There may be errors in spelling, grammar, and accuracy in this machine-generated transcript.
Sam Mansour: Welcome back to Auto Smarter, everyone. I'm your host, Abdullah Mansour, and I'm here again with our auto expert, Sam Mansour, CPA. Today we're talking about something that affects nearly every audit team at some point the checklist mentality. Sam, what exactly do you mean when you say auditors are trapped by checklists?
Abdullah Mansour: Yeah. So I know we've [00:00:30] kind of talked about this, um, in, you know, some of the other episodes on in this series because really checklists are they're peppered throughout the engagement, as we all know. And they're very they're very useful tools. Um, they're great to have because it kind of helps guide us along our audit and make sure, you know, they help us make sure that we're not missing anything. So they're really great. But at the same time, they can operate a little bit like a crutch or can be a crutch, because sometimes [00:01:00] we just get trapped in this mentality of checking the box without really thinking about, you know what we are checking the box on, or in some cases where, you know, you're you're confronted with a checklist that you're not as familiar with. And, you know, it's a lot of technical lingo you're not very strong at, um, that maybe that subject area and you just start checking the box. You know, I've, I've especially earlier in my career, I've been through that a lot where it's a newer [00:01:30] subject to me. I'm reading the checklist and I get to a section where I'm just not as strong in it, and I try my best to understand what's going on, you know, out on the time crunch of the audit to try my best to, you know, to, to to answer those questions. But, you know, it just comes with experience and it comes with time. So the checklists are meant to be a guide not necessarily to dictate the audit. So really there there's [00:02:00] something where there kind of has to be this balance between checking the box, understanding them, um, gaining the experience to know what you're checking the box on, and also not just, you know, putting your head down and filling them out, but rather, you know, kind of looking up a little bit and thinking about what you're doing.
Sam Mansour: Kind of thinking through. Yeah. We've talked about checklists just briefly in our previous episodes, and we kind of mentioned like don't pencil [00:02:30] whip them, but then also like really think about what you're doing instead of just marking off like pencil whipping the checklists. So that totally makes sense. So how would you say checklists go from being helpful tools to, uh, like a crutch? Essentially that's kind of stopping you from doing your job properly. Yeah. Like where's that? Where's that happen, I guess, or how how does that happen?
Abdullah Mansour: Yeah. So I think they become a crutch when they're kind of the default, you [00:03:00] know, primary thing that you do in the audit, right? So you are very much confining your perspective of the audit into those checklists. If the checklists say to go look at an area, you go look at that area. If the checklists don't say to go look in. And if they don't, if they're silent on a specific area, then you just don't even consider going in there. So basically, instead of it being a helpful guide, it becomes a literal crutch. And so, you [00:03:30] know, maybe kind of put it in more real world terms, uh, a crutch is something that, you know, you're crushing on. So every time you take a step forward, you're using that crutch to move forward. But what happens if you don't need that crutch? Right. Let's say your leg is kind of healed up and you can walk on your own, but yet you are still using that device, that crutch, even though you don't actually need to. So there's this balance between overreliance on that crutch. You know, let's say physically where [00:04:00] you don't let it go. And also over reliance on that crutch in terms of, you know, the audit documentation itself, you're just not you're not ever thinking beyond that checklist. And so I think that's how it could very easily become a crutch that you just never stop using. You never, you know, you just you're just so confined by it. And so it becomes a crutch that you never get rid of. And when you could, you know, you know, let's [00:04:30] say in a physical situation, normally walk on your own, you're still using that crutch when you shouldn't be. And the audit side, you know, maybe you should be looking up and going and investigating some other areas, but, you know, you're just confined to that checklist. And so it becomes an absolute crutch that you don't get away from.
Sam Mansour: Yeah. So would you say, uh, and there should be very client, uh, driven, right. I'm assuming. Is that kind of what you mean? Where? Like, it could be a crutch. As in, if the client is different than the checklist you should explore. [00:05:00] Like maybe that option more or that you know what I'm saying? Like that part of the checklist that didn't exist. Or if it does exist on checklist, but it's not necessary.
