Zeroed-In Consulting’s Post

The Financial Reporting Council made recommendations i.c.w. sampling methods, one of the pain points in the audit profession. The take-away points are: ·      #Judgements are poorly documented; reasons for differing from sampling tool suggestions must be documented. ·      Auditors lack #clarity on the basis for using alternative audit procedures to limit sample sizes for tests of detail. ·      Care is needed in selecting ‘key items’ in #stratified samples; reasons for selection must be documented and explained. ·      Selecting items over say 50% of performance materiality without justification is unacceptable. ·      Auditors should carefully #identifyriskyitems; the remaining population will be lower risk, resulting in a smaller residual sample size. ·      #Randomsampling is preferred over haphazard sampling; audit files must show that each item had an equal chance of selection. ·      Firms should understand the #statisticalconcepts behind their sample size methodologies.

Internal Auditors are more effective when they report to Audit Committees and CEOs. This helps them work independently and without fear. The 2024 IIA Pulse report says the financial sector is doing better in this regard, but other industries still need to improve. #InternalAudit #AuditIndependence The Institute of Internal Auditors Inc. #auditreporting

𝐓𝐡𝐞 𝐀𝐮𝐝𝐢𝐭 𝐄𝐱𝐩𝐥𝐚𝐢𝐧𝐞𝐫 𝐚𝐧𝐬𝐰𝐞𝐫𝐞𝐝 𝟒 𝐥𝐞𝐭𝐭𝐞𝐫𝐬 𝐢𝐧 𝐉𝐮𝐧𝐞. TAE is often invisible during June, July, and August. So that was surprisingly productive. —---------------------------------- On June 4, Jason in Fort Mason was getting bummed out by conflict. It seems it’s an inherent part of the internal auditor’s world, right? But TAE isn’t very conflicted. And TAE offers some ideas on how to reach that state.  Then, on June 11, Binky in Helsinki is dealing with hourly time budgets. Important? Not important? TAE offers some thoughts on the value (and worthlessness) of tracking hourly budgets. Next up, on June 18, Fran in Spokane opened her kickoff meeting with a heartfelt “I’m an internal auditor. And I’m here to help you.” She was pretty sure they didn’t really believe her. So TAE suggested that actions speak louder than words. And also provided some ideas on building relationships that demonstrate Fran’s helpful attitude. And finally, on June 25, Gene in Abilene was in the middle of audit planning. Again. Seemed like a ‘check the box’ activity that wasn’t actually impacting the audit. So TAE shared some ideas for planning Gene’s next audit that really would make a difference and create a better audit project.  TAE addressed a variety of issues in June, providing some interesting insights for all auditors (and other change agents) to consider as they strive to add value to their organizations. To find these posts (and more!) search the web for ‘theauditexplainer’. 

𝗖𝗼𝗺𝗽𝗹𝗲𝘁𝗲 𝗚𝘂𝗶𝗱𝗲 𝗳𝗼𝗿 𝗬𝗼𝘂𝗿 𝗔𝘂𝗱𝗶𝘁 𝗥𝗲𝗮𝗱𝗶𝗻𝗲𝘀𝘀 🛠️   With the busy season fast approaching, it’s time to gear up for audits! A well-structured approach can make all the difference. Here's your step-by-step guide to a seamless audit process:   Start with solid 𝗮𝘂𝗱𝗶𝘁 𝗽𝗹𝗮𝗻𝗻𝗶𝗻𝗴 and stay updated on 𝗮𝗰𝗰𝗼𝘂𝗻𝘁𝗶𝗻𝗴 𝘀𝘁𝗮𝗻𝗱𝗮𝗿𝗱𝘀. Address any organizational changes proactively and review past audits to identify improvement areas. Develop a 𝗰𝗹𝗲𝗮𝗿 𝘁𝗶𝗺𝗲𝗹𝗶𝗻𝗲, assign responsibilities, and ensure all 𝗳𝗶𝗻𝗮𝗻𝗰𝗶𝗮𝗹 𝗱𝗮𝘁𝗮 𝗶𝘀 𝗼𝗿𝗴𝗮𝗻𝗶𝘇𝗲𝗱. Conduct a 𝗽𝗿𝗲-𝗮𝘂𝗱𝗶𝘁 𝗿𝗲𝘃𝗶𝗲𝘄 to spot red flags and maintain open communication with all stakeholders. Preparation is key—make this audit season stress-free and successful with Windy Street! 🚀   #AuditReadiness #AuditSeason #FinancialClarity #WindyStreet

