Accounting for a Detoured Economist

A few months ago there was an article written about how to recognize a good computer programmer if you are a business manager that has trouble recognizing what makes a good programmer. There are several indicators and counter-indicators that the article lists such as…

Positive Indicators:

Passionate about technology
Programs as a hobby
Will talk your ear off on a technical subject if encouraged
Significant (and often numerous) personal side-projects over the years
Learns new technologies on his/her own
Opinionated about which technologies are better for various usages
Very uncomfortable about the idea of working with a technology he doesn’t believe to be “right”
Clearly smart, can have great conversations on a variety of topics
Started programming long before university/work
Has some hidden “icebergs”, large personal projects under the CV radar
Knowledge of a large variety of unrelated technologies (may not be on CV)

Negative Indicators:

Programming is a day job
Don’t really want to “talk shop”, even when encouraged to
Learns new technologies in company-sponsored courses
Happy to work with whatever technology you’ve picked, “all technologies are good”
Doesn’t seem too smart
Started programming at university
All programming experience is on the CV
Focused mainly on one or two technology stacks (e.g. everything to do with developing a java application), with no experience outside of it

I believe that this list can easily be applied to auditing. Here are a few of the indicator applied to the auditing field.

Passion for Audit (No I am not referring to Grant Thornton)

Good auditor is always passionate about their job. Good auditors would be in investigative careers even if they weren’t being auditors. Good auditors will have a tendency to talk your ear off about some technical detail of what they’re working on (but while clearly believing, sincerely, that what they’re talking about is really worth talking about). Some people might see that as maladapted social skills (which it is), but if you want to recognize a good auditor, this passion for what they’re doing at the expense of social smoothness is a very strong indicator. Can you get this guy to excitedly chat up a audit war-stories or new standards, for a whole half hour, without losing steam? Then you might be onto a winner.

Self-Teaching and Love of Learning

If you’re thinking of hiring someone as a auditor, and he ever utters the words “I can work with that, just send me on a training course for a week and I’ll be good at it”, don’t hire that guy. A good auditor doesn’t need a training course to learn a new standard. In fact, the great auditor will be the one talking your ear off about a new standard that you haven’t even heard of, explaining to you how it will affect the firm and the clients.

Intelligence

Some people assume that lack of social tact and lack of intelligence are the same. Actually, intelligence has several facets, and emotional/social intelligence is only one of them. Good auditors aren’t dumb. Ever! In fact, good auditors are usually amongst the smartest people you know. Many of them will actually have pretty good social skills too. The cliché of the auditor who’s incapable of having a conversation is just that - a cliché.

Formal Qualifications

This is more of a non-indicator than a counter-indicator. The key point to outline here is that formal qualifications don’t mean squat when you’re trying to recognize a good auditor. Although to have much of a career in our field you need to be certified, this is not a sign that the certified individual is even a decent auditor. The only thing they indicate is a certain level of knowledge of a accounting. They’re safeguards that allow recruitment people in large corporations to know “ok, this guy knows tax/standards/GAAP and he’s got a certification to prove it” without having to interview them.

Can you think of any other indicators/counter-indicators of a good auditor?

Is this supposed to be some sort of intelligent comment on the status of sexism in the American cpa job market? If it is it went straight over my head. This is not evidence of sexism. It is evidence of a new trend of female domination which will result in a dominant female presence in management in around 20 years as all of those females get their years of experience under their belt and move to positions of management.

PS - I would have just commented in the post, but Telberg’s spam filter software would not recognize that I was typing in the proper image text. Oh well.

Well it has been a while since I have written here. To be frank, it has been a while since I have even come to this site. I have fallen into a rut. Now a rut isn’t always a bad thing…in the short run. Life has consisted of the following….

1. Waking up
2. Playing with my lovely 1.5 year old daughter
3. Going to work
4. Working through lunch (if at all possible, pesky social events often get in the way)
5. Driving home at a devils pace.
6. Playing with my lovely daughter.
7. Dinner, chores, bedtime for Maya
8. Spend time with my wife
9. Watch a little boob-tube to wind down from the day
10. Go to bed
11. Repeat

I used to look forward to blog posts, but ever since I moved to North Carolina the activity has lost its luster. Strange…I am enjoying myself as I write this…but the activity is no longer a draw.

