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Abdullah Mansour: Welcome back to Audit Smarter. I'm your host Abdullah Mansour, joined again by audit expert Sam Mansour CPA. And today we're zeroing in on a critical topic documentation. Sam, let's kick it off with a big question. Why is documentation such a consistent weak point in audit files?
Sam Mansour: Well, thanks [00:00:30] for having me again. And, um, I think this is a great topic. Audit documentation. Um, you know, something, as you grow kind of in the ranks in a firm, you really start to understand the, you know, the importance of, of documentation and why it really matters. On the surface of it, it could seem just kind of another like check the box kind of thing to do, time consuming, you know, why do I have to do it? But really the documentation [00:01:00] is, you know, it's it's what makes up the audit file itself. It what? It's what leaves a trail for the next person. Right. Or as we've talked about in prior episodes, it leaves a trail for yourself. So, so it's it's it's just very critical. But it also can be, um, you know, very overlooked, a very overlooked area by a lot of people. Um, a lot of auditors view documentation as an afterthought rather than, [00:01:30] you know, as a fundamental piece to the audit. And again, if you don't document it properly, how is anyone supposed to know what you actually did? You know, you could say you audited certain sections. You could say you did these procedures, but if you don't actually document that in a memo and also in, you know, showing the work that you did, it's really difficult to anyone for anyone to follow you. Um, it's a lot of, you know, a lot of times something that auditors do at the end instead of building as you go. And I would definitely [00:02:00] say that's kind of a quote unquote Pro tip here is document as you go. It's so difficult to have a bunch of conversations, look through a bunch of supporting documentation from the client. And then, you know, at the end of the day, after you spend eight hours of work, recall everything that you looked at and document it.
Sam Mansour: I mean, that is so difficult. So it's a really good habit to be documenting as you go. And then when documentation is rushed or vague, it doesn't support [00:02:30] the conclusion reached or it cannot. Sometimes in some cases, it cannot support the conclusion reached because it is rushed, because it is vague. And, you know, it's difficult to follow. Again, kind of the breadcrumbs, the documentation that you lay down for somebody to lead them to the same conclusion that you've reached when you're just rushing through the documentation, you're including general statements, general terminology that if someone were to retrace your footsteps, they would have a really hard time. And that's a major red flag [00:03:00] in a review or an inspection, because you're coming back, you're trying to follow what this person did. If it's clean, if it's easy to follow, um, if the person took their time to document, well, uh, it's a much different scenario from someone who's, um, you know, documenting kind of towards the end of the day or even sometimes at the end of the week. Um, you know, after that much time has passed by, passed by, it's very difficult. So documentation is more than a compliance requirement. It's how you tell [00:03:30] the story of that audit, how you tell the readers of that file what you did. And again, the thing I've talked about many times before, but how do you remind yourself of what you did when you're listing as a recurring client and you're in year two, 3 or 4 of the audit, how do you remind yourself of what was done last year?
Abdullah Mansour: There are a lot of similarities, um, in my mind so far from the checklist episode we did and this documentation one. It [00:04:00] sounds like you don't want to pencil up either one. We also don't want to be. So don't be like too robotic about them. We also don't want to think too much. You just want to focus on what you're covering. Is that is that accurate? Would you say. So there are similar but there are of course some differences.
Sam Mansour: Yeah. When we were talking about the checklist and kind of the, the traps that those can cause. Um, those, you know, it's almost like a, it's a, it's documentation, but it's kind of laid out for you. Right. It's did you do this? Did you do this? Did you do this? [00:04:30] So and the documentation that we're talking about here is more maybe things that you kind of develop and come up with, like in a memo format or testing of a specific area, or let's say that you're looking at a group of samples and something maybe isn't completely out of compliance, but it but but it was close. And so maybe you want to add a note to it that that documentation, it's important to to do it well. But similar to our comments in the checklist side, we don't want to [00:05:00] become overly focused on it to the point that we're not actually paying attention to what's going on around us. So there is definitely a balance there.
Abdullah Mansour: Okay, that makes sense. What about bad documentation? I'm sure that can blow up an audit. Um, pretty quick. That would otherwise be a very a very good audit. Uh, why would you say that it is or how how does that happen?