Abdullah Mansour: Yeah. Because I mean, checklists are designed kind of as a textbook, you know, solution. Right? Uh, some people figured out what are some common deficiencies in audits or some common issues, and they put together these checklists. The checklists don't necessarily catch everything. And so from client to client absolutely. [00:05:30] There are differences. And that's a good example for you to point out because um, you know we we think of things that might be different in terms of maybe the technical aspects of auditing. Uh, but when you go from from one client to another client, there's environmental changes, there's maybe unique situations that the checklist doesn't capture from client to client. So that's when you kind of see, um, you know, some big, some big differences. You know, one example of kind [00:06:00] of a trap that I have, you know, seen before, uh, is an audit team marking a controls as, um, as being tested because they completed the checklist. But but basically they were kind of pencil whipping it. But when, you know, when they were asked about the controls and how they worked, they couldn't explain it, right. So they checked the box saying, yeah, this control area was tested, but it wasn't. So the issue is they never really evaluated the effectiveness [00:06:30] of it. They never really looked at it.
Abdullah Mansour: And so it looked proper on paper. But they actually missed testing that control. And there might have been a control deficiency, deficiency in that area because they didn't actually look at it. So that's where, you know, that crutch could actually kind of turn into a trap because they said That A control is tested, but it actually wasn't. It looked good on on paper. In reality, they didn't look at it. And then, [00:07:00] you know, uh, an example would be given on a prior episode. There was fraud at a specific client. Again, not a client. We came to this client later on in the process, but the auditors in the past had checked the box. There were severe control issues at the client which allowed for fraud to occur. And, um, it was just wasn't discovered by the audit team. And the person committed fraud for 4 or 5 years. And I think the auditors just kept coming in and checking that box. Right. Check check check. And it might have been the same auditor. [00:07:30] Recurring engagement. They got comfortable, they started checking it. And that's a perfect example where it became a severe, uh, crutch that led to this fraud not being caught over the course of 4 or 5 years.
Sam Mansour: Yeah, that totally makes sense. I'm not I'm not in auditing or the tax base, but I helped a client create a create a checklist. And they were they started using it and then they were like, well, I did my checklist. I was like, yeah, but you have different clients. And so they were having a hard time breaking out of [00:08:00] that mindset. What would be something? Because that is a huge deal, right? To keep that in mind. So how do you help auditors break out of that mindset of just like this is the checklist, I'm gonna follow it.
Abdullah Mansour: Yeah. So, you know, I think there's a variety of kind of root issues. Sometimes the the staff member or team members are just inexperienced. Other times maybe they're experienced, but they're so they come from an environment where they're just bred to live by these checklists. Right. So I think it kind of it's important to understand [00:08:30] their background. So if they're inexperienced maybe we need some training. So so then when they're filling out these checklists they understand if they come from a background where they are, um, just used to filling out checklists and using them as a crutch. Well, okay, now we know that we have to break them of that bad habit. Uh, but in either case, I think it's really important to understand why behind each procedure. So if we are completing a step on the checklist, well, what's the reasoning for that? Right. If someone [00:09:00] if someone is asked to do something, um, and they don't really know why they're doing it, it's kind of a problem, right? Because yeah, it's difficult to understand the context, the background, the purpose. So I think it's good to ask a question, what is this step designed to accomplish and what risk are they designed to address? Okay. So what's the goal here. And what's the risk that they're that we're trying to address.
Abdullah Mansour: Those [00:09:30] two things are really important because then it helps you think about the why. Okay. And then managers and partners need to challenge the team with follow up and deeper thinking. So if we're filling out the checklist or we're doing procedures in the field, managers and partners and senior level people can, you know, let's say someone's filling out a checklist or testing cash or testing accounts receivable. They can ask them, hey, you know, what did you think about this section? Do you have any [00:10:00] questions on this? Have you looked into this kind of that little bit of that? Um, like pushing them a little bit beyond the checklist with real life questions that that challenge them to think deeper about the checklist. And then, of course, when you get to the review stage and you're reviewing, uh, those checklists, you can ask those questions then. But sometimes if those questions are asked at that time, it's kind of scary because you start to ask these deeper questions in the review stage. And maybe we actually miss [00:10:30] something, which, I mean, that's not an excuse not to ask the questions, right? Um, but ideally we want to be asking them earlier on in the process.
Sam Mansour: And that makes sense. I just imagine if I'm a new auditor and I have a checklist, my first thing would be just to follow that checklist. And so it sounds like training is a huge part of that of using a checklist properly and also maybe a big part of its culture. Right? Like creating a team environment where thinking is expected and not optional. Is that correct?
