10 best practices for valuable audit planning 10 simple changes to the audit planning process that will help deliver more valuable outputs to your clients in less time

Information exchange is a key component of the client experience – what do you need, when do you need it by, and where should I send it?

The best Prepared-by-Client (PBC) list is tailored to a client based on the specific engagement services you’re providing to them.

Investing time into creating a well-thought-out PBC request list — or adjusting the prior year’s list based on the client’s feedback — is a simple and effective way of adding value to the client. It not only demonstrates that you value their time, but also puts the focus of your engagement on more valuable areas.

By investing into asking for the right information, you’re also placing yourself in a stronger position if the client doesn’t deliver.

Achieving a certain level of standardization in PBC request lists also unlocks opportunities for more advanced service transformation, such as leveraging robotic process automation (RPA) techniques to automate downstream actions. Technology can automate the creation and management of PBC request lists. More significantly, large reductions can be achieved in the number of items on the PBC list when transactional data is obtained from client systems.

The ever-increasing expectations around security and privacy means the exchange of financial and other confidential information through email, USB sticks, or other unsecure methods will soon be a thing of the past. 

Thankfully, many digital collaboration technologies now exist that facilitate secure client information exchange.

The key for audit teams is to ensure client collaboration also incorporates structure for PBC requests as well as workflow improvements, eliminating time spent chasing information, monitoring progress, and holding PBC status meetings.

Centralization opportunities are also created when a consistent technology with appropriate workflow functionality is used for client information exchange.

Two-way transparency is highly valued by clients. Knowing they have provided the required information which you are now working on allows them to focus on their day job. It also enables more flexible, remote   working for your team. At the same time, you can identify client delays real time and highlight over run implications immediately.

The sophistication of your planning relies on the granularity of information available to you. High-level financial information allows only high-level assessment and places a reliance on explanations being provided by clients. However, when you have access to transactional financial information, you can delve deeper and answer your own questions, changing the way you interact with your clients.

Holding transactional financial data allows you to visualize, drill down and explore the origins of variances, as well as leveraging data across audit and related services. This also provides new opportunities to plan an effective and highly valuable approach.

Preliminary analytics should be more than just a workpaper that is required to finalize planning. It should be the foundation the entire audit is built from.

Access to transactional data transforms analytics from the standard year-over-year review.

The identification of unusual trends and relationships allows you to visualize and explore the transactions within an account, easily find the causes of variances, and identify the transactions the approach should focus on.

Preliminary analytics are a key opportunity to also plan for value. What areas of interest or concern can be identified through exploring the data and discussing visualizations with your client? These might not have audit implications but could provide value to the client if explored or reported on alongside the audit process.

Investing time in precise scoping and risk assessment pays off many times over. It allows you to target your efforts on the highest risk areas.

Identifying areas where no risk of material misstatement exists also avoids any time being spent on activities which are unnecessary and add no value.

For group audits and complex engagements, scoping starts with the components which will be subjected to full audit work or alternative procedures. At an entity level, scoping and risk assessment activities identify the balances, accounts, or financial statement level issues which pose a risk of material misstatement.

Further, at the lowest level, teams identify the specific assertions relevant to the risk of material misstatement.

Dynamic planning meeting

Internal planning meetings are transformed by this new approach to planning. Being able to visualize and interact with data during the meeting allows the audit team to ask more direct questions, concluding on the impact and the procedures to be performed, rather than the further information to be gathered.

Walkthroughs should build an understanding of the flow of transactions and how they are recorded into the organization’s financial records.

A well-executed and valuable walkthrough provides a clear idea of what is expected and unexpected. Auditors should understand the interplay between transactions, balances, IT, controls, business risks, and audit risks.

The objective of the walkthrough should be focused on gaining an understanding of the life cycle of a transaction. It is critical to understand the initiation of the process and all pathways it could take until arriving to the end of the process.

This knowledge is key to adding value regardless of client size or sophistication. Feedback over controls can be tailored to the business size, irrelevant of the audit approach adopted.

Understanding how transactions flow through the financial records and the double entry combinations expected is also key to incorporating more advanced, data analytical techniques over 100% of populations.

As the focus of audit approaches shifts away from purely

testing the balance sheet position towards a greater focus on transactions, interim testing becomes an increasingly beneficial approach for audit teams.

Effective access to transactional data during the year, combined with completeness and accuracy confidence, means you can do more work earlier. This reduces the impact of busy season on you and of intense audit periods for the client.

It is important to ensure this work is not duplicative. Work done at interim should be effectively combined with year-end roll forward testing to produce an overall test, compliant with your methodology.

For all auditors, independence is key. Rules regarding independence vary for different clients in different markets.

However, independence should never be an excuse not to explore how the breadth and depth of expertise within your firm, or broader network, could add value to your client.

Taking time to understand and review a client’s financial performance, comparing them to peers and discussing this with colleagues in your firm, often identifies a range of ideas of how to help a client achieve their strategic aims, facilitating more interesting planning interactions.

Done well, this nurtures closer working relationships between teams and a more cohesive client experience across multiple service lines.

Conversations with your clients should add value from the very start. You should communicate with your client early and often, seeking to understand changes in their business and the challenges they are facing.

Holding interactive, open discussions about the audit, areas of focus, and where value can be added makes key contacts feel more involved and open to exploring new techniques. Sharing examples and demonstrating new capabilities you are utilizing on the engagement is time well spent to show value and substance behind the promise of a new approach.

This is an important factor in changing your approach to fully embracing new capabilities. A client who is engaged and sees value for them is far more receptive to working with you in new ways or providing different information. This also serves to shift their perspective of your services and focus the conversations away from cost towards value.

Holding open conversations with clients about value, both from the work you must perform and could extend your planned scope to perform, is essential in achieving fee income growth as a result of more valuable services. All members of your team must be confident in articulating the value of their work and comfortable discussing this with the client.

Value-pricing provides a framework to facilitate this conversation. Rather than quoting a single fee proposal, historically often based on an inflationary growth from prior years, a range of options are presented to the client for their consideration. These options range based on the level of value provided to the client and thus the associated fee.

Technology is an important component of such a proposition, as this allows you to introduce new capabilities rather than simply presenting the same services in a different format.

The result

Investing in the ten areas of valuable planning across digital collaboration, a tailored approach, and impactful client communications delivers a new, more valuable client experience.

It enables stronger and closer working relationships with your clients, provides opportunities for fee income growth, and more challenging and interesting work for the accountants in your firm.

Designed by auditors for auditors, Inflo works in real-time and ingests data from 100% of client accounting systems. It automates up to 30% of your audit program steps, and delivers unrivaled depth of analysis and unique business insights, significantly enhancing the value of the audit for your clients. Used in combination with the greater cloud audit suite, Inflo will increase the profitability of your audit practice through greater efficiency, while helping you attract and retain top talent and move your clients up the value chain.

Together, Thomson Reuters and Inflo provide you with progressive, next- generation audit technology that improves client value and brings a new level of modernization to your firm.

To learn more, contact us at +1 800 431 9025