Sam Mansour: Yeah. I mean, let's say that you do a really great job. You're going out to the field, you perform, you know, at [00:05:30] an excellent, excellent level. Right? You're you're just you do a phenomenal job in that audit. You ask all the right questions. You look in all the right places, you pull all the right samples and you do all the right things from a from a practical perspective. So it's a great audit. It's not just a good audit. It's a great audit. But then when it comes to the documentation side, it's sloppy. It's not put together well it's missing pieces. It's missing sections. It's is missing paragraphs that should be put together, you know, put into [00:06:00] certain memos. Reviewers and regulators. And even again, as we talked about your future self can't understand the work that you did very well, even though from a practical perspective you performed it exceptionally well. Right. So the documentation kind of lets you down there. So it takes what would be a great audit down to maybe a subpar audit, or maybe even one that wouldn't pass an inspection. So if it's not documented, [00:06:30] it wasn't done. That's kind of the mantra that I've actually heard in my career.
Abdullah Mansour: Okay.
Sam Mansour: If, if, if you didn't document it, it didn't happen. So you got to be really careful. And where I actually heard that from was, you know, someone more of a on the auditing side, they were an audit auditor that worked for the government. And they said if it's not documented, we consider it as if it didn't happen. So even great testing is meaningless if it's not backed by well written and well documented work [00:07:00] papers. Because again, how does anybody know that you did this stuff that you asked those questions, that you looked at the documentation? If you don't say that, you did. And then even if you do, say that you did. We need to and there's there needs to be enough clarity there for someone else to come and look at it and for that, for it to make sense to them.
Abdullah Mansour: So it should almost be like a detailed story or a or a manual of what you did during that audit, so that I can come in this [00:07:30] year and look back at what I did last year, and then anybody else could do the same. Would you say that is kind of what.
Sam Mansour: So yes, to some extent. I mean, you want to use your professional judgment, right? So, um, a detailed documented manuscript might be a little bit overboard, for example. So so you want to use your judgments. Some areas need a lighter explanation. Other areas need maybe more of a deeper explanation. So just it really kind of depends. [00:08:00] And you have to use your judgment and every scenario is a little bit different. You know, for me, when I find, you know, if I'm if I'm testing a certain section and everything is looking pretty good, it's pretty clean. Um, what I'm doing makes sense. It's easy to understand for myself. It's easy to understand for somebody else. If I were to document it. It's just a really simple area, right? The documentation there probably doesn't need to be extremely detailed, right? I mean, it needs to be detailed enough [00:08:30] that it makes sense, but it doesn't need to be like a small novel. There might be other areas that are more convoluted, more confusing. Um, and sometimes you sort of sense that yourself. You're like, this is kind of complicated.
Abdullah Mansour: Uh, at.
Sam Mansour: One point I was auditing, I was in some farm accounting, and actually I was auditing some farm accounting. And there were some there's some different things in there about how certain transactions were recorded based on the harvesting of crops and stuff like that. And I hadn't really [00:09:00] done a lot of these, maybe just a few a year. So it was difficult to remember some of the unique aspects of that industry. So I found that, you know, I would document the best thing that I could do is document how it worked in that industry, because I wasn't as strong so that I had a recollection of it. And the following year, or I remember looking things up online and finding, you know, professional literature that supported how those accounting practices or treatments [00:09:30] were handled. And so instead of just, you know, verifying the journal entry and moving on, I actually retain that documentation of why that journal entry was proper that way. Because it wasn't it wasn't a typical thing that people would see.
Abdullah Mansour: So kind of building an example for yourself moving forward, once you see that same scenario, is that kind of what you're.
Sam Mansour: Yeah, scenario again in another client or in this engagement itself for someone to come in after me and we're talking about how [00:10:00] detailed do we be? Well, we're we're I think the detail that we go into should kind of depend on the complexity of the scenario that we're in and how outside of the norm is this, either for us as a firm, for me as a person, or maybe just for the industry in general?
Abdullah Mansour: Okay, so we talked about what a bad audit would look like or how a good audit can turn into a bad audit. Can you can you explain what in your mind a good audit in general would look like [00:10:30] or good sorry, a good, good documentation for an audit.
