Can you foil an auditor as easily as airport security ?

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Mrs Younger returned from a trip to Australia with a friend this week. It seems they had got their passports swapped and nobody in 4 airports noticed , not even our shiny hi-tech Terminal 5 at Heathrow . So, while everybody is ordered around by "security officers" (who to be honest I wouldn't let anywhere near a business requiring a real decision to be made)  and randomly ordered to  take off their belts and shoes and generally bullied  , others are walking past officials and foiling the all-singing and all-dancing technology right under their noses . It's not unlike auditing - it's a numbers game , some you win and some you lose.....

About Norman Younger

Accountancy practice broker Commercial mediator & negotiator, Business broker  25+ years professional experience, charity trustee and community worker with a broad (but not-always "PC") view of the country's financial, business, political and social problems. Tel: 0800 2800 321. Follow me on Twitter 

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By Luke
29th Nov 2013 10:21

It's pretty easy to foil an auditor

if you know what you are doing.

I was a senior audit manager in a big 4 firm and then left, for lifestyle reasons, to be the finance manager in a £2m turnover organisation.  Having been on the other side of the fence and knowing what auditors look for, I produced an audit file for them to come in and 'audit'.  All the normal backup paperwork was there but I am pretty sure I could have hidden something if I had wanted to.

Six years in that job and I never had one audit adjustment.  Maybe I am just brilliant and maybe it was because I had effectively audited the books before I handed them over. 

That said, I think a large part was that I knew how to present a file that would satisfy them and limit questions. 

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By Old Greying Accountant
29th Nov 2013 11:44

I think ...

... your knowledge of what and audit is may be out of date.

A well run company should have no audit adjustments, that is not what they are there to do!

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29th Nov 2013 12:21

What is the auditor's job ?

Well, I had originally understood the job of the auditor as the person who is not  quite a bloodhound (you see I remember something from my studies)  .

Of course now I am older and wiser and I now know that the audotor is somebody who completes a ticking of boxes exercise and prays that he hasn't overlooked something . For this risk he charges a king's ransom

It's not the well run companies that cause the problems - but the secret is for the auditor to only audit such clients

 

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By Old Greying Accountant
29th Nov 2013 14:17

Very little box ticking ...

... in a modern audit conducted under the clarity isa's - in fact it is discouraged as it is ineffective, at least by the ACCA monitoring unit.

It is all about understanding the business, identifying risks and weaknesses and ensuring you have tested the right things in the right way with the right level of detail. And that doesn't mean ticking a ready made list of items, it means assessing the system and devising your own test tailored to the particular circumstance.It is now a bit like the old scince questions at school, your working paper just has headings for objective, test, result and conclusion.

The actual accounting entries are only a very small part of the audit these days!

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By DJKL
to frankfx
30th Nov 2013 11:33

Audit approach

Old Greying Accountant wrote:

... in a modern audit conducted under the clarity isa's - in fact it is discouraged as it is ineffective, at least by the ACCA monitoring unit.

It is all about understanding the business, identifying risks and weaknesses and ensuring you have tested the right things in the right way with the right level of detail. And that doesn't mean ticking a ready made list of items, it means assessing the system and devising your own test tailored to the particular circumstance.It is now a bit like the old scince questions at school, your working paper just has headings for objective, test, result and conclusion.

The actual accounting entries are only a very small part of the audit these days!

Not sure above approach is that new!

In the mid 1980's I was updating system notes, conducting walk through tests and then devising the appropriate testing based on the results of the foregoing and the calculated materiality levels.  Sounds like your description. 

The last time I had exposure to audit  my employer company had a larger (top 10) firm doing the work, Most of this appeared to be a lot of analysis on a laptop and very little actually looking at our records. Quite glad we no longer require to pay £6,000 for the service as it added nothing to our business and really glad that I will never work on an audit ever again.

 

DJKL

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29th Nov 2013 14:28

But what about when it goes belly up ?

So why are auditors in the firing line so often when there is a major catastrophe ? The point I am trying to make is that it is an impossibility to discover each fraud or act of creative accounting . Audit is perhaps as dismal an art as economics

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By JC
29th Nov 2013 15:38

Incorporate ..

@Flying Scotsman

'.. But what about when it goes belly up ? ..'

Isn't that the reason for incorporation etc. - to avoid the fallout

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to Buzby
30th Nov 2013 17:53

Incorporaation

That's what I like to hear. As I tell people "it's probably the cheapest insurance policy you can buy"

It may avoid finnacial fallout but the profession beats itself up and the media goes into a frenzy . The former obviously has an interest in defending its raison d'etre and the latter claims to be "informing the public" .  It sells papers but the public have little understanding of what audit is about , not so different to certain quarters of the profession itself

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