Every CPA practice needs quality control. The issue is whether the practice needs a dedicated QC person, and if that isn
A firm only needs a dedicated QC person when the work volume warrants it - particularly where there are bottlenecks and backlogs because the supervisor or partner who would review the work isn't readily or easily available, or the scheduling becomes exceedingly difficult and the expertise and training becomes more specialized and wider in scope.
Some firms maintain firewalls between quality control and the audit staff. Virtually every tax return, no matter how small, is reviewed by someone, whether it is a reviewer, another preparer, their supervisor or a partner. The QC person, who is usually at a higher level and billing rate, would ideally spend minimal time so as to deliver the product quickly and profitably while still maintaining firm standards.
Depending on the underlying quality of the original work, measures must be established to ensure the best quality at the least cost. Doing the work properly the first time is obviously the lowest-cost manner of QC. If the first-level work is done carelessly and without interest, the reviewer then will practically have to redo the work - either through extensive notes, comments and discussions, or simply making the corrections to get the work done properly.
Quality control can only succeed with the right processes and leadership determination to ensure that the best job possible gets done at the lower levels. Part of this is implementing the right procedures and checklists, and adhering to them.
Another part is the ego and pride of the staff to do the best job possible and not leave open items for their boss or the QC people to remedy. A culture of "doing it right the first time" has to permeate the firm. Only then can the QC person spot-check work and focus on major issues. This would also free up the QC person to train and further develop staff. Otherwise, the QC person's time is spent merely redoing and correcting errors.
The QC person also needs to have the authority to fully enforce processes and procedures, and should not be expected to correct the work. Having the person making the errors correct them establishes a pattern of quality and continuous learning. In most businesses, error rates of more than 8 to 10 percent are unacceptable; in accounting firms, these error rates are considered very good. (If your firm's error rate is at these levels, then a QC person is still necessary, but not as an added person on the project.)
QC really begins when the first person touches a file. They need to be taught to follow the procedures without shortcuts and to self-check the work before it's handed in for review. There is very little that a person does in audit and attestation, financial statement work, or tax compliance that cannot be self-checked and proofed.
Another self-checking mechanism is to have the employee develop a mindset to apply a "reasonableness test." The completed work should be critically reviewed to see if the purposes requiring the work and procedures were met, if the results make sense, what the client would look at, and whether the user would spot anything out of order.
Finding a QC person isn't easy. In addition to technical expertise, reviewers need the ability to focus on major issues, recognize that they shouldn't get bogged down with details, and value their time, as well as possessing training skills, patience and the ability to communicate the errors they find in a way that trains and elicits buy-in and growth - as well as the elimination of future errors.
Edward Mendlowitz, CPA, is a partner in the New Brunswick office of WithumSmith+Brown PC. Reach him at (732) 964-9329 or emendlowitz@withum.com.