Sam Mansour: Yeah. Um, so clearly states what was tested, why it was tested and how it was tested. So what, why and how and what the results were. Okay. So you want to be very, very clear on that okay. So we're testing cash receipts. Okay. Why are we testing cash receipts? And then how did we do it? You know, [00:11:00] what are some of those procedures we use to test cash receipts? And then what were the results of our tests? Right. Because if we're testing an area and we don't explain the results. I've actually seen it before in documentation where we'll test a specific area, but we actually it's funny because we show the testing, we show the check marks and we say, okay, this is good, good, good, good. But then we forget to note that, uh, you know, at the end, like write a conclusion saying, you [00:11:30] know, all things tested were, were, you know, um, proper. We didn't have any issues. And, um, you know, this was a clean section. Like, people don't kind of recap sometimes. Yeah.
Abdullah Mansour: Yeah. That's interesting. So would you say that's like, a good outline for a good audit? Maybe. Like, is that like, those were, I think like four or like main bullet points of your of a good audit. Is that how you describe that?
Sam Mansour: And I would say a good audit documentation of making sure that your [00:12:00] work papers include at a minimum, again, as we said, what was tested, why we tested it, how it was tested and what the results, uh, were.
Abdullah Mansour: Okay. Well, where do audits auditors usually fall short in documentation?
Sam Mansour: Um.
Abdullah Mansour: We kind of cover a little bit, but. Yeah.
Sam Mansour: Yeah, I mean, it really kind of depends on the firm, I would say. And sometimes what's happening in in the firm itself, it can vary, I [00:12:30] think. But some common ones would be missing explanations or variances or changes from prior year. Um, no rationale or sampling or scope decisions. I mean, that's huge because when you're sampling an area, you want to explain how you pick that sample size. You know, a lot of times there are different tables that we could use that help us determine what is our sample size in a given area, but maybe some explanation or rationales needed for why we selected that sample size. Like let's say it's low risk. [00:13:00] So we pick this many samples. It's high risk. We pick this many samples. Explanation there screenshots are attachments with no annotations or context. Sometimes people will pull in files and they don't know if it was PBC provided by client. They don't include work paper references out. So let's say you have a folder inside your audit software, and that folder has, uh, 2 or 3 PDFs in there. [00:13:30] And you don't make any notations in the PDF as to what is this used for. And then what does it link to? So maybe there's a memo that documents, um, what you know. So let's say for example, um, we are testing, uh, capital assets and we pull in this PDF document. That's a depreciation schedule from the client that was provided by them. But we don't say anything in there. We just pull it into the file. Okay. [00:14:00] And we have let's say we have a memo. That memo might refer to the PDF file. So I go look at that depreciation schedule. And you know x y z. But that's great right. So it's good. It's good. We have that memo. But if you were to just go to the PDF file and not be in the memo for some reason, you open up a PDF file and you're like, well, what is this thing?
Abdullah Mansour: You have no idea what you're looking at.
Sam Mansour: Yeah, I could see that. It maybe it says depreciation schedule the client provided, but what does it link to. Like what is this related to. Right. What. What. There's a bunch of numbers on here. What exactly [00:14:30] are we doing with this work paper. So we're not making. We're not giving. We're not giving an explanation of the purpose for it in there. We're not talking about the procedures that were done to it. And we're not referencing from this PDF schedule or PDF document that has the depreciation schedule to another document that gives us, you know, an idea, a linkage. So I like to always link kind of both ways. So every file that we put or every document that we put into the audit tree, I [00:15:00] think good documentation talks about what it is and where is it, what, what and where is it connected to. Um, and then summaries copied from client emails, um, without auditor analysis. So sometimes people will just a client will provide an explanation of something. They'll send it via email. We'll grab that email and we'll stick it into the audit file.
Sam Mansour: And it's like, okay, so what is this? You know. So then instead of you including like a common area on there, the person that's looking at this [00:15:30] email or PDF file, as we discussed, has to like literally read through the whole thing and then try to kind of come up with why you have this in here. I mean, that's very confusing and extremely time consuming as well. So you want to highlight things, you want to, um, right. You know, in like maybe in a box in and read an explanation of this. Why? This is why we included this email. Here are some specific things that you should look for. And let's say the email refers to like a PDF for [00:16:00] support for something. Let's say the depreciation schedule. So you so you show that reference to that depreciation schedule. And then from the from that depreciation schedule back to that email and then back to the memo. Right. So someone coming and looking through this they're able to like boom boom boom boom you know go from place to place to place.
