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Annual Audit: 5 Ways to Save Time, Money

April 1, 2022 By CFO Consulting Partners

(This article was originally published on Exit Planning Exchange.)

By Allan Tepper

Companies need about three months to receive a clean opinion for their annual audit.

So why does your company need more time? 

Expending too much time and money on your annual audit is a red flag for the executives involved with corporate governance and financial oversight.

New accounting rules and regulatory changes continue to drive the average hourly fees that public companies pay to external auditors. The rate has increased 31% during the last decade, according to a survey of finance executives. The average total bill jumped to $2.52 million in 2020.

“Auditors service two types of clients: those who are not prepared for the audit and those not properly prepared,” says CFO Consulting Partners’ Jeffrey Yager. “However, clients that are not prepared will generally pay higher fees. Nobody wants the audit to drag on. Everybody wants it done timely. Audit readiness translates into cost savings.” 

Unfortunately, financial costs aren’t the only expense. Add opportunity costs to the tab.

“Annual audits can be long and very expensive, not only in terms of the bill, but in terms of the wear and tear on your staff,” say CFO Consulting Partners’ Paul Karr. “A long, drawn-out audit is a huge distraction. Your staff can’t move on to their other duties if they are busy with auditors for long periods of time.”

Here are five ways to save time and money on your next annual audit process, according to CFO Consulting Partners’ Audit Readiness team members:

  1. Take Ownership Of The Process.

Companies tend to be unclear about what role they play in the annual audit process. And that ambiguity leads to inefficiencies along the way.

“It’s very important to prepare and manage the audit,” Karr says. “Most companies understand what it means to prepare for the annual audit. However, managing the audit doesn’t mean it is something the auditor does—it’s what the company does. Managing the audit process means keeping track of the auditor’s progress and establishing a good rhythm of meetings with the audit team. You want a regular rhythm with auditors. Is there a clear understanding about what they need? How can you respond to those needs as quickly as possible? Own the process.”

  1. Talk To The Auditor Sooner Than Later.

Building rapport with the auditors before the audit begins is a smart investment. This new relationship can result in saving time and money.

“It is really important to have a dialogue each year with your auditors and discuss what are the ways to better prepare for the audit,” Yager says. “There are always additional things that companies can do to achieve cost savings, make it a much smoother audit process so it’s completed on time. Discuss what work can be taken on by the company that would otherwise be done by the auditor. A company can’t perform its own audit, but it can make sure it has prepared the proper schedules to the extent the auditor is comfortable with the client doing the work. It will translate into less hours that the auditor will spend on the engagement.”

  1. Engage The CEO.

Leaving the company’s CEO out of the audit picture is a real problem.

According to Oracle’s 2021 “New benchmarks for security, risk, and audit” report, 30% of surveyed financial executives said lack of upper management support was one of the top challenges to their audit process.

The desired level of support begins with C-Suite involvement from the beginning of the process.

“CEOs need just enough details so they can manage them and not be blindsided,” says Karr. “The annual audit isn’t an audit of the accounting department; it’s an audit of the company. When it comes to internal controls, the CEO is needed to help everyone understand that. It’s not just about the Finance Department. The operations people have to be part of the game. So do the team members in credit. An involved CEO brings everyone together and holds them accountable.”

  1. Tell Your Story—Before Someone Else Does.

In recent years, changes in standards have helped drive up the cost of annual audits, which are beyond the control of the company. Being better prepared with appropriate financial records is something the company can control to reduce the cost.

Companies should tell their story with accurate financial statements and identify gaps or potential issues that could cause the audit process to drag on.

“Work closely with the auditor on certain issues before the audit actually starts,” says Yager. “How have any new accounting standards impacted the company? Have you addressed the new standards? Are there technical memos that need to be written for the auditor? That could save money.”

Companies also should spend more time reviewing the financial statements for disclosures that are missing or not written properly. “It’s important for companies to take ownership of the financial statements, as opposed to thinking, ‘the auditor will clean up everything, so I don’t have to.’ CFO Consulting Partners can assist a company with all of these items.”

  1. Measure And Manage.

Philosopher George Santayana once said: “Those who cannot remember the past are condemned to repeat it.”

He probably wasn’t talking about annual audits, but his point still rings true.

Companies should start this year’s annual audit process with last year’s.

“When preparing for the audit process, take a look at the rough spots from prior audits,” Karr says. “There is plenty of knowledge and anecdotes about things that didn’t go well. Before the audit starts, companies should review those areas with their staff and plan on how to make those areas work better.”

