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December 4, 2024

Hear, Hear!

Boost your business by becoming adept at active listening.

43:57.
According to an analysis of thousands of sales calls conducted by Gong Labs, a data services firm, that’s the talk-to-listen ratio of the nation’s top sales performers. In other words, they listen more than they talk. In the study, salespeople who focused less on sales pitches and more on active listening to uncover their clients’ pain points were selling at 120% above their quota.


Here’s another compelling statistic: More than 64 percent of HR professionals believe that active listening is the most critical leadership skill managers can possess, reports a study from the Society for Human Resource Management.


Active listening isn’t just a key skill for salespeople and CEOs: CPAs need to hone their listening skills so that they can fully understand their clients’ concerns and goals, ultimately leading to better client relationships and more effective service delivery. Listening also helps CPAs gather all necessary information to make decisions and identify potential issues that clients might not explicitly state. In addition, listening well is also critical to boosting productivity, reducing mistakes due to miscommunication, spurring problem solving among team members, and more.


So what is active listening? Harvard Business Review defines it as “when you not only hear what someone is saying, but also attune to their thoughts and feelings.” 


Here are four strategies to hone your active listening skills:

1. Stop talking. Next time you’re in a conversation, try to talk less and listen more. You don’t have much to gain from the conversation if you’re the one talking all of the time. Avoid the temptation to fill up pauses in the conversation with words. Often, such pauses give the other person more time to think and formulate their responses, which provides a more fruitful exchange.

 

2. Ask good questions. Show the person you’re conversing with that you care what they have to say by asking questions that reveal your interest. Avoid “yes” or “no” questions, as they tend to limit the conversation. If you’re talking to someone you know a little bit about, prepare for your meeting with some conversation-starters that relate to their hobbies or interests. People like to talk about themselves, and by establishing a friendly rapport at the start of a conversation, they’re likely to open up more. If you’re attempting to converse with a complete stranger at, say, a networking event, come prepared with questions designed to help the two of you find common ground.


3. Pay attention to visual cues. A great deal of communication is unspoken, so observing nonverbal cues can help you understand what the speaker is really thinking. For instance, if the person is crossing their arms or won’t make eye contact, they’re likely not being forthcoming or don’t have an interest in speaking with you. Make sure your own body language is welcoming by maintaining eye contact, nodding your head when appropriate and mirroring the speaker’s facial expressions to show understanding. Avoid fidgeting or staring at your watch or phone.


4. Summarize and validate. Restate the speaker’s key points in your own words without altering the meaning or tone to show that you’ve been paying attention. This may seem awkward at first, but saying something like, “Sounds like you are saying. . .” lets the person know you’ve been paying attention — and allows them to correct you if you’ve misunderstood something they said. It also helps the person feel validated -— which will go a long way to building your relationship.


Collemi Consulting leverages nearly three decades of experience to provide trusted technical accounting and auditing expertise when you need it the most. We regularly work with CPA firm leadership to help them develop and deliver the right training programs for their teams. To schedule an appointment, contact us at (732) 792-6101.

 

 



Testing of Non-Standard Journal Entries to Identify Questionable Transactions

By Jennifer Ruf • March 24, 2025
As audit season is in high gear, it’s important for auditors to step back and plan how they are going to audit a client’s books and records. What are the red flags you’re looking for when it comes time to throw open the books and look through a huge swath of journal entries to pluck out the ones that are questionable, and need to be questioned? First off, it’s important to understand how journal entries are created at the company being audited. For an auditor, that means looking at the internal control environment to understand how a journal entry is created: Who’s authorized to create one and who can create one. You have to understand the process. How does it start and how is the entry eventually recorded onto the financial reporting system? Once you know that, you can determine whether someone can come in and override the system, or if someone can pretend to be someone else and start recording journal entries onto the system. That will help you figure out what to look for to decide what entries to pull out and ask management to get back up information to support and validate those entries. Finding the needle The key here is not to just go through the mechanics, but to really go through the exercise so you can determine if management is playing games in the recording of those transactions. You have to be able to get comfortable with that, and that means you need to be able to document what you’re looking for. Because what the auditor is really doing is looking for a “needle in the haystack”, to identify the transactions that don’t look right, that don’t make sense in the ordinary course of business. For example, if the business is not open on weekends, are transactions being posted on a Saturday or Sunday, or even on holidays? If you see rounded numbers or accounts that are seldom used, those can be red flags as well. Sometimes it can be as simple as asking managers and others like accounting, data entry and IT personnel if they’ve observed any unusual accounting entries. Depending on the size of the company and scope of the work, you might need to use computerized audit software program — some of them with AI built in — that can scan the entries to identify anomalies. Red flags When an auditor is looking for evidence of management override of controls, they can look for some of these 12 red flags indicators: ● Top-side entries ● Entries made to unrelated, unusual or seldom-used accounts ● Entries made by individuals who typically don't make entries. ● Entries recorded at the end of the period ● Post-closing entries with no explanations ● Entries made before or during the preparation of financial statements with no account numbers ● Entries that contain rounded numbers or a consistent ending number ● Entries processed outside the normal course of business ● Accounts that contain transactions that are complex or unusual in nature ● Accounts that contain significant estimates and period-end adjustments ● Accounts that have been prone to errors in the past ● Accounts that contain intercompany transactions When testing non-standard journal entries and other adjustments, you should look for documentary evidence indicating that they were properly supported and approved by management. Finally, remember that while most fraudulent entries are made at the end of a reporting period, you shouldn't ignore the rest of the year  Collemi Consulting leverages nearly three decades of experience to provide trusted technical accounting and auditing expertise when you need it the most. We regularly work with CPA firm leadership to help them reduce risk and maximize efficiencies. To schedule an appointment, contact us at (732) 792-6101.

