Today's Technology for Tomorrow's Firm.
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TECHNOLOGY IN PRACTICE By Roman H. Kepczyk, CPA.CITP 20 May 2015 • www.CPAPracticeAdvisor.com T E C H N O L O G Y I N P R A C T I C E m n H . K e p c z y P A . C i s o r . c o m T E H N O L Y I N P R A C T H O G Y C H G E C L O E C L C H O C C T I C C T C E a n z y k , m a n H . K e p c z y n y B y R o m B y c z y k , c z y z y k , k , C P P C I T P C P C I T P I P T P i s m i A d i m v i s m i d v d v i 10 Lean Six Sigma Audit Considerations ENGAGEMENT PLANNING: A cotage industry of audit re-engineering frms has proven that engagement planning at the front end of the engagement is a key component of audit success. Tis requires the core partner, manager, and feld auditors present in the planning meeting , which promotes the development of a comprehensive and customized audit program for each client instead of doing it the "same as last year." Lack of team planning ofen results in sig- nifcant rework afer the engagement has started. In most cases, the client engagement partner and niche man- ager have specifc client/risk knowl- edge that would impact the design of the work program, which can impact feld procedures and point out to audit staf the high risk areas. Firms that have multiple engagements in the same segment have found that plan- ning these engagements at the same time helps optimize their time as well as educate the seniors on directing the process. Lean principles point to taking the time to plan thoroughly before the engagement starts so every knows what is expected and mini- mizes later rework. ENGAGEMENT MEASUREMENT: We've all heard the say ing " w hat gets measured, gets done," so what KPIs (Key Performance Indicators) are utilized within your audit practice to manage engage- ments? Of tentimes, there i s an engagement budget and expected hours, which are only looked at when they are busted. Lean Six Sigma suc- cess relies heavily on measuring key audit metrics that consistently point to engagement success. Te easiest metrics to track are "discrete" mea- surements, meaning they can be answered with a "yes" or "no." Within each engagement, firms can track whether or not the client provided the documents required on time, was the feld work completed on schedule, a n d w a s t h e r e p o r t d e l i v e r e d according to the date agreed upon with the client. Lean Six Sigma also utilizes "continuous" measurements that quantitatively track information such as number of days from comple- tion of feld work to fnal review, hours over/under budget, and proft margin on the engagement which are ideally reviewed afer completion to deter- mine where the frm should do more audits and where there needs to be improvements in the process. CLIENT PLANNING: We rely on clients to provide us with the necessar y informa- tion before the audit begins and the frm should get agreement from the client that they will have all informa- tion to you by an agreed upon date, or "they " w ill be responsible for delaying the delivery of the engage- ment. Tis may entail having to re- educate the client on the frm's portal and how to provide information, but this information should be recorded by the frm as well so that new staf learn to utilize these standard tools. Having ALL documents and client personnel available at the start of the engagement is critical to minimize false starts and delays, which nega- tively impacts the start of the next engagement, which makes scheduling a continual nightmare. REALISTIC PLANNING: One of the more sig- nificant issues with planning is that frms schedule engagements end to end without any room for planning and 2 0 M a y 2 • w w w A P a c t i c e A 5 w 0 2 5 0 w C w . C 0 1 5 A P r a c t i A P A A C P C A 2 0 • w w 5 w w 5 0 5 0 1 5 Roman H. Kepczyk, CPA.CITP, is the director 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. T he application of Lean Six Sigma principals has helped countless organizations objectively re-eval- uate and streamline their produc- tion processes. Lean Six Sigma is a consulting methodology gaining favor in the accounting profession for its focus not only on fostering operational efciency, but also improving audit quality and client interac- tions with the frm, which in the end helps grow the audit practice. Traditional audit practices can take advantage of the lessons learned from frms that have implemented "Lean" processes and below we point out ten opportunities for frm consideration: 1 2 3 4