As a former auditor, I was always left a little disappointed by the lack of innovation in the assurance world. CPA firms can be shockingly reliant on excel and other archaic processes. They waste the time of exceptionally smart individuals on tasks that are very repeatable. After drifting out of the audit practice and into lease accounting consulting, I gained a unique perspective on how this new area of high audit scrutiny is particularly ripe for innovation. At Netgain, we’ve been developing a solution to fill in this gap and automate this complex area of the audit.
Wedo not recommend auditing in excel because of the extra risk it invites.
Risks of Auditing in Excel
- Not scalable
- Need to manually create a new lease schedule for every lease and unfortunately, that is the easy part. Modifications, terminations, and other lease activity can be overwhelming and prone to errors in excel
- Not repeatable
- Firms are bad at sharing tools and templates internally, in a timely manner
- High risk of errors and miscalculations
- The new lease standard is complex, and creating an accurate amortization schedule can be more difficult than it sounds
- Difficulty obtaining and organizing all documents required
- No central document repository
- Difficulty auditing individual journal entries
- No automation around the journal entry calculations. Each journal entry will need to be validated against the excel amortization schedule
- Difficulty reporting
- No reporting is available
- No audit trail or workflow tracking
- Excel version control does not provide full details
Benefits of NetLease for Auditors
NetLease for Auditors creates a stable workflow for any number of leases at a fixed cost. Simply enter the lease contract details to get complete amortization schedules and journal entries based on ASC 842, IFRS 16 and GASB 87 guidelines.
NetLease for Auditors:
- Stabilizes audit cost by allowing unlimited users, clients and leases
- Saves time by standardizing audit procedures with repeatable processes
- Simplifies the footnote disclosure audit by generating out-of-the-box reports for disclosures
- Makes lease classification and modifications easy
- Enables quick sensitivity analysis for identifying client errors
Bottom line: Lease accounting is an area of audit ripe for innovation. Audit firms of all sizes benefit from a standardized approach with smart, efficient automation. NetLease for Auditors simplifies and standardizes the process of testing virtually all leases, even complex ones with early terminations or modifications.
Over the next few weeks, my colleagues and I will explore issues around auditing leases this year. Check back for more audit insights.
ASC 842 For Auditors