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How firms are plugging the audit gap

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1st Jul 2013
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As predicted the increase in the audit threshold last October to the European maxima of (two from) £6.5m turnover/50 employees/£3.6m balance sheet total assets has caused many smaller firms to reconsider their audit registrations.

But if that work goes, what are they doing to replace it? The question arose at the recent CCH conference in London, and the answers from practitioners in a panel session (pictured above with Douglas Rentoul on the big screen next to Laura Ambrose) pointed to closer involvement in clients’ business processes and doing more work for less cost through the effective use of technology.

“When I started, we were historians. Now I have to work with where we are today,” commented one small practitioner.

Laura Ambrose, a partner with Haslers in Loughton, Essex, agreed and said her firm was moving more into strategic support and “hands-on” work with clients. “Knowing what’s around the corner is what it’s all about,” she said.

As a 12-partner firm, Haslers has the resources to cover the costs of compliance and training, but she was aware that firms with just a few partners were turning away from audit.

With that work in decline, Ambrose explained why Haslers is focusing on business strategy and helping firms to grow. “It’s obvious. If clients grow, we grow,” she said.

In some cases the increased involvement includes offering clients more live data and management accounts, but Haslers will try to educate clients so they can do it themselves.

“We’ll work to get them into a good place and then try to train someone so we can hand that over, so we can focus more on the strategic side.”

If needed, Hasler works with business coaches and mentors to help clients achieve their goals.

Because fees for bread and butter work have been under pressure for the past few years the firm has also looked at its internal processes and efficiencies.

“Quite a lot of that is on a technological basis and how you use software,” Ambrose added. This expertise also found its way into other areas of for the firm, including a growing line in forensic accounting services.

“With technology comes fraud. We’re using our skills to take account the risks of technology.”

A very similar message came from Douglas Rentoul, the head of IT at the fast-growing Scottish firm Johnston Carmichael. “We’re finding we get more involved working at clients and... outsourcing business processes,” he said.

Having addressed the firm’s own workflows, Johnston Carmichael realised that a lot of other companies need similar help. “We found there are internal processes we can transfer to clients,” Rentoul told the conference audience.

Like most accountancy software suppliers at the moment, conference sponsor CCH extolled the benefits of cloud computing for this approach.

Barbara Kroll, the managing director of CCH’s cloud accounting subsidiary Twinfield, tied together the client involvement and technology usage themes by extolling the high-tech approach adopted by Deloitte in the Netherlands, where the firm has built an online portal to deliver collaborative services to its clients.

Deloitte realised that if it continued offering services in the traditional way, there was not much opportunity to grow, she explained. The partner in charge wanted to differentiate the firm by building a collaborative business that really understands its clients’ needs.

“The Deloitte portal is scalable and automated, so it’s profitable. If you standardise tools you get efficiencies… and scalability. Extra users mean very little extra marginal cost. Online is paperless and collaboration with clients brings [them] closer to the practice,” Kroll said.

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Teignmouth
By Paul Scholes
01st Jul 2013 17:50

That's nothing......

for those who remember the first audit exemption twenty years ago.  The firm I was with lost 80% of its audit work overnight, and what did we do then? 

We used to get up, half an hour before we went to bed, and found other, more valuable & constructive, work to do for the clients.

You try and tell the young people of today that, they won't believe you!

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Replying to lionofludesch:
Locutus of Borg
By Locutus
01st Jul 2013 17:10

Exactly

Paul Scholes wrote:

for those who remember the first audit exemption twenty years ago.  The firm I was with lost 80% of its audit work overnight, and what did we do then? 

We used get up, half an hour before we went to bed, and found other, more valuable & constructive, work to do for the clients.

You try and tell the young people of today that, they won't believe you!

I'm just about old enough to remember that first big audit exemption in the early 1990s and the silly compilation report, which was a sort of "we've checked some stuff but not done a proper audit".  A few years later the compilation report was scrapped altogether and the main audit exemption rose even higher.

As far as most small practices are concerned, the auditing of limited companies (unless the industry requires it to be audited) became a minor-issue years ago.

The last time I did an audit was about 4 years ago and I'm not sure I will ever do another one in my career.  I'm quite happy with that.  Auditing these days is more hassle than it's really worth with lots of box ticking and low margins.

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