Abdullah Mansour: Yeah. I mean, [00:11:00] you know, if, if the if the tone at the top from the partners and the managers and the people running the show is make sure you fill out these checklists, make sure they're done correctly. Make sure every box is checked. Just do it. And I've been, you know, mentored by people like that. Then you have this immense amount of pressure to just check those boxes. Boxes. If instead the culture of the firm is more so in line with, you [00:11:30] know, that deeper thinking, that curiosity, that judgment, that dialog, you know, between the team, that's a big difference between pushing people and the tone of just fill out the checklist. A lot of times, unfortunately, in public accounting, That kind of curiosity. That dialog is seen sometimes as a waste of time because it takes up billable hours, right? Uh, and sometimes we have these budgets that we're trying to meet, and it [00:12:00] puts pressure on the team. You know, I worked with a guy this was many years ago, and he was probably more, you know, leaning to the side of the curiosity to to the point that it was just, like, unreasonable, right. He would just spend hours and hours and hours thinking about things, researching things, going down rabbit holes.
Sam Mansour: Kind of over the top. And that it's a shift to the other side of what you're like. Not not a checklist, but they're going the exact opposite direction where they're thinking, wait, yeah.
Abdullah Mansour: There's no cap, just completely [00:12:30] on the other direction. Uh, and that just. Yeah. And so the tone at the top was, hey, buddy, you know, like, that's like you're going, you're straying way too far. Then the other example are people that just fill them out and you ask them questions and they have no idea beyond, you know, the checklist.
Sam Mansour: Which is terrifying.
Abdullah Mansour: Exactly. Because obviously they don't really know what's going on around them, but they're just filling this out and they're doing the minimum job here if they're even doing that properly. And so I [00:13:00] definitely think it's a balance. It's a it's it's it's difficult, you know, in the leadership of a firm to, to set this good balance. Uh, part of it I think is properly pricing, uh, audit engagements. Some firms will tend to price engagements very low. And so let's say, for example, your budget is $5,000 for an engagement, when really it should be 15,000. And you're trying.
Sam Mansour: To [00:13:30] stick.
Abdullah Mansour: Within that $5,000. I mean, that is so difficult because you're cramming, right? Something that should take you three times longer. Right? But you can't you didn't price it properly. You didn't go to the client. You didn't. You didn't price it properly with them. Uh, so let's say you're.
Sam Mansour: If so, you're under bidding a job and you're trying to stick within that bid. Then essentially is what you're doing right?
Abdullah Mansour: Exactly. And then you can run.
Sam Mansour: Into great.
Abdullah Mansour: Quality issues. Yeah.
Sam Mansour: Quality. Yeah. Yeah. [00:14:00]
Abdullah Mansour: Because let's say as a, as a, as a firm, your target is $150 per hour billable. Right. You're targeting to bill 150 on average across different team members. And so in that in that example, if you properly bid the job at 15,000, you would get your 150 an hour. But because now you're bidding it at 5000. How the heck are you still going to get that 150 an hour, right? If those are the hours that it's going to take. So the reality is, if [00:14:30] you did the job and the time that it should take, now you're getting 50 bucks an hour.
Sam Mansour: Yeah. So you're just cramming it.
Abdullah Mansour: But so but what what teams do is now the partner groups are not they're not happy with that 50th per hour. Yet they bid the job super low, so they add pressure to the team to get up to that 150, even though it's extremely unreasonable to do that because they literally, they quite literally need three times the amount of hours to do this. But but they're not allowed to do that.
Sam Mansour: Yeah. [00:15:00] So checklist dependance can be very or I guess. Yeah. If you're super dependent on a checklist like me very very dangerous. So what are some steps that firms can take to, uh, slowly move away from the checklist dependance.
Abdullah Mansour: I think that having kind of piggybacking off of what we just talked about, I think having a flexible budget or a big enough budget to do the work properly. I think that's really important because that makes you not feel so pressured to stick [00:15:30] to the word by word, uh, items that are mentioned in the checklist, but it gives you the freedom to kind of think beyond that. So good budgets and then customizing the audit programs for each engagement. Okay, so just stop using the generic templates, right? Um, it's really easy. Let's say you have a master file. You build a template for a specific kind of audit to just roll that template in. Uh, you know, update some work papers and just, you know, start filling them out. Then in that year. But that's sometimes that could be pretty generic. [00:16:00] So if you if you customize those procedures, uh, that's really important. A lot of audit software nowadays, you can go into the program side. If you fill out the initial questions really good, it'll kick out some really good checklists and good and good, um, templates that that are as custom as it can get for what you're trying to do. Then sometimes after that, you might have to kind of, you know, you know, add your own spin to it. Uh, [00:16:30] I would also add professional judgments in there. Right? Like so every time you fill out a step on the checklist, some kind of like a little step in there that says, you know, let's use our professional judgment here. Uh, do we need to do anything more beyond just this one step and then ask the auditor to explain what they learned or decided? So, like, you know, let's say you're given a math example as a kid in school, and, you know, you just give the answer the [00:17:00] number 12. But then they say, well, how did you get to that answer? Right. So even though 12 might be the correct number, but I want to know what steps you took to get to that result.