Abdullah Mansour: It's kind of a flow almost where you can you don't have to do a lot of digging. You can just look at like that, like the pictures you mentioned in the PDF, you can kind of figure out where it came from and what it is. So just kind of a flow of it's all connected almost. Is that.
Sam Mansour: Yes. So when it comes [00:16:30] to documentation, we want clear references, links to supporting schedules and documentation and notes so that the reviewer, when they're going through this, they're absolutely not having to like redo the work. Right. Because if you just pull in all the information from the client, you just stick it in the file. They're literally probably having to redo a good chunk of what you have put in here to figure out what the heck is going on. It should be easy for someone unfamiliar, right? Put multiple [00:17:00] underlines on unfamiliar with the client to follow your logic, your logic, step by step.
Abdullah Mansour: Okay, then that's all that makes sense. So I think, I think, I think the question I asked you is how to audit as fall short. And I think you answered with 4 or 5 main points. Um, what's the impact of those gaps, would you say?
Sam Mansour: Yeah. I mean, you waste reviewer time trying to interpret incomplete or incompetent work. Um, I have pulled people into my office, [00:17:30] you know, have said, look like this is what's happening now. You've gone out and audited this section, and let's say it took you four hours to audit this section. It's now taking me like, probably another hour to figure out what the heck.
Abdullah Mansour: Is.
Sam Mansour: Going on. Yeah, yeah. So I tried to explain to people, the team members that you're actually costing me a significant amount of time when I should be able. If you documented this, well, I should I should be able to take 15 minutes to kind of work through this. But you are making me work [00:18:00] harder, which is not it's not that I'm opposed to working, but it's just it's costing us time when you should. You would test the section and it would take you, let's say, four hours. Me as a reviewer, it takes me 15, 20 minutes depending on the section to come and review this. But now it's literally taking me four times the amount of time because your documentation is so confusing, right? So it's a big time waster. You increase the risk of audit deficiencies during peer reviews or inspections, because the [00:18:30] reviewer only has so much time to dedicate to this engagement. So let's say we're talking about we're talking about one section here that might take four hours for you to do, and it should take the reviewer 15 minutes, but you're making it take an hour for them. So they're taking four times the amount of time to review not just one section, but in theory, kind of everything else you did. Because it's not just that one section that's sloppy.
Sam Mansour: So you're increasing the risk of audit deficiencies during a peer review or inspection, because you're making it so much harder [00:19:00] for the reviewers now to catch everything that you did. And then also you're increasing the risk, because what if they can't find what's going on, or they can't interpret this when they come in and do their review and they'll say it's a couple years later or whatever it is. You're putting us all at risk. So you're wasting a lot of time. You're putting us all at risk, and you miss the opportunity to learn from your own work because it lacks clarity. So, like, let's say that you document how you did certain testing. If it's vague, it's [00:19:30] difficult for someone to give you feedback and say, hey, did you consider this? Hey, did you do this that way? Because you're not specific, right? But if you did detail it out step by step by step, a reviewer could come in and say, hey, did you think about this step? Or, hey, why don't you consider doing this? But when it's vague, it's like, I have no idea what you did. So you're putting us at risk. You're causing me a lot more time as a reviewer, and you're missing out on the opportunity to get good feedback.
Abdullah Mansour: Which I'm sure doesn't look good if you're trying to grow within that firm. And I'm assuming. Right, [00:20:00] if you're a reviewer is taking so much time or four times the amount they should on a review? Sure, that doesn't look great if you're trying to move up within that firm.
Sam Mansour: No, I mean, it comes back to your costing us time. Um, yeah. We have budgets. You're putting us at risk. And then, um, it's just frustrating. You know, I mean, people, especially in auditing that have they're disorganized, that don't document very well. The disorganization comes through because you see it in their documentation. [00:20:30] And if you're trying to rise up through the ranks, it's just not a good it's not a good sign.
Abdullah Mansour: Yeah. Well, what are some of your best tips for improving documentation on the job?
