Personnel Levels in a Typical CPA Firm

1. Personnel Levels in a Typical CPA Firm Dr. Donald K. McConnell Jr. The University of Texas at Arlington

2. Typical Personnel Levels • Partners [also principals] • Management group • Senior managers • Managers • Senior group • Supervising seniors • Seniors • Staff auditors • Staff accountants • Assistant accountants • [A horse by any other name is still a horse]

3. Partners and Principals • Have final responsibility for the audit engagement • Sign the firm’s name on the audit report • In some foreign countries, partners sign their names, not the firm name, on audit report • Have final responsibility for all audit work product; however, characteristically review work papers [audit documentation] in areas of greatest audit risk • Average annual earnings for a big four partner • How do you become a partner?

4. What Differentiates Principals from Partners? • Traditionally, principals were non CPAs, but “essentially” partner equivalents • More recently, persons seeking a better work-life balance • Typically principals: • Have fewer client responsibilities • May work seasonally, or only “x” days a week • Earn less than partners • Don’t have to put up capital, as partners must* • Don’t get to vote at partner meetings

5. Management Group • Senior managers and managers • Not on site day-to-day during fieldwork, as seniors and staff are • Fieldwork is that period when the audit team is physically on client premises conducting the audit • Management group functions: • Review work papers, after senior level review • Typically only on site when client “issues” arise, e.g. audit or accounting problems, or client wants “face time” • Preening to become partners • Do client billings, follow up with late payers, additional billings for over runs • Often on phone 25% of a work day!

6. Senior Group • Supervising seniors: • A more experienced senior • May be senioring [in charge of] multiple audits simultaneously • More likely to senior SEC audits • New seniors: • Usually run only one job, probably a small client • This is when you truly learn how to audit! • Rather than doing parts of the audit • You oversee entire audit process • Experienced staff may senior small audits

7. Senior Group Responsibilities • In charge of audit fieldwork • Great when you become a senior: your boss is no longer standing over you day-to-day! • Plans the audit, with manager and partner approval • Prepares audit program, based on control risk assessment • Delegates sections of the audit for staff auditors to do • Reviews work of subordinates • Senior retention issues… • First big job you senior can be frustrating: What did I do today!? • [Not generating many w/p’s anymore!]

8. Staff Auditors • Staff accountants • Have been through a “busy” season • Usually promoted from assistant accountant after nine months to a year and a half • “Fast-track” staff accountants often senior a very small or branch audit in as few as nine months from hiring • Audit tougher areas than assistants • Assistant accountant is entry-level • Accept that you are going to occasionally feel lost [even stupid], in the first six months • It’s just part of the learning process, and everyone goes through it!

9. Staff Auditor Responsibilities • Testing of controls at interim, SOX controls compliance testing • Substantive audit testing of, e.g.: • Fixed assets • Inventories • Accounts Receivable • Accounts Payable • Cash

10. Other Issues • Note there is a work paper [audit documentation] review hierarchy • To satisfy 1st std of field work • Work adequately planned • Assts, if any, properly supervised • Seniors review w/p’s and write review notes to be cleared, then manager does so, followed by partner • Cold partner (concurring partner) review • Partner or senior manager who understands the industry also reviews! • Purpose: are the Fin. Stmts. fairly presented in conformity with GAAP? • Req’d for audits of SEC clients, if CPA firm is member of SECPS of AICPA • Many firms have for all audits