Sam Mansour: I actually got there.
Abdullah Mansour: Yeah, exactly. And so I like to see an audit work papers and you know when reasonable in checklists where appropriate. So when reasonable where appropriate to maybe include a little bit of explanation. Right. Maybe a couple. It just gives you a quick sentence that kind of gives a little bit [00:17:30] of context. How do we come to this conclusion. Especially if it's something that it's not like super black and white, but it's something that could kind of go either way. And as we talked about in some of the prior episodes, maybe like a little bit of a memory jogger for myself, if I'm filling out the checklist and for the reviewer, suddenly jump in there, they see the note, they're like, oh, okay, that makes sense. Or if they come and ask me a question, I can go back and look at my note and say, well, it's for this reason, right? So, so adding a little bit of customization, a little bit of [00:18:00] context, um, and then in wrap up meetings, discuss not just what was done but why it mattered. So we could say that we audited a specific area. But why did we choose to audit that area, especially if it's not something that we typically do? So maybe for example, uh, we go and we look at, um, missing check numbers and a check sequence. Right. So the client will print out checks one through 10,000. [00:18:30] And we identify checks that are not that are gaps. Right. So let's say between check 1000 and 1002 1001 is missing. So we'll go to the client and be like, well, where is this one? Right?
Sam Mansour: Yeah.
Abdullah Mansour: We want to explain, well, why did we decide to do that procedure, even though maybe the checklist didn't say that we need to, to to do that specific test, we decided. But why did we decide that? And then we kind of add a little bit of explanation [00:19:00] for some context.
Sam Mansour: Yeah, that's a good balance. I think having a checklist and having your auditors understand it to the point where they can explain some of it. So it seems like a good balance to where they're not just doing too much thinking, but then too stuck on the checklist. So I like that like that balance. Well I'm sure I'm sure Sam and your in your career you've seen a lot of people become um, maybe like checklist mode where they're trapped. What would you say are some red flags? Identify somebody who's trapped in like, this checklist mode [00:19:30] where they're just so hyper focused on the checklist.
Abdullah Mansour: Only when you pick up the prior, if you look at the current year work papers and you compare it to the last year and they're basically exactly the same. I mean, you know that that's concerning, right? Um, I have like, you know, when when sometimes checklists will be in a word document, it's pretty easy to go control f replace, uh, this year's sign off. If again, if it's in word, replace it with with with a new sign off. Same same [00:20:00] initials. Just change the date to this year's date and then control F, replace boom and then skip and then skim through it.
Sam Mansour: They're just copying and pasting essentially.
Abdullah Mansour: Yeah. And I mean and I've seen and I've seen that go wrong because things may or may not be applicable this year. Um, there's no way it's going to be 100% the same as last year. So if they're stuck in this checklist mode, either pencil whipping them, just breezing through them, uh, checking the box without really thinking about it, you're not going to see a lot [00:20:30] of variation in the documentation from year over year. That's a huge red flag. Um, no documentation of key discussions or adjustments made during the audit. So, you know, sometimes I'll open work papers that are not the checklist necessarily, but it'll say, you know, uh, contact person at the top. We'll have a date, their title, their name. Okay. That's fine. That's current. But then you're reading through the memo and it's referring to someone completely different, right. So obviously that person that person was there [00:21:00] last year, but then they're not there this year. They updated the name at the top, but they forgot to update it throughout the the documentation itself. And you can also see that, you know, in checklists as well. Sometimes names are called out or there's little explanations that are put in. So really um, what happens is when you're just when you're just slamming through a checklist, you're not maybe updating key information like that. You're not, um, documenting key decisions. You're just seeing like [00:21:30] like almost like it almost seems like like a one line, you know, census. Do this, do this, do this, do this. And then checkbox checkbox, checkbox, checkbox. You know.
