The Audit Partner (#238)
/In this podcast episode, we discuss the skills and attributes needed to be a successful partner in public accounting. Key points made are noted below.
Skills Required for Auditors
The best way to cover the topic is to describe the skill set you need at each level of the promotion path in an audit firm. We start with the base-level, newly hired auditor. At this point, you’re expected to take what you learned in school and actually use it. That’s not as easy as it sounds, and this is why about 20% of the incoming class of new auditors will leave the firm within one year, and another 20% the next year.
The auditing tasks you’re assigned in your first year are not especially hard, and you’re supervised fairly closely, so you won’t screw up too much. The audit seniors and managers are watching to see if you understand what you’re doing, and if you’re smart enough to ask for help when you don’t understand something. However, asking for help too much indicates that your knowledge of accounting and auditing isn’t good enough. At the end of the year, the audit managers get together with the partners and decide who has flunked. If you’re not good enough, you’re counseled out.
Therefore, someone who wants to make it all the way to partner needs to have a solid understanding of the fundamentals of how to audit. The same goes for the second year.
Skills Required for Senior Auditors
In the third year, and this varies a bit based on the firm, you’re promoted to audit senior. This means you get to deal with more complex topics, like valuing inventory. For a stretch of two or three years, they’ll throw the more complicated topics at you, and you’d better show a solid understanding of the material – or, you’ll be counseled out of the firm.
As you can tell, as you go through this half a decade of being a non-management staff person, you’re being evaluated all the time. There are a couple of reasons for this. First, they need to make room for the next incoming class of new auditors, so they have to continually cut older people who just don’t have the skill level.
And the second reason is that the next promotion is to manager, where you’ll be running audits yourself. And they really can’t afford to have anyone in the manager position who might screw up an audit.
Skills Required for Managers
And then you’re promoted to manager. By now, you’ve survived a lot of job cuts, and maybe 10% of your original group is still working for the audit firm. At this point, it’s been established that you know the audit skills. And, getting back to the original question, this means that an audit partner has to have a seriously excellent knowledge of accounting and auditing.
But as a manager, the focus changes. Now, you need to live up to the title. Can you manage an audit? There are a lot of steps in an audit, and you have to keep track of everything. On top of that, you’re being asked to oversee the audit staffers who’re working on your audit. And by the way, this brings up a third reason why audit staff gets counseled out. The audit managers just don’t have time to hold the hand of anyone who isn’t getting it, because these audits have time budgets, and the managers are expected to meet those budgets.
And in addition, managers are faced with one audit after another, in succession, all year long. That means they also have to know how to wrap up the loose ends on the last audit while already working on the next audit. This brings up another issue, which is that managers start working some fairly serious overtime. You can get away with less overtime as a staff person, but that’s not possible as a manager.
So at this stage, managers start to take themselves out of the firm. They get burned out, and audit clients start to give them job offers. Between the punishment of the work and some pretty nice compensation deals, it should be no surprise that a lot of managers leave the firm.
Assuming they stick around, managers stay in that position for about three years. By the end of that time, you can expect that at least half of them are gone. Maybe more. So let’s get back to the question – an audit partner should have managed so many audits that he’s completely comfortable with how the work is done, and he’s willing to work the extra hours.
Skills Required for Senior Managers
And that brings us to the final group, which is senior managers. These people continue to manage audits, but now they’re also expected to bring in new business. That means spending time, both during the day and after hours, networking throughout the local business community. And this is where extroverts start to shine. Up to this point, someone who’s a terrific accounting technician can become quite a competent manager, and could be promoted to senior manager. But that’s where a lot of people run into a hefty barrier, because they’re so uncomfortable with trying to sell audit business. They just don’t get it.
Skills Required for Partners
So, let’s say that the typical interval for being a senior manager is three years. During that time, it’s going to be pretty obvious which ones are really partner material and which ones can only sell an audit if the prospective client comes into their office and begs them to take the work. Therefore, getting back to the question, audit partners can to pull in new business on a pretty regular basis. They’ve figured out which of their contacts generate the most business for them. They only sit on those nonprofit boards of directors that give them the best return on their time, in terms of sales leads. They can make sales calls and close business. And this skill is on top of having excellent knowledge of the fundamentals of accounting and auditing, and being great managers. As you might expect, audit partners work massive hours. There’s just no way to get the in-house work done, as well as all the networking, within a normal working day. Instead, figure on working somewhere close to a 60-hour week, and longer during busy season.
But, there’s one more step, which is going from junior partner to senior partner. As a new partner, you’re given some of the crappiest audits and administrative work, because the senior partners don’t want to do it. So, even though your compensation probably doubled with the promotion to partner, your stress level went up, too.
So those are the skills and attributes of a successful audit partner. The success rate for making it all the way to partner is around 2%. And even at that point, the stress forces some people to retire before the usual retirement age. So I suppose a final attribute of a successful partner is being able to deal with a never-ending pile of stress.
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