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Budgets

The competition amongst the firms are getting tougher, and I really don't like what it's doing to the auditing model. Firms are coming in and under-cutting other firms by offering the audit at half the price of the current audit fees charged by the existing firm. First off, there's a constant pressure on budgets, and the firms keep adding checklists after checklists and other necessary procedures to opine on an audit, effectively telling us to do more work in less time. Like the Wolf says in Pulp Fiction, "That's thirty minutes away, I'll be there in ten".


Secondly, given the lack of new clientele, firms are going in and undercutting each other like crazy. It's not like our budgets or our fees for that matter are too high. I mean, take a look at the invoices you pay your law firms. I don't hear any complaining there.
Look, I like competition, I'm all for being efficient. But this industry isn't like a grocery store - we sell cheap, so shop with us. Here's the thing, we audit financials not for the Company, but for the use of shareholders (public companies) and banks/investors (private companies). So for Companies to come in and almost force our hand to reduce hours, and in effect, reducing our audit work, we're not doing the best we can. As a user of financial statements, I'll be concerned. I mean, I'm okay if the Company I own has to pay 10-20% extra to make me feel comfortable relying on the financials.
I know this country is divided, 50% is for regulation and 50% is not. I'm all for deregulation in most industries, but there are certain industries that shouldn't be fully influenced by the free market, audit being one of them. There's a reason cops aren't run by the private sector. That being said, how about using an independent arbitrageur to mediate between clients and auditors to set audit fees. The independent can look at the required work and decide if the fees are too high/low, thus setting a range between which we can negotiate.
Getting pressured by management to do what we can to finish on budget is extremely stifling. I'm not blaming management, I'm just blaming the budgets. We seem to be going down a dangerous path that compromises the quality of our audit work.
PS - I can't believe I just said that

Comments

Anonymous said…
Very insightful. This is why I keep reading this blog. Thanks.
Anonymous said…
Well said. At the same time the firm's are taking on clients that they would never have accepted in years past. In combination with the fee pressure you talk about, it's a recipe for disaster. The focus is all about revenue growth these days. Which makes me think that it's only a matter of time before some new accounting scandals erupt in the next few years. How quickly we forget.
Anonymous said…
Learn to deal with it. Being smart about which corners to cut to beat budget is critical in this profession, which is entirely driven by appearance. Even the most inadequate jobs can be disguised by a neat work-paper presentation. Sorry for being brutally honest and a reviled saboteur of future budgets. Dirty little secret is that we get promoted when we ought to be fired. Even “our kind” has an attack of conscience now and then.
notfordisplay said…
That's exactly what i'm questioning. Learning to deal with something that's inherently flawed is a cop-out.
Kevin H said…
The things we do for this job...
Anonymous said…
I have a question I'm hoping you can answer for me, how many emails does an auditor or an accountant get per day, on average?
itauditsecurity said…
Good post.
Not sure how you can blame the budget, but not management, as one follows the other (unfortuntately, it appears backward).

It makes you wonder how many exceptions get "overlooked" simply because dealing with them and doing the extra testing would take too much time.

So the clients haven't complained or noticed the decline in quality?
This comment has been removed by a blog administrator.
Amanda said…
I just happened upon your blog after randomly googling Peter Olinto. I'm going through Becker now, and I completely agree with your post back sometime in 2007. You have a very entertaining (and harshfully true) blog. I'll continue reading.
Anonymous said…
i agree! the number of people assigned on each job gets smaller each year. we have to cut corners and reduce the quality of work in order to meet the crazy deadlines. i really worry about this profession
kushal22 said…
This comment has been removed by the author.
Anonymous said…
Hi, I really enjoy reading your blog.

I have a question for you. You have written about how boring and tedious audit can be, and how some graduates drop out after a year or so. I wanted to know if it is possible to join a different business stream if you don't like audit after a year or so. For example are there opportunities to move into Consulting or Financial Advisory?

Also how closely do you work with other business streams, and do you end up having good working knowledge of what exactly they do?
it's good to see this information in your post, i was looking the same but there was not any proper resource, thanx now i have the link which i was looking for my research.

Accounting Dissertation Proposal
Anonymous said…
Here is a good article from CFO.com on this topic. Your post reminded me of it. Its a good, quick read. ---> http://www.cfo.com/article.cfm/14485723?f=search
notfordisplay said…
Emails - really depends on your level at work. It increases as you progress within the firm since you're dealing with a multitude of clients and personnel at the same time. I avg. 30-40 work-related a day probably.
Dissertation said…
I am very thankful to you for posting such stuff.This really help me lot.

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