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Advice to the Lovelorn, or
“Why Is My Auditor Acting This Way?”
By B. Jennine Anderson, Managing Director
O ften when
attending
continuing educa-
tion, networking
and community
events, I engage in
casual conversa-
tions with CEOs
B. Jennine Anderson and finance people
from nonprofit
organizations. Eventually they will
start talking about their relationship
with their auditor. More and more
they describe a certain behavior, and I
end up explaining what has hap-
pened in the auditors’ professional
life that is making them act that way.
So, short of actually starting an advice
column dedicated to auditor/auditee
relationships, I thought I would write
this column to explain why “your
auditor is acting this way.”
The big picture answer is that the reg-
ulatory climate the auditors must
operate within has tightened dramat-
ically in the last decade. There was
the Sarbanes-Oxley Act, the Public
Oversight Board’s Panel on Audit
Effectiveness, AICPA Independence
initiatives and GAO Yellow Book
revisions, to name a few examples. A
result of all of this attention directed
For information contact Jennine Anderson at 410-720-5220 or email janderson@uhy-us.com.
UHY Advisors brings specialists in nonprofit solutions in accounting, audit and tax.
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on the auditors was a lot of new
Statements on Auditing Standards
(SAS) describing how auditors must
perform audits. Although new proce-
dures and practices have been intro-
duced in the last five years, the big
changes started with Calendar 2006
audits with many more occurring
during Calendar 2007 audits.
Now with that in mind, let’s look at
some of the ways your auditors’
behavior may have changed. Here are
three questions from fictitious audi-
tees about their fictitious auditors.
UESTION 1: My auditor used
Q to be really helpful. She would
make a lot of the adjusting jour-
nal entries. I am really busy and have a
hard time getting ready for the audit;
and there are yearend entries I really
don’t have time to do or don’t know how
to do. Well, this year, she warned me
before fieldwork that she couldn’t do that
anymore and then when she came to
fieldwork and she still had to make
entries, she wrote me up in two letters
that she gave to the board. One letter
talked about material weaknesses and
the other letter listed all of the adjust-
ments she had to make during the audit.
I did not appreciate that one bit. It made
April 2008
Vol. 1 • No. 3
L
Fax 410-381-2524 www.uhy-us.com
me look bad in front of the board. What
is wrong with her?
NSWER: Well, several things
A are going on here. Your audi-
tor must be independent. She
cannot be independent if she is audit-
ing the work that she did. SAS 112,
which talks about required written
communication of internal control
deficiencies, says that if you use the
auditor to fix your financial state-
ments then you have weaknesses in
your internal control over financial
continued on page 2
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UHY has a full staff of account-
ing professionals who can pro-
vide excellent support to your
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keepers or experienced CPAs,
just call us and we’ll help.
We also provide consultation
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controls, operating procedures
and accounting systems.

Advice to the Lovelorn,
or “Why Is My Auditor
Acting This Way?
continued from page 1
reporting, and that must be reported.
SAS 114 requires your auditor to
communicate with those charged
with governance matters related to
the audit that are significant and rele-
vant to those charged with oversee-
ing the financial reporting process.
Your auditor is supposed to report
such things as whether you were
ready for the audit, whether you
were cooperative and what adjusting
journal entries she had to propose to
correct your financial statements. My
recommendation: The best way to
avoid these comments is to be ready,
be cooperative and be accurate.
UESTION 2: The audit seems to
Q go on forever even though we
think we have given our auditors
everything. They need things from us ear-
lier and keep asking almost up to the time
when we get the final financial state-
ments. In the past they would come for the
fieldwork and then go away and do what-
ever it is they do. But this year they need-
ed to be onsite prior to the normal field-
work date, and we had to answer multi-
tudes of questions about procedures. We
even had to show them proof that we were
following the procedure. In addition, they
refused to even start fieldwork unless we
gave them a completed trial balance, and
they said getting it the night before was
not good enough. Then once they left, they
kept asking us to update things. What is
going on? They seem intrusive and take
up too much of our time.
NSWER: The new SASs
A require your auditor to obtain
an appropriate understanding
For information contact Jennine Anderson at 410-720-5220 or email janderson@uhy-us.com.
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and its subsidiary entities offer services from offices across the United States. UHY Advisors, Inc., and its subsidiary entities are not licensed CPA firms.
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of your organization and its environ-
ment, including its internal control, in
order to assess the risk of material
misstatement. The checklists help
your auditor understand and docu-
ment what your controls are. Your
auditor must figure out if you are
doing what you say you are doing
and then document that also; thus, the
request for proof. Your auditor needs
the trial balance to perform required
analytic planning procedures. Plan-
ning has to be done prior to the audit
fieldwork, obviously, since the results
are used in planning your audit. In
the past your auditor had more
options as to audit approach. Now
there are fewer options and more
mandatory requirements. My recom-
mendation: Taking this reality into
account in your audit scheduling will
make for a smoother audit process.
Expectations of audit committees and
boards with respect to deadlines may
need adjusting to accommodate these
requirements for additional lead time.
See, one of the reasons for the docu-
ment requests at the end of the audit
is SAS 103, which changed the dat-
ing of the auditors’ report on audit-
ed financial statements. The report
does not get dated until all evidence
needed to issue the report is
received. That date is much later
than the old dating convention (last
date of fieldwork). The auditor is
required to update procedures to
the date of the report. So a later
report date means a longer period of
updates. It is in your best interest,
and your auditors’ as well, to work
hard to get all evidence together in a
compressed time period. Aggressive
follow-ups on confirmations, legal
letters and any open items should
make life easier for each of you.
April 2008
Vol. 1 • No. 3
UESTION 3: I get really
Q annoyed when our auditors ask
for items they did not put on
their Client Responsibility List. We pride
ourselves on being totally ready for the
audit, but the auditor asks for extra
items. Also, during fieldwork the junior
audit staff asks for backup or proof when
I explain why things are the way they
are. Why won’t they take my word for it?
NSWER: Yes, we auditors are
A not perfect, and we some-
times forget to ask for items
that we know we need. However, the
new SASs may be part of the reason
you are asked for additional items.
SAS 107 tells your auditor that
throughout the audit he should be
reassessing the audit plan as he gains
more information. So he would not
know at the beginning of the process
all of the documentation that he may
need. Also, your auditor may have
deliberately not requested the addi-
tional information. The new SASs tell
your auditor to introduce an element
of surprise relating to the audit pro-
cedures. It is not a surprise if you are
told all procedures in advance. There
should be uncertainty. Finally, the
audit juniors have been reminded in
the planning meetings that they
should be professionally “skeptical”
of your answers and must obtain evi-
dence that your statements are cor-
rect. They must document whatever
evidence they are shown.
To all of you reading this column, my
hope is that you understand a little
bit more now that we auditors are not
acting this way just to make you mis-
erable or because we are disorgan-
ized or are poor planners. We also are
struggling to understand and imple-
ment the new requirements. Like
anything new, the process should get
easier with practice and cooperation
and planning. Let’s hope!