Work has been consuming lately. Going to a new firm is more challenging then I expected. As an ‘experienced hire’ I am expected to know what I am doing, and for the most part that is true. However, there are a plethora of landmines that I walk into daily that slow my productivity down compared to my coworkers (I am at a senior auditor level sniffing a manager position, but being held back by my lack of certification — AHHHHHHHHHHH!). Planning for clients with a risk based approach has proven to be difficult for me. I have been assigned to clients I do not know in industries I am not familiar with. How the hell do I know what the industry and client risks of material misstatements are…I am intelligent and can give a good guess, but I guess the idea of guessing at it seems wrong to me. During the June 30 year ends I was thrown into clients in industries I am familiar with but did not plan and walked into the middle of audits that I was expected to close. Let me tell you what a pain in the ass that was.

On top of all of this I am having to learn a new audit software package, new standards that change audits to a more risk based approach (I was used to a substantive overkill audit method) and a lack of knowing what a GP3 is (that is what my coworkers call the fraud assessment workpapers…even though they are now labeled something else in the audit workpapers). I went from comfortably knowing what I was doing and being the go to guy for questions to being a average auditor that barely treads water most days. A humbling experience, to say the least of the situation.

Also I am starting to feel my age. There is a partner at my firm that is just a year or two older than me. Fuck! It is hard to feel competent when I am not even certified and that guy is pulling in a fat paycheck. Now to be fair to myself he went straight from high school to an accounting degree to a job at a firm with no detours. Whereas I went straight from high school to farting off for years to a community college to two other colleges to an economics and statistics degree path to a PhD in economics to a PhD dropout to a what-the-hell-do-I-do-now career path to finding auditing. But still…fuck! If I was disciplined and had focus and drive from an early age where could I be right now?

Talk about a gut check. I am beginning to find my stride at the new job so the pain of the last six months is subsiding. I am also to the point where I will have enough credits in accounting to take the damn certification test (which means I still have to take MORE college accounting courses-FUCK! [Why can’t I take the test without 30 units of accounting coursework…if I can pass the exam without that bureaucratic obstacle why would I be less then qualified to practice as a CPA?]). I may write more in the near future…Maybe not. RSS me and find out.

Ta-Ta.

In the United States a new set of audit standards are taking effect that are providing guidance to external auditor that may have a dramatic effect on non-SOX audits. The Statement of Audit Standards (SAS) 103 through 112 will force auditors to prove why they assess the risk for an entity (as opposed to just defaulting to high risk and over-auditing each section). Furthermore, the auditors will be required to do more written descriptions that explain control risk for specific accounts and assertions. We will no longer be able to blindly follow audit programs and checklists. The managers will have to delete and add audit steps based on risk and relevant assertions. This is bad news for many auditors that have risen through the ranks in the last few years.

I know of more then a few auditors of all levels that get completely lost when they have to think independently and can’t rely on a standard audit program and last years workpapers. These people will be in trouble if they can’t begin to think independently about the objectives and risks of each individual audit area and assertion. Personally, I get bored stiff following audit steps blindly. I become the most intellectually stimulated and have the most fun when problem popup that cause me to go outside the standard audit steps to prove an assertion that substantially limits the risk of material misstatements. I look forward to the new standards…I wonder how many other feel the same way?

In a few months I will want to strangle myself for saying this…but I want to get out of the office and do some field work. In the past two weeks I have done almost 50 hours of CPE. Yuck! With a lack of billable time from clients, in anticipation of June 30 clients getting info to us soon, I have been banished to the world of CPE time filling.

Since I am the new guy I have had the joy of countless hours of Independence, Revised Audit Standards (especially in GASB land), and all the other crap the firm want me to learn so they can cover their ass if anything ever goes wrong (you know the we had him take 10 hours of CPE on this audit standard so he knew what he was doing was wrong). Needless to say a cash reconciliation is looking mighty interesting at the moment. Board minutes?…anyone have board minutes for me to read?…please!

My family is moving to the Raleigh area of North Carolina from the San Francisco Bay Area. I have accepted a job as a senior auditor in Raleigh and we are in the final stages of buying a house (inspection, closing escrow, etc.). Needless to say life is traveling at a speed faster than is comfortable for anything but a short period of time.

We are moving to North Carolina due to the substantial increase in quality of life and standard of living we could achieve from the move. An entry level single family home in a half-way decent neighborhood in the bay area hovers around $650,000 while a comparable home in Raleigh is less then $200,000. All the while I actually received an increase in salary to move! Needless to say my wife and I jumped at the chance…Laura’s parents, who currently live a few miles away, are going to need a few months to accept the decision…apparently taking a grandchild thousands of miles away can be a traumatic experience.

We will be driving across country on June 20th and will sign the purchase paperwork on June 27th. So don’t expect many posts for the next month. With packing and all the extraneous chores that come from a cross-country move I anticipate very little free-time to blog, or relax.

