By alan w. Anderson

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© Copyright 2012 Alan W. Anderson, used with permission.

WHAT BRINGS VALUE TO THE AUDIT?

VALUE-BASED AUDITS?

BY ALAN W. ANDERSON

ANDERSON’S AUDIT EXPRESS

B

usiness owners and organizations typically regard the annual audit as a cost, or “a necessary evil,” that adds little or no value to the 

business.  In contrast, auditors routinely “say” that their audit is different and does add value to the business or organization. To 

be sure, all audits have a purpose as they are generally required to maintain financing or to meet regulatory requirements. But is 

the auditor truly adding value?

There are numerous dictionary definitions of “value,” all centering around the concept of something being useful. “Adding value” then 

should mean to make something more useful.  Do you set out on every audit with the plan to add value by making it “more useful” for 

your client?  

Unfortunately, most clients will say that the audit is not adding value to their decision-making processes. In a 2008 survey conducted by 

KPMG of 200 small to medium-sized companies, 56% saw the audit as a routine chore that varied little from year to year. Just over 60% 

of the companies said their auditor did not raise any issues or ideas that were used in their business to enhance their processes or decisions.  

By taking the opportunity to truly understand your client’s business and going above and beyond the mandatory requirements and typical 

“accountant’s speak,” you will bring value to the audit. As you gain new insight into the client’s business and operations, you will continue 

to increasingly add value to the audit.  

The remainder of this article discusses ideas on how to gain business insight during the audit process and steps to follow to facilitate a 

meaningful discussion with your client.

© Copyright 2012 Alan W. Anderson, used with permission.

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© Copyright 2012 Alan W. Anderson, used with permission.

WHAT BRINGS VALUE TO THE AUDIT?

VALUE-BASED AUDITS?

THE

 INTERNET IS YOUR FRIEND

 

Gathering business insight is just one click away. 

Advances in the speed and functionality of search engines 

on the internet are an invaluable tool for the auditor. The 

auditor can quickly gather information about the client, 

their industry, and the general business climate in the area 

where they operate.   

 

This information can be used for two key purpos-

es; namely, 1) to facilitate the identification of risk areas in 

planning the audit, and 2) to gain business insight about the 

client and their industry. Both are important to the audit 

process. The greater the insight about the client’s business, 

the better the audit approach. This will lead to a greater like-

lihood that the auditor and the client will have a meaningful 

business discussion. 

 

It is surprising to me to find out how infrequently 

the auditor uses the internet to gather information about 

their client and their industry. This should be a routine step 

on every audit for audit planning and to gain insight about 

their business. 

 

The amount of information that a business or or-

ganization puts on their website is growing exponentially.  

This volume of information, however, does have its draw-

backs if the auditor spends an inordinate amount of time 

in “hunt and peck” or random search mode.  That is why I 

recommend that the auditor create a targeted and efficient 

on-line research plan.  

Consider the following items in your on-line research plan:

• Client website

• Industry association website

• Press releases

• News articles about the client

• Performance measures

• Economic update in the client market area

 

To better focus your research, start out with the ad-

vanced search feature of the search engine.  For example, 

since I always look for performance measures on my clients, 

I go to the advanced search page and type in the “industry 

and key performance indicators.”  

 

If your on-line research plan is specifically laid out, 

it is also possible to delegate the information gathering phase 

to an administrative person. S/he can go on- line to look for 

recent news articles, updated performance measures, and 

economic updates. 

INVOLVE

 YOUR AUDIT TEAM

 

The audit team needs to know that the partner ex-

pects them to understand the client’s business and to add 

value to the audit by identifying areas where the client can 

improve. Audit staff will not gain a tremendous amount of 

understanding of the client’s business by completing audit 

checklist after audit checklist, so the partner may need to 

jumpstart the process.

 

In my experience, all too often the only client per-

sonnel that the audit team talks to during fieldwork are 

those in the accounting department. So years ago I started a 

process where I assigned each member of the audit team to 

“interview” someone outside of accounting  and to prepare 

a brief written summary of that interview.   

