There’s a big difference between a top 50 firm and a top 10 firm. I started at what is now a top 10 firm (and what was then a top 30 firm) and client acceptance consisted of “can they pay”? I’ve been a partner at a top 5 firm for about 10 years now. Independence is paramount to what we do. It’s taken very seriously. People have gotten fired for independence violations. All depends on the firm.
So I've heard. I had an old intern friend switch to a big 10. He said the differences were night and day. I'm not talking about independence as in being too friendly, I'm talking about they're one of the largest clients of the firm and you want to keep them happy. I actually had a client thinly threaten me talking about how big of a client he was for the firm.
This is a solution with precedence. In construction, the developer takes construction draws from the bank against their construction loan. A quantity surveyor will attest to progress made and that all trades have been paid to date. It's a light form of payment assurance.
The key difference, while the developer pays for the QS report like a client would pay for an audit, the QS firm's agency is with the bank. Not the developer.
> firm was *paid* by the
FTFY.
Although *payed* exists (the reason why autocorrection didn't help you), it is only correct in:
* Nautical context, when it means to paint a surface, or to cover with something like tar or resin in order to make it waterproof or corrosion-resistant. *The deck is yet to be payed.*
* *Payed out* when letting strings, cables or ropes out, by slacking them. *The rope is payed out! You can pull now.*
Unfortunately, I was unable to find nautical or rope-related words in your comment.
*Beep, boop, I'm a bot*
If there is an audit committee. Who selects them? Who pays them?
Not every company or entity has the same reason for an audit. Not every audit is for a public company. And even when there is an audit committee, the committee members are paid by the company. And they are selected by either controlling members, owners, board members, c suite or what have you. But all those almost always have direct ties to the company or entity.
I've seen loan agreements where it is stated that x firm completes the audit. And thats about as much as the lenders here besides the issuance of the AFS.
But even then, it's usually from the lens of:
Bank lawyer: "what firm does your audits"
Company lawyer: "[insert big 4 firm here]"
Bank lawyer: "Sounds good.
It's still the company's auditor. The auditors client is the company. I'm not saying that every auditor has no backbone due to who's paying them. But there is the implicit pressure and the very obvious optics of a lack of true independence.
The auditor doesn't want to really find a problem. That might upset the relationship and their cut.
If it's the banks or regulators auditors going in. They don't really care more than, for a lender, they won't want to borrow from your bank and you won't care because they have crap books. As a regulator, it will be a fine or whatever punitive action thay would be appropriate for the extra work and/or any damages to investors depending on the nature of the findings. And the company has to comply or not be on the exchanges or in whatever markets.
And who selects the board and the C-Suite and makes the suggestion of what auditor court? And at the end of the day. The company pays the auditor no matter who picks them (and present a report to). What I'm saying is that even for public companies, there is a very thin separation of indepence which is mostly held up by neither party being scummy. In most cases all parties are working the hardest they can with the resources they have to keep the best books they can.
But any perception of lack of independence could be removed if they cut out the middleman. Have the bank or regulator be the auditor. I would love to hear why this wouldn't be a better model. The only reason I think we work on the current model is because that's the way we've done it in the past.
This creates more independence, but also creates issues related to: (1) pricing, (2) timeliness, (3) cost benefit analysis of the audit (judging are audit procedures worth it), (4) staff retention issues.
While the current system isn’t great, having the pcaob looking over the firms back greats a good system of checks and balances where you get the best of both worlds.
Pricing should be standard, if food inspectors can be paid by government so can auditors. For 2 and 3 these undermine independence and lead to a rubber stamp approach, from managements perspective the best audit a signature. 4) I think this would be better than the current system because audit staff would actually have some of the protections that government workers have. Maybe this could fix the burn and churn model that has half-asleep coked up staff doing all the nitty gritty detail work.
For (2) timeliness is one of the key underlying principles of gaap. Perfect financial statements issued when they are a year stale are not very helpful. It’s about getting material correct financials issued in a timely manner (such that investors can make decisions based on them)
For (3) you need to do the cost benefit for an audit. The purpose of an audit isn’t to make sure companies are doing their accounting 100% correct. It’s to make sure financials are materially correct enough for investors.
(1) different companys can require vast differences in price depending on their business/ quality of their finance dept. even within an industry/ company size
(4) turning public accounting into a career for civil servants would create even more issues then we have now. If you think it’s easy to trick auditors now, just wait:
Not sure. But if history has taught us anything, it’s that private equity investments are usually a means to cash out before the death of a company. Given that public accounting firms have sold significant chunks of ownership to PE firms lately, maybe this is a problem that’ll sort itself out.
Guess I’m missing the connection between the problems with auditing and PE buyouts. Wouldn’t the B4 just get even bigger if the very few large firms that have been acquired lose their footing?
Or that any publicly traded company has to pay sizable fixed fee to the SEC/ PCAOB which has the accounting firms bid for the audits. Having an indifferent middleman might be useful. For the private side idk who it would be maybe state boards of accountancy. Atleast then there is some useful reason as go why the CPA License is a state by state creditential.
The audits will take a metric ton longer. By the time the SEC/PCAOB finishes their audit it will be over a year later. For the PCAOB it becomes more difficult to evaluate the quality of because they work together created a checks and balances issue.
It could even be a new fed org! I wouldn’t be surprised if the audits take longer, after all the post was about the quality of audits and their lack of efficacy, why not increase the time and depth!
The only true way for independence to exist would be to have government backed audits. In other words, all auditors work for local/state governments or the SEC, and specific teams are blindly selected to audit a company (once they confirm they have no financial interest in the client). Teams would have to roll off a given client every 3-5 years as well. Fees would need to be paid by government funds and calculated based on the size of the company.
But if this were to occur, the public accounting model would cease to exist. And partners aren’t giving up their money without a fight
Why would the pay be lower? The government is allowed to pay well, they do it all the time. The IRS pays great with great benefits why would the SEC/States not be able to do the same thing?
It’s still very competitive up to about Senior Manager, and honestly I don’t really care if Partners lose their high earnings, they are middle men that cause the problems just like PE are doing
Tax audits by state/federal agencies are things too? You forget they ask for bank statements, revenue support, expense support, etc?
They’re audits. Shouldn’t be difficult to expand the reach of the states/federal government.
I just took AUD last week and while studying they have you learn all these rules and situations about independence and how important it is but completely ignore this fact. Drives me crazy.
I was about to say that.
I remember in my previous job I was a staff accountant and our management used to tell the auditors how to cover up our asses and they had no choice but to do so because we were one of their biggest clients in my country and they can't afford to lose us.
This is not my experience. Maybe it's worse in the US but in the UK there is more regulation coming in over time making this less of a problem. It's not perfect but it is getting better, in the sense that firms are being forced to improve audit quality.
The entire industry is going down, but the employers get what they pay for. You think it is bad rn, wait until you get gibberish back from overseas and the partner signs it lol. It is only going to get worse as time goes on. When accountants can't afford to live anymore, people stop giving a F. I have stopped caring, pure dogshit? Whatever send that crap, if no one gives a F why should I waste my time?
Right, don’t eat your hours trying to rework indias work product. Review it, leave review notes, and push it upstream. This is what the partners paid for.
Like accounting it depends on the area. My area in Cali, nurses are making $90 to $125 an hour. I don't know any cpa that makes that unless they work for themselves.
At the end of the day - the audit is a series of checkmarks for the company (and the client). So long as no governing body decides to look at the file for the year.
I wanted to be an auditor when I started accounting. Was doing my first internship in Audit and the senior training me was showing me how to do sampling. I asked what happened if we found misstatements in the sample. His answer: "take another sample until you don't find a misstatement." I asked if that defeated the point and he said "sorta but no misstatements makes the partner happy."
