The case for digitized perm files

Having lugged around three thick files representing the full permanent file for an audit client for the past few weeks, I’ve come to the conclusion that my firm needs to consider digitizing these things.

Perm files for accountants consist of client documents that carry forward year to year. For example, engagement letters are good for three years before they need to be updated and signed the client again, so a copy goes in the perm file for that time. Loan and lease agreements and their related payment schedules straddle multiple periods, as do rebate/royalty/license agreements. Articles of incorporation or amalgamation, and anything to do with share purchases and sales.

There’s no good reason to continue to keep physical copies of all these documents, rather than storing them in PDF or similar format and printing them when a hard copy is required (if ever).

The advantages are many:

  • Cheaper to store
  • Can easily be reprinted if hard copy is ever required
  • Increased mobility due to weight savings and digital format
  • Backups are simple and easy to do frequently
  • More secure storage on protected hard drives
  • Searchable (becomes really helpful as the file gains documents)

The same can basically be said for digitizing whole work paper files each year, but there are still situations where having a physical copy with work done directly on it is needed. I think tablets could be useful in ushering out the era of paper-based files, but who knows when the big firms will start to use them.

How far away from a truly paperless client file system is your firm?

MADD situation shows charities have many stakeholders

Recently, the findings from an investigation by the Toronto Star into charities have been released in the paper and they are not good for many charities, primarily MADD (Mothers Against Drunk Driving) Canada.

The Star found that the charity spends only about 19 cents for every donor dollar on programs designed to help victims of drunk driving and educate the public. This contradicts the information provided to potential donors, which claims MADD spends nearly 84 cents of every dollar on those programs.

Not surprisingly, there has been a substantial uproar amongst donors in light of these revelations, and the situation illustrates clearly just how many stakeholders there are for non-profit, charitable organizations like MADD.

Public companies have many users of their financial statements – both current (finite in number) and potential (pretty much infinite) investors and creditors. They are subject to intense scrutiny and pressure to meet earnings expectations. High profile charities are subject to the same pressures, but naturally with a focus on charitable works performed, rather than net income.

This is relevant to me because next week I’m going to be planning and conducting an audit of a new charity client of ours, and it ratchets up the pressure on my ability to plan a thorough yet efficient set of procedures to gain adequate assurance on the financial statement areas.

It’s exciting at the same time though to be involved in some way with an organization that is doing good in the world.

Shell and reporting sustainability

This piece in the Globe and Mail was interesting:

Shell was early with “sustainability reporting” (their first annual sustainability report was published in 1998). They currently have a goal to have their (self-reported) greenhouse gas emissions 5 per cent below 1990 levels by 2010, similar to the Kyoto Protocols.

The story was about Shell’s CEO lauding the Kyoto Protocol and expressing his wish that there was a strong worldwide framework within which the oil industry could work with governments to control carbon emissions. But I’m interested in the standards:

The company is using the Global Reporting Initiative guidelines, the best known international standard for reporting on GHG emissions. So Shell is also more transparent than some. Shell claims to have invested $1-billion (U.S.) in renewables since 2000, notably in a major offshore wind project in the North Sea.

Is anyone auditing this report? Or Shell’s claim of investing $1B USD in renewable energy? I took a look at 2005’s Sustainability Report and found no auditor’s report. There is an impressive External Review Committee, with representatives from Transparency International and the Danish Institute for Human Rights. They describe their procedures and identify three guiding principles: materiality, completeness, and responsiveness to stakeholders.

Sounds like a great opportunity for an audit of both non-financial and financial information.

Sharpening the axe in auditing

A post today at VeraSage provided a perfect metaphor for audit planning:

Once upon a time, there were two lumberjacks who challenged each other to see which one could cut down more trees in a day. At daybreak, the first one began furiously chopping down trees. He worked up a sweat and by noon he had cut down 16 trees. Meanwhile, the other lumberjack was way behind because he took the first two hours to sharpen his axe. […] By early afternoon, the first lumberjack was slowing down. It took him almost an hour to cut down one tree, while the other lumberjack was catching up fast. […] By late afternoon, the second lumberjack who had sharpened his axe had passed his friend by many trees and won easily.

They associated it with doing away with timesheets, but I was thinking audit planning and prep checklists the whole way. An audit where a little extra time is spent before preparing the client will go that much faster and smoother when fieldwork actually starts.

‘Tis the season for giving links

Dan Meyers of Tick Marks is caught up in the spirit of giving in his own way – he’s revisiting his special 12 Blogs of Christmas from last year around this time and giving us all a refresher on the more memorable posts from the accounting blogosphere from the year nearly ended.

Since my blog wasn’t around this time last year I wasn’t featured, so I’m going to help Dan out and highlight what I think are the best posts I’ve made in the 10 months or so I’ve been blogging about the accounting and audit professional industry:

  • Income trust tax loophole gaining popularity
    One of my most popular posts in terms of number of comments, I discussed the tax law and theory surrounding income trusts in Canada, which quickly became one of the most controversial aspects of the still relatively new Conservative government here.
  • Terrorist accounting
    I’m still pretty proud of this little nugget, even though as I was writing it I was a little worried it might offend more than it entertained. It’s a flight of fancy as I try to get inside the head of a terrorist organization’s bean counter. It was timely and creative, if nothing else!
  • UFE results dreams begin
    Surprisingly my most visited post, possibly due to its primo position in Google’s search results, it was short but sweet and captured the growing anxiety I was feeling as UFE results day approached. I think most people who click on the link in Google are hoping for a wilder dream than the one I described!
  • Global ethics and international accounting standards
    Probably my most ardent foray into accounting related activism, the post details the struggle the Publish What You Pay campaign has had in lobbying for an international standard mandating companies in certain industries report payments they make to governments, in an effort to put an end to the injustice of corruption in the third world.
  • The CA Advantage – marketing the profession
    The profession debuted a new ad campaign highlighting the skills a CA can bring to an organization, and I compared it to the successful marketing of a rival designation here in Canada, the Certified Management Accountants.