Sam Mansour: Just like yeah.
Abdullah Mansour: It's like an Excel sheet where everything is just one row. There's no variation, no discussion, no documentation in there. Some checklists are just that way. Um, but but that's the kind of another red flag.
Sam Mansour: Is that pretty common that you've seen, like where people just follow checklists and just don't don't think. And then you get to the client and you have hopefully it doesn't get to that point where you're actually sitting with the client, but where they have like a different [00:22:00] name on a different page. For example, as you kind of mentioned briefly, was that like how common would you say that is?
Abdullah Mansour: Yeah, I mean, it has it happens quite a bit. Uh, for I mean, sometimes it's it's not because of bad auditing. It's just because, like, let's say you're documenting a memo from last year and you, it's a two, three page memo, and you're talking about the internal controls and procedures around accounts payable. And [00:22:30] you're referring to, let's say Sally is the AP person and Sally's name is peppered throughout these 2 or 3 pages, but Sally's not here. And then in the most recent audit. But she was in the past. So maybe you update Sally's name on pages one and two, but for whatever reason you miss a couple references on page three. So sometimes you, you know, being disorganized in the audit documentation can, you know, you end up with landmines in your work papers where the names and dates are just peppered all [00:23:00] over the place. And so even though you have gone and updated the procedures, even though you weren't just blindly following the checklist, even though you weren't just rolling things forward, you just missed some of these things because it's landmines. I mean, in an audit file, tons of documents like it's really difficult to find everything. So sometimes it's for that reason, and other times it's because we're rushing through. And to be honest, like it's hard for me to tell how much of that is just due to, like, I guess, pencil whipping [00:23:30] the checklist.
Sam Mansour: That totally makes sense. I can see that that happening almost by accident sometimes too. Well, what if we flip that? And what is it? What would it look like when a team is truly thinking? I know we kind of touch on that a little bit, but I would like to get more into that a little bit more.
Abdullah Mansour: Yeah. Well, I mean they definitely make adjustments every year, right? So so you see changes year over year. The audit programs evolve as the client evolves. Um, because the client, you know, the shape and [00:24:00] size and look that they are today is going to be very different for most organizations in ten years from now or ten years in the past. And so you want to see this evolution. You want the audit documentation to audit tree the checklist. You want them to evolve with the client's evolution. And so it should be they should kind of walk, you know, in parallel their documentation shows they've identified risks and adapted their procedures because [00:24:30] the procedures from year to year. Some of them are going to be very similar, like I would say, at least 80%. But then you want to see some variation, right? Because everything is again it's not.
Sam Mansour: Yeah.
Abdullah Mansour: Stay the same year over year.
Sam Mansour: That just show that shows that they're thinking and they're, they're actually thinking about what's in front of them, not just following that checklist, or they're actually looking up and saying, okay, things are changing. We have to modify it to go along with the adjustments of the client. Is that would that is that accurate? Would you say?
Abdullah Mansour: Yeah, yeah. I [00:25:00] mean, you know, life is always changing. Organizations are always changing. And so if your checklist and your documentation don't evolve right, with their changes, like for example, you see them making changes year over year as an organization. But for whatever reason, your audit documentation is exactly the same year over year. That's kind of a it sparks like a little bit of questions, right? Like why are your checklists that you are, uh, [00:25:30] like, if you're filling out your risk assessments and things like this in a software and it's kicking out checklists and that your team is filling out those checklists in the field. Why is it that those checklists are just the same year over year, except for maybe some changes in standards that the software picks up? Like that's it. Nothing else has changed in their environment and their business and their operations.
Sam Mansour: That makes sense. So you use an accounting software for the checklist or do you have any, um, do you have any tricks or tools that you use for checklists, or is that do you use the accounting software? [00:26:00] How does that go? Usually.
Abdullah Mansour: Um, it kind of depends. A lot of auditors nowadays will use an audit package. And there's different, you know, some that are great, some of them are okay. And some of them some of them are kind of designed for certain types of audits. But generally, you know, you fill out the answer the questions in the software and then the software will produce checklists and it'll produce them based on, you know, maybe changes in standards and what you provided as far as answers. And then those will, you know, be somewhat customized [00:26:30] to.
Sam Mansour: Okay.
Abdullah Mansour: You know, the situation that you're in. And that helps with customization of those checklists.