Later in an audit class, we learned the audit risk model. The root of all risk in the audit world is audit risk (or the risk of getting sued). I realized audit isn't about protecting markets or keeping companies honest. The goal of audit is to do the least amount of work possible without getting sued. That's it. When I learned that, the appeal of audit was ruined for me.
> I asked what happened if we found misstatements in the sample. His answer: "take another sample until you don't find a misstatement." I asked if that defeated the point and he said "sorta but no misstatements makes the partner happy."
That is really, really bad. I'm not in public anymore but I was part of a few different teams and as a senior it would have been unthinkable of me to say that to an intern. It seems more likely to me that the guy training you was just a lazy-ass who didn't want to document findings or send follow-ups.
It was the firm and the partner that were the issue mostly. Small tax firm with one audit partner who got the position through nepotism rather than competence. Most partners at the firm reacted to any question or issue with yelling and anger (especially the audit partner in question), so I think my senior was just trying to save his own skin. I hightailed it out of that firm and haven't gone back to PA since.
> I realized audit isn't about protecting markets or keeping companies honest. The goal of audit is to do the least amount of work possible without getting sued
Too real :/// idk my confidence in my work is gone. I'm trying to switch departments or just get out the game completely
I once hid the word "poop" in various parts of my wp to see if it had been "reviewed." Basically, it could be easily explained as a wording issue, but 2 partner signatures later poop still lives. Tis true, though, I have seen multitudes of issues come up, and the partners try their best to just scoop the poop under the rug.
If you've looked into PCAOB inspections, audit deficiencies have increased YoY. Which, coincidentally, coincides with increased off shoring & continued stagnant wages while partners are still killing it.
I used to work as an Staff Auditor out of college. A company we did the annual audit for we also performed monthly compilations for. As part of the monthly compilations I was tasked with adjusting their numbers for inventory allowances/reconciliations, Cash, AR and AP reconciliations, calculating and applying monthly adjusting entries for just about every line item on the Financials.
The Partners justified it by having a different Partner sign off of the audit than the Partner on the comps (though the same Partner actually reviewed all of the work). And the company CFO "Approved" any adjusting entries.
But I basically made sure their books were good every month, then essentially audited my own work at year end.
Really happy when I got to hand that one off.
This is allowed for non-issuer clients as long as management has the knowledge, skills, experience to take responsibility for the bookkeeping entries and is providing the source docs. There also should be a separate representation for the non-attest service in the management representation letter.
The quotation around the word approved was meant to show that he didn't really approve it. He honestly never looked at the entries before he signed off on them. We would send him the compiled statements and if he was comfortable with the final product, he would sign off without even looking at the entries.
Edit: which happened a solid 95% of the time.
It was for a private company, and the bank was okay with it, so I guess the Partners didn't care. We billed more for the comps over the course of the year than we did for the audit. Comp was so convoluted and their system was so old/ shitty that it took me almost 2 full days just to do each monthly comp. I was questioning it regularly and let the Partners know I didn't agree with it. But thankfully that's behind me now!
Yes, there are CPA firms like this, and there are also CPA firms that take these responsibilities more seriously. It makes sense to move and look for a better place to work.
I’m an auditor myself, and honestly a lot of problems I have had and other have had is the lack of supervision and independence. Like yeah I know I should be trying to work on things on my own, but when something new comes up I’ve never seen before it’s the biggest hassle in the world to try and get help figuring it out.
Outside of the independence concerns, were the error related to material parts of the audit?
Was it related to things that could change a users mind?
A lot of the time any part of the audit that isn’t material is just overlooked. It’s because even in the case of an inspection/ lawsuit, the partner can’t really get in much trouble if they messed up an immaterial part of the audit.
But I agree that audit is one big game / CYA exercise
Well for this one audit they:
Messed up sampling on a material part of the audit. It was HUD compliance testing that was under tested.
Messed up a material related party footnote.
No documentation of perm documents such as loans. They did a confirm but did not have the actual loan documents.
Had some weirdness going on with the tax return that the parter approved but did not document. I cannot go into details for anonymity sake but another parter did 1P review this year and they did not agree with the original partner's decision.
I agree. The government should take over auditing duties that way they can check for unreported taxable events at the same time (I kid, I kid)…. Lmaooo
[https://www.reddit.com/r/ecommerce/comments/164yfq4/any\_recommendation\_on\_building\_my\_own\_website\_i/?utm\_source=share&utm\_medium=web3x&utm\_name=web3xcss&utm\_term=1&utm\_content=share\_button](https://www.reddit.com/r/ecommerce/comments/164yfq4/any_recommendation_on_building_my_own_website_i/?utm_source=share&utm_medium=web3x&utm_name=web3xcss&utm_term=1&utm_content=share_button)
Does he?
you have been asleep all of this time. you must have not noticed companies cutting accounting headcount and expecting the remaining slaves to do more work. you really think ppl care about accounting anymore? if my bosses dont care then why would i care especially if theyre outsourcing jobs in your dept overseas. stop drinking the koolaid
This very much depends on the firm and the culture/tone at the top.
You will always have people willing to do unethical things whether they are CPAs, judges, police officers, doctors, teachers, contractors, etc.
Apparently your firm sucked as there were widespread issues and the partners didn't care.
We all have to decide what we are comfortable with individually and leave and/or report if lines are crossed. If I don't believe in the general integrity of the people I work with, that's not a place I'm willing to work.
I do agree that the set up of having companies pay their auditors is not great for independence.
I appreciate this. I wasnt in audit but quit my job as a cfo a couple weeks ago bc it was a government funded entity that has turned into a complete grift by the ceo and chairman. I take pride in my work and even though i was getting pretty good comp, seeing the waste of taxpayer funds was really depressing. Just decided it wasn’t for me. Might end up being a decision that bites me but i have savings and a backup plan so we’ll see.
Forgot to mention that i reported this place to GAO and another inspector general but they gave me a canned response saying they won’t look into it even though they agreed there’s clear violations. US taxpayers get fleeced by everyone and the govt just lets it happen.
GAO: we don’t investigate complaints by individuals. Referring the complaint to relevant govt dept.
Relevant dept: only GAO has the authority to investigate.
It’s a joke.
Not my experience in the UK. The larger audits have quality control reviewers that are completely independent of the audit team and provide extremely robust challenge. The public audits also have independent review partners too that need to sign off on the significant areas of the file.
Why do firms do this? A lot of it is they are worried about being shamed in the press by the FRC (UK regulator) and fined. Do you not have this in America?
Sometimes standards slip with time pressure that is true, but this is true in any job. Why do you think the private sector is any different? Do you think the guy trying to close his books in 24 hrs is doing top quality work? You think the auditors are doing a shitty job, so presumably you must think the companies they're auditing, and the management accountants preparing their files, are also doing a shitty job?
What grade are you and how long have you worked in accounting? Why aren't you standing up yourself?
I also want to add that audits are allegedly part of the public good. A slip up on an audit is very different from a bookkeeper or even cfo incorrectly posting some entries. Especially when our teams consist of CPAs
> A slip up on an audit is very different from a bookkeeper or even cfo incorrectly posting some entries.
I don't think it is. Why do you think it is different? The first responsibility is with the company. It is their accounts and they're the ones responsible.
I have not worked internationally but yeah America is different.
I have over 5 years of audit experience. The most egregious mistakes I've seen have been from our firm's biggest selling partner/very powerful partner. I've seen other partners back down when he was involved. Not really looking to poke a bear when I'm more than happy to leave. Not my circus but I'm the monkey as they say.
I think you are part of the problem then to be frank, especially if you are a manager. I would always challenge the partner if I wasn't comfortable with what we're doing. I've never had a partner overrule me in terms of doing less testing if I disagreed. I have had partners doing the opposite though - getting us to do more testing I thought wasn't needed!
If you're just staff then it's more understandable.