Sam Mansour: Yeah, I mean, we and we've talked about this during, you know, multiple sessions now and even today, but document as you go. Document as you go. Document as you go. Um, I found that, like, one of the biggest pitfalls for myself and for other people is pushing it off until later, right? It's something that we kind of just want to move on to the [00:21:00] next thing. We don't want to sit there and write these long memos. Um, but but again, you lose, you know, you remember you you your memory is not as great as you would think it is, right? So, so you kind of lose bits and pieces as we go, as time passes. So document as you go. Use standard templates to guide quality, but customize where needed. So when you're documenting, you can make everything up from scratch. That's fine. But like that's so time consuming to just [00:21:30] start from ground zero, right. You can leverage templates to guide you. And that's kind of the key thing here to guide you, um, through the process. Uh, we, you know, created we found that, you know, for certain sections where maybe there wasn't a template or a checklist or something. An aid provided on a lot of firms will do this.
Sam Mansour: We'll create our own templates, um, so that we're not having to recreate the wheel every single time. So if you find yourself like, for example, whenever I'd send [00:22:00] clients an email and I would say, hey, you know, we're kicking off the audit and we're about to get started with planning. We're going to be asking for these things. I'm going to send that to ten different clients, and it's probably going to be like, for the most part, the same, except for maybe the first line or two. So why not just turn that email into a template? Then I'm going to ask them for a set of samples or some initial things for planning and risk assessment. It's probably going to be, you know, pretty standard, um, um, set of words. I had a person tell me one time, [00:22:30] a fairly experienced auditor who said, you know, I don't want to sound too canned. I'm like, look, just come up with a, like a couple sentences at the beginning of the email that basically says, oh, hey, you know, let's say, you know, the client took a trip last year. Hey, how was the trip last year? You know. How's it going? Do you have a good time?
Abdullah Mansour: Add something personal to it.
Sam Mansour: Exactly. And then. Yeah. And then? And then the next chunk of it could just be your, you know, you could tell the person, hey, you know, I'm gonna [00:23:00] I'm gonna provide you below with some, some of our standard language to get this thing going. And then boom, then you start to kind of get into the templates. So, um, you can customize it. But I think, you know, just emails is a very basic example. Um, for something that you could turn into, templates you could use, and I'm sure you could do that throughout the audit. You just have to be careful to make sure that you're actually using the templates and not just throwing them in there and hoping that, you know, they'll they'll take care of all of the documentation because they won't. [00:23:30] And then I would add context to support decisions. Don't assume the reviewer knows what you're thinking. That could be a big gap between the person preparing the documentation and the person reviewing it is that they think, well, it's like, think of this like you. You're trying to explain maybe like a math concept to someone you know, like a child, you know so much more than them.
Sam Mansour: And you forget that. That maybe they know some of the initial steps. And so you have to kind of take [00:24:00] a big step back and you have to, you know, talk them through the basics. There's a gap between what you know and what they know. In the case of a reviewer, there isn't a gap of education like that, a knowledge, I mean, they're more knowledgeable than you, but the thing is, they're not knowledgeable. Maybe with the clients, they're not knowledgeable with the procedures that you performed. And so when you're documenting, you want to make sure that you're doing it in a way that they don't need to, you know, read [00:24:30] your brain. Right. They they can read the documentation and say, okay, I understand what he's saying. And not having to wonder, oh, was this what he meant by it? Because reviewer reviewers will do that. Oh, I think he was thinking this. And sometimes it's pretty close. It's an easy subject, but sometimes it's like really far out in left field. It's like, okay, what the heck is he thinking? And if they're saying that you got a problem?
Abdullah Mansour: Okay, that's all that makes sense. I just want to touch on the first one document as you go. I know we mentioned that quite a bit in this episode, I think in the [00:25:00] previous episode, but, um, early on in my career, I hated taking notes as I went in a meeting, and then I get to the end of the meeting and it was such a mess trying to figure out what they said and how they did it. So I just want to emphasize that how important that is, I think in any job. Really. Well, on to the next question. How can reviewers, uh, help reinforce good habits?
Sam Mansour: Yeah. I mean, so this is a great question because I kind of think it's a it's a two way thing, right? So people, the staff members, the team members, the preparers, the people that are, you know, documenting [00:25:30] these work papers and testing out in the field, it's their job to to, you know, document. Well, as we've talked about, use good references and document well. However, there's also a kind of an element of training that the people reviewing these work papers can, can, can do, they can provide us. Some reviewers can get pretty frustrated and just like, you know, leave comments like, just fix it, you know, and then the prepared kind of like, [00:26:00] uh, okay, what does this mean? You know, um, some reviewers will leave paragraphs and paragraphs of, of, you know, of review comments. And so I think there's kind of this in-between balance between paragraphs of information and just fix it.
