Knowledge Based Audits = Revenue Positive Audits

Planning for Revenue Positive Audits

You’ve heard it said many times, whether by a motivational speaker or your mother. Success does not happen by accident.  Successful outcomes in most cases come as a result of proper planning. This planning process applies especially well in the area of audits. More specifically, the means by which a firm plans and prepares for an audit often determines whether the audit is a revenue enhancer or revenue neutral proposition.

Outdated Planning and Processes = Revenue Seepage

Most auditors are natural planners.  Thank goodness they are.  However, an Achilles heel for far too many auditors is the “way” with which they approach and plan an audit.  The “Check-List” method of auditing is still very much alive and well.  Yet with the rapid changes that can occur with new and existing clients via external forces (such as new legislation) or internal forces (brought on by mergers and acquisitions), a check-list approach can prove cumbersome. Failure to customize audit planning and work processes can cost valuable time which in turn translates to lost dollars. Fortunately, this narrow “one size fits all” check list approach, is now being challenged.  It’s being challenged by a more common sense method, better known as the Knowledge Based Audit (KBA) Methodology.

Busy Work vs. Auditing Risk

The two different audit approaches could not be more different. Whereas the “Check List” method approaches every audit in a manual fashion, the KBA methodology properly plans and takes a customized automated approach.  So what dictates the work processes of each approach?  It boils down to one word….data.  The checklist approach largely depends on human actions of compiling, organizing, selecting, and analyzing a literal mountain of audit data.   This mass of data, coupled with the reliance on staff to process it without error, can create doubt and double work on many audit jobs.  The KBA approach is just the opposite.  By utilizing the most current audit engagement and analytical tools that exist today, the KBA approach removes hours of manual labor where most data errors occur. This massive efficiency upgrade, frees up audit teams to shine in the area that they know best… auditing risk!

Examples in the KBA Way

In truth, the KBA relies on combining the best of audit technology and the best of human audit intelligence. Having both compliment and excel in their respective capacities, make for an unbeatable audit team. One of the many success stories that demonstrate this dynamic in action is the multi-office firm of Vavrinek, Trine, Day & Co.,LLP, located in Rancho Cucamonga, CA. By shifting away from time consuming manual work and disjointed staff collaboration, the firm successfully adopted the foundational KBA methodology, in conjunction with the  Wolters Kluwer Integrated Audit Approach (IAA).  Combining the top tech solutions, which make up the IAA, positive results followed almost immediately. Nannette Casady, QC officer of the 230 member firm elaborates, “With this in place, our auditors already start 50 to 80 percent through their planning process. That’s an enormous time savings for our firm.”  She continues, “The IAA requires you to follow the standards, so you’re not over-auditing. You are actually doing your audit based on the risk, not checklists, and everything is clearly documented. In addition to better audits, it makes the job easier for our auditors and makes the peer review process easier too.”

So Why Do Firms Continue With a Check-list Approach?

So if the KBA methodology is such a resounding success, why are some firms hanging on to their check-list approach? In reality, old habits and old methods die hard. For others it is a matter of underestimating the positive difference a move to a KBA approach can make.  One has to think there will be time in the near future where the migration of more firms to this new and improved approach will coax late adopters to come on board.

Is your firm holding on to old and inefficient audit processes? If so, consider the improvements that the Wolters Kluwer Integrated Audit Approach can make by downloading our free ebook; 5 Tips for a Quality Audit.

 

 

 

 

AUTHOR

Brandon Sims

All stories by: Brandon Sims