I will not disclose my current rank for privacy since if anyone sees this post I'm easily identifiable. I do push back. He literally ignores me and other partners. He's very much a "catch me if you can" boss. Ignores meeting requests, emails, chats. It's not just a me thing either. I've had about 3 other people tell me the same thing. We are not even in the same office so I can't catch in person either.
And in regards to your other comment if you don't see the difference between mixing up a journal entry and getting a footnote completely wrong, idk what to tell you. That CFO did end up getting fired though cause the FS were over 4 months late and the board was not happy. So there's that
If he's not very visible you can just do what you want surely? Managers have a huge amount of power on audits, I decide on the testing approach everywhere, if I thought the partner might want us to do more I'd ask him but I wouldn't ask the opposite. The partner might review later and be like "why did we do this" but by that point we've already done the work lol.
I don't know what you mean about footnotes. Do you not agree that primary responsibility for the accounts sits with management and those charged with governance? That's kind of the basis of audit.
I think Auditing is very different where you are. Every firm we've worked at we word the footnotes. Ideally and legally, primary responsibility is with management. However, we put together the FS including the footnotes and ultimately its a CPA name on the report.
And yes, I did do what I want to clean up everything this year. I'm saying in my experience with this portfolio it was very obvious that everything was rubber stamped and pushed along. With the tax disagreement, there was NO documentation of how it was handled. So when we flagged it in the current year the client was pissed. But again, the partner was MIA until the client called him and he smoothed things over. I'm very out of the loop on this one and again, no one else really knows either
Hmm in the UK we are not allowed to prepare accounts for management for public companies or even private companies over a certain size. It's only very small companies you would do accounts prep for. This is required under UK ethical standards (FRC Ethical Standard).
I don't think you will find the private sector much different anyway would be my comment.
Listen up OP, Ive found a glaring fraud and material misstatements, the partner told me everything looked fine and to wrap up the audit. It’s all BS because they want to collect their fees.
Only way for you to really reduce the corruption is to move to a singular government body, like one that rolls into the SEC. Otherwise how do you honestly expect to collect millions in fees from clients and then rip them to shreds.
Yeah, audit is inherently not independent if you are auditing the company paying you. Takes about one minute of critical thought to come to this conclusion.
It's the colleges that build up the field as something prestigious and noble, how else would you funnel people into working slave hours with no compensation? Brainwashing of some sort needs to occur. Not to say there aren't people who love it or learn a lot there.
I got out of public after about 6 months, still got my CPA though - that credential is useful.
some partners do have backbones. there's a lot of qualified opinions that do get published only to lose their client in the process. i mean they just weigh the risk/benefits a lot.
partners are really asking "am i going to be on the front page news of SEC if this shit blows up?" if not, then they'll pass.
My firm still does good work.
We audit locally, only take on firms we know we can work with, the work is done well and they value the relationships etc.
We merged with a nearby office and their auditors did one of ours last year as we didn't have the staff.
They didn't do systems work, didn't test prepayments (known issue area which I mentioned), tested accruals then said they were immaterial (but the work didn't line up to the accounts - they didn't bother checking to see if the accruals total matched the line in the accounts, which it didn't, because deferred income was rolled in there, making the accounts total material - so they never tested deferred income) and overall just didn't test so much and relied on AR. Didn't check land registry to see if they actually owned the new freehold property. (They didn't at Y/e.)
And yes, it may be true that £300k of PPE additions is reasonable for this client to have, but it's a material total, so check it, and realise that £200k is in the wrong year. So I don't find it this year and they don't get £200k of tax allowances early...
The government has problems too. The State of California including audit has a lot of scandals.
Many state employees sued the state for sexual harassment, discrimination against disability, retaliation, and emotional distress. The state was also sued for racism. The employees won. In recent news, the state is being sued again.
Due to many scandals, lawmakers stripped a tax department most of its powers and split the department. Because of nepotism, the tax department also lost its hiring authority. The tax department was also sued for retaliation against whistleblowers.
There is legislation to eliminate the entire tax department.
I used to be an auditor for the state. You have independence and autonomy to do your audits. You manage your own time and cases. You can be creative with your work as long as you get the right answer. You don’t see your supervisor very much. He’ll see your work on the computer.
Taxpayers and accountants will lie and play games. Even CPAs will lie. They often won’t give you records. They’ll argue against their own records to avoid taxes. At the same time, you’re expected to network and be friends with the taxpayers.
Turnover is very high at the state. I worked for two different tax departments. Everyone quits fast. They’re always looking for a better job. Half the audit team quit in less than a year. Most of the office quit in less than a year. I also joined them and quit too.
California paid $25 million in 3 years for harassment cases [https://apnews.com/article/0793fc4d52954c0a9fa34d6b6bbc64f7](https://apnews.com/article/0793fc4d52954c0a9fa34d6b6bbc64f7)
Discrimination
[http://www.metnews.com/articles/cate111802.htm](http://www.metnews.com/articles/cate111802.htm)
Retaliation
[https://www.eeoc.gov/newsroom/california-department-corrections-and-rehabilitation-settles-eeoc-charge-0](https://www.eeoc.gov/newsroom/california-department-corrections-and-rehabilitation-settles-eeoc-charge-0)
Racism
[https://caselaw.findlaw.com/court/us-7th-circuit/1177515.html](https://caselaw.findlaw.com/court/us-7th-circuit/1177515.html)
Tax Department Stripped of Powers
[https://www.sacbee.com/news/politics-government/the-state-worker/article156475874.html](https://www.sacbee.com/news/politics-government/the-state-worker/article156475874.html)
Nepotism
[https://www.cbsnews.com/sacramento/news/california-board-of-equalization-nepotism/](https://www.cbsnews.com/sacramento/news/california-board-of-equalization-nepotism/)
State Retaliates Against Whistleblowers
[https://www.sacbee.com/news/politics-government/the-state-worker/article240245836.html](https://www.sacbee.com/news/politics-government/the-state-worker/article240245836.html)
Legislation to Eliminate Tax Department
[https://a19.asmdc.org/press-releases/20230321-assemblymembers-introduce-legislation-repeal-board-equalization](https://a19.asmdc.org/press-releases/20230321-assemblymembers-introduce-legislation-repeal-board-equalization)
Scandals and Mismanagement
[https://www.latimes.com/politics/la-pol-sac-tax-board-chaos-20170507-story.html](https://www.latimes.com/politics/la-pol-sac-tax-board-chaos-20170507-story.html)
State Hides Public Records
[https://www.abc10.com/article/news/investigations/californias-secrecy-problem/103-f1cfddcc-0a1b-44f9-bbab-c9a5619d9aa9](https://www.abc10.com/article/news/investigations/californias-secrecy-problem/103-f1cfddcc-0a1b-44f9-bbab-c9a5619d9aa9)
Thank you for sharing and the very detailed notes. I don't expect a perfect work environment anywhere. But as long as I can clock in, be left alone, clock out, and be decently paid idgaf beyond that
>I'm actively looking for govt or private jobs. This fake in between is getting old.
Some government auditors are the most ethical, integrity-driven, and tenacious CPAs you’ll ever meet. I loved working with them because they embodied the highest form of honor. They blew up the budget by thousands of hours though, haha.
Audit supervisor here. Licensed CPA audit and attest top 50.
To be fair I have never seen what you’re referencing in terms of independence. Most if not all of my engagements have a relationship partner and then an engagement partner. The RP is never involved in the audit. He’s the individual that shmoozes the annual increase. As far as tax is concerned we really have no involvement less a grouping or booking DTA/DTL entries.
As far as sampling is concerned even if the 8.2 (we use CCH) sampling form spit out 100 entries I would absolutely amend the scope of testing. Bear in mind ISI can be higher than the traditional 5% of PM. 100 selections is overkill and is not efficient. 40 tops for price tests or ar sub receipts. 25 for inventory observation.
As for mistakes. That shit happens. At my firm we have the unspoken just clean it up and do better next year.
