Personnel Levels in a Typical CPA Firm

Partners (also Principles)- partner signs the firm's name on the audit, not their own name; partners need to have 10+ years of experience

Management group:
-Senior managers
- Managers
- 5-10 years of experience needed; may be responsible for more than one engagement at the same time.

Senior group:
- Supervising Seniors
- Seniors
- 2-5 years of experience mostly field work
- when you become a senior, you are very valuable to outside clients, because you supervised and audit, you have 5-6 big clients and you see what they're doing right and wrong, so your experience becomes very valuable to the industry; It is hard to keep Seniors especially heavy Seniors, because if a company looses a CFO they will ask them to take the place and use their experience.

Staff auditors:
- Staff accountants
- Assistant accountants- it takes about one year to progress to the next level.
- 0-2 years of experience, performs most of the detailed audit work.

-Have final responsibility for the audit engagement

-Sign the firm's name on the audit report

-In some foreign countries, partners sign their names and
not the firm name on the 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 4 partner: $750k- $800k

-How do you become a partner?
1. Technical expertise
2. Bring in clients
3. People skills
4. Have to be nominated by partner's committee

- Traditionally, principals were non CPA's but "essentially partner equivalents used for consulting.

-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

-Partner reviews the overall audit work and is involved in significant audit decisions; A partner is an owner of the firm and therefore has the ultimate responsibility for conducting the audit and servicing the client

-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 wok papers, after senior level review
*Typically only on site when client "issues" arise you spend more time and have to bill overtime. Managers have to keep billing files in detail.

-Often on a phone 25% of a work day

-Needs 5-10 yrs of experience

-Help the in-charge plan and manage the audit, reviews the in-charge's work and manages relation with client

-May be responsible for more than one engagement at the same time.

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
-Really learn to audit when you have to deal with bad audits.
-Rather than doing parts of the audit
-You oversee entire audit process
*Experienced staff may senior small audits

Senior group responsibilities:
*Coordinates and is responsible for the audit field work, including supervising and reviewing staff work.

*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- if company has good controls it is a low control risk; if company does not have good controls it is a high control risk

*Delegates sections of the audit for staff auditors to do

*Reviews work of subordinates- prepares Review Notes, which are later reviewed by Manager or Partner

*Senior retention issues...

*First big job you senior can be frustrating; what did I do today?

-Staff accountants:
*Have been through a busy season
*Usually promoted from assistant accountant after 9 months to a year and a half.
*"Fast-track" staff accountants often senior a very small or branch audit in as few as 9 months from hiring.
*Audit tougher areas than assistants

-Assistant accountant is entry-level

-Accept that your are occasionally feel lost (even stupid), in the first 6 months.

-It's just part of the learning process, and everyone goes through it.

-Staff auditor responsibilities:
*Testing controls at interim and SOX controls compliance testing - done 2-4 months before year end
*Substantive audit procedures(it is dollar amount test) we are directly testing dollar amounts and obtaining evidence
-Fixed assets
-Inventories
-Accounts Receivable
-Accounts Payable
-Cash
*Substantive- testing dollar amounts

-There is a work paper (audit documentation) review hierarchy
*To satisfy 1st standard of field work
-Work adequately planned
-Assistants, if any properly supervised
-Assistant (anything below partner level)

*Seniors review work papers and write review notes to be cleared, then manager does so, followed by partner.

-Cold partner (concurring partner) review:
*Independent review- in this the auditing partner looks from the audit reports to the functions of the organization; Instead of digging in the details and working up, independent reviewer starts at financial statements and look at any thing that stands out.

*expertise with no audit engagement- "fresh set of eyes"
*Partner or senior manager who understands the industry also reviews!
*Purpose: are the financial statements 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