audits from the prior year, eliminating the need for data re-entry and saving the firm a great deal of time. YKSM estimated a savings of approximately 15% of their time on each audit, after year one using Knowledge Coach. That translates into an estimated savings of at least $75,000 per year. Additionally, the firm now generates higher quality audits because the solution helps ensure that each identified risk is addressed effectively.

“While we’ve always had confidence in the quality of our audits, we were over-auditing and completing superfluous checklists. That reduced our overall efficiency,” explained Moretti. “With Knowledge Coach, we have eliminated the unnecessary workpapers from our workflow and are tailoring each audit to the identifiable risks. From a quality control standpoint, Knowledge Coach gives me and the other Partners more confidence that we are taking all of the necessary steps to ensure a quality audit.”

CCH® Learning & Development Academy Optimizes Investment

To help staff master the Knowledge-Based Audit Methodology, YKSM employees went through Wolters Kluwer’s School of Audit. The training and consulting helped them get up and running faster to take advantage of the full power of the Integrated Audit Approach.

“Wolters Kluwer’s training and consulting helped us internalize the knowledge-based audit approach,” explained Moretti. “The investment you make in the first year will come back two fold in the next year — especially at the Partner level.”

Gain the Same Benefits as YKSM

Does your firm also deal with under or over auditing? Then learn more about how Knowledge Coach and the Integrated Audit Approach can solve this problem for your firm too. On this web page, you will find video testimonials from other firms, and additional information.

AUTHOR

Wolters Kluwer Tax and Accounting

Wolters Kluwer Tax and Accounting is a leading provider of software solutions and local expertise that helps tax, accounting, and audit professionals research and navigate complex regulations, comply with legislation, manage their businesses and advise clients with speed, accuracy and efficiency. Wolters Kluwer Tax and Accounting is part of Wolters Kluwer N.V. (AEX: WKL), a global leader in information services and solutions for professionals in the health, tax and accounting, risk and compliance, finance and legal sectors. We help our customers make critical decisions every day by providing expert solutions that combine deep domain knowledge with specialized technology and services. Wolters Kluwer reported 2016 annual revenues of €4.3 billion. The company, headquartered in Alphen aan den Rijn, the Netherlands, serves customers in over 180 countries, maintains operations in over 40 countries and employs 19,000 people worldwide. Wolters Kluwer shares are listed on Euronext Amsterdam (WKL) and are included in the AEX and Euronext 100 indices. Wolters Kluwer has a sponsored Level 1 American Depositary Receipt program. The ADRs are traded on the over-the-counter market in the U.S. (WTKWY).

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