I have noticed that many of the audit blogs have been really slow lately. This would be an optimal opportunity for an up and coming blogger to collect readers with demand far exceeding supply. If you want some readers, email me at csilvey@gmail.com and I will post a link and your RSS feed.

So, you are a high-quality auditor…which essentially means you are a nitpicking anal-retentive rule loving detail orientated thorough control loving in-human entity. As an auditor you would think that your diligence would be rewarded….and it is. How? By the creation of extra work and unpaid overtime. While your lazy tic-and-tie co-workers are oblivious to what is actually going on and couldn’t detect a finding unless it dug out of its own hole and bit them on the cheek you are finding errors left and right. Errors not found last year, even though the controls have not changed. In five minutes you find major control problems…and are left wondering why no one else has found such simple errors. Why couldn’t prior auditors find these errors? And why in the hell are you the only auditor still working 11 hours after the shift began?

The most obvious answer is that the incentives are not in place to reward the hard work and diligence it takes to find, and properly document, errors in accounting. The first dis-incentive is the actual documentation of errors. It takes double, or more, of the time to document an error then to document no exceptions noted. If the prior auditors saw a discrepancy they are more likely to justify the reason the discrepancy is not a problem because they do not want to go through the intense and detail orientated task of documenting and proving that an error exists. It is just easier to note a ‘potential’ compensating control and not think too much about the issue at hand. The manager and partner do not have enough time to fully understand the issue at hand, and the likelihood of a review note is relatively low. So why create trouble and more work if the finding is not a major material misstatement?

Second, the budget on most jobs is an additional dis-incentive. Although it is possible to ask a client fort more money to cover extra time spent to research findings….the reality is that a client with findings may be a bit bitter and may not be in the mood to here about increase over the contract rate. Additionally, the firm has an enormous bias and culture to come in under, or at, budget and not write-off a plethora of billable hours because they go over budget.

Finally, all of the work and time spent on a finding may go completely unappreciated by your supervisors. Every finding is additional work and time, for the auditor that recognizes them, and has a multiplying effect that is exponential based on the number of managers, supervisors and partners involved in the audit. It is no fun for the supervisor to go to the client with a laundry list of problems…after-all the client is the one paying the firm…not the regulatory agency that requires the audit. The firm is in a difficult position…having to choose between making the regulatory agency happy with an independent audit and keeping the audit client happy enough with the services provided by the auditing firm to re-sign a lucrative contract in a few years.

The bottom line for a staff auditor is that doing your job with the utmost of quality and attention to detail may not always be appreciated or welcome. This isn’t always (or usually, the case) but it happens enough that most people who have performed audits in their career will know exactly what I am talking about.

There is so much truth in this joke I couldn’t stop laughing for quite a while

Q: Why did the auditor cross the road?
A: Because he looked in the file and that’s what they did last year.

I have stepped away from taxes and back into the worlkd of audit. On my first job I actually caught someone lying to me and creating documents, that should have been created and signed months ago. If you have ever worked as an auditor then you know the feeling of being lied to but not being able to prove it. Well last week I got that feeling and was able to create an air-tight case using time stamps and other evidence to prove my suspicion, I felt like an audit stud…if such a thing exists. I wish I could write more about the particulars…but as we all know the good war stories can’t be blogged about. DAMN!

In other news I ran across a post in LiveJournal by a guy named Matt T who was attempting to describe the specioes known as auditors. He wrote a pretty good description including gems like

Should the auditor begin to behave aggressively towards you, asking what proportion of your contingent liabilities you consider probable, the best advice is to shout ‘Enron!’ and run very fast in the opposite direction. This will make the auditor in question shrivel up and die.

and…

An audit team typically changes its hunting ground every couple of weeks. Hunting grounds normally take the form of offices, but may also include factories, shops, schools and hyperspace. Any place of work is a potential source of nourishment to the paper-hungry auditor. All audit teams have a leader, who runs ahead of the pack in search of an audit trail. Should he find something suspicious, for example a file that has not been organised in alphabetical order, he will begin baying to attract the attention of the rest of the pack. Once the pack have a sniff of the scent, they are released upon the unsuspecting company, and tear around the offices of the internal accounts department, hunting out similar transgressions. When they find another offending item, they will let out a charecteristic whoop of delight, and fall upon the filing cabinet, tearing the paperwork to shreds with their bare teeth in their eagerness to devour it.

and…

Audit packs have their own dens, known as home offices. The pack visits the office on average once a month, in order to refuel on stationery. Auditors can survive several days and nights without water, sex or sunlight but are liable to fall seriously ill if deprived of paper clips and yellow post-its.

I encourage you to read the whole post here.