If revenue testing has been problematic, for example, conduct a pre-audit. Review financial records with the largest revenue transactions of the year. Pull the financial documents now and make sure you are ready. By getting ahead of it now, allows your team to get the audit done faster—saving time and money.”

CFO Consulting Partners is comprised of a team of senior financial executives. We provide a broad range of financial management services to public and private companies. We work for CEOs, CFOs, as well as audit committees and boards. Our mission is to apply our consultants’ considerable collective experience to resolve client issues in a professional and efficient manner.

Blog Contributors:

Jeffrey Yager, CFO Consulting Partners; over 30 years of experience as a former audit partner at RSM US LLP. He has served as the auditor and advisor to domestic and offshore hedge funds, private equity groups and investment advisory firms. 

Paul Karr, CFO Consulting Partners; a former Big 4 audit partner, has over 20 years’ experience in senior leadership roles in finance and controllership, including over 15 years in insurance and financial services, and provides leadership in closing processes, internal controls, accounting policy (US GAAP and IFRS), SEC financial reporting and restructuring. 

(Allan Tepper, CPA/MBA, is co-founder and senior managing director at CFO Consulting Partners. He can be reached atepper@cfoconsultingpartners.com or (646) 650-2028 x701.)

Filed Under: Allan Tepper, Resources

Audit Stress? 7 Ways to Find Relief

February 25, 2022 By CFO Consulting Partners

We used to sit in that chair.

Our team, which includes former CFOs and controllers, understands the angst that comes with an audit. We’ve lived through the pain and scrutiny.

You’re going to need unchallengeable numbers to be audit ready.

That’s how we’ve been able to help small and midsized companies—for more than 15 years—across many industries resolve audit headaches. As an added benefit, many experienced lower audit fees due to a more efficient audit. 

We also know how to prevent problems with audits in the first place.

Need to get your financial statements together? Got it. A recently acquired company needs to prepare for their first audit ever? No worries.

Our Audit Readiness service provides peace of mind to both public and private C-level executives who need accurate numbers. We also can help with strengthening internal controls over financial reporting, as well as providing accounting implementation in “hot” areas as revenue recognition, lease accounting and IFRS reporting. 

When it comes to our Audit Readiness service, here are seven ways we can help relieve the stress:

  • Prepare or assist in preparing a full set of GAAP financial statements, including auditable supporting workpapers
  • Research GAAP and disclosure issues and the application of accounting principles to a company’s facts and circumstances
  • For public companies, draft Form 10-Ks, 10-Qs, registration statements and proxy reports
  • Provide support related to SEC comment letters
  • Restate financial statements for prior period errors
  • Assist with preparing delinquent SEC filings
  • Assure a high level of quality control, as all engagements are reviewed by another partner

Let us help you minimize any uncertainty involving an upcoming audit. 

Contact us today!

David DeMuth
609.309.9307 x700
ddemuth@cfoconsultingpartners.com

Allan Tepper
646.650.2028 x701
atepper@cfoconsultingpartners.com

Eric Segal 
609.309.9307 x702
esegal@cfoconsultingpartners.com

Filed Under: Allan Tepper, David Demuth, Eric Segal, Featured, Newsletters, Resources

Allan Tepper appointed to the Board of Directors of the Boys & Girls Club of Garfield, NJ

May 5, 2016 By CFO Consulting Partners

Filed Under: Allan Tepper

David DeMuth’s podcast on CFO Consulting Partners and its Services

February 7, 2016 By CFO Consulting Partners

Hear David discuss CFO Consulting Partners and its services as a guest on Master Your Finances, hosted by Kurtis Baker. Master Your Finances is a weekly broadcast, produced by Rider University. David was interviewed on February 7, 2016.

LISTEN NOW

Filed Under: David Demuth, News & Events

Newsletter – December 2015

December 9, 2015 By CFO Consulting Partners

Financial Transparency – A Case Study

The following is a composite case of several organizations, and any resemblance to an actual client is clearly coincidental.

Background:
A client suffered fraud, misappropriated funds, and confused financial concepts. This caused lots of frustration at the board level. The audit report took almost a year to complete, and the auditing firm pointed out a number of material weaknesses, which went years without being adequately addressed.

What was the problem? The accounting process was opaque, bookkeeping practices were cumbersome, information was not captured at a correct reportable level, internal controls were weak; executive management did not have appropriate skills, and most importantly, the board did not understand the way information was reported (too high-level with weak explanations). This resulted in serious cash flow problems.

