Accounting for a Detoured Economist

Shivani over at One Step at a Time has a list of pet peeves she, as a second year auditor, has with her first year coworkers. The greatest hits are…

1. You’re not supposed to leave after 8 hours during busy season
2. Shut off the email and AIM
3. Ask for more work

I have to admit to being guilty to #2, especially in the beginning of my audit career. I have gotten out of the habit as I noticed what Shivani has noticed…

Some first years I’ve worked with sit on their AIM all day long and it takes them three times as long to finish something.

Yep, that is spot on. I am not of a chatter…but I can fall victim to the ‘wikipedia effect pictured below very easily.

From Desktop

My firm has actually blocked access to gmail and other chat enabled services while on the company network. This is a pain-in-the-ass solution, but I understand why they did it. Furthermore, considering the new email and electronic document rules in the US I can not blame any company for doing the same.

Shivani expands on all three pet peeves in her post here. Also check at Shivani’s earlier post in regarding the top 10 qualities of a good employee, which is also an excellent read.

Ken T. Trotman of UNSW wrote an academic paper a few years ago called A field-based analysis of audit workpaper review. In his conclusion he wrote…

Our study found some significant differences between manager and senior reviews.

First, managers spend more time on review than seniors.

I can’t speak to this subject more then to say that maybe this is because Managers get the workpapers closer to the audit deadline and have less time to spend on review before the report must be out the door.

Second, seniors’ expectations of the perceived emphasis of the reviewer were more related to documentation while managers’ expectations were more related to “big picture” issues.

Third, we found that managers report spending a greater percentage of their time on assessing opinion formation than seniors. Both of the last two points provide support for Ramsay’s (1994) theoretical framework showing that managers’ knowledge is organized around conceptual errors (e.g., opinion formation issues), while seniors’ knowledge is organized around mechanical errors (e.g., documentation errors).

Makes sense to me…seniors are concerned with not missing the obvious mistakes that can put their career on a long delay. This is the famous ‘Can’t see the forest for the trees syndrome’. A manager is more concerned with impressing the partners with a big-picture finding that shows a breadth of knowledge in the field more then a technical knowledge of workpaper attention to detail.

Fourth, while both managers and seniors reported that they responded to reviewers’ preferences, the effect was greater for seniors. Managers’ better-developed schema for review is less likely to be impacted by the review level above. Fifth, seniors spent more of their review time on training subordinates than did managers. A better understanding of how the review process varies with experience allows training to be more focused toward the needs of different ranks of auditors.

This couldn’t be more true. I find partner review notes multiple times more interesting and educating. This isn’t because I am a partner kiss-ass, it’s because most partners in my firm are not trying to nitpick to get ahead….they just want to get it right. Many partner review notes at my firm identify a potential problem, try and determine what I have done to address the issue, give advice about how I can better word what I have done to clearly address the issue or give an easy way to do additional testing to address the problem immediately, and give more then a day or two to address the problem (usually a week). This isn’t to say that my managers and seniors don’t do these things (I don’t know who reads this blog, but judging from the statistics on my website many people from my local area read this blog)…it is just that they rarely do all of them in any one review note.

If you have a few minutes you check out the full article. It is an easy read for an academic paper and is refreshing to see that the academic community can be so in touch with the day to day issues of auditors.

I have an entire batch of workpapers that have sign-off dates of January 2006. The problem is that I audited the 12/31/2006 financial statements…damn.

From Desktop

Note to self…look at the past three weeks of audit workpapers to see if there is a single workpaper dated correctly. If there is….congratulations, you are not a complete idiot…just a 99% one. Argggghhhhh.

Does anything ever get done on the first day of fieldwork on an audit? It is a certainty that little will get done on most of my assignments. Is it the same at your firm? Today I spent the first half of the day waiting for a Peachtree conversion from 2002 to 2006, waiting on a TB conversion in epace, collecting all of my audit programs, figuring out what accounts the client has, etc. The second half of the day was spent bouncing between Cash, AR, Computer System Internal Controls, and Cash Receipts Internal Controls; I couldn’t concentrate on any one thing for more then a few moments before someone would divert my attention to another area of the audit. I don’t think I signed off on a single workpaper today. Frustrating!

