[Accountingbeans]

So I’m starting full-time in audit, but realized I don’t REALLY know what busy season is or why it’s busy. People just always talked about it like it was an assumed fact that everyone knew what it was.

So can someone tell me:
1) WHEN busy season is, for both audit and tax (I know they’re different)
2) WHY it’s busy at these times for both audit and tax (what needs to be done by which date, making it so busy?)

Thanks. This is totally something I should know by now

Newbie
BEC- August 31

[Bluetoothray]

Yes. You should know this by now. https://big4playbook.com/accounting/big-4-busy-season/

[Accountingbeans]

@bluetoothray Well that answers some of it, mainly the “when.” But how about the “why”? My basic understanding is that tax returns are due 3/15 for pass through entities and 4/15 for non-pass through. So deadlines to file those, busy season for tax I suppose 12/31-4/15? For audit, most companies have 12/31 year end, so financials are due? When? 90 days? So because auditors need to audit financials, their busy season is generally 12/31-March/early April? (But NFP I believe is summer, maybe 6/30 YE?).

Is that about right?

Newbie
BEC- August 31

[diabloargentino]

Why is it “busy”? Because there is a lot of work to do and not enough people to do it – simple as that.

[Accountingbeans]

@diabloargentino I mean I get that part. My question is more: What deadlines are due, when are they due? Thus answering the “why” of busy season

Newbie
BEC- August 31

[Bluetoothray]

Here's the math. @diabloargentino has it right. There's typically more work than there is staff to do the work, which means each individual staff has to do more work than someone who works a 9-5 job. It's also a money generating machine for partners. I can only speak for Big4 auditors, but I figure it's similar in regional firms, but most if not all staff are salaried. During the months of January through April the client has lots of work to do, instead of hiring more people to split the work over several people the partners work the staff extra hours. A staff might earn $50k in a year whether they work 40 hour weeks or 60 hour weeks. The firm, however, will bill the client for every hour that the staff works. I don't know exact figures but a staff, after discount can be billed to the client for around $250 an hour. So if a staff works 2000 hours a year they make the firm $500,000, and receive a 10th in their salary. Economically it makes more sense for the firm/partners to work their staff to death than to hire enough people to evenly split the work. Voila.

[Accountingbeans]

@bluetoothray I’m sorry if my question is causing confusion. I understand the part about working more because the clients are busy. But my question is WHY are the clients busy during these months? Because financials are due, and therefore we need to audit them by a certain time period? When is that time period? That’s what I’m looking for. Sorry if that wasn’t clear

Newbie
BEC- August 31

[Bluetoothray]

Yes. 10ks are due. Auditors will try to do as much interim testing as possible in order to make busy season easier, but you have to wait till after the year close to audit the financial statements as a whole. That's why that little window is so busy. https://www.sec.gov/fast-answers/answers-form10khtm.html

[Amortized and Energized]

Yes, public companies have to issue their financials and are under immense pressure from SEC, shareholders, bondholders etc. to issue their financials on time and accurately. As a result, the auditing firm is under immense pressure to deliver and this usually ends up in a lot of extra hours for the auditing team.

FAR - Aug 2015 (58), Feb 2016 (81)
u
BEC - May 2016 (79)
AUD - Jul 2016
REG - Aug 2016

[Anonymous]

The 10k, which is an audited set of financials, is due 90 days after the end of the year (3/31), or 75 days for accelerated filers (3/15). Public companies are required to file this with the SEC. This was in your AUD materials.

Private companies are not required to file 10k's, but they may have contractual obligations to lenders or equity owners to issue an audited (or reviewed) set of financials within a certain time frame. The due dates would be found in loan agreements, perhaps in the debt covenants section, or in the ownership agreements.

When the partner decides to accept an audit engagement, they have a discussion with the owners of the company to determine when they need the audit report and whether they are flexible on this date. Those due dates are sometimes specified in the engagement letter.

You might be able to find some of these documents in the client's files, if you are curious, but its the partner and managers who decide when and how to schedule work and staff engagements. Good business practices dictate that a firm should try to schedule interim audit testing and testing before the year end in order to lessen the amount of work required during busy season, if appropriate. But there's a lot of work that cannot be done until after 12/31 and the client closes their books.

[Accountingbeans]

@chynablue Perfect, thank you

Newbie
BEC- August 31

[Author]

Replies