Sam Mansour: Okay. That totally makes sense. What about for firms who want to eliminate the checklist trap. What would you suggest there. If if they're stuck in this trap and they just can't can't get out of using checklists and they're just too dependent on them, how would you say they can kind of break out of that a little bit and start to do more of that thinking that's customized to their client that might help them out in that way. Or [00:27:00] or I guess for like a junior, for someone that's low for some of this newer to the firm. Right. How would they kind of. So they're in a trap. They're hiring new people. How do they get those people, the current people, the new people, kind of out of that out of that checklist trap. So I guess two questions.
Abdullah Mansour: But yeah, I mean, if you're kind of in this as a firm, if you're in this checklist trap and you're saying, hey, you know, we know we need to make a course correction and we are going to make a course correction. But how do we change [00:27:30] the culture? I mean, I think that is a like really difficult thing to do because everyone's just used to doing their job in a certain way, right? They're used to showing up. They're used to taking a certain amount of time. Your budgets are set at these rates, you know, because let's say, um, you budgeted on on not having to do these many checklists on not having to customize, [00:28:00] on not having to think a whole lot. And so if you if you built your budgets around that from the beginning. Right. So you come into this next year and you're like, okay look we're going to do better this year. We're not just going to blindly fill out the checklist. Well, first thing is you're kind of trapped by your budget, right? The fees that you quoted the client in the past. And so so I think you first have to start out with, you know, asking yourself, are are those fee structures appropriate? And maybe it's something that you need to go back to [00:28:30] the client and say, you know what? Considering, um, the work that we're doing, you know, a lot of the changes year over year, price increases and stuff like that, you know, you're going to see a large price increase this year from X to, to, to Y. And what I found is when, when a firm does that and they build properly, the client a lot of times will stay. Because if they go out and say, well, this is ridiculous, and they ask around, they'll find that those fees are industry standard. And what they were getting with you was [00:29:00] a really good deal, right. An unreasonable.
Sam Mansour: Okay.
Abdullah Mansour: You know, so so first, I think you have to make sure that there's enough wiggle room in your budget. I think that's huge. It's really difficult to get out of this checklist trap if you are confined by these unrealistic and unreasonable time constraints. So I would take a hard look at that. Then what I would do is, you know, now that we've kind of hopefully been able to open [00:29:30] up the budget to an appropriate amount of time to fill out these checklists to the existing people and to the new people, I would make sure that they're competently trained on reading, interpreting and understanding these checklists because, you know, I have felt this way early in my career. You put a checklist in front of a new person and you're like, hey, go audit, you know, these sections, and here's your checklist. And then you're reading this stuff and you're like, oh my gosh, I see this in school, you know?
Sam Mansour: Yeah. [00:30:00]
Abdullah Mansour: I have no idea what this is, but my boss is expecting me to read this checklist. And I actually remember sitting there, you know, like looking at my computer, looking at my screen, just like I am now and thinking, oh my gosh, like, I had no freaking clue what I'm doing. Um, and so what I, what I tell a lot of the entry level people now is like, look, what you learned in school is very different from what you're going to be doing here. Right. Do not be.
Sam Mansour: Yeah.
Abdullah Mansour: Do not be afraid to ask a [00:30:30] lot of dumb questions. And I kind of add this in. I say, look, if you don't ask me the questions now and just fess up that you don't know it, right. You're better off doing it now. Because if you if I hear you asking in 12 months or 24 months or whatever it is, those questions that you should have asked in the first two, three, four months, like I'm going to be very concerned.
Sam Mansour: Yeah.
Abdullah Mansour: So you want to you want to encourage them, right, to to ask questions, to say, [00:31:00] hey, I don't know what this means. And you also want to let them know that it's okay if the first few times going through this checklist, you know, it takes you a really long time. Uh, I had someone that was training me, the audit senior at the time, and the criticism that I used to get is look at this person next to you, how quick they are. And I was like, literally just brand new to auditing. And I was like looking at the person and thinking, wow, this person's getting it done in like [00:31:30] 20% of the amount of time it takes me. This is insane. I'm so far behind. I'm so dumb.
Sam Mansour: And they're just flying through the checklist essentially. Is that is that like what they were?
Abdullah Mansour: Yeah.
Sam Mansour: Oh I see okay.
Abdullah Mansour: Yeah. Later on down my career I actually ended up surpassing them in terms of seniority. They kind of stayed where they were. And I ended up, you know, getting more senior than them. So I was reviewing their work papers now years later and and yeah.
