I think most auditors would agree that “As Busy as an Auditor in December” is part of the industry vernacular. Non-essential tasks fall by the wayside as auditors find themselves crunching at year-end. Between finishing up this year’s jobs, doing next year’s annual planning, and ensuring those last few CPE credits are earned and recorded, the weeks between Thanksgiving and Christmas routinely becomes the busiest time of year for many in the profession.
Most auditors view the December crunch as an inevitable part of their chosen profession. CPAs are busy in March and April; Auditors are busy in December. I do not believe this to be necessary, nor even beneficial to the firm (nor the auditor). Of course, this year’s reports must be completed on time. Of course, you must have a plan for next year. Of course, you must maintain your certifications. But year-end overtime is NOT the only solution!
As far as CPE credits are concerned, I don’t need to tell anyone that there are plenty of opportunities to earn them all year, avoiding the December crunch. Since CPE is one of those “important but not urgent” tasks until the hard IIA-imposed deadline of 12/31, they are an easy candidate for the back burner. From a big picture perspective, though, the opportunity to front-load your training is NOT the elephant in the room. The real opportunity lies in scheduling and planning audit work.
Auditing is traditionally an annual deliverable-focused activity. Over the course of the year, audit departments work to produce a set of audit reports that jointly reflect an independent perspective on the risks and controls within the organization. This aggregation of reports provides the board with a view on management’s focus on risk and the overall well-being of the organization. But the board does not want to have a “BIG MEETING IN JANUARY” where they will consider this view, make a pronouncement, and ignore the question for the rest of the year. The board is constantly interested in understanding management’s approach to risk management and the state of the firm. Therefore, on the demand side of the audit deliverable, it is not required (nor even optimal) that there be an annual plan which is completed in December and reflects the totality of audit work over the prior 12 months.
The process for executing an audit (resulting in a report) is not well modeled as a constant effort over a particular duration. Audits generally start out with relatively lower-effort research and interviews, increase in effort to perform risk assessment, prioritization, and testing, and then find total effort reducing as reports are written and results are communicated to management. Department resources, therefore, are optimized when these bell-shaped effort curves can be overlaid so that total resources demanded at each moment are relatively consistent (corresponding to staffing levels). This can only happen if, in any given month, audits are being started (lower effort), processes are being risk assessed and tested (higher effort), and conclusions are being reported and discussed (lower effort). Annual auditing on a consistent January-to-December basis is sub-optimal from this perspective. Therefore, on the supply side of the audit deliverable, it would be preferable to adopt a more month-agnostic approach to auditing.
Now that we’ve motivated a re-imagining of annual auditing, there are several ways such an approach could be implemented. Since it’s December and I’m sure most of you are busy crunching and won’t read this until January anyway, I’ll break those out in part 2 of this series. Happy Holidays!