The Rising Cost of Bigger Audits
In their article, “Have Audits Become Too Inefficient and Expensive?” (The CPA Journal, February 2016, pp. 18-23), Arthur Radin and Miriam Katowitz have explored an important topic and offered advice that could prove preventive. It brought back the memory of the first time we lost a substantial and prestigious client because the audit became too costly.
In virtually all cases, if there is no critical or creative analysis, then mechanical calculations are done by computer software, not by people.
For several years I had convinced this client that the audit, although not necessary, was a wonderful discipline for the accounting department and offered a measure of assurance that the financial arm of the company was efficient and well controlled. It was an act of faith on my part that all substantial companies should have a certified audit. A secondary complaint was that, since we billed based on time charges, the longer the audit took, the more the client paid, and so our goals in the conduct of the audit were not well aligned. The only change from then until now is that, as the authors point out, the requirements are greater, and so the danger has increased.