Run out of time doing an audit

Run out of time doing an audit

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We have been doing an audit of a clothing company recently and things did not go according to plan.
Basically we have run out of time doing the work and have not done half the audit work we should have. It's not through the want of trying its just that we couldn't spend anymore time on it as we are already over budget as it is.
Would ICAEW still expect their auditors to continue with the audit work until such time as we had completed all procedures or would they accept we had to qualify the opinion because of time problems? Do they accept that time is of the essence with these things?
Thanks in advance.

Replies (22)

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By occca
24th Apr 2013 17:25

Time Management !

Is this a joke?

Surely it's up to you to quote the correct amount of time for the work involved

I think ICAEW would take a very dim view of saying you ran out of time - it's up to you to do the job correctly and come up with the correct conclusion

 

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David Winch
By David Winch
24th Apr 2013 17:37

Audit

You have to do sufficient work to enable you to form your audit opinion.

You cannot qualify your opinion on the basis that you didn't have time to do the job fully.

Would you buy a new house from a builder who said, "Sorry, we didn't have time to put the roof on. See ya!"

David

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collings
By Steven Collings
24th Apr 2013 17:59

Risk

You say that "things did not go according to plan".  Did you not identify issues which may render things not going according to plan at the planning stage of your audit?  Were there issues in last year's audit (if one was done or if you were the auditor, of course)? 

As I am sure you are aware, it is the sufficiency and appropriateness of audit evidence that dictates the audit opinion you should form and you need to consider that even though you have run out of time to perform your procedures, the evidence you need to form an unqualified opinion may be available (clearly you won't know that if you don't perform the required audit procedures) and performing those audit procedures could very well generate that audit evidence.  I doubt (in fact I am convinced) the ICAEW would not agree to your time constraints as being a basis to qualify the audit opinion and my opinion is that you should undertake all the procedures necessary to arrive at an appropriate opinion whether or not this results in your firm making a loss on the job.  Once you have undertaken all the required audit procedures you will then be in a position to form your audit opinion.

Regards

Steve

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By sparkler
24th Apr 2013 18:01

Carry on until the job is done.

I trained as an auditor with a Big 4 firm.  I don't think anyone would have dared to suggest to the partner that they had "run out of time" to do the audit - you carry on working until the audit is finished!

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By Jekyll and Hyde
24th Apr 2013 18:09

cowboy accountants
Perhaps we need to have a tv programme on professional services similar to that of cowbow builders.

I only hope the op was only joking, perhaps had seen something similar recently and wanted an outlet to air their views.

It seems to me that that over the last decade or so accountancy/audit has become all about reducing cost for business and not about delivering quality work. This comes from the top down and one could draw some comparison to the op query and that of risk auditing and fixed fee in a very competive market. Clearly the big firms have cut several corners over the last decade to achieve budgets. Lack of wanting to pay for compliance work and only wanting to pay for value added work. There was huge debate on this early last year.

There does seem to be a lot of horsemeat rather than quality beef in accounts/audit nowadays and you get what you pay for.

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By User deleted
24th Apr 2013 18:12

Excellent!

I've spent too long on the vat return I'm doing so I'm going to file half a vat return and be done with it! I'm sure the client won't mind, nor HMRC. This is going to make such a difference to the way I work from now on :)

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By zarathustra
24th Apr 2013 18:36

At first I thought this was a mickey take .

However, then I got to thinking:

Suppose the auditor has agreed to carry out the audit on a time spent basis rather than an agreed fee, so he has agreed £X per hour.

There have been issues which have arisen during the course of the audit which have taken more time than anticipated.

It has reached the point where the client says they are unwilling to pay for more hours.

What does the auditor do at that point - is it not a limitation of scope, albeit one which was not apparant at the outset?

 

 

 

 

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By Ayesha Bham
24th Apr 2013 18:49

No joke
No it is not a joke!
The clients computer system was down for 2 days and then the key accounts staff were on holiday.
We have had to significantly reduce this fee because the client is having a difficult time.
Given the comments it looks like we are going to have to complete the audit.
Thank you.

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By Chris Smail
25th Apr 2013 02:03

You had nine months!

Client's financial problems make the audit more expensive not less!

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By MissAccounting
25th Apr 2013 10:21

Wow

I officially think Ive seen it all now!

Surely if the computers were down for 2 days and you were sitting twiddling your thumbs then you need to add 2 days onto the audit cost you agreed up front.  If key accounts staff were on holiday during an audit(!) and you need to go back then you do so at an extra charge!

Computers conveniently broken and key accounts staff on holiday...sounds to me like there is a bigger problem than your time!

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Glenn Martin
By Glenn Martin
25th Apr 2013 11:01

Was any planning done at all on job

Assuming this is not a wind up It would seem that little to no planning can have been carried out prior to commencement of the job.

Did you ring the week before to confirm the records were up to date and ready to audit, did you check the key staff were going to be there, did you not think of returning to the office or working elsewhere when computers were down.