We all know what the problem is…poor planning. I don’t know where to place the blame…maybe it was my fault. Should I have set up my workpapers over the weekend? Maybe. But shouldn’t the TB be complete before the audit team arrives at the client’s site? Shouldn’t the basic source documents be ready when we arrive (bank statements, reconciliations, aged receivable and payable reports, etc). Shouldn’t’ checklists and narratives be sent before the team arrives? Seniors, Managers, Partners, and the client are tasked with these planning items…The efficiency gain the firm would achieve with well planned audits appears to me to be substantial? Am I missing something?

As some of my regular cross-over readers know, I am a PhD drop-out from Cornell University. I was studying economics and had a full fellowship with tuition, healthcare, and a basic living stipend paid by the university while I studied. I had similar offers to study at UCSD, U. Maryland, U Virginia, Ohio State, and a number of other well known universities. I began to blog as an undergraduate studying for my economics and statistics degree. Upon dropping out of my math economics PhD program I sort of fell into the accounting field.

The economics blog universe was small when I began to blog…but it continually grew with more and more blogs each month. I developed a blog style that was highly dependent on interaction with other blogs through commenting on others posts, reading a post written by another blogger that would spark a new idea in me, and the free exchange of opinion on whatever the controversial subject of the day happened to be. I loved it, and the process never seemed to be burdensome. Blogging about accounting/auditing is nothing like my experience blogging about economics. Why?

Both subjects are considered dry by most of the population. Notwithstanding the occasional pop-culture breakthrough of people like Steven Levitt , Milton Friedman, or Robert Kiyosaki for the most part explaining your job to a person at a cocktail party will more likely then not be met with glazed over eyes and the summoning of additional cocktails to get through the boredom of the field of economics or accounting.

For the last few months I have thought that my newness to the field made writing about accounting difficult. All SAS statements are new to me so SAS 99 is as new to me as the newest statement coming down the pipeline. Backdating seems criminal to me…but my newness in the field leaves me second-guessing my knee-jerk reaction on the subject…”maybe there is something I am missing”, I think to myself. This stops me from posting for fear of looking like an uneducated loaf on the subject.

Another contributing factor to my lack of productivity is the audit/tax busy season (I have learned that the busy season is much longer then the non-busy season in an audit company). My audit busy season is from August to December. I also do tax work so I have to withstand another busy season from February to April. In economics when I was extremely busy my blog production went up. I was exploring new ideas, learning tons, and wanted to blog about it all. I have a similar desire to blog during the busy season now. The problem is how to blog about interesting subject that come up over the course of the day without disclosing information about the entity I am auditing. Generalization about the field work…but they are less interesting then the nuts and bolts of actual occurrences. Furthermore, although I have never disclosed the company I work for or the clients I am working on, it would not be hard to figure these things out…and if a client ever gets litigious I don’t want to be a target in any way. So during the busy season, the things I most want to blog about become off limits and since I am soo busy I have little time to pursue other areas of interest that would be pertinent to this blog.

The lack of other active bloggers interested in the subjects I am interested in is also hindering my blog productivity. There are many blogs that deal with new tax laws, or big-four happenings, or discuss industry problems from a firm’s perspective. But these things don’t interest me as much as the anecdotes about the field and how they relate to the experience of being an accountant/auditor. The lack of staff and senior level day-to-day blogging leaves the accounting/audit blogosphere without much of a dialogue. The back and forth dialogue of an active blog community is sorely missing in the accounting/audit blog community. My eyes are rarely opened to a new idea, or a fresh prospective on old topics. Where is the innovation in the field? Who is criticizing the status-quo? Where is the debate? People like Dennis Howlett, Krupo, and the Anonymous Accountant (when s/he was blogging) do a fantastic job, but I need far more people to read on my RSS feed. A community of four or five is not enough to obtain a critical mass that perpetuates itself for more then a few months.

