Today's Technology for Tomorrow's Firm.
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28 September 2014 • www.CPAPracticeAdvisor.com TECHNOLOGY IN PRACTICE By Roman H. Kepczyk, CPA.CITP How to Implement Lean Six Sigma in an Accounting Practice Production efciencies learned in the manufacturing environment are b e i n g a p p l i e d t o a u d i t a n d accounting practices and building quality control into the three major phases of a compliance engagement: planning, feldwork, and wrap up/ delivery, in addition to adding value from the client's perspective, which is becoming a key diferentiator in delivery of A&A; services. PLANNING One of t he key prem ises of ever y aud it re- eng i neer i ng f i r m i s t hat e n g a g e m e n t p l a n n i n g n e e d s t o become a pr ior it y w ithin the f rm a nd be done i n conju nc t ion w it h clients. LSS helps frms defne Key Performance Indicators (K PIs) to determine whether an engagement is successf ul such as completing feld work on time, delivering the report by a specifc due date, and whether t he engagement w a s over/u nder budget and implementing a mecha- nism to ensure they are utilized. Integrating K PIs into the planning process begins w ith hav ing the client agree to prov ide their trial balance and all other required schedules to the frm on an agreed upon date or " t h e y " w i l l b e r e s p o n s i b l e f o r delay ing deliver y of the report. Too ofen, f rms take on the burden of dealing w ith incomplete or delayed sou rce doc u ments, a nd, u n for t u- nately, many frms have trained their c l i e n t s t h a t t h i s i s a c c e p t a b l e behav ior. Planning should be done w ith the ent i re engagement tea m f i rst a nd then include the client so ever yone's expectations are set. It should take into account the size of the cl ient and the overall risk of the engagement and be done in conjunction w ith any other similar niche clients to improve the overall efciency of the team. Work ing as a segment/niche team allows for par tners, managers and staf auditors to discuss and under- stand the plan for each indiv idua l cl ient, i nclud i ng deter m i n i ng t he appropriate level of stafng for each day on the job as well as to tailor the e n g a ge me nt prog r a m to w h at i s necessar y for that client. Doing this w ith all team members also allows for discussion on the impact of any new accounting standards and for the drafing of preliminar y footnotes, so staf are in tune w ith the require- ments before beginning feldwork. One of t he key component s of pl a n n i n g i s t o i nc l u d e t he t i me needed to substa nt ia l ly complete each engagement before sta r t i ng t h e n e x t o n e . To o o f t e n f i r m s ne g le c t pl a n n i ng a nd "w r ap up" days w ith rev iewers and par tners, w h ic h a re necessa r y to meet t he schedu led del iver y date. A not her important LSS component of plan- ning is deter m ining the optimum onsite stafng requirements needed for the job. W h i l e t h e r e a r e t i m e s w h e r e overstafng is important for training and possibly for inventory observa- tion, if it is not necessary for staf to be onsite on a par ticu lar day, it is beter to have them work remotely t h rou g h t he c ol l a bor at ion tool s mentioned below in the Fieldwork section. LSS principals also support using a work fow tool which tracks target dates and sends out warnings to notif y managers as to the adherence to the schedule and promote com - munications with the client when the schedule is at risk. A not her i mpor ta nt pa r t of t he planning with the client is educating them on all documents needed and how they should be delivered. Using client portals helps in planning, as the in-charge can be notifed when documents are uploaded and those documents are also accessible to any member of the audit team, which is not the case with email that is usually only available to the recipient. If the client does not deliver the required documents on time, the frm must be prepared to invoke the previ- ously agreed upon consequences with the client, which is why it is critical that the partner, manager, and staf are all in tune with this, which was part of the initial planning. FIELDWORK Firms must adhere to their plan to ensure they complete all necessary deta i l work wh i le t hey a re i n t he feld, which also includes preparing a d r a f t o f t he f i n a nc i a l r e p or t s (including footnotes and previewed disclosures), and having the neces- Roman H. Kepczyk, CPA.CITP, is Di- rector of Consulting for Xcentric, LLC. and works exclusively with accounting frms to implement today's leading best practices and technologies. Roman re- cently updated his "Quantum of Paper- less: A Partner's Guide to Accounting Firm Optimization," which is available at Amazon.com and a Certifed Lean Six Sigma Black Belt. A udit re-engineering has been around for decades and deliv- ered significant increases in frm productivity and is now making another quantum leap in improvement by integrating the key tenets of Lean Six Sigma (LSS) into today's digital audit workfows. WHEN BEGINNING FIELDWORK, AUDITORS SHOULD PLAN TO START WITH THE MOST DIFFICULT COMPONENTS OF THE AUDIT SO THOSE PARTS CAN BE COMPLETED BEFORE WRAP UP TO ALLOW FOR ANY UNFORESEEN ISSUES, AND THEN SCHEDULE TO DO THE LOWER RISK, MORE STANDARDIZED ITEMS AT THE END OF FIELD- WORK, WHILE THE SUPERVISOR IS DOING THE ONSITE REVIEW.