It’s Time For Year-End Audits

December 20, 2024
Are you prepared?
A woman's hands holding a microphone

Shake It Off

December 9, 2024
Conquer your fear of public speaking and present like a pro
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There’s Only One Year Left to Implement the PCAOB’s New Quality Control Standards

November 18, 2024
ADDITIONAL GUIDANCE: Since this blog was first published, the PCAOB released two new guidance documents. The Nov. 26 updates can be found here: An additional overview of the requirements of QC 1000 and staff guidance for firms about how to comply with the standard. This document provides additional staff insights on scope and applicability, responding to engagement deficiencies, and documentation for AS 2901, Responding to Engagement Deficiencies After Issuance of the Auditor’s Report. The Public Company Accounting Oversight Board (PCAOB) recently announced a new set of quality control standards designed around a risk-based approach. And there’s only one year to design and implement them. The PCAOB’s new QC 1000 standard is more than two decades in the making, as it replaces the quality control standards it adopted on an interim basis back in 2003 from the American Institute of Certified Public Accountants (AICPA). The new standard is intended to make independent registered public accounting firms significantly improve their quality control (QC) systems. QC 1000 applies to all PCAOB-registered member firms, with more extensive requirements for those that audit more than 100 issuer clients annually. It has been approved by the U.S. Securities and Exchange Commission (SEC) and goes into effect on December 15, 2025. The new requirements and the work required to implement them will be extensive, and the larger public accounting firms require external oversight of the QC system. Therefore, it is strongly recommended that firms do not put it off until the last minute. At its core, the new standard is intended to enable firms to identify their specific risks and design a quality control system including policies and procedures to guard against those risks. The overall goal is to establish what the PCAOB calls “a continuous feedback-loop for improvement.” In this, the new standard differs from the International Auditing and Assurance Standards Board’s (IAASB) International Standard on Quality Management No. 1 (ISQM 1) and the AICPA Statement on Quality Management Standards No. 1 (SQMS 1). An extensive but not comprehensive comparison document of the three standards may be found here, but is presented only as a reference tool. New requirements QC 1000 has requirements that do not appear in other QC standards. They can be more prescriptive or more specifically tailored to the U.S. legal and regulatory environment. There are 10 main areas in which the QC 1000 standards go beyond other, existing standards. These are: Evaluation and Reporting: QC systems must be evaluated annually and reported to the PCAOB. They must be certified by specific individuals with responsibility and accountability for the firm’s QC system. Governance and Leadership: Firms must create and maintain clear lines of responsibility and supervision. Larger firms must have outside oversight and a confidential complaint system. Ethics and Independence: Quality objectives must be tailored to the U.S. regulatory environment. Larger firms must implement an automated system for identifying securities investments that could impair independence. Monitoring and Remediation: QC 1000 divides monitoring into engagement and QC system levels. Engagement and QC deficiencies are defined, including requirements for their determination. Larger firms must (and smaller ones should) monitor in-process engagements. Quality Objectives: The firm’s personnel must comply with its policies and procedures Information and Communication: Quality objectives for communication with external parties are established at the firm and engagement level. Communication of the firm’s QC system’s policies and procedures must be communicated in writing. Resources: The firm’s personnel must adhere to standards of conduct. Policies and procedures must address both enumerated and circumstance-specific competencies. Mandatory training, licensure and technological resource requirements are established Risk Assessment Processes: Quality risks must be identified and assessed annually. Roles and Responsibilities: A single person must be assigned responsibility for each role and responsibility in the QC 1000 standard. Documentation: With respect to the QC system’s operation, documentation that allows an experienced auditor to evaluate the operation of quality responses must be provided. Documentation must be retained for at least seven years. That’s not an exhaustive list, but it does give an indication of how much work will be involved. And it’s happening at the same time as the AICPA extensive new Statements on Quality Management Standards (SQMS) requirements are coming into effect . Collemi Consulting leverages nearly three decades of experience to provide trusted technical accounting and auditing expertise when you need it the most. We regularly work with CPA firm leadership to help them reduce risk and maximize efficiencies. To schedule an appointment, contact us at (732) 792-6101.
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