Many small to mid-sized audit practices often find themselves grappling with that familiar challenge, controlling the audit hours without compromising on work quality. Profitability can decline, even incur a loss, from an over-run of the audit team’s work time required to complete audits to the right professional standard.
This dilemma often makes audit partners consider reducing their audit clients or outsource them altogether or even just give up auditing.
What if the issue is not the audit work itself but how it is managed? Reducing audit hours without substandard audit work is possible. The key lies in adopting a more structured approach, which combines proactive planning, cloud-based audit tools, time budgeting and clearer co-ordination with the clients.
Changes you can make
The revenue of global accounting services grew at a Compounded Annual Growth Rate of 3.1%, reaching an estimated $643.8 billion, which includes an estimated 4.8% increase in 2025 alone.
This demonstrates an apparent rise in demand, along with the opportunity to make auditing a more profitable section of your practice if you implement certain best practice.
Create a proactive time budget strategy
The International Standards on Auditing (ISAs), particularly ISA 300, require firms to establish a time budget as part of their planning process. It also advises routine inspection of files by regulators to ensure that this time budget step has not been overlooked.
By defining expected hours for each audit section at the outset, the Senior Statutory Auditor (SSA) sets clear performance benchmarks and flags potential bottlenecks.
A proficient SSA would, from the outset, collaborate with the audit team to agree on realistic hour allocations. Each section of the audit file would have clear and justified time expectations assigned to each audit team member. This must be based on the experience of the previous year’s audit, the client’s risk profile and the audit team’s capability.
Otherwise, time budgets are invariably too optimistic. Why not make this process a part of your audit firm’s culture? It is essential for you to enable your audit team to understand and stay within the agreed-upon time frames.
Get your audit teams to track and communicate effectively
Engage clients in pre-audit preparation
A significant portion of the audit is often spent chasing incomplete records or correcting poorly prepared documentation resulting in time waste. Therefore it is best to involve clients early.
- An aged analysis of debtors and creditors
- Double-check the stock valuation calculations
- Log investment market valuations
- Provide copies of all correspondence of disputes and warnings
- Identify and document fixed assets with their photos (InPractice Audit Files has photo upload feature)
- Back up the “going concern” justification with a cash flow forecast with “what-if” scenarios, required by ISA 570 of the International Auditing and Assurance Standards Board (IAASB).
Use cloud-based time budgeting tools
To control audit hours while maintaining quality, audit firms require more than spreadsheets and a trail of emails.It works seamlessly in the cloud-based InPractice Audit File with an in-built budgeting tool that facilitates real-time collaboration.
For a deeper dive into cloud-first auditing and practice growth, read our E-mag Keeping in Contact.
