Tuesday, December 17, 2013

best time to leave before busy season

I'm curious, what is your take on cutoff date for leaving your firm? With busy season coming up, I'm sure this is a hot topic. 

Good question. It's obviously subjective. Feel like everyone will have a different answer for you. My personal view on it is that if you are a key resource on an engagement, you have to let them know a couple months before busy season so they can find an alternative resource. If you are not a key resource, end of November would seem to be appropriate.
There are always some individuals who leave in December too, but it's not the best time. Always look at who you'll be burning bridges with, and whether it's worth it. If you're looking to switch careers, then leave anytime prior to busy season if the opportunity is good, since leaving this job won't come back to haunt you. If you intend to stay in accounting, then think about it a little more, since you may need those contacts down the road. Curious as to what people think - let us know via the comments section.

Sunday, December 8, 2013

internal audit to reporting

I have been in the audit of a Europe-based FPI for 5 years now and was just offered a position in their Internal Audit Department. I am interested in reporting, however, and I am worried that accepting this offer will put me in a radically different career path. Please share your view. 

I wouldn't call it radically different, but if you've already spent 5 years internal audit and want to go into reporting, you may have to keep searching for jobs. Alternatively, share your goals with the company, and ask if you can get into their reporting group over the next couple years. Make sure you share your thoughts with the reporting group so they can keep you in mind when they're looking. I've seen lots of people go from audit to reporting, so I wouldn't fret. Just keep looking for that reporting job even if you end up taking this internal audit job. Contact some recruiters - companies are always on the lookout for people to join their reporting group.

big 4 alternatives

I am undergrad senior for accounting. I am 27. I have been told many times that the best thing to do after college is to land a job in a big-4 company. I am not sure if I am willing to put in 60+ hours a week for this “dream job”. If I don’t want to take the “ideal” path, what other options I have? 

That's a tough age to start, but I've seen people do it, but you definitely have to be willing to put in the hours. If you don't want to go down the big 4 path, you can always take a job at a regional firm and work there for 2-3 years before going into a senior accountant job at any Company. That's really your best bet if you want to be in accounting. Now, if hours are a priority, and you're okay moving up slowly in the workforce, you could try going straight into industry. It's unfortunate that it's this way, but in the accounting world, the big 4 are essentially an ivy league type recruiting zone for various companies.

industry experience

I am CPA - equivalent in rather small regional audit practice in a country in Middle Europe. Locally, big four companies are considered top experts in audit, excelling in larger companies audits. But they also do smaller and mid size companies. They do it charging much more in fees than mid tier companies not to mention smaller regional auditing firms like the one I work for. Once or twice our paths crossed. Me a CPA doing a statutory audit and audit teams of 2-3 people at their 20s doing an audit of a consolidation package of the same client. I sometimes audited the same client the next year after it was audited by a Big four. Well, the clients' comments apart (young clueless people stressed to do the job they don't understand), I was not really impressed. One client had to go through major fundamental error adjustments. I can't believe the partner or manager at Big 4 was unaware of the omission or maybe he didn't care to understand. It could be this type of reckless approach that led to big accounting scandals. Some companies cooked their books for years while they were being audited even though it was very easy to see how they did it. I think that there is too much time being spent on procedures, "planning" and creating volumes of files, doing stuff complicated beyond understanding and too little in trying to understand how a client is trying to fool you knowing the young blokes just don't get the sh#$$#. Don't you think young associates should first gain some industry experience before they join audit firms? 

That's an interesting idea, and I'm sure industry experience will help, but once you start in the industry, it is really hard to switch to public accounting. And to be honest, the model works best for young kids out of college who still have the energy to work long hours. And to be honest, as a staff accountant in the industry, you usually don't get to see enough to have that valuable knowledge to add to the audit practice. The same applies for banking and consulting - they need young and hungry, not old and experienced and content unfortunately.
Certainly an interesting idea though, maybe having certain controllers serve in an advisory role to the Firms while they develop their audit programs would help.

Monday, October 28, 2013

dealing with ex auditors

I have a question - how do you deal with auditees (especially those who have prior audit experience and therefore think that they know everything) who question your audit methods? I could explain my audit methods, but I don't see why I should, and it seems like the client is just being difficult for no reason (or to stall for time). 