Here is how the board/company addressed the problem:

Quality of staff – The board insisted that the accounting and executive staff be upgraded and reorganized, and that the new CEO be very close to the numbers.

Discipline – The board insisted on a standard financial reporting package. This consisted of a balance sheet, P&L, cash flow report, variance analyses of this year versus the prior year, accounts receivable and accounts payable aging reports, and other standard reports.

Restructuring the way information was reported – It is now reported in the way that the business is run. This meant a redo of the chart of accounts to re-organize the way information was reported and to capture certain information at a more detailed level.

Policies and procedures – They were developed in bullet point form; they were kept to a few pages and reviewed and approved by the board, and are now followed by senior management. For example, capital expenditures, which could be masked by leasing equipment in which the monthly payments are in relatively small amounts, could no longer fall under the radar.

Sense of openness:
The new CEO and the board encouraged openness in reporting and telling it like it is. Any spin was discouraged. Businesses were separately reported so one could see the contribution profit. A strategic plan preceded the budgeting process and the fist year of the plan became the budget.

Result:
The organization is on its way to meeting its goals with a renewed sense of excitement, and with a financial process that tells it like it is.
__________________________________________________________
Our firm is a team of senior financial executives. We provide a broad range of financial management services to public and private companies. We work for CEOs, CFOs, Controllers, as well as audit committees and boards.

Our mission is to apply our consultants’ considerable collective experience to resolve client issues in a professional and efficient manner.

Filed Under: Newsletters

Financial professionals in short supply

December 21, 2012 By CFO Consulting Partners

by John Callegari

With the acquisition of Germany’s Deutsche Card Services and its 100 employees, EVO Payments International, a payment processor, also wants to add a handful of financial and accounting professionals at its Melville headquarters.

But CEO Jim Kelly said the company is having a hard time doing that. “The market must be getting better, because we can’t find them,” Kelly said this week. “And I know it’s not a result of the salaries we’re offering them.”

He’s not alone.

Businesses across the nation are struggling to find talented accounting and finance professionals, specifically business systems analysts, tax accountants and auditors. And they’re coping by seeking out less qualified individuals or increasing the salaries they’re willing to pay.

Nationwide, almost 60 percent of companies surveyed in Robert Half International’s annual professional employment report noted it is at least somewhat challenging to find needed accounting and finance employees.

To combat the shortage, Dawn Fey, district president of New York City-based Robert Half International, which helps place accounting and finance professionals at companies in the New York metropolitan area, suggested companies limit their wish list for potential employees to only a couple of must-have skills.

“Some of the skills clients are looking for are still so new and different that few have them,” Fey said. “For example, Dodd-Frank is new for everyone, so not that many people are completely versed in it yet. Expecting job candidates to be completely up on that along with several other skills may not be realistic.”

The current 4.7 unemployment rate for accounting and finance professionals sits well below November’s 7.7 percent national unemployment rate for all occupations. For companies seeking younger talent, the supply is more readily available than for mid- to senior-level professionals, but the key is to get a first crack at them. Michael Nugent, director of the MBA and Finance program for Stony Brook University, recommended companies keep close contact with the career centers at local universities to reach potential employees before they hit the job market.

But with much of the demand for mid- to senior-level finance professionals, some companies have turned to outsourced accounting professionals to meet their needs while combing the market for permanent replacements.

And rightfully so, some would argue. A lot of these outsourced professionals will be able to work with integrating existing internal systems into software such as Salesforce (learn more about these type of integrations on the Salesforce website). This is often a skill that in-house accountants lack.

Huntington Station-based CFO Consulting Partners, a provider of interim and part-time CFO services, has seen its business increase 25 percent in the past year, according to co-founder and senior managing partner Allan Tepper, with the majority of that stemming from smaller to midsize companies and community banks.

“When the banks are feeling pressure from regulators, they must react, so they try to staff up,” Tepper said. “We usually compete with talented people who are in between jobs, but that kind of competition has been taken off the table right now.”

Accounting and financial employees are the second most in-demand jobs nationwide according to a new study by CareerBuilder and Economic Modeling Specialists International. The study noted 37,123 accounting and finance jobs have been added since 2010, a 3 percent increase, second only to software developers, which increased by 70,872 jobs during that same time period. And the number of jobs in accounting and finance is expected to grow between 16 and 23 percent by 2020, according to the U.S. Bureau of Labor Statistics.