Abdullah Mansour: Kind of middle ground.
Sam Mansour: Yeah, exactly. I like to find something that's, you know, kind of a little bit detailed enough to where it actually does help you prepare. But then also at the same time, um, [00:26:30] if you find yourself as a reviewer giving that same review, comment over and over again to the same person, like it's like, okay, maybe the comment isn't working. Um, maybe do something, do something different. I've reviewed budgets before for reviewers, and sometimes they can kind of be the technical guys or girls and I'm like, wow, like, you just blew this budget. And they're like, yeah, every time I review XYZ person's work papers, I'm like, leaving massive comments. I'm like, but this doesn't make any sense. Like, [00:27:00] you're you're leaving the same massive review comment every time you leave a review comment, it's the same thing. Are you just, like retyping this? And they're like, yeah, I'm just retyping it.
Abdullah Mansour: I'm like, yeah.
Sam Mansour: Astronomically time.
Abdullah Mansour: At that point. Would you suggest a meeting or how do you figure that out if you have the same comments every single time to say the same person?
Sam Mansour: Yeah, I mean, absolutely. I you know, I think at some point you kind of have to tell the person, hey, let's get on a call. You know, let's jump on a zoom [00:27:30] link. Let's, let's meet in.
Abdullah Mansour: Person or.
Sam Mansour: Whatever it is. Yeah, we got it. We got to do something different. So I think like leave detailed review comments to reinforce good habits or break bad habits, but then also kind of take a pause and say, maybe this person needs kind of more of an in-person, face to face explanation. But definitely the reviewer can help reinforce good habits that can help, you know, train on better documentation. Because if you're looking at work papers and you're seeing general documentation, [00:28:00] you're seeing sloppy documentation. The reviewer can and should guide the preparer by giving them good review comments that allow them to understand what has to be corrected, and then correct it. I've given advice to, you know, the the team members that prepares when sometimes memory isn't, like, great. Um, it's actually something that I've used myself. Open up a word document and when you get review comments, [00:28:30] you should copy the review comment into that word document. So let's say you label your cash lead work paper, you call it 2000 and you get some review comments on that cash lead. I would copy those review comments out of whatever software it is, or if you receive them verbally and put them in your word document. Then the next time you're testing a cash section, go [00:29:00] open that document again and say, okay, I've tested the section. Let me look through the review comments I received last time and see if they apply to this work paper.
Sam Mansour: Almost kind of like self review. Yeah. And then and then keep doing that. And if you find that eventually you know you're you're catching these or either pre catching because your documentation is good or you find that, um, you're not getting these review comments anymore, you just because like you understand you have it down pat. You remember it. Now you can delete [00:29:30] that review comment from your word document. But I'm sure over time you'll get more in a given section. So you just kind of keep adding until the point that maybe you're free of this, of this review comment, documentation. But as a reviewer, it's very frustrating to give someone the same comment over and over and over again. But I also understand that as a new team member, especially, or especially if you're new to a section or new to the firm, it's difficult to like, remember everything. So document it and [00:30:00] then review your own work so the reviewer is not having to give you the same review comment more than once or twice, because that's very common, and it can be very frustrating. And I think reviewers, they're not. Sometimes they become less helpful because they're just like, fix it. Essentially they're saying, I've told you this like 20 times now. Like, come on.
Abdullah Mansour: So you're essentially reviewing reviewing it before it gets to the to the reviewer, which totally makes sense. Kind of check check your own work before it gets to that next step.
Sam Mansour: Yeah. And typically from a budget [00:30:30] perspective, because I know we kind of hit on budgets in the last episode quite a bit. Um it's cheaper. A lot of times if the the preparer is doing a detailed and thorough review and not waiting to use up, uh, the reviewer's time, which could be at like almost double or more the bill rate of that preparer. Right. So you're better off spending a little bit of extra time, because if the reviewer has to dig through your work papers, they're confused on what's going on. They're trying to find [00:31:00] the documentation and then they're then then after that, they're having to write a comment.
Abdullah Mansour: Oh, gosh. Yeah.
Sam Mansour: It's just it's just so much time that they're taking to figure this out. Maybe they have to call you. Maybe they have to send you an email. Maybe you have to send you a message over teams or slack or something. I mean, it's just it's just self reviewing is massive. There's no reason why you couldn't double check your own work.