To be honest,  back when I was a staff associate, I liked it when clients challenged my audit methods - this made me understand why I'm doing what I'm doing so I could create an effective argument for it. Clients are inherently difficult just because they don't like doing additional work if it doesn't add value for them - unfortunately nature of the beast, and this is a majority of clients. Best way to overcome this is to explain why your methodology is necessary. Sometimes, if you don't agree with the methodology or think the requests are excessive, sympathize with your clients but explain to them that it's just the rules we have to follow. Some will get it, some won't. 

Clients who were previously auditors are an interesting lot - the worst of them being ones who spent less than 4 years in the audit practice, and now think they know everything there is to know about auditing. You'll see this everywhere - you'll win some over, and butt heads frequently with others. Unfortunately there is no magic answer. Adapt and achieve.

Future of the Big 4

How do you see the future in this industry, say 5 years down the road? Hours are inevitably longer, and pay may never catch up to the hours worked since no one ever agree on the fee inflation. All of our work are statutorily based, and we are never really adding too much value that will generate revenue for the clients in my opinion. Is it better to switch out to other areas of the firm like non assurance services where it may be more meaningful? 

The way I see it, audits aren't really a growth area for the Firms, but rather, just their bread & butter to chug along at a mature growth rate. And the Firms know that, they've known that for years, which is why they invested heavily in consulting, and then got completely sidetracked by the Arthur Anderson fiasco. Now the Firms are slowly building back their consulting business, albeit very careful to make sure that everything's straight from an independence standpoint. They know if that they want their profits to increase, given the increased regulation in the audit world, they can build on their resources and consult on a variety of projects. This can be very uneven and cyclical due to the economy, and will not provide the job security that auditors have, but it's definitely what the Firms intend to do over the next 10-15 years. 

In terms of whether you should switch out, it all depends - do you value job security, do you like the consulting aspect (travelling a majority of the time, uneven times where it's really busy or not busy at all), your future career goals, etc. All these factors play a role in what you want to do.

A little history is in order here for anyone interested:

a) PWC sold its consulting business to IBM in 2002 - IBM's consulting unit is doing pretty well.
b) KPMG spun off BearingPoint in 2000. BearingPoint is now bankrupt.
c) Ernst & Young sold its consulting business to Cap Gemini in 2000. Cap Gemini is doing well.
d) Deloitte elected to keep its consulting business, and it has proven to be a great decision in hindsigh.
e) Arthur Anderson split its consulting business in 2001. That consulting business is Accenture, which has obviously gone on to do really well, unlike Arthur Anderson.

Notice something about these years? All occurred during 2000-2002.The Enron scandal happened in 2001.
Now we're slowly trying to build it back up - with the benefit of history though.

Saturday, September 28, 2013

New world

I've posted a few blogs earlier on this new world that we live in. This is a world where we're auditing for the regulators (PCAOB) instead of auditing for investors. We're auditing in fear of the PCAOB or our internal reviews finding something instead of auditing using a sense of reason. This is an era of upheaval that, from my understanding, harkens back to when 404 was first implemented. There is a sea change going on at the Firms because of the new PCAOB demands. It's certainly painful for the people implementing this now, but it'll be fascinating to see if this changes. Once the dust settles on this internal control rehaul, will the PCAOB choose a new battle to fight that will cause another upheaval in the near future. The PCAOB is turning into a dangerous animal, especially since it's backed by the government and is paid for by the private sector (mandatory PCAOB fees for all issuers). With that kind of funding, and with teams dedicated to different accounting firms, what is the incentive for them not to find new issues every years in order to prove their usefulness. Now, don't get me wrong, some of the "clarifications" by the PCAOB of its standards makes sense. You'll hear from most partners informally that the PCAOB is neither just right, nor too much, but somewhere in between. The Firms are certainly pushing back against the PCAOB, but they aren't winning all the battles, and so the auditors have to bear the burden of the battles they lost. Until the SEC conveys this message to the clients instead of the audit firms, there will continue to be even more hostility shown by the clients towards the additional requirements we're asking to be implemented.
The problem with this, for many of the individuals working at the Firms, is that the burden falls on us. This leads to increased hours and increased stress, with the rewards not increasing in proportion. Our fees are not increasing proportionally with our hours, leading to more stress on profitability. A majority of the partners believe that this is just a cycle, and that we will revert back to the mean soon. They may be right,since they've spent more years and have seen several more cycles than us. What is interesting is that since many managers and snr mgrs haven't experienced something like this, they're dealing with the unknown and do not expect this to go away, leading to many of them looking to go away. At the same time, the new blood at the Firms wouldn't know anything else, and it could only get better from here. All in all, the audit factory continues to churn, like it always has.