Monday, December 6, 2010

It’s Not Easy…Signing Off on Financial Statements


Well, busy season is just around the corner. It’s time for the (seemingly) never ending closing of books (if you’re the accountant or bookkeeper) or all those audit procedures that you wished will be finished in time for the deadline (if you are the external auditors). And if you have your own small audit / accounting practice (like me), it’s time to sign off on your clients’ financial statements that you audit.

I’ve been signing off on a couple of audit clients for like 3 years now and honestly, I’m thinking of not signing off on anything for 2010. Crazy huh? I mean, becoming an audit partner and signing off on financial statements may be the ultimate experience / status for someone in the external audit world (no matter whether he or she is a CA or in another designation). But for someone who has been in this world for over 10 years, signing off is not as easy as it seems (but then again, it never was).

For one, the buck stops on you. The partner’s signature is now like an evidence, a kind of paper trail that will lead back to (and can be used against) the partner if something bad happens to the client after the audited financial statements are released. Just go over the accounting scandals that happened in the past. Whose name appeared prominently in the news, next to the names of the Pres., CFO and other key company officials? The audit partner, of course.

For another, it’s becoming more and more difficult to become a partner and to stay that way. The regulators are breathing down on you. Requirements after requirements are piling up on you and are becoming more and more stringent (case in point: the stricter independence requirements and the 2009 Code of Ethics for Professional Accountants). And clients are expecting an unqualified (or unmodified) opinion from you (no matter what happened during your audit) – although this doesn’t mean you will do what they expect, of course.

Still want another? What about the independent review of the audit working papers?  The CRA already issued its policy on access to audit working papers. There’s the CPAB for public companies. And if you are alone or there are only 2 of you, what’s to say that you can handle a full – scale, all out review on your audit working papers?

Lastly, and this is my pet peeve, it’s a thankless job sometimes (at least for me). There are times, really, when I just wonder if my clients really appreciate me as their external auditor or if I’m not just another signature that they need to obtain to comply with regulations. And then they haggle on my fees!  Oh don’t get me wrong, even in the big firms, there are always clients who want to haggle on the fees but if you’re a very small one, haggling is a way of life for us. It’s like they think your signature is just worth peanuts or something like that. Or am I just one of those unlucky ones who have clients that are always trying to cut down their auditors’ audit fees?

Of course, being a partner is a status symbol or something, especially if you are one in one of the Big 4. Plus you earn more money (a lot more!) than other people in your profession. Plus you talk to the top people and may even become well known in your society. But, heck, with the above, I’m seriously re – thinking the signing off financial statements. Maybe I’ll just stick to doing accounting jobs for now.

Note to those who want to become partners – This is not meant to discourage you. These are based on my thoughts and experiences ONLY so I hope you won’t be discouraged with it. If you want to become a partner of an auditing firm, I’d still say go for it. As I said, it is the ultimate status for an external auditor working for an audit firm. And if you intend to stay an external auditor for a long, long time, becoming a partner should definitely be something that you should strive for.

5 comments:

  1. With all the talk of audit staff "unionizing" for better conditions, you wonder whether it wouldn't make sense for small firm partners to "unionize" to avoid audit firm haggle-buse.

    The (until now?) undiscussed response, especially given the mounting overheads and requirements, eh?

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  2. Great post. There is a lot to signing off, and to be honest i hate the fees haggling. Thats where i feel people do not respect us enough. I am not saying that clients just pay whatever we ask, but i know exactly why you mean by haggling. I think some clients really view us as just another signature needed. Thats it. To be honest that attitude aint changing, but as you said the requirements for auditors become more stringent every year. I guess thats just the way it is.......

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  3. I just don't see being an audit partner as a super awesome goal in life... I may think differently in a few years, but it seems like a LOT of stress!

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  4. Kellen, totally agree with you. When i got my CA (not too long ago) i knew i would never stick around to be partner, but i always wished i could be one.

    Not anymore. Wow i see the stuff they need to do. Sure its a great position and they make good money and blah blah blah, but wow being pretty much a slave to the client is pretty sad. Especially for junior partners. In addition i would like to see my kids more than 4 hours week and actually spend time with my wife.

    I dont know if its just me, spending my 4th year in audit has left me completely jaded, i cant wait to switch out into something more interesting and value added.

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  5. don’t believe I have read something like this before. So nice to find someone with some unique ideas on this topics,

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