Sarah Johnson, CFO.com | US
January 26, 2007

Audit deficiencies: efficiency versus effectiveness as it relates to "Competency Behaviour Modification" versus "Knowledge and Virtue" Bases

The large audit firms are business. They are more interested in managing their processes to maximize the audit billings contribution margin than they are with achieving audit effectiveness. Interestingly, a Chartered Accountant graduate did not know what a cumulative translation adjustment was with respect to a self-sustaining subsidiary and another CA graduate had no clue what the 2-step goodwill-impairment testing method was. And these are the supposedly rigorously trained Chartered Accountants. CA's know how to do things efficiently (if we want to interpret that as "doing things right" in Drucker terms). Problem is, they don't know how to do things effectively (if we want to interpret that in Drucker terms as "doing the right things"). As I learned from one CA, "cash is king". Remember that. To the CA in public practice in Canada and probably to the CPA in public practice in the USA, money is everything (I would even go so far as to argue that they see everything in terms of the $ sign). The problem is that the CA's focus on "competency" behaviour modification education to develop an armed profession of right wingers rather than a "knowledge and virtue" auditor as the Certified General Accountants create.

Posted by David Newman | Feb 3, 2007 5:43 PM ET