Accounting for a Detoured Economist

Just got back from North Carolina where I had a number of job interviews, my wife and I have made an offer on a house, and we spent some time on the coast. At work we are also at the height of interim work and I have a final in cost accounting on Thursday, so its easy to see why production at Accounting for a Detoured Economist has been low lately. Talk at ya soon.

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.