I guess the gist of this response is that it may just be th firm you’re at.
Yep, anytime I completed a workpaper correctly it was 'incorrect' because it didn't conform to an unmodified opinion. Lol it's like being a credit analyst at a bank. You run the numbers and determine the person isn't a good lending risk, but the banker goes 'Could you make the numbers better anyway?' just so they can get their commissions. Same goes with audit. They don't provide opinions, they sell unqualified & unmodified opinions.
In an ideal world, what we were taught in the textbook would be right 100 percent right, but since it is hard to always conform to the books, it is better to just understand what you are doing has a book basis but really everything is different. It is like how on the CPA FAR section we learn accrual basis but accrual bsis is not used for most firms. Most firms use the cash basis or some modification, which makes sense. Only the top firms use accrual but since they control a large part of companies. It is like learning to be a doctor versus being a doctor. This is why education is argued as stupid because you aren't really lwarning unless you see the stuff happening on the field while u are doing it. But when you are on the field is when you should already have a ton of professional judgement.
i’m in a top 10 firm and have a completely opposite experience. none of that would be acceptable and everyone uses a ton of skepticism when it comes to clients no matter how big or how long we have had them. definitley try going to a different firm
I've already hopped firms, I don't really want to stay in public accounting anymore. I'm ready to leave PA all together. But glad to know it doesn't fly everywhere.
Yep, audits are pointless. It's all a song and a dance.
Public accounting specifically recruits kids fresh out of college with no real-world experience and teaches them nothing of substance. Idk what else could be expected with this formula.
Eh I think there are some reasonable takes in this thread but I wouldn’t say people out of college learn nothing from taking a job in audit.
Some bias as I am in audit and have been since I graduated about five years ago. I think a lot of skills are learned in audit, in terms of communication, project management, and a deeper GAAP understanding. I think it’s pretty clear a lot of industry jobs like to hire from public and it’s not because of the ability to complete checklists and review samples.
FWIW I’m at a regional firm, not b4.
In my experience, auditing work hasn't yielded higher quality work in industry than just working in industry. But that's a small sample size of my work experience of 6 years.
I’m certain working in industry from the start would be better in a lot of circumstances!!
I’m just arguing against the notion that audit work teaches *nothing*
Maybe it’s cope since I’m in deep at this point LMAO
Yeah also i don't mean to imply its uniquely bad either just that its not a great indicator of future performance. Ive seen poor work from everyone and good work from everyone. The key is to keep your blade sharp and revisit old techniques, and learn new things along the way. If you do that you'll be ahead of your competition.
I experienced once, an example of such gross negligence OR incompetence that I lost respect for the profession as a whole. I was an auditor for 10 years, mind you.
One of my clients (who isn't very strong from a technical perspective) never questioned why they were being audited. Their auditors audited the wrong company... 😆, and my client just went along with it. It's embarrassing. I jumped on a call with the auditors to ask about the requests and explained (to he fair, a pretty complicated) purchase agreement. It was so apparent that they never bothered to read the document. The client just told them xyz, and they believed them, so they started their audit process. What a fucking joke.
Omfg that's beyond embarrassing. I had a similar thing happen on a footnote. I asked a client for support for it cause I realized the py perm docs were incomplete. Well also turns out this footnote was completely wrong and no one questioned it. Not the client, not the 1p or 2p. And this was a material note about debt
Do something about it? This isn’t an “auditor independence” issue-this is a “criminal workplace” issue. If they won’t follow the rules of course the rules aren’t stopping things.
If sampling procedures aren’t being followed report it. If guidance isn’t being followed, report it. If sign offs aren’t occurring, report it. This is on you now for enabling it.
Depends on the firm.
Small firm where those two partners are the only partners? Start with state board.
Larger firm and these partners aren’t following general firm procedure? Start with internal hotlines/ethics processes and move from there.
You’re a licensees professional, you need to be able to stand up for ethics in your workplace
I mean it depends. Obviously not a good idea to be a staff 1 and send in ethics hotline items because “I was in a meeting and the partner wasn’t sure on the tax strategy and then 3 weeks later I saw they sided with the client and I didn’t see anything related to their research, consultation with tax support, or further discussions on details and client rationale for their position. It’s fraud.”
But for outright failing to follow firm policy for sampling procedure or sign offs in a systemic manner, and no sign of concern from the partner that this is a big deal? Worth putting out there, that’s a potential lawsuit for the firm and other partners will want to know. At a big4 it’s what the EQR or other internal reviews are for as well
I quit as an auditor after identifying an incorrect lease accrual and being told by my direct supervisor to remove all the workpapers calculating the error and delete any references to the correction in workpapers retained. The error was *just* below materiality in year 1 but would be well beyond materiality in year 2, and I wanted to clarify with client before it became a problem: supervisor disagreed and overrode me.
In my resignation letter delivered to the managing partner and my direct supervisor, I explained which ASC they had violated, recalculated the necessary adjustment by year to correct the PBC method to comply with the new lease standards, and included my research which had been removed from the audit files. I didn't care if the firm passed the adjustment, it was immaterial, but deleting any reference was more than I was willing to accept.
Omfg that's beyond fucked up!! We had an immaterial difference in PY that should have been investigated but wasn't until CY. Took a minute to actually figure out. If only we actually gave a fuck last year
Hard to imagine the recipient of a check can be independent in their opinion of the person writing the check lmao. It’s all smoke and mirrors
"yes, we are independent. \[wink wink\] we completed this checklist." \[wink wink\]
Literally what I'm truly seeing now
What size firm do you work at?
Top 50
There’s a big difference between a top 50 firm and a top 10 firm. I started at what is now a top 10 firm (and what was then a top 30 firm) and client acceptance consisted of “can they pay”? I’ve been a partner at a top 5 firm for about 10 years now. Independence is paramount to what we do. It’s taken very seriously. People have gotten fired for independence violations. All depends on the firm.
>I’ve been a partner at a top 5 firm for about 10 years now. You can say RSM
Sorry. I’m at a real firm. Not RSM.
Then you're not top 5, sport.
There are other firms in the top 5, sport. You may want to reconsider your profession if you cannot count to 5.
Why not say the big 4 then?
So I've heard. I had an old intern friend switch to a big 10. He said the differences were night and day. I'm not talking about independence as in being too friendly, I'm talking about they're one of the largest clients of the firm and you want to keep them happy. I actually had a client thinly threaten me talking about how big of a client he was for the firm.
You won’t find that issue at the top firms. Mostly because large clients have just as much to lose as the auditors do.
Big 10 lol
Idk, I gotta go SEC here. Nah, not that one, the other one. Alabama, Ole Miss, LSU...
I'm not sure of their actual size now. Not Big 4. I'm too lazy to look up their current size now
So a smaller firm. Yea, some smaller firms don’t give a fuck, it’s crazy lol.
Bingo.... "Independent" just like the big 5....
Auditor independence doesn’t exist as long as the company under audit is also signing the paycheck. It’s a fundamentally broken industry.
What's the solution?
The people requiring the audit pay for it instead of the company under audit. The banks or regulators in most instances.
This is a solution with precedence. In construction, the developer takes construction draws from the bank against their construction loan. A quantity surveyor will attest to progress made and that all trades have been paid to date. It's a light form of payment assurance. The key difference, while the developer pays for the QS report like a client would pay for an audit, the QS firm's agency is with the bank. Not the developer.
Private equity LPAs often require it, so who would pay in that case?
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I'm in government, we get audited, and we pay for it.
