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For one reason or another, most organizations prepare reports on their financial performance. These organizations often engage a CPA to audit their financial statements. The CPA will issue a report that provides the highest level of assurance that the entity’s financial statements are presented fairly and in conformity with generally accepted accounting principles.

But let’s be honest. The audit historically has been viewed as a necessary and often-times static activity. It’s been called a commodity . . . a cost of doing business . . . even a “necessary evil” needed to get your loan. The good news is there are accounting firms that are working to change the audit, turning it into a value-added tool for the organization it represents.

Recently, Practical Accountant, a prominent magazine in the accounting industry, published an article that featured accounting firms making significant changes in the way their firms approached an organization’s audit. Taking advantage of the latest technology and using operational and strategic, as well as financial information obtained to better understand the client’s business, these firms have been able to assist their clients in facing many of their overall business challenges.

Amper is proud to have been selected by the Practical Accountant regarding their cover story article. The following excerpts reflect our efforts in providing a more valued audit product.

Bill Kraut, Partner in Charge of Quality Assurance at Amper, Politziner & Mattia, says his firm’s approach to auditing has been significantly re-engineered.“It is company oriented in contrast to financial statement oriented. We require a true understanding of the industry and the company, from the internal control environment and systems processes to information flow including the computerized end. We get involved with electronic data interchange (EDI) and e-commerce . . . Most people think of e-commerce as retail sales, but it is obviously so much more. It’s wholesale purchasing, wholesale selling, distribution channels, all sorts of things where the Internet can be functional.”

For each audit the firm performs, Amper assembles an integrated team of specialists with knowledge of the client’s industry, issues and benchmarks. The team works to address the issues that are unique to that particular company, which produces a better understanding of how a client operates within its industry.

Kraut explains how his firm is designing and utilizing effective analytical procedures. “They’ve always been around but they are getting much more sophisticated. For example, if a client normally ships in truckloads of $10,000 orders, I can look at sales invoices and anything smaller than $10,000 I should investigate. If all of a sudden the client is shipping in $1,000 orders instead of $10,000 orders and getting the same margin, I can tell my client maybe they have a group of customers where they’re shipping all $1,000 orders instead of $10,000 orders and getting the same margin. Maybe they shouldn't be getting the same margin because now there is less than a truckload and they are most likely paying a higher freight cost.”

Reengineering the audit process means taking advantage of the latest advances in technology to benefit the client. Instead of having to rely on printouts of spreadsheets with an organization’s financial information, data can now be extracted from a client’s computer system and manipulated and analyzed in a number of different ways. This enables an organization to view data in ways that benefit the client in making strategic and managerial decisions.

Kraut indicates that “We’re learning how to better use data extraction manipulation software to provide value-added information to clients. We can do things such as monitor slow-moving goods and correlate purchases of goods with sales of goods. That is, are you buying what you are selling? It is part of an audit but to what degree? Clients will ask us to do more with this and refine it further after we discuss it with them.”

Like most things today, even the audit process has been affected by the Internet. Amper audit teams utilize the Internet to do benchmarking studies, to gather industry information and search databases. These tools add value to the final audit product as they effectively capture, measure and point out areas that need improvement or change. They identify performance drivers and help the auditors understand the dynamics of the industry and what the key drivers are that may impact the business in the future.

Kraut says that, “An audit is a license to dig deep into the soul of a company and see everything there is. What better way to find things that a client truly needs? We don’t simply tell them to reconcile petty cash anymore. We make real meaningful recommendations as to areas they should look into to help their company grow and succeed.”

The audit is changing. It’s no longer solely a “look back,” but represents an opportunity to significantly help clients make decisions affecting the future. With the knowledge an accounting firm gains through the new and changing audit process, it provides clients with business solutions to strengthen management, improve operations and enhance controls.

If you have any questions please contact Bill Kraut at the Edison Office 732.287.1000.