A Brighter Way
A Brighter Way
New risk assessment standards make audits a more valuable business tool
If you have an annual audit performed, there's a pretty good chance that your audit fees are going to increase.
Now that we have your attention, here's why: the Auditing Standards Board of the American Institute of Certified Public Accountants has approved eight new Statements on Auditing Standards (SASs), collectively referred to as the Risk Assessment Standards.
To us, the Risk Assessment Standards mean more detail, more fieldwork, more partner involvement and more time spent on our auditing engagement. And of course, with increased time comes increased fees, but efficiency is and will continue to be a top priority of ours. We will still strive to perform the most cost-effective audit possible.
The standards, which are effective for audits of financial statements for periods beginning on or after Dec. 15, 2006, create an audit process that is now more in-tune with the risks facing your company and your financial reporting. In fact, these standards create great benefits for you.
"Your audit, by design, will now be more tailored to you, your industry and your environment," said Jeffrey H. Tucker, CPA, shareholder, New Philadelphia.
The more risk-specific audits you'll get from now on will also help you improve your internal controls. According to Tucker, the head of Rea's audit practice, we will identify weaknesses and provide a more valuable management letter than ever. "By focusing specifically on your entity and your risk, this extra audit cost, which will probably be between 20 to 50 percent of your current fees, just might be recaptured in the added value," he said.
Basically, the new standards take your annual audit from a requirement that you have to fulfill to a meaningful, valuable tool to improve your business. In a way, you are getting two services in one: an audit of your financial statements and an internal control check-up.
"Fraud is on the mind of business owners and CPAs alike," said Tucker. "And while no audit is guaranteed or even designed to detect 100 percent of fraud risk, these new standards create an environment that makes it difficult for fraudulent activity to go undetected."
The Risk Assessment Standards also help your board and decision-makers by providing more timely and accurate information. "Through better communication of your risks and internal controls, your board members will be more informed," said Tucker, "and can then set better policies."
In addition to increased board effectiveness, these audits will serve as a performance measure - you will have assurance that your people have the right quality of information at the right time. And your auditors will visit you earlier in the year and ask more insightful questions, which will give us a greater understanding of your business and allow us to help you beyond the audit.
As CPA firms across the country squirm in their seats to find the time and resources to fulfill these requirements, Rea embraces them, as they give us one more way to help our clients become more efficient and successful.
We would love to discuss the new standards and fee structures with all of our current audit clients. If you haven't heard from us already, you can expect to be contacted by one of our professionals.