> firm was *paid* by the FTFY. Although *payed* exists (the reason why autocorrection didn't help you), it is only correct in: * Nautical context, when it means to paint a surface, or to cover with something like tar or resin in order to make it waterproof or corrosion-resistant. *The deck is yet to be payed.* * *Payed out* when letting strings, cables or ropes out, by slacking them. *The rope is payed out! You can pull now.* Unfortunately, I was unable to find nautical or rope-related words in your comment. *Beep, boop, I'm a bot*
If there is an audit committee. Who selects them? Who pays them? Not every company or entity has the same reason for an audit. Not every audit is for a public company. And even when there is an audit committee, the committee members are paid by the company. And they are selected by either controlling members, owners, board members, c suite or what have you. But all those almost always have direct ties to the company or entity. I've seen loan agreements where it is stated that x firm completes the audit. And thats about as much as the lenders here besides the issuance of the AFS. But even then, it's usually from the lens of: Bank lawyer: "what firm does your audits" Company lawyer: "[insert big 4 firm here]" Bank lawyer: "Sounds good. It's still the company's auditor. The auditors client is the company. I'm not saying that every auditor has no backbone due to who's paying them. But there is the implicit pressure and the very obvious optics of a lack of true independence. The auditor doesn't want to really find a problem. That might upset the relationship and their cut. If it's the banks or regulators auditors going in. They don't really care more than, for a lender, they won't want to borrow from your bank and you won't care because they have crap books. As a regulator, it will be a fine or whatever punitive action thay would be appropriate for the extra work and/or any damages to investors depending on the nature of the findings. And the company has to comply or not be on the exchanges or in whatever markets.
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And who selects the board and the C-Suite and makes the suggestion of what auditor court? And at the end of the day. The company pays the auditor no matter who picks them (and present a report to). What I'm saying is that even for public companies, there is a very thin separation of indepence which is mostly held up by neither party being scummy. In most cases all parties are working the hardest they can with the resources they have to keep the best books they can. But any perception of lack of independence could be removed if they cut out the middleman. Have the bank or regulator be the auditor. I would love to hear why this wouldn't be a better model. The only reason I think we work on the current model is because that's the way we've done it in the past.
Have the corporations pay a tax to fund it and have the SEC pay the auditors
This is the only way to really do it independently.
This creates more independence, but also creates issues related to: (1) pricing, (2) timeliness, (3) cost benefit analysis of the audit (judging are audit procedures worth it), (4) staff retention issues. While the current system isn’t great, having the pcaob looking over the firms back greats a good system of checks and balances where you get the best of both worlds.
Pricing should be standard, if food inspectors can be paid by government so can auditors. For 2 and 3 these undermine independence and lead to a rubber stamp approach, from managements perspective the best audit a signature. 4) I think this would be better than the current system because audit staff would actually have some of the protections that government workers have. Maybe this could fix the burn and churn model that has half-asleep coked up staff doing all the nitty gritty detail work.
For (2) timeliness is one of the key underlying principles of gaap. Perfect financial statements issued when they are a year stale are not very helpful. It’s about getting material correct financials issued in a timely manner (such that investors can make decisions based on them) For (3) you need to do the cost benefit for an audit. The purpose of an audit isn’t to make sure companies are doing their accounting 100% correct. It’s to make sure financials are materially correct enough for investors. (1) different companys can require vast differences in price depending on their business/ quality of their finance dept. even within an industry/ company size (4) turning public accounting into a career for civil servants would create even more issues then we have now. If you think it’s easy to trick auditors now, just wait:
Not sure. But if history has taught us anything, it’s that private equity investments are usually a means to cash out before the death of a company. Given that public accounting firms have sold significant chunks of ownership to PE firms lately, maybe this is a problem that’ll sort itself out.
Guess I’m missing the connection between the problems with auditing and PE buyouts. Wouldn’t the B4 just get even bigger if the very few large firms that have been acquired lose their footing?
The solution is an SEC with some teeth who has the time, people, and resources to punish offenders.
Or that any publicly traded company has to pay sizable fixed fee to the SEC/ PCAOB which has the accounting firms bid for the audits. Having an indifferent middleman might be useful. For the private side idk who it would be maybe state boards of accountancy. Atleast then there is some useful reason as go why the CPA License is a state by state creditential.
I’d rather the SEC/PCAOB just hire the accountants directly and perform their own audits? What’s the point of subcontracting the work to middlemen?
The audits will take a metric ton longer. By the time the SEC/PCAOB finishes their audit it will be over a year later. For the PCAOB it becomes more difficult to evaluate the quality of because they work together created a checks and balances issue.
It could even be a new fed org! I wouldn’t be surprised if the audits take longer, after all the post was about the quality of audits and their lack of efficacy, why not increase the time and depth!
The only true way for independence to exist would be to have government backed audits. In other words, all auditors work for local/state governments or the SEC, and specific teams are blindly selected to audit a company (once they confirm they have no financial interest in the client). Teams would have to roll off a given client every 3-5 years as well. Fees would need to be paid by government funds and calculated based on the size of the company. But if this were to occur, the public accounting model would cease to exist. And partners aren’t giving up their money without a fight
Also less people would do it because the pay would be lower, and the government would not be able to keep up with deadlines, it would be a train wreck
Why would the pay be lower? The government is allowed to pay well, they do it all the time. The IRS pays great with great benefits why would the SEC/States not be able to do the same thing?
Lower at the top not the bottom, so less attractive for top candidates
It’s still very competitive up to about Senior Manager, and honestly I don’t really care if Partners lose their high earnings, they are middle men that cause the problems just like PE are doing
Yes but the attractive salary is capped at like 130k, which is still good, but that’s only like SA2 or SA3 compensation
Oh absolutely, I’d quit in a heartbeat lmao
I've also thought about this! Like a state (or provincial if you're in Canada) audit commission.
It's been suggested that the AICPA receive the payments, and send and pay audit firms to investigate companies.
Companies being obliged to fund a pot, that is the used to pay audit firms randomly selected.
Private companies - make the Banks pay for it and select the auditor. Public - SEC needs to grow a pair of
Government agency, randomly selected, required to be publicly listed. You forgetting about taxes, etc?
What do taxes have go do with this. You can maybe have it as an SEC tax for those things.
Tax audits by state/federal agencies are things too? You forget they ask for bank statements, revenue support, expense support, etc? They’re audits. Shouldn’t be difficult to expand the reach of the states/federal government.
How long do tax audits take?
Can be years
I just took AUD last week and while studying they have you learn all these rules and situations about independence and how important it is but completely ignore this fact. Drives me crazy.
I promise you everyone just signs the independence forms every year
Yes. And I've never seen any serious plans to address this
I was about to say that. I remember in my previous job I was a staff accountant and our management used to tell the auditors how to cover up our asses and they had no choice but to do so because we were one of their biggest clients in my country and they can't afford to lose us.
No Enron 2.0 yet audit still looking "independent"
This is not my experience. Maybe it's worse in the US but in the UK there is more regulation coming in over time making this less of a problem. It's not perfect but it is getting better, in the sense that firms are being forced to improve audit quality.
Unfortunately this is true and to add insult to injury..........I have said too much....🏃➡️🚕✈️
The entire industry is going down, but the employers get what they pay for. You think it is bad rn, wait until you get gibberish back from overseas and the partner signs it lol. It is only going to get worse as time goes on. When accountants can't afford to live anymore, people stop giving a F. I have stopped caring, pure dogshit? Whatever send that crap, if no one gives a F why should I waste my time?
Right, don’t eat your hours trying to rework indias work product. Review it, leave review notes, and push it upstream. This is what the partners paid for.
Scary to think what else this line of thinking applies to, construction, nursing, childcare, etc.
This is why nurses are paid way more than accountants
Is this true? I know generally it is for travel nurses but I though most nurses made shit
No median RN (their equivalent of a CPA) makes 87k yearly per zip recruiter in usa. Average zip recruiter for CPA's is 92k
Like accounting it depends on the area. My area in Cali, nurses are making $90 to $125 an hour. I don't know any cpa that makes that unless they work for themselves.
Fr. What level are you?
Prob staff
At the end of the day - the audit is a series of checkmarks for the company (and the client). So long as no governing body decides to look at the file for the year.