The interview consisted of the following 5 questions:

1.  What is your role in the organization?

2.  In your view, what is the greatest strength of your area 

or department?

3.  In your view, what is your area or departments great-

est opportunity for improvement?

4.  In your view, what is your company’s greatest strength?

5.  In your view, what is your company’s best opportu-

nity to improve upon? 

 

These questions served as an effective way to get a 

dialogue started between the audit team and client person-

nel outside of accounting. They allowed the team member 

to ask open-ended questions that gave them insight about 

other areas in the company which, in turn, helped them 

better understand the client’s business. A better understand-

ing of the client’s business, in turn, caused them to be better 

auditors as well as business advisors. 

 

The next step in my approach toward getting the 

audit team involved was to have an open- ended discussion 

about what they learned about the client’s business. At the 

end of every audit, I would convene a meeting of the audit 

team. We would start by discussing the results of their inter-

views of client personnel and what these viewpoints meant 

to the business. Finally, starting with the newest member of 

the team, each member completed the following sentence:

 

IF I WERE RUNNING THIS BUSINESS, I WOULD......

 

This process has several benefits. The audit team has 

a much better understanding of the client’s business. The 

team must put on a “business hat” and think like a busi-

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© Copyright 2012 Alan W. Anderson, used with permission.

ness person. This also helps them to become better auditors. 

Most important, the process serves as the platform for add-

ing value to the audit by identifying meaningful ideas to be 

discussed with the client.

COMMUNICATE

 TO ADD VALUE

  

 

Adding value to the audit does not happen by ac-

cident. It happens when the audit team plans and creates an 

approach to make the audit different by purposefully add-

ing value. The use of the internet and involving the team 

in identifying potential opportunities, as discussed above, 

serve to gather information. This information is then used 

to discuss ideas for improvement with the client’s team.

 

This communication must be a two-way exchange 

of ideas between the auditor and the client.  And the ideas 

are just that…… ideas, not answers or mandates. In this 

type of scenario, a PowerPoint type of presentation is more 

effective than a detailed letter because the presentation is 

more flexible and the creative process can expand during an 

idea exchange where the client provides additional insight. 

A letter is seen as a formal document that may inhibit open-

ended dialogue and discussion.  

 

For every audit, I recommend a standard Power-

Point type of presentation be used to discuss the audit, in-

cluding both required communications as well as ideas for 

business improvement. This is the best means to facilitate 

open-ended, two-way communication.  

The following outline is recommended for each presentation:

•  Results of the audit

•  High level overview of the financial statements

•  Industry and/or competitor trends

•  Economic climate

•  Key Performance Indicators (KPI’s) compared to the 

industry (both financial and strategic)

•  Operating improvement ideas

•  SAS 115 communication

•  Governance communication

 

The format for the presentation should be in bullet-

point format without excessive wording to stimulate discus-

sion rather than to force a lot of reading.

IN CONCLUSION 

 

The best client relationship is one that is long term.  

Long-term relationships need to be constantly nurtured and 

cared for. Providing total client service to your clients will 

promote long-term client retention. In addition, total client 

service will move you out of the stereotype of being seen as 

just another provider of commodity services.

© Copyright 2012 Alan W. Anderson, used with permission.

CLICK HERE TO REGISTER

FOR THIS SELF-STUDY SESSION

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© Copyright 2012 Alan W. Anderson, used with permission.

“WHAT BRINGS VALUE TO THE AUDIT?

VALUE-BASE AUDITS?”

DESCRIPTION: 

This session discusses ways to bring better value to the audit and the concept that is often times referred to as 

“value based audits.”

COURSE TYPE:

 

Self-study

CPE HOURS:

 

2

DESIGNED FOR:

 

Audit partners, managers and staff who want to provide high quality client service while streamlining and mak-

ing their audit process more cost effective.

OBJECTIVE:

 

This session will help you and your audit team, design, build, inspect and deliver an efficient audit that has more 

meaning for your client.

PREREQUISITES:

 

Experience as a member of an audit team.

ADVANCED PREP

:

 

None.

ANDERSON’S AUDIT EXPRESS

SELF-STUDY 11