Is there a silver lining to the Great Resignation for auditors?

Is there a silver lining to the Great Resignation?

Every firm we’ve worked with in the last few months has had enormous loss of staff, but we believe this talent crunch could be a blessing in disguise.

When the pandemic hit and firms had to work remotely, they were forced to figure it out and make it work. The firms that embraced the challenges presented by the pandemic inherently created competitive advantages over the firms that lamented the new virtual environment. Those firms better leveraged existing and new technologies to enhance communication with staff and clients and to perform traditional A&A tasks in more provocative remote ways.

Current staff shortages should cause firms to look more deeply at their audit procedures and processes to see where and how they can create capacity. The firms that best accept and respond to the challenges of the staffing shortage will once again separate themselves from their competition.

Firm leaders need to start thinking about what they can do now to make the work more meaningful, even during busy season. The last thing a staff accountant wants to see coming is the same book of business, the same number of audits, and the same clients as last year, but two or three fewer staff to do the work. Partners need to be very clear that they do not intend to burden the remaining staff with absorbing the work of the people who left. All that will do is cause more people to think about leaving.

We have five recommendations to implement now that can mitigate a stressful busy season due to staff shortages. None of these ideas are terribly difficult to implement, nor do they require investing in new technology. They do require thinking innovatively about how your firm operates. And out of necessity, because you’re short-staffed right now, you’ll need a different approach. By making these small changes, you’ll start as a firm to turn your ship towards thinking about how to do things differently and efficiently, and that is the silver lining to the Great Resignation.

Stop blindly following SALY

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If there was a year to challenge SALY, this would be it, because staffing is not the same as last year. Take the time to study and understand the audit standards so you understand what is really necessary for the audit. There are almost always multiple ways to carry out audit procedures to comply with the standards besides the procedures you’ve used for years, if not decades. This includes taking a look at what you are considering a risk at your client, and determining if that risk is still present or was a remnant from a rolled-forward risk assessment. Blindly following SALY can result in performing procedures that may no longer be necessary. Seriously challenge what is still necessary and find alternative ways to achieve those objectives.

We’re not suggesting that you ignore the requirements, but we are suggesting that you take a deeper risk-based approach. Most firms start their field work with the easiest areas first, usually because that’s the documentation the client has ready. Then the team runs out of time, so they end up doing the riskiest areas back in the office, during what should be a wrap-up stage and the pick-up-put-down begins.

Under a risk-based approach, you start work in the riskiest areas, then back off your procedures as risk becomes less. This requires time on the front end deliberately planning what is a higher- and lower-risk area and verifying your client has what you need before you start fieldwork. We find that it generally saves time to do the hardest areas during field work instead of leaving them for the end. This might require rescheduling with the client if they aren’t prepared.

Hire for the required skill set

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Not every task in the audit requires a degreed accountant to perform it. One way to make the work more meaningful is to align the repetitive tasks with individuals who are comfortable in a routine task world. Consider hiring non-degreed accountants to do the tedious, manual work. These might be people with a two-year degree in accounting or a certificate in bookkeeping, or even less experience.

Many firms bring on interns as a part of their recruiting process. Then they make the mistake of assigning the routine work to interns from a four-year accounting degree program. This can leave these people with the distasteful impression that the job of being an accountant is not very exciting, so they may not want a job as an auditor in a CPA firm. Thus, bringing on additional accounting interns is not a good solution to deal with the current situation.

Over time, you can build up a team of specialists and develop a task-based approach to your audits. But to ease the crunch now, consider hiring an AP clerk-type person who can do the easy tasks for all audit teams. Their availability will force firms to plan their workflow around when that person can do the easy tasks.

Hold clients accountable to being ready on time

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With smaller, leaner teams on audits, firms do not have the luxury of waiting for clients to fulfill their PBC items. Clients will need to be ready on time. The staffing shortage will force firms to enforce the fundamentals in ways they haven’t been enforced before. There are many techniques you can use to improve client PBC accountability. For example, start with letting the client know that it would be in both their and the firm’s best interests to reschedule the start date of the audit if they cannot be ready as scheduled.

Leverage technology sooner

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To solve the talent crunch for this busy season, you’re not going to enable a whole new data analytic program and artificial intelligence program right now. Instead, take advantage of this golden opportunity to look at using technology differently to replace manual labor.

To leverage technology for any audit task, start by thinking about the goal of the audit task. What do I want to accomplish? How can I accomplish that purpose? What information do I usually look at to perform that task? How do I access that information? Can I accomplish that using technology we already have?

This doesn’t require a huge investment. Start by applying the technology you already have. Think about the data tools you already have in place. Excel is rarely used to its fullest potential by audit teams. There is no reason in the world you can’t do some of those manual tasks now by rethinking how they can be done. For example, instead of performing an inventory price test by pulling invoices and manually checking prices, use Excel to compare unit prices on the inventory listing with the distributor’s price list. If the inventory value for each SKU is within an acceptable range of the current price from the vendor, you just performed a price check on the entire inventory.

Besides inventory, can you automate matching cash receipts in a bank statement to open receivables for subsequent receipts testing? What about subsequent disbursements testing? Those are three easy things you can do now.

Shed the D and F clients

Rethink your client roster, with a priority on quality over quantity. With fewer team members, this is the perfect time to get rid of the clients who are overly time-consuming and who complain the most about your fees. We’ve all taken on clients just to fill up the schedule, but with fewer people needing work to keep them busy, ask your staff which clients they most dislike working with. Make a point of letting go of those low-quality clients. Working with clients who are disorganized and unresponsive has a powerfully harmful impact on morale. The cost of replacing staff — especially in a talent crunch — far exceeds the revenue your firm might earn.