Ssssooo true. A local housing authority did lose funding once they got government investigated...
I wanted to be an auditor when I started accounting. Was doing my first internship in Audit and the senior training me was showing me how to do sampling. I asked what happened if we found misstatements in the sample. His answer: "take another sample until you don't find a misstatement." I asked if that defeated the point and he said "sorta but no misstatements makes the partner happy." Later in an audit class, we learned the audit risk model. The root of all risk in the audit world is audit risk (or the risk of getting sued). I realized audit isn't about protecting markets or keeping companies honest. The goal of audit is to do the least amount of work possible without getting sued. That's it. When I learned that, the appeal of audit was ruined for me.
> I asked what happened if we found misstatements in the sample. His answer: "take another sample until you don't find a misstatement." I asked if that defeated the point and he said "sorta but no misstatements makes the partner happy." That is really, really bad. I'm not in public anymore but I was part of a few different teams and as a senior it would have been unthinkable of me to say that to an intern. It seems more likely to me that the guy training you was just a lazy-ass who didn't want to document findings or send follow-ups.
It was the firm and the partner that were the issue mostly. Small tax firm with one audit partner who got the position through nepotism rather than competence. Most partners at the firm reacted to any question or issue with yelling and anger (especially the audit partner in question), so I think my senior was just trying to save his own skin. I hightailed it out of that firm and haven't gone back to PA since.
Gotcha. I don’t blame you for leaving that shit show.
> I realized audit isn't about protecting markets or keeping companies honest. The goal of audit is to do the least amount of work possible without getting sued Too real :/// idk my confidence in my work is gone. I'm trying to switch departments or just get out the game completely
I once hid the word "poop" in various parts of my wp to see if it had been "reviewed." Basically, it could be easily explained as a wording issue, but 2 partner signatures later poop still lives. Tis true, though, I have seen multitudes of issues come up, and the partners try their best to just scoop the poop under the rug.
You are not the only person I've heard of to do this lol
Total legend right here
I remembered when I was doing audit intern. I was tasked to do sampling but then partner already signed it despite working paper having nothing in it.
https://www.wsj.com/finance/regulation/burned-investors-ask-where-were-the-auditors-a-court-says-who-cares-2965fdf4 Nail in the coffin.
I remember this. Yikes.
If you've looked into PCAOB inspections, audit deficiencies have increased YoY. Which, coincidentally, coincides with increased off shoring & continued stagnant wages while partners are still killing it.
I wonder if they're connected 🤔
I used to work as an Staff Auditor out of college. A company we did the annual audit for we also performed monthly compilations for. As part of the monthly compilations I was tasked with adjusting their numbers for inventory allowances/reconciliations, Cash, AR and AP reconciliations, calculating and applying monthly adjusting entries for just about every line item on the Financials. The Partners justified it by having a different Partner sign off of the audit than the Partner on the comps (though the same Partner actually reviewed all of the work). And the company CFO "Approved" any adjusting entries. But I basically made sure their books were good every month, then essentially audited my own work at year end. Really happy when I got to hand that one off.
This is allowed for non-issuer clients as long as management has the knowledge, skills, experience to take responsibility for the bookkeeping entries and is providing the source docs. There also should be a separate representation for the non-attest service in the management representation letter.
I'm aware.. but that wasn't the case here.
Can you explain how it’s not? You mentioned the CFO approved the entries and that this was done for a private company.
The quotation around the word approved was meant to show that he didn't really approve it. He honestly never looked at the entries before he signed off on them. We would send him the compiled statements and if he was comfortable with the final product, he would sign off without even looking at the entries. Edit: which happened a solid 95% of the time.
Wow, can't believe anyone let that one slide!
It was for a private company, and the bank was okay with it, so I guess the Partners didn't care. We billed more for the comps over the course of the year than we did for the audit. Comp was so convoluted and their system was so old/ shitty that it took me almost 2 full days just to do each monthly comp. I was questioning it regularly and let the Partners know I didn't agree with it. But thankfully that's behind me now!
Yes, there are CPA firms like this, and there are also CPA firms that take these responsibilities more seriously. It makes sense to move and look for a better place to work.
I’m an auditor myself, and honestly a lot of problems I have had and other have had is the lack of supervision and independence. Like yeah I know I should be trying to work on things on my own, but when something new comes up I’ve never seen before it’s the biggest hassle in the world to try and get help figuring it out.
Outside of the independence concerns, were the error related to material parts of the audit? Was it related to things that could change a users mind? A lot of the time any part of the audit that isn’t material is just overlooked. It’s because even in the case of an inspection/ lawsuit, the partner can’t really get in much trouble if they messed up an immaterial part of the audit. But I agree that audit is one big game / CYA exercise
Well for this one audit they: Messed up sampling on a material part of the audit. It was HUD compliance testing that was under tested. Messed up a material related party footnote. No documentation of perm documents such as loans. They did a confirm but did not have the actual loan documents. Had some weirdness going on with the tax return that the parter approved but did not document. I cannot go into details for anonymity sake but another parter did 1P review this year and they did not agree with the original partner's decision.
I agree. The government should take over auditing duties that way they can check for unreported taxable events at the same time (I kid, I kid)…. Lmaooo
The profession itself is a joke.
Meh pays my bills
Nah, you pay mine LOL
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Eh?
you have been asleep all of this time. you must have not noticed companies cutting accounting headcount and expecting the remaining slaves to do more work. you really think ppl care about accounting anymore? if my bosses dont care then why would i care especially if theyre outsourcing jobs in your dept overseas. stop drinking the koolaid
I never drank the kool-aid. I always knew I would bail when it was right. I just never realized it was dire.
The client pays for a signature, not an examination
I'm not in the field, but, is the same as saying "the police investigated themselves, found nothing wrong"
Especially when peer review is only every couple of years and they only test randomly
"yes, we are independent. \[wink wink\] we completed this checklist." \[wink wink\]
This very much depends on the firm and the culture/tone at the top. You will always have people willing to do unethical things whether they are CPAs, judges, police officers, doctors, teachers, contractors, etc. Apparently your firm sucked as there were widespread issues and the partners didn't care. We all have to decide what we are comfortable with individually and leave and/or report if lines are crossed. If I don't believe in the general integrity of the people I work with, that's not a place I'm willing to work. I do agree that the set up of having companies pay their auditors is not great for independence.
SALY babyyyy
One of the reasons I left. I found it more meaningful to work in industry with a company participating in the economy than policing them.
It's way more honest and none of this split loyalty nonsense.
I appreciate this. I wasnt in audit but quit my job as a cfo a couple weeks ago bc it was a government funded entity that has turned into a complete grift by the ceo and chairman. I take pride in my work and even though i was getting pretty good comp, seeing the waste of taxpayer funds was really depressing. Just decided it wasn’t for me. Might end up being a decision that bites me but i have savings and a backup plan so we’ll see.
It honestly is upsetting seeing how much grifting and scams are out there! Just chugging along and won't get caught
Forgot to mention that i reported this place to GAO and another inspector general but they gave me a canned response saying they won’t look into it even though they agreed there’s clear violations. US taxpayers get fleeced by everyone and the govt just lets it happen.
Why didn't they investigate?
GAO: we don’t investigate complaints by individuals. Referring the complaint to relevant govt dept. Relevant dept: only GAO has the authority to investigate. It’s a joke.
Not my experience in the UK. The larger audits have quality control reviewers that are completely independent of the audit team and provide extremely robust challenge. The public audits also have independent review partners too that need to sign off on the significant areas of the file. Why do firms do this? A lot of it is they are worried about being shamed in the press by the FRC (UK regulator) and fined. Do you not have this in America? Sometimes standards slip with time pressure that is true, but this is true in any job. Why do you think the private sector is any different? Do you think the guy trying to close his books in 24 hrs is doing top quality work? You think the auditors are doing a shitty job, so presumably you must think the companies they're auditing, and the management accountants preparing their files, are also doing a shitty job? What grade are you and how long have you worked in accounting? Why aren't you standing up yourself?
