SENIOR LEVEL

Can you provide an example of a time when you discovered a significant error or discrepancy in the audit process? How did you handle it?

Sample answer to the question

One time, during an audit of a client's financial statements, I discovered a significant error in the recording of revenue. The client had classified revenue from a long-term contract as current, which inflated their short-term liquidity ratios. I immediately brought this discrepancy to the attention of the audit team and discussed it with the client's management. We conducted further investigation by reviewing the contract terms, supporting documents, and discussing with the accounting team. After confirming the error, we adjusted the financial statements to reflect the correct classification of revenue. I updated the audit working papers and documented the process to ensure transparency and compliance with GAAP. Finally, I presented the findings and recommendations to the client’s management, emphasizing the importance of accurate financial reporting and the risks associated with misclassifying revenue.

A more solid answer

During an audit of a client's financial statements, I utilized auditing software to analyze revenue data and discovered a significant error in the recognition of revenue from a long-term contract. The client had incorrectly classified the revenue as current, leading to an overstatement of their short-term liquidity ratios. To address this issue, I immediately communicated the discrepancy to the audit team and initiated discussions with the client's management. We conducted a thorough investigation by reviewing the contract terms, supporting documents, and engaging with the accounting team. After confirming the error, I worked with the team to adjust the financial statements to accurately reflect the classification of revenue. I meticulously updated the audit working papers and documentation to ensure transparency and compliance with GAAP. Furthermore, I presented the findings and recommendations to the client's management, emphasizing the importance of accurate financial reporting and the risks associated with misclassifying revenue. This experience enhanced my attention to detail, analytical skills, and ability to effectively utilize auditing software for error detection.

Why this is a more solid answer:

The solid answer expands upon the basic answer by providing more specific details and addressing the evaluation areas. The candidate mentions their use of auditing software to analyze revenue data, demonstrating their proficiency in using auditing software and productivity tools. They also highlight their effective communication skills by initiating discussions with the client's management and presenting the findings and recommendations. However, the answer could still be improved by discussing the outcome of the error resolution and any lessons learned from the experience.

An exceptional answer

During an audit of a client's financial statements, I utilized advanced auditing software to perform data analytics and discovered a significant error in revenue recognition. The client had incorrectly recorded revenue from a long-term contract as current, leading to an overstatement of their short-term liquidity ratios. Realizing the importance of addressing this discrepancy promptly, I immediately communicated the findings to the audit team and initiated discussions with the client's management. To investigate further, I conducted a thorough review of the relevant contract terms, supporting documents, and engaged with the accounting team for clarification. Once we confirmed the error, I collaborated with the team to adjust the financial statements accordingly and rectify the misclassification. I meticulously updated the audit working papers and documentation to ensure transparency and compliance with GAAP. Additionally, I presented the findings and recommendations to the client's management, emphasizing the significance of accurate financial reporting and the potential risks associated with misclassifying revenue. As a result, the client promptly rectified the error and implemented improved controls to prevent similar mistakes in the future. This experience further enhanced my attention to detail, analytical and problem-solving abilities, effective communication skills, and proficiency in utilizing advanced auditing software and tools.

Why this is an exceptional answer:

The exceptional answer builds upon the solid answer by providing even more specific details and showcasing the candidate's advanced abilities in utilizing auditing software and performing data analytics. They emphasize the outcome of the error resolution, including the client's prompt rectification of the error and implementation of improved controls. The answer also mentions the candidate's continuous improvement mindset by highlighting the lessons learned from the experience. Overall, the exceptional answer demonstrates the candidate's strong analytical and problem-solving abilities, attention to detail, effective communication skills, and proficiency in using auditing software and productivity tools.

How to prepare for this question

Familiarize yourself with different auditing software and tools commonly used in the industry to enhance your technical skills.
Stay updated with the Generally Accepted Auditing Standards (GAAS) and Generally Accepted Accounting Principles (GAAP) to ensure compliance in the audit process.
Practice analyzing financial data and identifying potential errors or discrepancies to sharpen your analytical abilities.
Develop effective communication and interpersonal skills to confidently interact with clients, audit teams, and management during the resolution of audit issues.
Consider sharing examples of how you handled errors or discrepancies in past audits during mock interview sessions to gain additional practice and receive feedback.

What interviewers are evaluating

Analytical and problem-solving abilities
Attention to detail
Proficiency in using auditing software and productivity tools
Effective communication