Outsourced Audit Testing for CPA Firms: Options Compared

Most small and mid-size CPA firms have more audit work than staff to do it, especially in busy season. The testing is usually where the hours go: vouching samples to invoices, testing journal entries, working through control attributes. There are four common ways to get that work done without hiring.

The options

Option	Who does the testing	What your team does	Main risks
Offshore or outsourced staff	Accountants at an outsourcing firm, working in your files	Assigns work, answers questions, reviews	Ramp-up time, time zones, turnover, client data leaving the firm
Contract or freelance auditors	Experienced seniors hired per season	Supervises and reviews like any staff member	Availability in busy season, cost, consistency
Audit software your staff runs	Your own staff, faster	Still performs the testing, plus reviews	It saves time per item, but someone still has to do every item
An audit testing service	The service runs the procedures and returns workpapers	Sends the population and documents, reviews and signs off	Fit with your methodology, how reviewable the output is

Whichever you choose, the firm keeps responsibility for the audit. Under the quality management standards (SQMS 1 in the US, CSQM 1 in Canada, ISQM 1 internationally), using outside resources does not move responsibility away from the engagement partner. The work has to be directed, supervised and reviewed the same way as your own staff's.

What to check before you outsource testing

1. Can a reviewer follow the work? Every item tested should show the document used, the fields compared and the conclusion. If your reviewer has to redo the matching to trust it, you have not saved the hours. See audit working papers.
2. Does it follow your procedures? Your sample, your attributes, your thresholds. The provider should adapt to your program, not the other way around.
3. How are exceptions handled? Look for exceptions flagged with the specific difference, not buried in a note.
4. Where does client data go? Ask where documents are stored, who can see them, and whether they are used to train anything.
5. Turnaround in busy season, when everyone else is also outsourcing.
6. Cost per engagement, compared with the staff hours it replaces.

Which procedures outsource well

Procedures with a defined population, clear attributes and documentary evidence are the easiest to hand off:

• Vouching and tests of details on expenses, revenue and fixed asset additions
• Journal entry testing against the firm's criteria
• Tests of controls with clear attributes, such as the three-way match
• The search for unrecorded liabilities

Risk assessment, materiality, estimates, going concern and the overall conclusion stay with the engagement team.

Where Warp fits

Warp is an audit testing service for small and mid-size CPA firms in the US and Canada (formerly Snap Accounting). The firm sends the general ledger, the sample and the client's documents. Warp runs journal entry testing, test of details and controls testing, and returns workpapers where every result links to the page in the source document, with the reasoning shown. Your team reviews and signs off. Book a call to see a sample workpaper.