Starting salaries for accounting and finance positions, estimated at about $61,000 in 2010 according to Bureau of Labor Statistics, are expected to rise an average of 3.3 percent in 2013, according to an annual employment report from Robert Half International. The report noted there will be a particular need for Financial Analysts and business analysts who can support growth opportunities, as well as staff and senior accountants.

While the need for more finance professionals continues to grow, the number of degrees conferred nationally in accounting and finance has remained relatively stable. Locally, Stony Brook University has actually been drawing down the number of students admitted to its business school from 1,200 in 2010 to 1,000 in 2011 and 900 in 2012. This comes at a time when 68 percent of accounting majors nationwide have received job offers, the highest percentage of any major according to a report from the National Association of Colleges & Employers.

Nugent said the school is making its entry requirements more stringent in an effort to lower class sizes. Stony Brook does not have enough professors to handle both the undergraduate and graduate workloads, so the school is focusing on expanding its MBA program. The decrease in undergraduate admissions should only be temporary, Nugent said.

“We’re in the process of expanding the finance and accounting faculty by between four and eight new hires in the next year,” he said. “Once we have adequate staffing, then we can again look at
increasing enrollment.”

Richard Paris, CEO of Melville-based Marcum Search, the staffing division of accounting firm Marcum, said he’s seen a large increase in demand for finance and accounting professionals
across the nation for the last six months.

“We have 75 recruiters who work for us, and we are overwhelmed with work,” said Paris, who noted the company just completed an acquisition of Connecticut-based search firm Horton
International on Dec. 1. “We’re having to turn down some work.”

Marcum has even turned to some of its own to help stem the shortage, creating a financial incentive program for all staff members who refer qualified accounting and auditing professionals. The incentive is being used to recruit tax and assurance professionals for Marcum’s offices in Melville, New York City, Pennsylvania, Boston, Connecticut, South Florida and San Francisco.

Paris said the uptick in demand for financial professionals stems from the economy’s turning around enough that companies can afford to fill vacancies in crucial positions like accountants and auditors.

“Companies wait and try to do more with less during bad times,” he said. “Then they backfill in their overhead positions when there’s a rebound. That’s what we’re seeing on the corporate side.”

Nugent agreed, saying companies locally now have to again contend with the large Wall Street firms that have recovered from the 2008 recession. “You have a lot of extra demand here because of New York City,” Nugent said.

And for larger companies with multiple offices, like EVO Payments International, if the talent market has soured in one area, it may be worthwhile to look elsewhere.

“Most of the countries we’re getting into require some work done locally, so while we’ll keep attempting to centralize some of our administrative work [on Long Island], we’ll also staff up our offices in these other countries,” Kelly said.

As seen: http://libn.com/2012/12/21/financial-professionals-in-short-supply/

Filed Under: Allan Tepper, News & Events

Allan Tepper named Chairman of the Banking Committee of the NYSSCPAs for the 2010/2012 years

January 1, 2012 By CFO Consulting Partners

Filed Under: Allan Tepper

Economic echoes of 2008

September 18, 2011 By CFO Consulting Partners

Banks teetering. Deals unraveling. New York business holds its breath, hoping this September isn’t anything like that September.

The economy is on the brink—again—and while officials overseas and in Washington try furiously to stabilize teetering banks, this time in Europe, business leaders in New York are beginning to fear the worst. Again.

“In my 30 years of business, this is the second-worst business environment I’ve ever seen, after the fall of 2008 and early 2009,” said Allan Tepper, co-founder of CFO Consulting Partners, which advises manufacturers and distributors. “Frozen is the word that best describes things.”

The bunker mentality is back. Companies are revising projections for next year and cutting back on new investments or hires, reining in discretionary costs such as marketing, and spending only on projects that promise immediate payoffs.

Many local businesses aren’t retrenching, of course. And today’s economic crisis differs in significant ways from the one in September 2008, when the housing bust drove Lehman Brothers into bankruptcy, nearly destroyed American International Group and paralyzed the entire financial system. Current events are less cataclysmic, at least so far, and focus more on the health of European nations and the viability of the big banks that lent heavily to them than on financial and economic problems centered in the U.S.

Still, while New York’s economy fared better than the nation’s in the recession that officially ended in June 2009 and recovered faster and more strongly, that outperformance ended this past June, when the Big Apple’s private-sector job growth suddenly trailed the national rate.

The city’s economy, ever-tethered to the financial markets, took further hits when stocks fell over the summer as Washington fought over the nation’s debt limit, Standard & Poor’s cut the U.S. credit rating, and Europe’s economic problems extended from Greece and Spain to Italy and even France.

