[Finally_a_CPA]

Hey everyone,

So I have been in public for over a year. I was working mainly in taxes but now my firm is having me help with audits. The thing is, I know that in auditing, it is important to understand why balances in accounts decrease/increase dramatically. For instance, if I’m looking at office expenses and it increased by 80k (assuming my materiality threshold is 50k), how do you guys handle this?
So let’s say I have 20 accounts with big changes, do you guys talk to the client about all of these accounts (assuming the changes in the accounts are not clear to you)?
I just feel weird about emailimg the client asking them to explain increases/decreases in so many accounts.

[reallytired]

I usually ask about the accounts with the largest changes. I would ask about enough changes to bring the total untested amount below materiality. I.e. if accounts A, B, and C all changed by 12k each, get explanations why they changed and ask for supporting documents to corroborate the changes. This means you'll have tested 36k, bringing total untested amount to 44k (below materiality).

Asking about every single account is definitely overkill, but maybe see if you can get an overall answer as to the change?

Disclosure, I have only been auditing for a year now so there may be better ways to test but this is where I usually start.

B 10/29/16
A 10/1/16
R 9/2/16
F 7/26/16

[Anonymous]

I would look at the general ledger and do a bit of digging. Usually you have a materiality threshold for individual transactions as well, and depending on the account, materiality can vary.

You can tell if the variance is due to a few big transactions booked to that account or if it's a bunch of smaller transactions that might have been booked in the wrong place. Or it could even be an error and an adjustment to the account might be required.

You should write down what you find out on your own from doing a bit of digging and run it by your senior or manager unless they've already told you to contact the client directly with questions.

[STP]

This is what I normally do.

Hi John,

Please see attached and provide explanations for the variance. (Excel file with 100 accounts that include variances over ISI or 1/3 TM and 10% or 20% whatever threshold you use)

You should never feel weird about asking a client to provide you audit evidence no matter how little or large your request is. You want sufficient appropriate audit evidence and if not asking the client to provide all those variances results in insufficient audit evidence then you may be in trouble. It's kind of like asking the client to provide you with 100+ signed confirmations to send out. You shouldn't feel weird about asking them to provide you with that because it's so many. You shouldn't ever feel weird about requesting any amount audit evidence from the client (sorry just need to repeat this).

[Finally_a_CPA]

Thank you all for your great advice!
I hope it will eventually get easier. I just know that auditing is not really my thing but I guess I'll have to deal with it until I'm ready to move on to another firm.

STP: You're right! I shouldn't feel weird about it. I will definitely do what you suggested.

[GrumpiestMage22]

I second what everyone else has said, don't feel weird and make sure you get a sufficient explanation for the variance. Maybe ask a Senior or Manager about possibly fluctuating in groups. I don't know what software you are using, but the software that I use lets me group accounts, for example, contribution revenue, program revenue, etc. This would let you flux in total rather than individually.

[Author]

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