Maintain Excellence, Cut Risk

Firms that operate at the highest standards minimize liability problems. Here are some pointers.

There are two basic risks for firms: catastrophic service failure, such as that incurred from providing inaccurate audit-related services, and business failure caused by losing top-quality clients. A firm that merely reviews completed audit engagements to check whether staff complied with procedures or makes sure partners and staff members have met continuing education quotas isn’t doing enough to mitigate its risk.

What will cut risk is to have every member of the firm commit to excellence in every aspect of the business, from checking financial statement footnotes to ensuring the audit committee understands them. Partners can inspire and better manage their practices by hiring the best people, training them well, applying high development and performance standards, firing poor clients and vetting new ones carefully.

Maintain Excellence, Cut Risk [Journal of Accountancy, January 2003]

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