By February, your team is looking for more hours in the day. Client requests are piling up, selections are waiting for support, and partners are asking questions your team could have resolved months earlier.
Some of that work could have been completed at interim. Some could have been eliminated with better evidence during planning.
Everyone wants a better risk assessment. The obstacle is the work it takes to build one: gathering evidence, preparing rollforwards, explaining account movements, and investigating unusual activity. Under pressure, last year's audit plan becomes an easy starting point. Teams spend valuable hours testing areas with little risk of material misstatement while the issues that need attention wait until busy season.
For December 31 audits, September 30 is an opportunity to change that. Audit Sight's Cash Proof and new Risk Assessment help your team move more testing into interim and use the resulting evidence to focus the remaining audit.
Bank statements and the GL. Your team already requests both. Start with January through September data.
Cash Proof matches bank activity to recorded transactions and identifies reconciling items and noncash activity. Your team can review the results, investigate differences, and perform relevant revenue and expense testing through 9/30 while there is still time to resolve client questions.
The new Risk Assessment carries that evidence into A/R, Fixed Assets, Debt, and Equity. Account movements, cash-supported activity, and items requiring further attention become available at the click of a button.
Instead of spending hours assembling the evidence before deciding what to test, your team can spend that time evaluating what the evidence means. Which movements are already supported? Which exceptions need investigation? Where does the audit need more work?
In a recent case study, Audit Sight found a team was able to eliminate 130 sample selections across six audit areas by utilizing the cash proof for detail testing and their risk assessment procedures.
Each eliminated sample means less support to request, fewer client follow-ups, and less work to prepare and review. Here is how those reductions can add up for a team performing an AICPA audit over a Healthcare Organization.
Evidence of collections and risk assessment can inform the testing of receivables and reduce the need for separate selections where the relevant assertions are already supported. Your team can focus further work on unpaid balances, unusual items, and questions the collection evidence does not answer. For the engagement, the team reviewed the AR rollforward, saw all increases went to Revenue and all Collections were vouched to cash. This allowed the team to no longer require a high level of assurance from confirmation testing. By changing the desired level of evidence, the samples at year end decreased based on their sampling methodology.
Cash Proof connects recorded revenue with cash activity and helps identify the differences requiring attention. That evidence can reduce overlapping detail testing and direct the team toward exceptions. Revenue occurrence and cutoff can remain high risk even when the testing response changes. This resulted in the team reducing their sample size in half as they are no longer worried about collectibility.
The rollforward separates cash-supported activity from noncash movements. Where Cash Proof provides relevant evidence over payments for additions, the team can avoid repeating that bank-vouching work and focus on matters such as capitalization, disposals, and unusual adjustments. The team was able to completely remove fixed assets from scope.
Cash evidence supports borrowing and repayment activity. The debt rollforward helps the team identify movements that need explanation, including noncash changes. Reusing that evidence can eliminate duplicate selections over cash movements while the team addresses agreements, covenants, and classification. Traditionally, the team has vouched selections of borrowings and repayments.
Cash-supported contributions and distributions can be distinguished from noncash changes. Your team can use the evidence already obtained and direct further procedures toward authorization, classification, and unexplained equity movements. Traditionally, the team has vouched selections of contributions and distributions.
Cash Proof helps connect recorded expenses with bank activity and surface reconciling items. Where that evidence supports the planned objective, it can reduce duplicate vouching and focus further testing on exceptions, noncash activity, and remaining cutoff or completeness questions. Traditionally, the team has vouched selections of expenses.
130 fewer selections. More time for the areas that need an auditor's judgment. The reductions depend on the engagement, the assertions being tested, and the evidence obtained.
The missed opportunity is waiting until year-end to obtain evidence that could change the audit plan today.
Start with one December 31 engagement. Request January through September bank statements and the GL, run Cash Proof and Risk Assessment, and review the results with your team.
What have we already supported, and what is left to test?
Use the answer to complete appropriate interim procedures and update the remaining audit plan. At year-end, address the final three months and changes affecting the interim results, including new activity, revised materiality, and entries affecting the period already tested.
Learn how Cash Proof Risk Assessment helps teams reduce audit testing, or contact your Audit Sight Customer Success team to get started.
Put September's evidence to work before February's hours are spoken for.