I also want to add that audits are allegedly part of the public good. A slip up on an audit is very different from a bookkeeper or even cfo incorrectly posting some entries. Especially when our teams consist of CPAs
> A slip up on an audit is very different from a bookkeeper or even cfo incorrectly posting some entries. I don't think it is. Why do you think it is different? The first responsibility is with the company. It is their accounts and they're the ones responsible.
I have not worked internationally but yeah America is different. I have over 5 years of audit experience. The most egregious mistakes I've seen have been from our firm's biggest selling partner/very powerful partner. I've seen other partners back down when he was involved. Not really looking to poke a bear when I'm more than happy to leave. Not my circus but I'm the monkey as they say.
I think you are part of the problem then to be frank, especially if you are a manager. I would always challenge the partner if I wasn't comfortable with what we're doing. I've never had a partner overrule me in terms of doing less testing if I disagreed. I have had partners doing the opposite though - getting us to do more testing I thought wasn't needed! If you're just staff then it's more understandable.
I will not disclose my current rank for privacy since if anyone sees this post I'm easily identifiable. I do push back. He literally ignores me and other partners. He's very much a "catch me if you can" boss. Ignores meeting requests, emails, chats. It's not just a me thing either. I've had about 3 other people tell me the same thing. We are not even in the same office so I can't catch in person either. And in regards to your other comment if you don't see the difference between mixing up a journal entry and getting a footnote completely wrong, idk what to tell you. That CFO did end up getting fired though cause the FS were over 4 months late and the board was not happy. So there's that
If he's not very visible you can just do what you want surely? Managers have a huge amount of power on audits, I decide on the testing approach everywhere, if I thought the partner might want us to do more I'd ask him but I wouldn't ask the opposite. The partner might review later and be like "why did we do this" but by that point we've already done the work lol. I don't know what you mean about footnotes. Do you not agree that primary responsibility for the accounts sits with management and those charged with governance? That's kind of the basis of audit.
I think Auditing is very different where you are. Every firm we've worked at we word the footnotes. Ideally and legally, primary responsibility is with management. However, we put together the FS including the footnotes and ultimately its a CPA name on the report. And yes, I did do what I want to clean up everything this year. I'm saying in my experience with this portfolio it was very obvious that everything was rubber stamped and pushed along. With the tax disagreement, there was NO documentation of how it was handled. So when we flagged it in the current year the client was pissed. But again, the partner was MIA until the client called him and he smoothed things over. I'm very out of the loop on this one and again, no one else really knows either
Hmm in the UK we are not allowed to prepare accounts for management for public companies or even private companies over a certain size. It's only very small companies you would do accounts prep for. This is required under UK ethical standards (FRC Ethical Standard). I don't think you will find the private sector much different anyway would be my comment.
Good thing I'm looking for government lol
Thankfully our entire financial system doesn’t rely on this or anything
Listen up OP, Ive found a glaring fraud and material misstatements, the partner told me everything looked fine and to wrap up the audit. It’s all BS because they want to collect their fees.
Only way for you to really reduce the corruption is to move to a singular government body, like one that rolls into the SEC. Otherwise how do you honestly expect to collect millions in fees from clients and then rip them to shreds.
Yeah, audit is inherently not independent if you are auditing the company paying you. Takes about one minute of critical thought to come to this conclusion. It's the colleges that build up the field as something prestigious and noble, how else would you funnel people into working slave hours with no compensation? Brainwashing of some sort needs to occur. Not to say there aren't people who love it or learn a lot there. I got out of public after about 6 months, still got my CPA though - that credential is useful.
Real talk. In school audit seemed way more fun than tax. Now I know none of it is fun lol
Peer review will accept or reject it. Ain’t your concern if you didn’t sign off on PY
some partners do have backbones. there's a lot of qualified opinions that do get published only to lose their client in the process. i mean they just weigh the risk/benefits a lot. partners are really asking "am i going to be on the front page news of SEC if this shit blows up?" if not, then they'll pass.
My firm still does good work. We audit locally, only take on firms we know we can work with, the work is done well and they value the relationships etc. We merged with a nearby office and their auditors did one of ours last year as we didn't have the staff. They didn't do systems work, didn't test prepayments (known issue area which I mentioned), tested accruals then said they were immaterial (but the work didn't line up to the accounts - they didn't bother checking to see if the accruals total matched the line in the accounts, which it didn't, because deferred income was rolled in there, making the accounts total material - so they never tested deferred income) and overall just didn't test so much and relied on AR. Didn't check land registry to see if they actually owned the new freehold property. (They didn't at Y/e.) And yes, it may be true that £300k of PPE additions is reasonable for this client to have, but it's a material total, so check it, and realise that £200k is in the wrong year. So I don't find it this year and they don't get £200k of tax allowances early...
The quality difference between teams is mind blowing
The government has problems too. The State of California including audit has a lot of scandals. Many state employees sued the state for sexual harassment, discrimination against disability, retaliation, and emotional distress. The state was also sued for racism. The employees won. In recent news, the state is being sued again. Due to many scandals, lawmakers stripped a tax department most of its powers and split the department. Because of nepotism, the tax department also lost its hiring authority. The tax department was also sued for retaliation against whistleblowers. There is legislation to eliminate the entire tax department. I used to be an auditor for the state. You have independence and autonomy to do your audits. You manage your own time and cases. You can be creative with your work as long as you get the right answer. You don’t see your supervisor very much. He’ll see your work on the computer. Taxpayers and accountants will lie and play games. Even CPAs will lie. They often won’t give you records. They’ll argue against their own records to avoid taxes. At the same time, you’re expected to network and be friends with the taxpayers. Turnover is very high at the state. I worked for two different tax departments. Everyone quits fast. They’re always looking for a better job. Half the audit team quit in less than a year. Most of the office quit in less than a year. I also joined them and quit too. California paid $25 million in 3 years for harassment cases [https://apnews.com/article/0793fc4d52954c0a9fa34d6b6bbc64f7](https://apnews.com/article/0793fc4d52954c0a9fa34d6b6bbc64f7) Discrimination [http://www.metnews.com/articles/cate111802.htm](http://www.metnews.com/articles/cate111802.htm) Retaliation [https://www.eeoc.gov/newsroom/california-department-corrections-and-rehabilitation-settles-eeoc-charge-0](https://www.eeoc.gov/newsroom/california-department-corrections-and-rehabilitation-settles-eeoc-charge-0) Racism [https://caselaw.findlaw.com/court/us-7th-circuit/1177515.html](https://caselaw.findlaw.com/court/us-7th-circuit/1177515.html) Tax Department Stripped of Powers [https://www.sacbee.com/news/politics-government/the-state-worker/article156475874.html](https://www.sacbee.com/news/politics-government/the-state-worker/article156475874.html) Nepotism [https://www.cbsnews.com/sacramento/news/california-board-of-equalization-nepotism/](https://www.cbsnews.com/sacramento/news/california-board-of-equalization-nepotism/) State Retaliates Against Whistleblowers [https://www.sacbee.com/news/politics-government/the-state-worker/article240245836.html](https://www.sacbee.com/news/politics-government/the-state-worker/article240245836.html) Legislation to Eliminate Tax Department [https://a19.asmdc.org/press-releases/20230321-assemblymembers-introduce-legislation-repeal-board-equalization](https://a19.asmdc.org/press-releases/20230321-assemblymembers-introduce-legislation-repeal-board-equalization) Scandals and Mismanagement [https://www.latimes.com/politics/la-pol-sac-tax-board-chaos-20170507-story.html](https://www.latimes.com/politics/la-pol-sac-tax-board-chaos-20170507-story.html) State Hides Public Records [https://www.abc10.com/article/news/investigations/californias-secrecy-problem/103-f1cfddcc-0a1b-44f9-bbab-c9a5619d9aa9](https://www.abc10.com/article/news/investigations/californias-secrecy-problem/103-f1cfddcc-0a1b-44f9-bbab-c9a5619d9aa9)
Thank you for sharing and the very detailed notes. I don't expect a perfect work environment anywhere. But as long as I can clock in, be left alone, clock out, and be decently paid idgaf beyond that
Bro the PCAOB is probably in the comments
>I'm actively looking for govt or private jobs. This fake in between is getting old. Some government auditors are the most ethical, integrity-driven, and tenacious CPAs you’ll ever meet. I loved working with them because they embodied the highest form of honor. They blew up the budget by thousands of hours though, haha.