Abdullah Mansour: That's why it makes sense. And I've been told in my career by by a manager one time [00:31:30] that you're going to make mistakes. It's going to happen. But where it becomes a problem is when you make that mistake over and over and again, that's when it becomes an issue, like within a company.
Sam Mansour: Yeah. And think about it like you have between like before technology, you had notepads and paper. You can write things down. Right. Uh, but now with you can record and get transcriptions of calls. You can take notes on your phone. You can take notes on your computer. I mean, there's no reason why [00:32:00] you shouldn't be able to capture that review comment that was given to you. Put it someplace and then double check your own work against that comment so that that reviewer doesn't have to give it to you again. I mean, there's no reason why other than in my opinion, I'm just gonna be honest. Laziness.
Abdullah Mansour: Sure. Yeah. No, that seems simple enough to check yourself and to reduce that, those repetitive, um, review comments. So we've talked about, um, the preparer [00:32:30] and how they could maybe do things a little bit differently or better. We've also talked about the reviewer and how they can kind of help help the preparer. Uh, kind of do do better in, in that they don't keep having the same, uh, review comments. But let's jump into maybe a, the manager side of things. How can they lead by example and help show how to do things a little bit differently or better?
Sam Mansour: Yeah. You know, back to that kind of that comment of [00:33:00] maybe someone is just continuing to make the same mistake over and over again.
Abdullah Mansour: Yeah.
Sam Mansour: You know, for me, after years of experience and making a lot of mistakes, I've learned to capture, review comments, put them in a word document or something, and then make sure I don't make them again. Right. But maybe this person hasn't. This person is going through this this, um, review comment cycle. Maybe they haven't figured that out. So as a good manager, I think you should be proactive in coaching, not just in correcting. [00:33:30] I had someone kind of struck me a little bit. They said, yeah, I know Sam, like everyone here, especially on the review team, There's never any positive feedback, you know? It's just always negative.
Abdullah Mansour: It's always negative.
Sam Mansour: Yeah. And I was like, but I kind of thought about it for a second and I was like, how does that make any sense? I mean, they're just giving like I'm actually kind of my response to that person now that I think back on it was, they're just leaving you review comments, right? Like they're they're just telling you adjust [00:34:00] this reference, fix this wording, change the date. You know, you miss this. And so it's like it's just part of the process. Like it's just review comments. Everyone gets review comments like it happens. Like you're not perfect.
Abdullah Mansour: It's how it's how it goes. Yeah.
Sam Mansour: Yeah I mean it's normal. It's kind of it's kind of how we teach is we give review comments. That's how we train is via review comments. But then I kind of took a step back and I thought about it. I'm like, you know what? From a person coming into this firm, it actually can come off as very negative because [00:34:30] the comments, by their nature and it's what we do, but it's just they're not positive, right. It's never you don't.
Abdullah Mansour: Yeah.
Sam Mansour: Very rarely do I see a review comment that's like, hey, good job, hey good job. Usually it's silent unless there's an issue. Um, but see, I think that's where you go from the correcting mode, which is review comment, review comment review comment. You did this wrong. Fix this, change this. You're missing this to the coaching mode.
Abdullah Mansour: Um, and I see okay.
Sam Mansour: And that's identifying maybe individuals [00:35:00] because not everyone's going to be the same. Identifying individuals who might need a little bit of extra help pulling them aside, um, walking them through well documented files to show them what good documentation looks like. Right. Because maybe they haven't seen it. Um, maybe they don't know where to go to see it. Right? Like you as a at the manager level, you've maybe seen tens or hundreds, probably hundreds of engagements and you're like, oh, these are really clean. These look really good. But how are they to know that? Right? They have no idea. The new [00:35:30] person is probably just barely getting used to your client naming structure. So. So maybe you pull them aside and you say, hey, let's let me I know, I know, you've gone through the cash section and we've given you these review comments, and I want to show you what you know. This other file looks like that. I've seen a lot of really good documentation in. And so you sit down with them, you open it up and you spend the opportunity to coach them instead of correcting them. And then you tell them, hey, look, go refer back to this if you want to look at what a good reference, what good, what good references [00:36:00] look like, and then keep the review comments. And then during the wrap up wrap up, highlight strong examples of documentation from the team. So strong examples would be good examples. So let's say that someone did a phenomenal job at testing a really hard section, and they documented it really well. Um, you want to kind of point out the win, right? And say, hey, you know that that was really good. It's super clear. Wow. You know, I I'm really impressed with it. So maybe Pepper in some of those more positive [00:36:30] comments as well.
