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The Secret to Quality Audits and Fine Wines? Quality Control

Vineyard“Quality means doing it right when no one is looking.”
Henry Ford

Browsing the internet and looking at websites of CPA firms I notice they pretty much all talk about being quality firms. We all believe we have quality, but just what is quality?

As I sit with my evening glass, I realize what draws us to a fine wine is the diligent process to produce the beverage we enjoy. The process for producing a fine wine is not unlike the accounting and auditing world. Indulge me as I demonstrate the similarities.

Winemakers must identify critical points in the process where problems can arise in order to  eliminate or minimize precursors for taints and faults, and then rectify any problems that still do occur. 

All facets of the winemaking process must be carefully controlled to create a quality wine, just as we must control all facets of the accounting and audit process to produce a quality audit. As you can see below, there is a strong correlation between our profession’s elements of quality control and those required to  produce fine wines.

 Wine Making Quality Control Elements

Comparable A&A Quality Control Elements

Facility assessments: cellar assessments

Acceptance and continuance

Management assessments

Tone at the top

Personnel assessments

Human Resources

Varietal and regional benchmarking; regulatory compliance

Relevant ethical requirements

Analysis and results interpretations

Engagement performance

Corrections and troubleshooting

Engagement performance/monitoring

Independent evaluations

Monitoring

Such variables as the speed with which harvested grapes are crushed, temperature and timing during fermentation and aging, the percent of sugar and acid in the harvested grapes, and the amount of sulfur dioxide added during fermentation all have a tremendous impact on the quality of the finished wine.

Similarly, professional judgment must be employed in the performance of our accounting and auditing engagements to produce quality reports that comply with professional standards. 

To bring this a little closer to home and our profession, let’s consider how we often advise or evaluate our clients. We expect clients and prospective clients to have strong leadership and foster an environment of solid internal controls (Tone at the Top). Our professional standards require that we evaluate the skills, knowledge and experience of our clients (human resources and relevant ethical requirements). We expect to see documented internal controls, documented policies and procedures, and appropriate documentation to support transactions (engagement performance). We also expect our clients to perform ongoing evaluations, separate evaluations or a combination thereof to ensure their controls are functioning appropriately (monitoring). Imagine our perception and evaluation if these elements are not continuously evaluated throughout the year, every year.

In our firms, we need to have good governance and a documented system of quality control, just like we advise others. We expect this of our clients; we should expect it of ourselves. 

Soon our year-end audits and busy season will be upon us. Now is a great time to review your Quality Control document. If you do not have one, then create it; after all, it is required by our professional standards. 

The AICPA has a newly revised and updated free practice aid available to assist you in this important endeavor. It has been designed with two versions – one for small and medium-sized firms and one for the sole practitioner. There are illustrative policies and procedures which are more easily customizable for practitioners, and the practice aid includes tips, warnings, and notes to help practitioners better implement the policies and procedures.  Take the time to read them – they provide insightful and practical advice

The Peer Review Board has also been making changes to drive improvements in audit quality. Be sure to review those changes as you revise your Quality Control document and prepare for your next peer review.

Whether your passion is wine, food or some other product or activity, it is the underlying system of quality control that draws you back to it again and again. Just like we recognize quality in what we purchase, our clients will recognize our quality work.

“People forget how fast you did a job – but they remember how well you did it.”
Howard Newton, American advertising executive, and author.

Rick Reeder, CPA, CGMA, is the Owner of Reeder & Associates, PA in Tampa, FL.  Rick is a member of the AICPA Quality Control Standards Task Force, Past Peer Review Board Chair and former member of the Government Audit Quality Center Executive Committee.  His firm specializes primarily in audits of not-for-profit organizations and performs audits of ERISA and CIRA engagements.

Vineyard courtesy of Shutterstock.

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