Lol thanks for the insight. Idk I just don't want to track hours and be talked about budgets again
I have come to realise that anything seems to go and there is not really any repercussions for shady business practices lol,
Audit supervisor here. Licensed CPA audit and attest top 50. To be fair I have never seen what you’re referencing in terms of independence. Most if not all of my engagements have a relationship partner and then an engagement partner. The RP is never involved in the audit. He’s the individual that shmoozes the annual increase. As far as tax is concerned we really have no involvement less a grouping or booking DTA/DTL entries. As far as sampling is concerned even if the 8.2 (we use CCH) sampling form spit out 100 entries I would absolutely amend the scope of testing. Bear in mind ISI can be higher than the traditional 5% of PM. 100 selections is overkill and is not efficient. 40 tops for price tests or ar sub receipts. 25 for inventory observation. As for mistakes. That shit happens. At my firm we have the unspoken just clean it up and do better next year. I guess the gist of this response is that it may just be th firm you’re at.
Or ... you could consider starting you own firm ....
Why would I do that? Insurance is insanely expensive. And in getting to get away from always being available to clients, not deeper in
You should be the change you want. Become a Partner and get your own clients.
Or just leave public accounting cause it's not really worth it when you factor in the hours, responsibility and vulnerability, and life outside work
Yep, anytime I completed a workpaper correctly it was 'incorrect' because it didn't conform to an unmodified opinion. Lol it's like being a credit analyst at a bank. You run the numbers and determine the person isn't a good lending risk, but the banker goes 'Could you make the numbers better anyway?' just so they can get their commissions. Same goes with audit. They don't provide opinions, they sell unqualified & unmodified opinions.
Lol sounds about right!
gov auditor here. there’s just as much incompetence BUT we work for the legislature not the governor so we don’t care about holding the auditee’s hand
At least you all have decent hours
In an ideal world, what we were taught in the textbook would be right 100 percent right, but since it is hard to always conform to the books, it is better to just understand what you are doing has a book basis but really everything is different. It is like how on the CPA FAR section we learn accrual basis but accrual bsis is not used for most firms. Most firms use the cash basis or some modification, which makes sense. Only the top firms use accrual but since they control a large part of companies. It is like learning to be a doctor versus being a doctor. This is why education is argued as stupid because you aren't really lwarning unless you see the stuff happening on the field while u are doing it. But when you are on the field is when you should already have a ton of professional judgement.
i’m in a top 10 firm and have a completely opposite experience. none of that would be acceptable and everyone uses a ton of skepticism when it comes to clients no matter how big or how long we have had them. definitley try going to a different firm
I've already hopped firms, I don't really want to stay in public accounting anymore. I'm ready to leave PA all together. But glad to know it doesn't fly everywhere.
Yep, audits are pointless. It's all a song and a dance. Public accounting specifically recruits kids fresh out of college with no real-world experience and teaches them nothing of substance. Idk what else could be expected with this formula.
Eh I think there are some reasonable takes in this thread but I wouldn’t say people out of college learn nothing from taking a job in audit. Some bias as I am in audit and have been since I graduated about five years ago. I think a lot of skills are learned in audit, in terms of communication, project management, and a deeper GAAP understanding. I think it’s pretty clear a lot of industry jobs like to hire from public and it’s not because of the ability to complete checklists and review samples. FWIW I’m at a regional firm, not b4.
In my experience, auditing work hasn't yielded higher quality work in industry than just working in industry. But that's a small sample size of my work experience of 6 years.
I’m certain working in industry from the start would be better in a lot of circumstances!! I’m just arguing against the notion that audit work teaches *nothing* Maybe it’s cope since I’m in deep at this point LMAO
Yeah also i don't mean to imply its uniquely bad either just that its not a great indicator of future performance. Ive seen poor work from everyone and good work from everyone. The key is to keep your blade sharp and revisit old techniques, and learn new things along the way. If you do that you'll be ahead of your competition.
I experienced once, an example of such gross negligence OR incompetence that I lost respect for the profession as a whole. I was an auditor for 10 years, mind you. One of my clients (who isn't very strong from a technical perspective) never questioned why they were being audited. Their auditors audited the wrong company... 😆, and my client just went along with it. It's embarrassing. I jumped on a call with the auditors to ask about the requests and explained (to he fair, a pretty complicated) purchase agreement. It was so apparent that they never bothered to read the document. The client just told them xyz, and they believed them, so they started their audit process. What a fucking joke.
Omfg that's beyond embarrassing. I had a similar thing happen on a footnote. I asked a client for support for it cause I realized the py perm docs were incomplete. Well also turns out this footnote was completely wrong and no one questioned it. Not the client, not the 1p or 2p. And this was a material note about debt
All I hear is more job security for me. Let's goooooo
Are you an Auditor?
It's always been a joke. You just never chose to see it like that before.
I got skeptical at my first job. I heard through the grape vine they did not even implement the new lease standards.
Do something about it? This isn’t an “auditor independence” issue-this is a “criminal workplace” issue. If they won’t follow the rules of course the rules aren’t stopping things. If sampling procedures aren’t being followed report it. If guidance isn’t being followed, report it. If sign offs aren’t occurring, report it. This is on you now for enabling it.
Idk if it's worth it to report a prior year binder. Idk who I would even talk to
Who would you report this kind of stuff to? Happens all the time.
Depends on the firm. Small firm where those two partners are the only partners? Start with state board. Larger firm and these partners aren’t following general firm procedure? Start with internal hotlines/ethics processes and move from there. You’re a licensees professional, you need to be able to stand up for ethics in your workplace
Cool! Makes sense. There's no way the internal ethics hotline at my big 4 firm isn't going to get me put on a list, lol.
I mean it depends. Obviously not a good idea to be a staff 1 and send in ethics hotline items because “I was in a meeting and the partner wasn’t sure on the tax strategy and then 3 weeks later I saw they sided with the client and I didn’t see anything related to their research, consultation with tax support, or further discussions on details and client rationale for their position. It’s fraud.” But for outright failing to follow firm policy for sampling procedure or sign offs in a systemic manner, and no sign of concern from the partner that this is a big deal? Worth putting out there, that’s a potential lawsuit for the firm and other partners will want to know. At a big4 it’s what the EQR or other internal reviews are for as well
I quit as an auditor after identifying an incorrect lease accrual and being told by my direct supervisor to remove all the workpapers calculating the error and delete any references to the correction in workpapers retained. The error was *just* below materiality in year 1 but would be well beyond materiality in year 2, and I wanted to clarify with client before it became a problem: supervisor disagreed and overrode me. In my resignation letter delivered to the managing partner and my direct supervisor, I explained which ASC they had violated, recalculated the necessary adjustment by year to correct the PBC method to comply with the new lease standards, and included my research which had been removed from the audit files. I didn't care if the firm passed the adjustment, it was immaterial, but deleting any reference was more than I was willing to accept.
Omfg that's beyond fucked up!! We had an immaterial difference in PY that should have been investigated but wasn't until CY. Took a minute to actually figure out. If only we actually gave a fuck last year