The pressure on external auditors continues to heat up 🔥 and guess who will be downstream from that scrutiny? The financial reporting teams they audit. This week, and on the heels of another shocking auditor scandal, Paul Munter issued a statement pleading for audit firms to improve the tone at the top. His statement followed newly refreshed audit quality standards from the Public Company Accounting Oversight Board (PCAOB), who continues to demand that external auditors up their game. Although my experience with external auditors has been almost universally positive (at least as positive as an audit can be 🔎), even the good ones have to respond to these initiatives by the SEC and PCAOB, which will ultimately mean more scrutiny on the financial reporting teams that perform this important work. #SECReportingisLIT #financialreporting #externalaudit #financialstatementaudit Statement by Paul Munter: https://lnkd.in/gxrVeGWw PCAOB Adopts New Standards: https://lnkd.in/gS9v5XGJ The Latest Audit Scandal: https://lnkd.in/gCxpAy6n

2023 Audit Committee Transparency Barometer Audit committees rely on trust, so transparency is essential. Explore this overview of disclosure trends to get a better picture of this market and its future. https://on.ft.com/3UfMcUy

Hocking Valley Community Hospital recently was presented with an Auditor of State Award. Eligible entities that receive this award meet the following criteria of a “clean” audit report: The entity must file financial reports with the Auditor of State’s Office by the statutory due date, without extension, via the Hinkle System on the GAAP accounting basis. The audit report does not contain any findings for recovery, material citations, material weaknesses, significant deficiencies, Uniform Guidance (Single Audit) findings, or questioned costs. The entity’s management letter contains no comments related to: Ethics referrals Questioned costs less than the threshold per Uniform Guidance Lack of timely report submission Bank reconciliation issues Failure to obtain a timely Single Audit in accordance with Uniform Guidance Findings for recovery less than $500 Public meetings or public records issues The entity has no other financial or other concerns.

Our audit team understands the challenges audit committees face today. Here are five top concerns identified in a recent study.

Can an Audit Be “Clean”? 🤔 In response to a great comment from one of my previous posts on external audits, let’s discuss the heart of any statutory audit - the #AuditReport! This is where the auditor gives their final opinion, summarizing the entire audit process. There are 4 major types of opinions auditors can issue, and understanding them is key to knowing where your company stands. 📍 Unqualified Opinion This is the gold standard! An unqualified opinion means the financial statements are accurate, reliable, and comply with accounting standards. It’s a big thumbs up for strong financial management and transparency. 📍 Qualified Opinion A qualified opinion means the financials are mostly in good shape, but there are specific areas that need attention. While not perfect, it suggests some room for improvement—nothing too alarming. 📍 Adverse Opinion An adverse opinion is a major red flag. It indicates that the financial statements are so misstated they can’t be trusted. For stakeholders, this is a serious warning sign. 📍 Disclaimer of #Opinion When an auditor issues a disclaimer, they’re basically saying, "We don’t have enough info to form an opinion." This could be due to significant uncertainties or restrictions, raising big questions about the reliability of the financial data. Understanding these opinions helps not just in evaluating financial statements, but also in recognizing the importance of solid financial practices. So, which opinion would you want your company to receive? 😉 #Audit #Accounting #StatutoryAudit #FinancialManagement

Earlier today, the FRC issued a report raising concerns about the widening performance gap between the Big Four firms and some mid-tier firms. The report states that the #auditquality ratings of certain mid-tier firms have declined significantly. The main areas of concern include: - Audit procedures related to #estimation and #judgment, such as impairment, valuation, going concern, and provisions (specifically, the evaluation of key assumptions and the challenge to management). - The audit of #revenue, with a focus on contract testing, data analytics, and data input testing. - Testing of #journals. - General IT controls (#GITCs). - The audit of #inventories. https://lnkd.in/dT-AByvA