There is an old saying that if you are bored you are probably boring, inferring that dynamic people find ways to occupy their life and avoid boredom. Boring people don’t do this and by default become bored. I am open to the prospect that I may be boring (for gods sake I enjoy economics, math/statistics, and accounting…the possibility is real). But it is possible for dynamic people to be bored in a boring environment. The accounting/audit blogosphere community is boring at the moment. I hope I am contributing to changing this….I pray others will step-up to the plate and grow the community and rock the boat a bit.

Update: I want to read posts like this in the accounting field (Thanks for the link Krupo)…

…The real cause of September 11th was lazy associates, public interest attorneys, and law students from second-tier schools. I haven’t yet figured out the details of my argument, but give me the weekend and I’ll come up with something. Obviously they’re the cause of every other problem in society, so why should 9/11 be any different? They’re the cause of global warming (hardworking associates don’t have any time to pollute), rampant disease (hardworking associates don’t interact with anyone, so they can’t spread illnesses), poverty (hardworking associates have all the money they need, building up lots of interest since they have no time to spend it), divorce (hardworking associates don’t have time to date and get married in the first place), overpopulation (hardworking associates die young), the social security crisis (hardworking associates die young), the Medicare shortfall (hardworking associates have private insurance, and die young), food shortages (hardworking associates don’t have time to eat, and die young), and more. So why shouldn’t they be the cause of terrorism as well. I’ll figure out the link. It’ll just take a few days.

Update II: Welcome Neil McIntyre On Accounting readers, I hope you enjoy and stick around a bit. Feel free to add me to your RSS feed….

Thanks for the link.

According to CFO.com 22 Medium size accounting firms are uniting under the name Baker Tilly USA. According to CFO.com…

Under the agreement, the alliance, which until now had collaborated under a loose affiliation, will use the Baker Tilly name to solicit business from larger clients. Varying member companies will be brought on board according to a client’s needs, and revenues will be divided among those companies involved based on the percentage of work each handles, says Bob Ciaruffoli, chairman of Baker Tilly USA and CEO of member firm Parente Randolph.

The tremendous barrier to entry for smaller accounting firms wanting to attract patronage from large international companies is usually a Mt. Everest-like undertaking. IF Baker Tilly can attract reputable firms and provide consistent work quality between their 22 affiliates I believe this model will be tremendously successful. This is a large if! From my experience at a small firm with just three partners in my office it is obvious to me that consistency will be a big issue. How can multiple partners at 22 firms, with varying corporate cultures and ideas of what issues are the most important, audit multiple sites and consistently integrate workpapers, findings, and expectations. This seems like quite a large task…not impossible…but certainly challenging.

I work for a unique accounting/audit firm we In the last two months I have been on audits for School District, Occupational Training Center, a Bank, a Ocean Ship Transport Company, A Nuclear Non Proliferation Charity, and a number of small businesses. I have done compilations, audit reports, tax returns. The variety of my jobs has kept me interested in each client and stopped me from getting into the rut that many auditor’s fall into during their busy season. By the time I acquire my CPA I should have a good understanding of what type of accounting most interests me. What a great opportunity.

This variety does have its drawbacks. Remembering when revenue is recognized in a governmental entity (partial accrual), non-profit (where revenue is recognized when promised…not when received, regardless of the period it is pledged to be used), and private businesses operating their business on full-accrual and a cash basis can be very daunting. It is easy to confuse the rules and references for all of these entities. FASB, GASB, PCOAB, etc. When you don’t specialize it becomes exponentially harder to locate specific rules and dictums. And don’t even get me started on the mass amount of tax rules I will have to cram into my head in the next few months.

I guess this goes to prove that there is no perfect situation…every wonderful job has its dark-side. Luckily I enjoy the challenge of the dark-side of my job.

Have you ever needed to figure out how many weeks away July 17th 2009 is away from August 31, 2006? Or need to know how many months or days a lease has for a footnote and you just don’t feel like doing the math. Then I have the website for you. Time and date dot com calculates the duration between any two dates for quick calculations of days, weeks, months, and years (they will even give you hours, minutes, and seconds). Check out the site here and be sure to bookmark it for your next report writing marathon.