Sam Mansour: What was your manager looking at to determine [00:32:00] that. Just the checklist. Like they saw your counterpart going through the checklist a lot faster and you were a little bit slower at it. Is that how they determined that like they were faster? Auditor. Is that basically what happened based on checklist.
Abdullah Mansour: Yeah I mean I think some people like some seniors are very budget conscious. Right. Which is good. They want to be very, very conscious of their of their budgets. And so then they communicate those budgets down to the team. And so then, you know, like as a, as a staff I would say they'd say, okay, well hey, look, you know, think [00:32:30] it's going to take you four hours to audit this section, right. So then I kind of have in my mind I'm like, okay, you know, four hours is roughly what it takes. But again, let's say back to the example we gave a while ago. Let's say it should be three times that, right? Let's say it should be eight hours, not four. And so that's that's kind of a problem because the budget that's being communicated is unrealistic. Which then that means that, you know, a lot of times after you do your testing and your procedures, maybe you're following along with the checklist. You [00:33:00] get to filling out the checklist at the end, and that's where you're crunched on time and you're just like, bam, bam, bam, bam, bam, bam bam bam, boom. Turn it in for review.
Sam Mansour: Yeah, that really makes sense. Back on the budget thing. That was kind of interesting. Uh, topic you you touched on very briefly if if a newer auditor comes in and they're just, like, strapped for time. Is that like a sign that your bid was too low for that audit, or how do you determine that? Or is it someone more senior that determines that? Because what if I can imagine if I'm a new auditor, I come [00:33:30] in and I know the budget, I know how many hours and our hourly rate and I'm just bogged down. I can't I can't get this done in time. Is that like a signal that you're under the under bid, that job.
Abdullah Mansour: Not with the newer people because it's really difficult. They learn at different rates, they go at different speeds. And so more so when you find someone that you think does a reasonable job. So like they don't get a lot of review comments, their work, their work is pretty clean. You know, they're they're rational, they [00:34:00] provide good documentation. You just you can get a sense that they're just they're a level headed, you know, good auditor. They are what I have used in the past is kind of my baseline. Right. So so like let's say that it takes them an hour to fill out a checklist. I'm like, okay, you know, that's something around an hour is probably pretty reasonable if if it's half an hour. That seems really quick. If it's an hour and a half. Um, maybe that's kind of bordering on the high end of things. [00:34:30] The the inexperienced people or the entry level people. What I try to do is say, look, guys, this fairly experienced person, maybe they're two years, three years into this, they could do it in an hour. But I don't expect for you to do it in an hour. Right. That's very unrealistic. Um, what I expect of you is to to focus on the quality of what you're doing.
Abdullah Mansour: Not so much the quantity or the hours, necessarily. Right? So you're not going to. I don't want to spend five hours on it. I don't want you to sit there [00:35:00] spinning your wheels. Okay. Because if they if a if a, if an experienced person can do it an hour for you to do it in five, that's probably a little too much, right. So, so so we got to kind of think through this logically. And you want to give them a gauge but you don't want to put their backs up against the wall to where I think. I think that's what happens, right? I don't think that people in firms are necessarily like, yeah, we just want to, you know, you know, pencil up these checklists. I think that they're put into a time crunch. [00:35:30] Usually they put under budget constraints. They're not trained properly on the checklist. Maybe they don't understand them very well. And they're just like rushing to get through them. They're they're they're worked very hard. Um, so, uh, so I think the budgets and the time constraints are a big factor into that.
Sam Mansour: What about for a new auditor that comes into an organization? We probably already covered the majority of this, but they come into a firm and they're trying to figure out how to keep that balance. Right. I'm sure it's kind of tough [00:36:00] being someone that's newer, because you want to impress the partners and the senior people in the firm and move quickly, but you also want to have good quality work, so I'm sure there's some sort of balance. What advice would you give to a very new auditor that starts in a company, say, out of college and they want to be impressive.
Abdullah Mansour: But yeah, I mean, it's kind of a difficult, um, decision. I've always given people this advice. You're better off going slow and then picking up the speed later. [00:36:30] Um, whereas if you start out with the speed to impress people, it's difficult, I found, to pick up the quality. So what happens is, like you're filling out a section in the audit, and instead of taking your time with the checklist and really reading through it and understanding it and asking questions and doing research on what this means, you're just going through quickly to impress people, or you're afraid of the consequences of them, not you being insufficient. Right. Because you're new.