It’s all been enough to spook recession-battered businesses and investors alike. In the past few weeks, Zynga, Groupon and Facebook have been forced to postpone their initial public offerings. Corporate merger activity declined by 18% last month, and more buyers are getting cold feet at the altar. Last week, Avis Budget abandoned its yearlong pursuit of Dollar Thrifty, citing market conditions, and fashion designer Tommy Hilfiger called off his $170 million acquisition of the Clock Tower, the landmarked office building overlooking Madison Square Park that he had intended to convert into a luxury hotel and condominium.

Meanwhile, many companies are finding it tougher to borrow money, particularly in the short term. Issuance of commercial paper, the ultra-short-term debt that some companies use to pay suppliers or make the week’s payroll, has declined for nine consecutive weeks.

“It’s a constant beat-down,” groaned market analyst Meredith Whitney at a conference last week. Moments later, Larry Fink, CEO of money management giant BlackRock, urged European officials to bail out their banks much like the U.S. did. “Can we trust governments to do what they did in ’08 and “09?” Mr. Fink said. “If we felt comfortable that Europe will do right thing … [we would] have a dramatic rally.”

Snip, snip, snip

The recent waves of uncertainty forced OwnEnergy, a Brooklyn developer of wind-powered energy farms, to start a cost-cutting program late last week. The directive is for the firm’s 15 employees to spend less on travel and conferences, while delaying spending on less mature projects. Cutbacks are required, said CEO Jacob Susman, because there’s less financing available for alternative energy and the slow economy has cooled demand for electricity.

 

“We don’t know how long this economic situation is going to last, so we have to be agile where we can,” Mr. Susman said.

Building sales are still getting done but are taking between four and six weeks to close, instead of the two to three weeks seen just a few months ago, said Robert Knakal, chairman of Massey Knakal Realty Services. He noted that lenders are now inspecting building boilers—something that is never done in more robust markets. “Buyers and banks want to dot every I and cross every T,” Mr. Knakal said.

The jitters extend to Broadway, already facing a long-in-the-making fall season that will see 15 shows open, compared with 21 two years ago (see “Chilly fall
season on Broadway,” this issue).

“I wouldn’t do a big musical at this time,” said veteran producer Stewart Lane, who is hoping to find backers for a new musical with songs by John Denver. He figures his production will cost around $6 million, much less than the approximately $16 million for a major show.

Marketing and public-relations efforts are also heading for the wayside as corporate giants streamline.

“I’ve spoken to clients who say they’re going to have fewer PR agency partners next year than this year; that’s going to be true of marketers as well,” said Tom Morrissy, executive vice president of client solutions at Synaptic Digital, a video communications company whose clients include General Motors, Google and American Express.

Consumers are also hunkering down. Nat Wasserstein, a crisis manager at restructuring advisory firm Lindenwood Associates, said that retail clients aren’t replenishing their inventories as quickly, while some are slower to fill back orders because that would require them to spend money for supplies. Times are toughest among sellers of housing-related items, such as plants for landscaping or windows. But even businesses that are not in trouble are more cautious than in the past.

“People are so risk-averse, it’s clogging the engine of growth,” Mr. Wasserstein said.

The city’s hospitality business appears to have avoided the economy’s wrath and the euro’s summertime meltdown, at least so far. Tourism remains strong, thanks in part to the weak U.S. dollar and also to the fact that more moderately priced hotel rooms can be found here now than in 2008, said John Fox, a senior vice president at PKF Consulting.

High-end restaurants appear to be thriving still. Drew Nieporent, founder of Myriad Restaurant Group, which owns the Tribeca Grill, Nobu and others, insisted it’s “business as usual.”
“We have a very busy party season now,” he said. “That bodes well for the holiday season.”

Contributors: Theresa Agovino, Lisa Fickenscher, Matthew Flamm, Daniel Massey, Elaine Pofeldt and Miriam Kreinin Souccar

Correction: Tom Morrissy is executive vice president of client solutions at Synaptic Digital. His surname was misspelled in an earlier version of this article, originally published online Sept. 18, 2011.

A version of this article appears in the September 19, 2011, print issue of Crain’s New York Business.

As seen: http://www.crainsnewyork.com/article/20110918/FREE/309189977

Filed Under: Allan Tepper, News & Events

Allan Tepper interviewed by CFO Studio

August 5, 2011 By CFO Consulting Partners

Filed Under: Uncategorized

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