Abdullah Mansour: Yeah, that's all that makes sense. Um, I really love that advice kind of being a coach and not and not just a leader. Because in the previous episodes we've talked about how important culture and collaboration is to to an audit. And this could help maybe increase that. Have you seen have you seen that happen where that that coaching has led to like a better culture. And then it's also led to maybe like better audits just overall.
Sam Mansour: Yeah, I mean, absolutely. Because when people are just [00:37:00] if they take review comments, it's kind of a beat down process on their documentation. Um, they're, they're it's just negative. Right. They're not encouraged anything. Um, but when they take it as you're trying to help them, you want them to succeed, you want them to grow. Uh, it's a completely different perspective. And and I think they, they perform very differently when they feel that way.
Abdullah Mansour: And a healthier, a healthier environment, probably [00:37:30] too. Well, Sam, do you have any final thoughts, uh, for people looking to or people or teams looking to tighten up their documentation within their organization.
Sam Mansour: Yeah, I mean, we kind of talked about this a little bit, but think of every work paper as a standalone work paper. So when I was referring back to, you know, if you pull in an email or a PDF and, and you're not really documenting what this is, you're not putting references on it and someone has to, like, go to a different work paper to figure out what this work paper is and why is it here in the middle [00:38:00] of this file? You know, it's confusing. Yeah. So every single thing that you pull into that file should be documented. Well, even if it seems repetitive from work paper to work paper, you want to still make sure that it can stand on its own. And it's really clear without having to, like, hunt through other files to figure out what that file is for. Okay. And then if a reviewer or supervisor can't follow it without calling you or emailing you, messaging you, or whatever it might be, it's not [00:38:30] done yet. Okay. That that documentation needs to be sufficient that they can look through it on their own without you sitting there answering question after question after question. Right? Because then those questions that you're answering for them is probably the gaps in your documentation, right? If you're having to explain it to them, they probably need to have that in that documentation.
Sam Mansour: I think some, you know, kind of younger auditors might feel frustrated that that [00:39:00] they're like, well, it makes sense. It should just be in there. Right. But you can't think that way. Um, they have to be able to stand alone looking at those work papers, read them, understand what's going on, um, without having to call you and and message you and ask you questions. And then good documentation reduces stress. It it it helps speed up the review process and it protects the firm. So just remember that right. Good documentation reduces stress because you're not having to like guess and wonder and dig and hunt. It [00:39:30] increases the speed in the review process because the reviewer is able to just kind of more easily get through everything and then it protects the firm because in the event of an inspection, a peer review or something like that, you're able to go back to that documentation and you're able to recall very easily what was done, how was it done? Why do we do it that way, and what were the results? We kind of talked about that, um, a little bit before, but we want it to be [00:40:00] really, really, really easy.
Sam Mansour: So again, think of every work paper as a standalone work paper. This is especially for the people that are kind of new to auditing. And then number two, if a reviewer has to ask you questions outside of that documentation, that means your documentation is most likely lacking. The third, remember the benefits of good of good documentation. Stress reduction. Trust me, stress reduction for you as a repairer, when you get review comments and you have to go and figure out what you did, that's very stressful. Um, it speeds up the review process. You make their make their [00:40:30] life a lot easier, and then you're protecting the firm. You're protecting the firm. You're protecting the firm because that documentation now can support what you did. Instead of you, you know you do not want a peer reviewer to say, what did you guys do here? And a lot of times I've been with a lot of peer reviewers. They don't do that right. They just look at your documentation. They're not they're not going to call you in every two seconds to ask you why you did what you did. In every work paper. I mean, that that's just too much.
Abdullah Mansour: Yeah. Yeah, that [00:41:00] totally makes sense. And those are those are very, uh, very good. Closing thoughts. Uh, that's excellent advice overall, Sam. Thank you for helping us think more clearly about this critical audit skill. And then next time on Audit Smarter, we'll dig into how to conduct better inquiries and why the why the right questions can make or break an audit. So everyone don't miss it. And, uh, make sure to check out our next episode.