July 3rd, 2009 MJRamos
I was talking to someone the other day about “positioning” a planned service offering and asking questions about how his firm is “positioned” against others. Here’s what I mean.
A lot of firms have what I think are very generic brands and firm positioning statements. They’ll emphasize their customer service, say (”customer service is our focus!”) or their partners and employees (”our people make the difference”). The problem is that all the other firms are saying the exact same thing. So how do you differentiate yourself?
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July 2nd, 2009 MJRamos
I’ve been working on creating a second edition to the AICPA Risk Assessment Audit Guide, and it was in that context that I read Nicholos Kristoff’s column in today’s NYT. The key point.
Evidence is accumulating that the human brain systematically misjudges certain kinds of risks.
And then this.
Still, all is not lost, particularly if we understand and acknowledge our neurological shortcomings — and try to compensate with rational analysis.
This is the point of performing risk assessment procedures.
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July 1st, 2009 MJRamos
The key to getting a good answer is asking the right question. It all depends on how you frame the issue. My friend Hiram Hasty recently reminded me of this fact.
One of the questions auditors frequently ask is “do I have to do a walkthrough every year?” The answer is “no,” which is usually how I answer the question. The standards do not require walkthroughs.
But Hiram re-framed the issue by asking (in a very Socratic way) “can you meet the audit objectives related to understanding the client and its environment without doing a walkthrough?”
The initial question was “what procedure do I have to perform?” which leads to a very rigid, rules-based answer. Re-framed the issue becomes “what procedures are available to me to meet my overall audit objective?” The resulting answer is better because it forces you to think through the issue and not just reach for a convenient answer.
I was just reading the Risk Assessment Audit Guide, the gray box after paragraph 4.38, which takes on the issue of the client’s documentation of its internal control. The question people ask is “my client is a small business that doesn’t document its internal control. Is that a material weakness?”
The audit guide offers the following.
To evaluate whether inadequate documentation is a control deficiency and, if so the severity of that deficiency, it is helpful to consider how the client can meet its control objectives without adequate documentation.
The advice in the audit guide is to take the same strategy Hiram took with regard to walkthroughs. Reframe the issue. Start with overall objectives and proceed from there.
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June 29th, 2009 MJRamos
I’m talking about an in-firm collaborative work site or social networking site or something similar. If you build one, will come?
No. At least not with a whole lot of work on your part. This isn’t Iowa, Shoeless Joe.
More and more firms are going down this road, and I think it’s a good one. But you really need to think it through.
The biggest problem people make is they think they’re building a website. You’re not. You’re building a community that just happens to gather on a website. It’s not about the technology. It’s about the people and the social contract between them.
I’ve been in on a few planning sessions of organizations that get enamored with this technology, and a lot of time is spent on discussing features of the site, “Web two-point-oh” and the like. Forget the features–you can always add or change those later.
Instead, try to figure out how you will drive people to the site. Plan on spending the first 6 months to a year addressing this one issue. There are a variety of techniques and tricks you can use, and you’ll have to use all of them and make up some more. You will have to assign one person the task of driving people to the site and that person will have to be relentless, and imaginative and have a thick skin and a good sense of humor.
If you stick with it, you can create a site that is self sustaining and that becomes part of the culture of the organization. But don’t underestimate what it will take to do that. It will make building a baseball field in the middle of an Iowa cornfield seem like a walk in the park
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June 29th, 2009 MJRamos
Congressman Ed Perlmutter represents Colorado’s 7th district, which is not my district, but close enough. He’s a member of the House Finance Committee and was quite visible during the MTM hearings. Personally, I thought he was guilty of a little grandstanding during the mtm hearings (I wouldn’t tell him that), but overall I think he’s smart and genuine, and a good public servant who’s serious about governing. He’s “in it for the right reasons,” as they say. (For sure, I’d tell him that).
So he’s really interested and will play a key role in the regulatory reform legislation. Among other things, the proposal laid out for the president calls for
the accounting standard setters make substantial progress by the end of 2009 toward development of a single set of high quality global accounting standards.
Here’s what I’d like to say to Congressman Perlmutter
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June 21st, 2009 MJRamos
Cut through COSO and SAS 109 and all the authoritative and nonauthoritative guidance and all your forms…the key question is “as a practical matter, what are the most important controls at a small business?”
I’ve been posing this question to a number of top auditors. The most pithy response to date.
I think the core control I want to see, particularly at small businesses, is someone who understands the entire business well enough to recognize unusual trends or transactions. This is usually at the executive level and does not require expertise in GAAP, just a desire to read the financial statements and make sure they reflect what management knows to be happening in the business.
And now the follow up. What questions do you ask to make this assessment? How can you tell if your client “gets it?”
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