If you have agreed a special price for doing the audit as your client is having a hard time, you have discounted your fee not the amount of work that needs to be done.

Do you expect you client to explain to his bank or other interested parties that he has a qualifed

opinion on his accounts as you got the planning/costings wrong on the audit.

Have you not got a boss or manager who you can ask about how to procced or are you the boss?????

I

 

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By Andy Reeves
30th Apr 2013 12:18

Hand back your audit registration certificate NOW!

If the OP had to ask this question, then may I respectively suggest that she should not be doing any audits as she has clearly not kept up to date with even the basics.

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Replying to Portia Nina Levin:
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By BigBadWolf
30th Apr 2013 12:33

Agreed

Andy Reeves wrote:

If the OP had to ask this question, then may I respectively suggest that she should not be doing any audits as she has clearly not kept up to date with even the basics.

 

Totally agree.

 

 

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By johngroganjga
30th Apr 2013 12:35

Agreed

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By carnmores
30th Apr 2013 12:38

ignore the unhelpful answers

if  you cannot do any further work for whatever reason then you will have to qualify the accounts and say why - if the company cannot afford it as opposed to wont then that is slightly different and in addition a going concern qualification would be required - if it wont afford it then i suggest that you point out the consequences to the directors. lack of access to the computer and the staff is a fair reason to say that the quote has to be revised  

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By johngroganjga
30th Apr 2013 12:43

An audit being incomplete for reasons that are within the auditors' control is not a basis for a qualification, so that is not a solution to the problem.  The correct response in this case is either to complete the audit or to resign as auditors.

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By carnmores
30th Apr 2013 12:52

John what is not a solution to the problem

 i dont understand your reply can you be more expressive pls? what is in the auditors control?

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By johngroganjga
30th Apr 2013 13:08

What is in the auditors' power to control is to spend the time necessary to compete the audit.  This is different from a limitation in scope imposed by external events over which the auditor has no control, which would indeed by a suitable matter for an audit report qualification.

If is not appropriate for auditors to disclaim opinions on clients' accounts because they have chosen not to carry out the procedures necessary to enable them to form them.  Therefore suggesting that course of action is not an appropriate solution to this problem.

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7om
By Tom 7000
30th Apr 2013 13:48

AUDIT QUALIFICATION

 

What are you going to put....

 

..the accounts may or may not be correct but to be honest we cant tell as we didnt complete all our work because we dont think we got paid enough....

Have you actually added up the cost of the staffs wages and compared it to the money receivable? Not some spuriois charge out rate made up on a whim. Will you ACTUALLY make a gross loss on the job?

 

If so, bite the bullet, finish the job....properly (or you will get struck off)   , take your gross loss and quote them double next year....

 

Cant win em all.....can you?

 

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By Carlos_Fandango
30th Apr 2013 14:19

You didn't run out of time...you ran out of budget.

Had the same problem myself, the audit was the addon to other services provided by another part of the firm...so the audit fee was cut to below the bone.

Audit fee each year has stayed at £4,000 and time costs are always at least £7,000.

So it's the loss leader...you've just got to hope everyone else appreciates that.

 

You've got to go back and do what you need to do to support whatever audit conclusion you come to.

If the audit is more complicated than first thought (due to computer breakdowns or sampling results being poor meaning a bigger sample was necessary) then a higher fee should be chargable.

 

The next point is going to be that you can't qualify the audit report because that means the bankers will withdraw the overdraft...which means you are not independant and should resign.

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By carnmores
01st May 2013 13:04

@john @tom

who would be an auditor these days! thankless task it seems - its ages since i gave up the ghost....

 

BTW i stick by what i said  CAN NOT as opposed to WILL NOT, i would expect an auditor to pick that up !

 

and its is precisely the question of loss leaders , that so many people get excited about !  are they doing a cheaper audit to get other more profitable work and is there a hidden trade off 

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By DerekChaplin
02nd May 2013 16:29

Definately carry on

I remember an audit just after the major change to charities auditing. We planned the job, performed the audit on a similar basis to the previous year, all sorted, passed to the partner who tore up the original planning and we started from scratch again.

Client had a similar fee to previous year and we had the mother of all write offs. We also learned an important lesson - planning needs to be properly performed and in accordance with proper audit regulations.

In order for an auditor to be ble to sign an audit report they have to have performed a full audit. You can only qualify it if there is a reason as a result of the audit, not due to a lack of auditing.

Your firm needs to be able to justify their audit procedures. The budget has no bearing on this - that is an internal issue you need to discuss with the partner responsible for the job. So you may not hit your billing/recovery targets - so what. You still have to do a proper audit - no excuses.

However if the client is deliberately witholding information in order to prolong the audit/hide something, then that is a different matter altogether.

You have to remember that the person responsible for the audit is a professional and needs to act in such a way.

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