Sam Mansour: Yeah. Which could be nerve [00:37:00] wracking for for most people that are.
Abdullah Mansour: Exactly. So I think I think it takes a little bit of a it takes some guts, I would say to, to do the right thing and the right thing is making sure that you're understanding these checklists because the checklists are really, really, really good guide for what you should do as far as audit procedures in a given section, right? Uh, that.
Sam Mansour: Sounds like it paid off.
Abdullah Mansour: For.
Sam Mansour: Oh, it sounds like it paid off in your career, right, for when you were starting out. And [00:37:30] you were. It sounds like you had some of that kind of anxiety of, am I moving fast enough? And you're told you weren't moving fast enough, and then that you surpassed that your your coworker. Right. So it kind of worked out for you to have that confidence that you have to do the right thing and use the checklist appropriately.
Abdullah Mansour: Yeah. I mean, it was I definitely I think I balanced the, you know, not succumbing to the pressure and making sure I understood what I was doing. But I also like looking back on my the early days of my career. [00:38:00] I actually wish I would have slowed down a little bit more and paid more attention to those checklists because I found that, you know, when you start to run a job, if you started out making sure that you understood every single step and every single checklist along the way to the best of your ability. By the time you rose in seniority, you would have a lot of in-depth knowledge because the checklist is guiding you. The key here is guiding you, right? It's guiding [00:38:30] you to did you do this? Did you do this? Did you do this this way? You know, uh, did you complete this step? And so it's it's prompting you to do a good job. And, you know, you don't want to spend an unreasonable amount of time in these areas and just going ridiculously slow.
Sam Mansour: Yeah.
Abdullah Mansour: Um, but but I think we just again, I think we have too much pressure. We go too quickly. And so, so, you know, for anyone listening to this episode, if you are in a senior level position, I definitely [00:39:00] think that the pressure that we put on the people below us to stick to budgets is causing some of these issues that we're finding in the checklist. Um, there also could be a lack of training. You know, I try to assume positive intent. I don't I don't I don't think by nature people are wanting to not follow the procedures or just ignore them or go over them quickly. I think it's there's pressures. And if you look at the firm as a whole and you find that this is not just an issue with one [00:39:30] team member, right? But a lot of people like it's it's multiple people that when it gets to the review stage. Right. Uh, usually the bottleneck of the firm, that reviewer is catching a lot of things consistently across the board. A lot of times you'll hear the main reviewer and the firm saying, guys like, you know, I'm leaving a lot of comments in these work papers, especially on these checklists.
Abdullah Mansour: That means I think you have more of a bigger firm issue, whether [00:40:00] it's the tone at the top, the training, and you kind of need to figure out what is it and then tackle that issue specifically. And then on the other side of the fence, you know, to kind of round this episode out if you're a, an entry level person, um, and you're getting into this checklist can be confusing sometimes you don't understand the language in there. But but but don't move on to another section unless you really understand what you're being asked [00:40:30] to do in that section using that checklist. And if there's something that you're not sure about, um, if someone just says, oh yeah, don't worry about that, I would, I would try to figure out what that is, because maybe that person is telling you not to worry about it. Maybe they're also just kind of breezing over it. You really want to understand those checklists to do a good job in auditing.
Sam Mansour: That's all that makes sense. So it sounds like overall the checklist checklists are important, but culture goes into it and that's a huge part of it. Any final thoughts on, uh for firms who want to eliminate the checklist trap?
Abdullah Mansour: Um, [00:41:00] yeah. Yeah. I mean, I mean, I just really think it comes down to tone at the top, you know, those checklists? Uh, yeah, I guess one last thing. I heard this. I heard this really good, uh, piece of advice. The technical reviewer of ours said, um, he's like, look, when the peer reviewers come in, because our work was subject to peer review, they have a checklist, and their checklist is checking in on your checklist. You know, so like, think what what what checklist are they looking [00:41:30] at to audit your stuff. And those are the things that you need to be thinking about. So so like it does. Our world is definitely driven by checklists. I get it. Um, but just be mindful of, you know, what you're learning in there and how you're using it.
Sam Mansour: Well, Sam, thanks for joining us and sharing, uh, some eye opening information about checklists and for everyone listening. Thank you for joining. And remember to ditch the checklist trap. We'll see you in the next episode. Thank you.