Going into this busy season, all of our audit clients are laser focused on improving efficiency, and rightfully so. We’ve always believed that the foundational skills at the heart of our upskilling curriculum—critical thinking, problem solving, communication—are not just important for the future, they can help improve productivity now.
Take a look at the most productive people in your office, the ones everyone turns to when something absolutely has to get done and get done right. Imagine them with just average problem solving or communication or critical thinking skills. All of a sudden, they seem pretty average.
Firms looking to improve audit efficiency are now gravitating to improved project management skills as a solution, which is right on point and so much better than the approach most firms took when I was coming up (“Our sample sizes are too big! Reduce sample sizes!”)
It’s no secret that most jobs lose profitability because the seniors don’t manage the audit very well, leaving the partner and manager to wrap the job and perform tasks that lower billing rate staff could have and should have performed.
“If only they were better project managers!”
We firmly believe that project management skills are an important foundational skill set, which is why we build it into most of our courses. Of all the skills in our curriculum, project management skills have the most direct impact on engagement realization and profitability.
But project management skills alone are not enough. Sometimes, the real reasons why managers and partners put more time into the project than originally planned have very little to do with project management. Here are three stories from our training classes that illustrate the need to look beyond project management for answers to the inefficiency problem.
The 1% solution
I was a participant in a webcast for a data analytics software vendor. One of their users made a presentation in which he extolled the virtues of the software and all the ways they used it to streamline substantive tests on their engagements. He said, “we save an average of 4 hours on each job.”
Which begs the question “whose hours?”
The efficiency problem isn’t that the staff are spending too much time on the job, it’s that the partners and managers are spending time doing the work the staff should have done but didn’t.
Later, when I did the math, I figured that 4 hours of staff time saved amounted to about a 1% improvement in realization on a typical solution.
When looking for efficiency gains, firms should set a higher bar. Not only is a 1% gain not that great, it provides no sustainable competitive advantage. Any firm with the same software can easily get the same results.
If you have a powerful tool like data analytics, why not use it to tackle your most difficult problems. The band’s best singer sings lead. The team’s best defender guards the rival’s best scorer. If data analytics is your auditor’s most powerful tool, why use it to get a 1% return?
One of the reasons partners and managers run up engagement costs during wrap up is that audit issues are discovered late in the audit. One of the main causes of this problem lies in the low value flux analyses that most audit teams use to identify risk and plan their audits.
In our introduction to data analytics course, the case study works to drive efficiency through better planning that identifies issues earlier in the audit. We teach the participants to use data analytics to provide more visibility into an underlying data set and perform more meaningful analytics. The result is the identification of several unexpected audit transactions and relationships the team can investigate early and resolve while they are still assigned to the engagement.
Moral of the story Redefine the purpose of audit planning to emphasize the early identification of audit issues, and repurpose your best people and tools to achieve that objective.
Practice tip If an unresolved issue winds up on the partner’s or manager’s desk, the first question to as is “should we have identified this issue earlier in the audit, and if so, why didn’t we?”
Preparing the Cash Flow Statement
A firm asked for our help with a staff training program, and when we talked about the topics they wanted to include in a course, a manager told me, “preparing the statement of cash flows. The staff can’t do it, so I have to.”
“Is that a task a staff auditor should be able to do?”
As it turns out, the firm had included preparing a statement of cash flows in their curriculum for a number of years, and so kudos to them for acknowledging the obvious: their training wasn’t working.
Not all the issues a firm faces can be solved through training, but the task of preparing a cash flow statement is one that can. Why, then, was the firm unable to solve the cash flow statement problem through training?
Firm leaders recognize that training must be about building skills and competencies and not just “getting everyone their 40 hours.” The key to making sure your training does its job is to focus on training outcomes not just reactions. It’s common for firm leaders to assume that if a topic is on the training agenda then their people must have been “trained.” Or they measure the success of a program based on whether the participants liked it or the classroom was lively.
Instead, firms should work to create clearly defined learning objectives and gauge the success of the course based on its ability to meet those objectives. If the purpose of teaching staff how to prepare a statement of cash flows is to reduce the time partners and managers spend on that task, then the measure of training effectiveness should be whether managers and partners are spending less time on the statement of cash flows.
Moral of the story Demand more from your training. If you’re not getting the business results you need, then it’s time for a change.
Practice tip When planning the year’s training agenda, firm leaders and learning managers should ask, “what are the desired training outcomes and why these are important for the business?” At the end of the training season, they should meet again and ask whether those objectives were met.
The meaning of “done”
Early in the design phase of every custom training program, we ask stakeholders to describe the practice problems they want to solve through training. We were working on a project management program for an audit department and during one of these early discussions a partner told me “seniors don’t know what it means to be ‘done.’ Their definition of ‘done’ is not my definition of done.”
Had we been involved in an efficiency project and not building a training course, the obvious follow up question would have been, “do you have that conversation with your seniors? Do you tell them what being ‘done’ means to you?”
The Gallup Employee Engagement survey is the gold standard for measuring what drives productivity. For over 30 years, they’ve been asking managers and employees the same 12 questions to help understand what managers should do to improve employee productivity. The question that is most often linked to productivity? “I know why is expected of me.” In other words, employees who have a clear understanding of their supervisor’s expectations will be more productive than those who do not have this clear understanding.
Moral of the story Your audit teams need to know what you expect from them. Tell them what it means to be “done.”
Practice tip Project management training should be specific to auditing and to your firm’s unique needs. Learning objectives should be built around explicitly stated manager expectations. Use training to communicate and drive consistency about what “done” means at your firm.
Improving the project management skills of audit supervisors will help them improve efficiency. But this training should be just one piece to a multi-pronged approach. Look holistically at efficiency and be thorough in exploring root causes of the problem. Some of these causes may have nothing to do with project management, and so they must be addressed through other means.
Be sure to check out our Audit Efficiency webcast series